Category: Trader interviews
Reviewed: Jun 2010
This is Jack Schwager's third installment of the Market Wizards series. This one concentrates solely on stock traders, with the most popular ones being Steve Cohen and D.E. Shaw. Ari Kiev was chosen to contribute to the traditional closing interview on trading psychology.
There some interesting stories, including Mark Cook's nightmare Cities Service trade, the description of D.E. Shaw's mysterious firm, Jeff Bezos, and some of the personal histories of the various traders. Here are some of the interesting quotes and ideas from the book:
- Stuart Walton: "I always find that the hardest thing to do is the right thing to do."
- Stuart Walton: On being surrounded by other traders: "I found that having another opinion in the office was very destabilizing."
- Stuart Walton: "Prices move before fundamentals."
- Stuart Walton: "Start each day from last night's close, not your original cost."
- Steve Watson: "My favorite theme for a short [sale] is a one-product company, because if that product sales, they have nothing us to fall back on. It's also much easier to check out sales for a one-product company."
- Ahmet Okumus: The efficient market hypothesis is ridiculous "because different market participants would do research of varying quality. The market price will reflect the average assessment of all investors."
- Mark Minervini: "Losing all your money is one of the best things that can happen to a beginning trader."
- Alphonse Fletcher: On managing other people's money: "It is not worth the trouble having an investor who would be a distraction."
- Steve Lescarbeau: "I think that a physical science degree is as good as if not better than a financial degree because it trains you to be analytical. If there is anything I am really good at, it's being a researcher."
- Steve Lescarbeau: "Let's discriminate between a market timer and what I consider myself - a market reactor. A market timer says, 'The market is too risky here. I think the Dow was going down to 8,000 during the next three months.' They have a view about what is going to happen. They prognosticate the market. I do not attempt to prognosticate the market. I react to what happens in the market...I make no predictions. I have absolutely no idea what is going to happen."
- Dana Galante's short-fund strategies.
Overall, this book is much weaker than the other two Market Wizards books, which are both classics. Many of the traders' strategies are based on structured trades (like private deals) which are not relevant to the at-home trader. And many of the traders interviewed do not have the level of accomplishment that warrants a Market Wizard status, with Steve Cohen and D.E Shaw being exceptions.