Flight to Safety

If you had told me a few years ago that the most striking parallels for the irrational behaviour of markets would come to me not from my perch in the trading floor, but from a bawling child, well…you could’ve knocked me down with a teether. Or pacifier.

Again, had you told me then that there existed a tube-like contraption to extract snot from a creature suffering from a blocked nose, one that didn’t know how to blow its nose, I would most likely have recoiled in distaste. So, it is quite telling that when I was recently introduced to that very contraption, I fell upon it like a pile of bricks, dubbing it the most useful thing invented since MTR Ready-to-Eat.

Markets flit about amongst a set of behaviours that at best times, confound even the most seasoned of practitioners. Risk aversion is that strange thing that causes traders to withdraw into their shells, like a beachful of turtles facing a predator onslaught. It makes them take refuge in old, predictable things like gold, the US dollar and the Japanese yen. And abandon the tantalizing yet risk-fraught plays with more complex financial instruments. This behaviour can play out in counterintuitive and fascinating ways, such as US Treasury bills finding favour when the US was downgraded or the surge in the Japanese yen when a tsunami wreaked havoc in Japan.

So what has all of this got to do with de-blocking a baby’s nose? Well, more than you would think. Like any right-thinking being, my child absolutely abhorred the idea of this thingamajig that (to toddler-eyes) I had clearly thought up as a punishment, a brand new ‘time out’ idea. So, there was much protestation, and I as the perpetrator, would surely bear the brunt of baby-wrath? As it turned out, I couldn’t have been more mistaken.

Just like the markets, the baby also has a strange concept of flight-to-safety. When subjected to a snot-clearing attack by the mother, rush to the safest thing you know, ergo, the self-same mother who mounted said attack. For the rest of that day, she resisted all attempts by the father and others at soothing, and clung to me.

Now you know why markets are irrational. They are just the macrocosm of grown up babies.