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Rt's
Just thought I'd post this to the list. This guy has a lot of good
things to say about what goes on between our ears! Harry
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Date: Sat, 03 Oct 1998 05:27:25 -0500
To: Subscriber@xxxxxxxxxxxxxxxxx
From: "Edward A. Toppel" <eddie@xxxxxxxxxxxxxxxxx>
Subject: Samurai Trader's Email Digest Issue # 13 October 3, 1998
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SAMURAI TRADER'S EMAIL DIGEST - Issue # 13 October 3, 1998
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Welcome to the Samurai Trader's e-mail Digest. This weekly digest
features questions from readers of the book, Zen in the Markets. Answers
are provided by the book's author, Edward Allen Toppel. Investment or
trading questions unrelated to the book will also be considered. Last names
and email addresses of those submitting questions are not listed so that total
confidentiality is maintained. For details, visit
<http://www.samuraitrader.com>
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*Moderator's Comments
Contest Winners and the reason for the contest.
*This Week's Topic
1. What Do John Meriwether and Victor Neiderhoffer have in Common?
or "If Brain Power Doesn't Work, What Does?"
*Closing Thought
_____
MODERATOR'S COMMENTS
As many of you noted correctly, John Meriwether was the correct answer.
Please send your mailing addresses to me so that I can ship you the 1999
Little Zen Calendar to you.
I'll do that as soon as I get them in. Thank you all for participating.
I ran that contest so that I could pique your interest in this week's only
topic. I will resume the normal format of answering your questions in next
week's Digest. The near demise of Long Term Capital Management and the
recent Victor Niederhoffer debacle clearly confirm, once again, the thesis
of my book, Zen in the Markets: The less you think you know, the more you
know. I couldn't resist the chance to use these news events to illustrate
vividly my point.
_____
THIS WEEK"S TOPIC
"What do John Meriwether and Victor Niederhoffer have in common?
or
"If brain power doesn't work, what does?"
First, who are these guys?
John Meriwether was the head of Salomon Bros. bond trading department and
was featured in Michael Lewis's book "Liar's Poker". He and some of this
cohorts were reputed to play the game of liar's poker for a million dollars
at a crack. A little rich for my blood. He later founded Long Term
Capital Management, a mega hedge fund whose slate of advisers/managers
included two Nobel prize winners and a host of legendary traders. Despite
all this 5 Star talent, the Federal Reserve Bank had to orchestrate a bail
out to save the rest of us. Or at least that's what the FED would have us
believe. How do any of you feel about the FED coming to the rescue of a
private money management firm?
Victor Niederhoffer also ran a hedge fund that went belly-up last October.
He also is a famous commodity in the trading world. The FED didn't rescue
him. He only lost $45 million in a few days.
Here we have two brilliant individuals backed up by a staff of other
brilliant people. Yet they managed to blow big money. Meriwether in the
billions, Niederhoffer in the millions. Some of it their own, much of it
(OPM) other people's money.
I know of other hedge funds that were run by reputed geniuses that went
busto as well.
O.K. Whats the point?
The markets are not about using your brain power. They are about obeying
the market's signals and not those of your Ego. On the trading floor and
elsewhere, I have noticed that being real smart does not guarantee success.
Actually, I believe that it almost guarantees disaster. Your sense of
your self is often inflated by your reputed intellectual prowess. It's
harder for you to accept what the market is doing, especially when it is
going against your very careful and brilliant analysis. It's harder to
accept the market's call and not that of our overly inflated EGO.
Markets defy rational analysis. It's been proven over and over again.
Yet. people are always trying to find the "Holy Grail" of investing or
trading. There just isn't any. It's a matter of accepting that the market
is always right. Plain and simple.
K.I.S.S. Keep it simple stupid and you'll stand a better chance of success.
It is all about going with the flow, not about figuring it out, not
swimming against the tide.
Brilliant people seem to have a difficult time accepting this truth. Their
EGO's won't let them.
The rest of us dummies don't have as hard a problem letting go.
I dwell on this point throughout my book.
In Chapter Two, "Saying Good- Bye to Aristotle", I point out how no one
has been able to predict accurately the direction of markets. Yet, they try
and continue to try without results. Isn't that the definition of
insanity? "Doing the same thing over and over again, getting the same bad
results yet not willing to try another approach?
It's all about surrender to the simply truth that you'll never be able to
figure out what the market will do in advance but you can jump on once the
ride has begun. I have a feeling that surfers would make great money
managers. Especially Zen surfers. They are used to riding waves and not
thinking about it. Here is comes, let's jump on and enjoy the ride.
Where is Forest Gump when we need him?
_______________
FINAL THOUGHT
"A road without bumps doesn't lead anywhere"
Rev. Koyo Kubose
O.K. So not every trade is successful. However, you can learn from those
trades. Did you let go quickly when you were wrong? If not, why not? Were
you going with the flow or jumping in before the market told you what to
do? I am positive that we learn more from our failures than from our
successes.
That's it until next week.
Eddie
________________________
Feel free to forward this Digest to others you think may be interested.
If you are not a subscriber, please follow the directions on our web site
at: <http://www.samuraitrader.com>. To unsubscribe, email
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----------------------------------------------------
The Samurai Trader's email Digest is a production of Samurai Press, IL.
All opinions expressed in the answers provided are those of Edward Allen
Toppel and are not meant to endorse, condemn or in any way guarantee any
of the investment or trading opinions or decisions discussed.
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