A Little Sleuthing Can Lead to Big Profits

After the U.S. invasion and occupation of Iraq has begun, global stock markets and individual consumers will react in ways both predictable and obvious.

Or at least it will seem that way in retrospect. For no matter which way stocks ultimately move -- up, down or sideways -- we are bound to hear a chorus of traders, policymakers, economists and friends declaring that the rest of us were idiots for not understanding the result was clear as day many weeks before.

So what will be so obvious in retrospect?

More important than the right answer -- which is probably that investors overdosed on caution -- is the method used to develop the answer. For as I learned from the Williams Inference Center last week, the trick to preparing for both short-term, event-driven market moves as well as long-term, culture-driven market moves, is to learn how to symbolically separate meaningful clues from trivial ones.

The Past Is No Predictor

Jim Williams, whose 40-year-old organization professes to offer corporations and institutional investors help with thinking about thinking, insists that the usual method of determining the future, which is to assume that it will be similar to the present, seldom works. Trading after major, unpredictable events does not typically follow the current trend, it creates a new trend. And that new path may be a reversal of the current trend, or it may be a new direction entirely.

To discover the most likely new path, Williams says, seek unintended social, political or financial messages by turning over and correctly interpreting a "down" card. In games of chance like blackjack and poker, down cards have values that are typically known to one player but not to the rest. If powerful enough, they can change the course of the game. In the game of life, he believes that down cards surface as anomalies, or strange, telling little facts known initially only to a niche group, which reveal deep truths valuable to all.