Sunday, May 22, 2011

The Art of Speculation

The objective of this post is to establish speculation as an artistic activity. This obviously does not mean that speculation can only be practiced as an art; just as one can paint, sculpt or write with no artistic ambition, it is obvious that one can speculate with no artistic concern whatsoever. My point is rather to say that it is possible to develop an artistic mastery in speculating just as it is possible to develop one in the other arts. In particular, I wish to investigate how such a mastery is conducive to successful trading.
In order to do that, I shall first consider some traditional features of art and build some analogies with speculation. That will hopefully open new perspectives to thinking and practicing speculation


Let me start by a quote from Baudelaire’s Salon of 1859:

“Car il est évident que les rhétoriques et les prosodies ne sont pas des tyrannies inventées arbitrairement, mais une collection de règles réclamées par l’organisation même de l’être spirituel. Et jamais les prosodies et les rhétoriques n’ont empêché l’originalité de se produire distinctement. Le contraire, à savoir qu’elles ont aidé l’éclosion de l’originalité, serait infiniment plus vrai. » [ Salon de 1859- Le gouvernement de l’imagination]

Which, in english, gives :

“Since it is clear that rhethorics and prosodies are not arbitrarily invented tyrannies but a collection of rules required by the very organization of the spiritual being. And never did the prosodies and rhetorics prevent originality to get produced distinctly. On the contrary, to say that they nurtured the occurrence of originality would be infinitely truer.”

Such a remark was inspirational for Raymond Queneau and Francois Le Lyonnais when they founded the Oulipo in 1960. This movement may be superficially seen as a reaction against the trend of discarding traditional rules such as versification in poetry, figuration in painting or common practices (tonality, contrapuntal forms,…) in music. In this sense, it would closely relate to Baudelaire’s point in reasserting such rules on the ground that they coincide with “the very organization of the spiritual being”. Such is not the goal of the Oulipo however, it is, in fact, more in line with the questioning of the traditional rules and their replacement or improvement, as can be seen in the efforts of Schoenberg in music or in those of Kandinsky in painting. In my understanding, the Oulipo’s project is, first of all, to assert the necessity of constraints, and secondly, to reflect upon the nature of these constraints.
According to this conception, Art is not to be freed from arbitrary constraints and led to develop from a pure constraint-free intuition as some may have thought wrongly in the 20th century (with experiments such as some kinds of stream-of-consciousness, automatic writing, …); on the contrary, Art needs constraints, for intuition and imagination to be productive. The fundamental problem then becomes one of knowing which constraints are relevant, or even whether this question is meaningful at all.
In practice, Oulipo’s artists have often been led astray from their original goals by surrealistic believes, but these early objectives do retain, in my view, all their relevance. The presence of mathematicians, such as Francois Le Lyonnais and Claude Berge, among the founders, tends to credit the central concern about structures that underlies the whole enterprise. Many Oulipo’s constraints came therefore to be inspired directly from mathematics. The Oulipo’s work may then seem to be acquainted with what TA is doing in relation with speculation, provided that speculation is indeed an art.


When considering art, we routinely turn our attention to beauty, as art is widely defined as the making of beautiful things. However, there is no beauty to be found in speculation, the speculator does mot produce any masterpiece that can be looked at and admired in an aesthetic perspective, the only judge of the value of a speculator’s action is the profit or the loss he made, and this judgment is as unaesthetic as can be since it solely is based on immediate usefulness. Art, from the romantic period onwards, is not considered as a mean for a material gain, or it becomes devoid of content and is abased to mere propaganda. Art is believed to be an end to itself (which was translated by Duchamp as “Art for art’s sake”), in that the search for beauty, is not the search of an external object in order to acquire or even unveil it in a mundane sense, it is more about creating beauty.
Speculation cannot be said to create anything beautiful, it merely is useful for the speculator and the system which it brings to existence: the market. However, art may also be said to be useful, just not directly so, I admit that art is an end to itself (but I contend that speculation is also an end to itself) but its creations have a purpose and even a cognitive content, the beauty is enlightening, it says some truth, albeit not one as formed and determinate as is normally considered to be a true statement.
I have written earlier that the market is evolving faster than mundane reality, and it is in this difference of speed that we must look for the reason of the absence of beauty in speculation. I believe that beauty simply has not the time to form in the market place, speculation can only display its utility, its efficiency, the enlightenment of the speculative art is at best confined to the mind of the speculator, and even there, it is only present for a fraction of a second, and it leaves no trace whatsoever. The closest to the art of the speculator is the performance of an amnesic improvisator with no public.
In that, I think I can say that speculation is an art, at least that it can be considered as an art in the way a speculator wishes to approach this activity, the speculator can, and I believe must, be an artist, even though he will never be recognized as one by any public.


Baudelaire, again in the “Salon de 1859”, wrote this at the end of section 8 “Le Paysage”:

“I would rather return to the dioramas, whose brutal and enormous magic has the power to impose on me a useful illusion. I would rather go to the theater and feast my eyes on the scenery, in which I find my dearest dreams artistically expressed and tragically concentrated. These things, because they are false, are infinitely closer to the truth.”
[translation from “The Arcades Project”, p.536 (Q4a,4), Walter Benjamin, First Harvard University Press, 2003]

Similarly to the dioramas, it is because TA is false that it may bring us closer to the truth of speculating, which is itself a production of truth (and that is similar to the status of truth in art as well). Many Technical Analysts are looking for low-lagging tools, conceiving no-lagging tools as the ideal they should aim at, but this is a mistake, the ideal TA tool is not one with no lag at all, since if such a tool were existing, there would be no market in the first place, the ideal TA tool is one that has a lag adapted to the given speculator and particularly to his relation to the conditions of the market (its speed). The TA tools therefore are not there to tell some truth about the market but rather, like the dioramas for Baudelaire, to “artistically express and tragically concentrate” the reality of a relationship between the speculator and the market conditions (the speculator’s dream), which, when witnessed by the speculator will allow him to be attuned to the market.
The point of the Oulipo’s constraints is exactly that as well, it is to pull the mind of the artist from the unconstrained immediacy of nothingness, from the passivity of contemplation, in order to force him to reconquer this immediacy by displaying his creative power to overcome the constraints. Like an Oulipo’s constraint incites/challenges the artist to create in order to overcome it, TA incites/challenges the speculator to speculate also in order to be overcome.
That view, in some way, gives credit to the contrarian philosophy, a speculator speculates against TA. Speculation to qualify as the activity I expose here, must always be done at variance with the market and with what the market is saying; speculation is the counter-proof of TA, and it is through this double-negation of the market (TA negating the market and speculation negating TA), that the speculator becomes the market (see The Logic of Place: not-not-a = A).