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The Education of a Speculatorby Victor Niederhoffer
Synopses & Reviews
"With an original mind and an eclectic approach, Victor Niederhoffer takes the reader from Brighton Beach to Wall Street, visiting all stops of interest along the way. What emerges is a book full of insights, useful to the professional and layman alike." — George Soros Principal Investment Advisor The Quantum Fund
"A riveting account of the games of childhood transformed into the obsessions of a contrarian winner!" — Dr. James D. Watson Nobel laureate and co-discoverer of DNA
"Speculation is part science, psychology, gambling, statistics, panic, and deception. This delightful autobiographical tour of the many facets of speculation by the most Galtonian of speculators introduces the reader to a Runyonesque cast of characters and to a wealth of ideas drawn from psychology, ecology, squash, chess, horse racing, and the author's unusually extensive experience. Readers will meet hoodoos and hoboes, scientists and musicians, champions and losers, hustlers and handicappers, George Soros and Francis Galton. An engrossing story that all will profit from, even those who prudently decide to remain on the sidelines of the markets." — Stephen M. Stigler Department of Statistics University of Chicago
"The Education of a Speculator is the first meaningful book on speculating. Successful speculating is as fine an art as chess, checkers, fishing, poker, tennis, painting, and music. Niederhoffer brings forth the best from each of these fields and shows the investor how their principles can enrich one's life and net worth." — Martin Edelston President, Boardroom Inc. publishers of Boardroom Classics & Bottom Line/Personal
"Victor Niederhoffer's The Education of a Speculator is an educational delight for all readers. The insight and interdisciplinary relationships he provides not only suggest lessons about financial markets, but how the world works. This book is a joy to read, a treat to muse over, and an endless source of provocative discernment." — Herbert London John M. Olin Professor of Humanities New York University
Warning: This book may permanently alter the way you see the world.
In the world according to Victor Niederhoffer, life is speculation and we are all speculators, except when we lose—then we are gamblers. We speculate on our careers, relationships, games, and investments. Life-changing decisions hang on our ability to read and anticipate turns of events. As a speculator in stocks, bonds, currencies, and futures, Niederhoffer's credentials are dazzling: he's been rated the best commodity trader in the United States, as well as being advisor to and investor for George Soros, and mentor to Monroe Trout and a host of other financial wizards. A Harvard grad and University of Chicago PhD in finance, he is a fierce and savvy competitor, a five-time U.S. National Squash Champion. Now, in this exhilarating ride of a book, Niederhoffer shares the insights of a lifetime of speculating, competing, and winning.
Successful traders are a breed apart; they owe their fortunes to more than just a strong trading system and the ability to follow technical indicators. Their markets sweep and swirl around the globe twenty-four hours a day, buffeted by forces of every size and shape imaginable: acts of God, acts of man, fluctuations in currency prices and barometric pressure, assassinations, insects, science, love, and revenge. In The Education of a Speculator, Niederhoffer opens the kaleidoscopic story of his life to show how he came to understand these fundamental forces. Offering a way of thinking rather than a "system," this powerful, remarkable book shows us how to speculate and win much more than we ever thought possible.
Growing up in Brighton Beach, Brooklyn, Niederhoffer's childhood was one of constant and intense competition, during which he learned both how to win and—equally valuable—how to lose. These early lessons became the basis of his successful approach to mastering virtually any arena, from music and sports to gambling, mathematics, and trading. Niederhoffer shows how, by distilling the lessons of board games, horse racing, and hoodoos, we can achieve the right mental and emotional state before, after, and during a contest.
In a colorful, compelling narrative account of his life and education, Niederhoffer emerges as a complex, eccentric, and fascinating individual, a man whose unique perspective combines the best inspirational messages of his father, who knew the psychological advantages of generosity as a way of defeating an opponent, with the humorous and often self-defeating behaviors of his hapless uncle. Along the way, we see the tell-tale indicators that would one day give him the edge in deals worth millions of dollars.
He tells us how he learned to psych out the SAT exam, skate through Harvard, and defeat hundreds of opponents in squash—using principles that can be applied to all kinds of personal challenges.
Of course, Niederhoffer's greatest fame (and fortune) is as an extremely successful trader, and here his tips, principles, and methods become most manifest. This is a man who never wears shoes inside his office, who makes the National Enquirer required reading for his staff, and never has sex right before a big trading day. (Niederhoffer's highly amusing views on the role of sex in human activity are alone worth the price of admission.) In chapters that are breathtaking in their leaps of imagination, and startling in their depth of insight, Niederhoffer establishes the relationship between stampeding elephants and market behavior, explores the use of musical structure as a guide to trading, and dissects the many roles of deception. In The Education of a Speculator, charts of stock prices are followed by pictures of paintings; the advice of cops, crooks, and Nobel scientists are all juxtaposed and synthesized—all in the service of successful speculation and investment. The Education of a Speculator is Victor Niederhoffer at his wittiest, wisest, and most articulate.
Acclaim for The Education of a Speculator, a provocative and penetrating look into the mind, the soul, and the strategies of one of the most controversial traders of all time
"A compelling and an entertaining read." -The Wall Street Journal
"Victor Niederhoffer gives us page after page of distilled investment wisdom. Taken together, this is pure nectar to those who aim for consistently superior stock market performance." -Barron's
"The Education of a Speculator offers plenty of insights into the way markets work, but the epiphanies are what a reader might expect from Lao-tzu rather than, say, Graham and Dodd." -Worth magazine
"The Education of a Speculator is the first meaningful book on speculating. Successful speculating is as fine an art as chess, checkers, fishing, poker, tennis, painting, and music. Niederhoffer brings forth the best from each of these fields and shows the investor how their principles can enrich one's life and net worth." -Martin Edelston, President, Boardroom Inc., publishers of Boardroom Classics and Bottom Line/Personal
"With an original mind and an eclectic approach, Victor Niederhoffer takes the reader from Brighton Beach to Wall Street, visiting all stops of interest along the way. What emerges is a book full of insights, useful to the professional and layman alike." -George Soros, Principal Investment Advisor, The Quantum Fund
Praise for PRACTICAL SPECULATION
"This is a wonderful book. Victor Niederhoffer and Laurel Kenner probably know more about short-term movements than anyone else. Their knowledge, based on sophisticated analysis of their unique database, underlies the findings in this bookan invaluable guide for speculators."
James H. Lorie, Eli B. and Harriet B. Williams Professor Emeritus of Business Administration Graduate School of Business, University of Chicago
"A Rabelaisian romp down Wall Street. Always taking the unconventional course, this book is fearless and occasionally shocking, but always the conclusions are backed up by supporting numbers. It leaves no sacred cow unskewered. Bold analogies and clever insights spill from its pages. Recommended to those seeking both fun and profit."
Richard Zeckhauser, Frank P. Ramsey Professor of Political Economy, Harvard University
"A fascinating read, one that will both entertain and educate."
Edwin S. Marks, Chairman, Carl Marks & Co., Inc.
"Practical Speculation is so good that Ill guarantee it. If its not for you just return it to me with your sales receipt for a full prompt refund."
Martin Edelston, Publisher, Bottom Line Personal
"Pearls of investment wisdom from a Wall Street legend that should be treasured not only for their insights into the workings of the market, but also for their candor and humor . . . Ive learned more from reading Niederhoffers works than I care to admit, and recommend this to anyone with serious financial aspirations."
Andrew Lo, Harris & Harris Group Professor
MIT Sloan School of Management
Includes bibliographical references (p. 423-427) and index.
About the Author
VICTOR NIEDERHOFFERs storied career as a speculator spans more than twenty-five years. He began speculating in commodities in the 1970s, and through 1997 held one of the most successful track records of any hedge fund manager. He currently manages money for overseas clients and trades for his own account. Niederhoffer is the author of the critically acclaimed and bestselling Education of a Speculator, and has written numerous articles for scholarly and professional publications including the Financial Analysts Journal. A magna cum laude graduate of Harvard (1964) and the University of Chicago (PhD 1969), Victor taught finance at Berkley and founded Niederhoffer, Cross & Zeckhauser, a mergers and acquisitions firm that was a leader in the field for many years. During the 1970s he dominated the squash world, claiming the world title in 1976. He currently writes a weekly column for CNBC Money with Laurel Kenner.
LAUREL KENNER is a financial writer. Her columns on the stock market, co-written with Victor Niederhoffer, have appeared on CNBC Money, worldlyinvestor.com, and TheStreet.com. Her journalism career includes five years as chief U.S. stocks editor at Bloomberg News and five years as an award-winning aerospace reporter for Copley Newspapers. She holds a degree in classical piano from the University of California at Los Angeles.
Table of Contents
PART ONE: MUMBO JUMBO AND MOONSHINE.
1. The Meme.
2. Earnings Propaganda.
3. The Hydra Heads of Technical Analysis.
4. The Cult of the Bear.
5. "We Are Number One" Usually Means "Not Much Longer".
6. Benjamin Graham: Mythical Market Hero.
7. News Flash: Computer Writes Stock Market Story!
PART TWO: PRACTICAL SPECULATION.
8. How to Avoid Spurious Correlations.
9. The Future of Returns.
10. The Periodic Table of Investing.
11. When They Swing for the Fences, We Run for the Exits.
12. Boom or Bust?
13. Market Thermodynamics.
14. Practical Market Lessons from the Tennis Court.
15. The Fine Art of Bargaining for an Edge.
16. An Amiable Idiot in the Biotechnology Revolution.
17. Earnings Impostors.
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