Sometimes the biggest risk of all is taking one, and the need to be sure you are making the right choice actually increases the risk. The market is not efficient and hedging doesn't work. To rely on charts to understand the market is Mamis' way. The author is an excellent market technician who offers sound financial guidance and insights into the prepared mind. He gets your thinking going with a comfortable investment philosphy that will often go against convention. There are enough anecdotes, war stories, and charts to make for sound advise. The path to market freedom is technique, and you don't have to be one of the best traders to succeed with experience. It seems to me that the entire 1990s have confirmed the ambiguities of market language and how to operate in such a world. You will know how to keep risk at bay which most of us find not to be an easy task. 241 pages.
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From Kirkus Reviews
A veteran Wall Streeter, Mamis argued for technical (as opposed to fundamental) analysis of stock prices in When to Sell (1977) and How to Buy (1982). In the charmingly existential text at hand, however, he goes well beyond his demandingly interpretive discipline to reflect on larger issues. To achieve success in either life or the market, Mamis points out, individuals must act before they know enough, meaning there are hazards involved. He observes, for instance, that investors who hesitate may catch only the last 20% of a bull move and thus assume a disproportionate share of risk. Among other problems, the author notes, those under pressure (i.e., at risk) often let emotion determine their responses. Since experience instills concern as well as confidence, he says, many people (having been coerced into socially acceptable behavior patterns since childhood) become paralyzed at critical junctures in their personal and financial lives. Taking as a given the premise that ``the market climbs a wall of worry,'' Mamis advises readers to trust their intuition (not instincts) whether trading equities, falling in love, or engaging in other more or less gainful pursuits. Incurring informed risks, he asserts, can prove a liberating proposition whose reward is not necessarily a payoff, but a balance. By this, Mamis means the satisfaction that accrues from playing a game (or role) to win, rather than not to lose, from start to finish. In addition to an abundance of Zen-like pronouncements (e.g., ``death is the extreme of risk''; ``like sex, money distorts our senses''), he offers a full measure of contrarian counsel on a wealth of subjects--from gold (a commodity Mamis cites as an impotent hedge during recent market breaks) through indexing (an investment approach that reduces responsibility without curbing risk) and diversification (a system ``designed to protect the dumb''). Thought-provoking perspectives on the market and life as tests that never end. -- Copyright ©1991, Kirkus Associates, LP. All rights reserved.
--This text refers to an out of print or unavailable edition of this title.
About the Author
After serving as Assistant Director of the NYSE Floor Department, Justin Mamis founded and edited The Professional Tape Reader in 1972, selling it in 1977 to its current editor with thoughts of retirement. Instead he spent several years as an "upstairs" Member-Trader for Phelan, Silver, an NYSE specialist firm and subsequently settled into his roles as market advisory letter writer, forecaster, and philosopher on behalf of Wertheim & Co., and then Gordon Capital. He then became Senior Vice President and Chief Market Technician at Hancock, where he wrote his weekly Mamis Letter. Quotes from the Mamis Letter appear frequently in Barron's and The Wall Street Journal and his often heretical and usually grumpy comments can be heard from time to time on CNBC. Among his credentials he has been voted for several consecutive years to the Institutional Investor "All-Star Team" in the categories of Market Timing and Market Technician. Justin continues to write his market letter and do forecasting and philosophizing.
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Customer Reviews
Most Helpful Customer Reviews
54 of 54 people found the following review helpful
By dbphoenix
The Nature of Risk is a seminal work for anyone who understands that self-knowledge is key for success in the financial markets, particularly at market extremes. Rather than babble about risk in general, Mamis takes this engine apart and examines its parts, among which are information risk and price risk. He explains that as one's tolerance for information risk increases (the need to know why the stock is doing whatever it's doing), one's price risk diminishes (one is better able to jump in and take advantage of whatever opportunities for picking up cheaper shares present themselves). On the other hand, if one has no tolerance for information risk and must know everything about a stock's movement, his price risk will be that much greater because the price will likely, by then, have risen to an over-extended level. Therefore, having identified these components of risk (time risk is another), one must then balance them out in order to approach the markets rationally and unemotionally.
An extremely important work, particularly for the investor who is plagued by doubt, confusion, and anxiety.
26 of 26 people found the following review helpful
By dbphoenix
It's been four years since I first reviewed this book (see the next to the last, below), and I still consider it to be absolutely essential for anyone considering any sort of involvement in the financial markets. In fact, it's probably essential for anyone who is considering anything at all that entails more than minimum risk.
The amateurs miss the point. This is not about the best stochastic settings or how to massage the bid and the ask. This is about facing up to the very real risks inherent in the financial markets, including the very real risk of financial ruin. Amateurs don't see the risk; therefore, they don't bother to grapple with it. Instead, they would rather blow up and disappear. If one wants to last, he must come to terms with the nature of risk, his own tolerance for risk, an understanding of how to manage risk. Without that, he's doomed.
21 of 21 people found the following review helpful
By A Customer
I read the first edition of Nature Of Risk many years ago while in college developing a thesis about markets, the media, and mass behavior. This book helped me to sharpen my thinking on those topics, but it also was a sheer delight to read and reflect upon. It gently guides readers to consider their own risk-acceptance (and denial) behaviors in the face of everyday events and circumstances (one of which just happens to be the financial markets). Nature Of Risk is *not* a book that will help you to "win in the markets." But it is a pleasure to read. There are very few writers - especially financial writers - of Mamis' caliber, precision, and throughfulness.
21 of 22 people found the following review helpful
Mr. Mamis steps beyond facts and figures used to analyze the stock market. He examines the psychology and consequences of waiting, learning, and gathering information about potential investment and life choices.
An informed decision would seem to be a sound one. It may very well be, yet in the context of the market, as information risk diminishes (more knowledge is gained about a particular investment), the price risk will increase (assuming positive news results in a rising stock price). Once an investment is deemed to be solid and secure, the existing information will already be reflected in the price of the equity and the potential for appreciation becomes much more limited (price risk increases). The art of balancing information risk and price risk is a central theme of the book, which is discussed, in intricate detail. Also discussed are methods of determining when price risk is likely to be at an absolute minimum -- all news surrounding a company is bad, and no matter how much more bad news comes out the price does not decline further. An interesting "head and shoulders" method of timing the market is presented as well.
Whether it's embarking on a new career, investing for a quick hit, or retirement, taking a new job, signing an agreement or contract, making a new purchase, or getting married, all of life's decisions involve the same basic tradeoff between information risk and anticipated benefits (price risk). The author discusses not only the stock market and investing, but presents mental models from various situations, which most anyone has experienced, and can relate to in some form.
... Read more ›10 of 10 people found the following review helpful
By Jonathan
I was reluctant to buy this book based on the first reviews I read. However, I have been daytrading for four years now, and frequently go against the crowd. Perhaps it is this contrarian view that keeps me in this business. I manage a proprietary firm in Denver (Bright Trading) and recommend this to ALL the new traders as well as veterans of the craft. It is fresh, insightful and really gets to the meat of what makes one trader successful while another fails. A great companion to this book is Mark Douglas' book Trading In The Zone.
16 of 18 people found the following review helpful
By H. Trivedi
Amazon Verified Purchase
Firstly, I have a lot of respect for Mamis, so this is NOT to run him or his writing style down.
In-fact, I have given his other books, When to Buy and How to Sell the Five Star ratings as they are very useful and well written.
However, after reading those, this book seems to repeat some of the points made in them and seems a little defensive about Technical Analysis. Avoid this one but positively buy the other two.
Most Recent Customer Reviews
3.0 out of 5 stars
Good point, book kinds of drag
In a sentence, this book belabors the point you can't let yourself get paralyzed and you have to make a decision. Read more
Published 8 days ago by Robert Zaleski
5.0 out of 5 stars
Strange but great
Is a strange stock market book, but great. The idea that information risk is inversely correlated to price risk is just a fair description of reality. Read more
Published 20 months ago by Hugo
5.0 out of 5 stars
Excellent! Should be one of the first books that any trader reads.
This should be one of the first books that any trader reads. I can understand why it isn't. It doesn't have the mind-blowing rags to riches power plots that attract the masses,... Read more
Published on January 11, 2010 by DK
5.0 out of 5 stars
A Fascinating and Valuable Read
I can't put the book down. Mr. Mamis' thoughts are unique and exquisitely thought-provoking. He is invaluable in illuminating the self-examination necessary in my work as an... Read more
Published on July 17, 2009 by Arlen
5.0 out of 5 stars
A Different Twist on Risk
I was surprised to see a couple of reviews calling this book psycho-babble. Those criticisms seem off the mark to me. Read more
Published on January 22, 2009 by Leisa
5.0 out of 5 stars
Fantastic book on risk!
Justin Mamis talks about risk and knows what he is talking about! He describes different types of risk, like information risk or price risk. Read more
Published on June 13, 2008 by Chris Jaronsky
2.0 out of 5 stars
So-So
If you are going to buy one of his books, get "When to Sell". This one was long, wordy, and tough to read the whole thing - looking for content. Lots of fluff. Read more
Published on September 8, 2001
1.0 out of 5 stars
when technician turns psychologist
I read Mamis' "When to Sell" and looked forward to this book. I was disappointed to find "The Nature of Risk" is three parts psycho-babble and one part... Read more
Published on July 28, 2001
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