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Practical Speculation Paperback – January 21, 2005
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At last, some modest proof of what some of us have long suspected - beware of lords on boards. Authors Victor Niederhoffer and Laurel Kenner* studied the relationship between stock returns and the number of board members with titles in the 50 largest companies by market value in the FTSE 100. Over a five year period, the more titles on the board, the worse the performance of the shares.
Niederhoffer and Kenner even invented a valuation indicator, the earnings/lords ratio, dividing the earnings per share by the number of titles in the boardroom. At the time they did the study, Powergen, with just one lord, looked the most attractive stock on this basis.
The finding raises the obvious question of causality. As the authors write: "Was it the lords who caused the lackluster performance or the lackluster performance that prompted the companies to use lords as window-dressing?"
That comment, however, suggests a possible American misunderstanding of the British honors system. The presence of titles on UK boards does not simply indicate the lingering influence of the ancient British aristocracy. Charities may still want to recruit Lord Ponsonby-Snodgrass just to make the notepaper look respectable; boards of FTSE 100 companies don't really need to do so.
Instead, the preponderance of titles shows the tendency for the honours system to reward people for business success. Rise to the top of a FTSE 100 company and you can be pretty sure a gong is heading your way, especially if you have the foresight to make some political donations.
The "lords on boards" effect may thus be merely another indication of the old rule of "reversion to the mean". Executives get awarded titles when profits are strong and the share price is rising, not in the aftermath of profit warnings and failed acquisitions. Since all companies eventually suffer some sort of bad news, the disasters are more likely to occur after the honours are awarded. When the queen brings the sword down on an executive's shoulder, the blade of Damocles may not be far behind it. *Practical Speculation, published by John Wiley & Sons (The Financial Times, June 4, 2003)
"...At last, some modest proof of what some of us have long suspected - beware of lords on boards..." (Financial Times, 3 June 2003)
"...will enable the investor to make independent decisions about their investments with confidence..." (Portfolio International, June 2003)
"...shows how far pension fund figures are out of line with long -term share market expectation..." (Liverpool Daily Post, 6 August 2003)
"Niederhoffer and Kenner dispense pearls of wisdom for both the seasoned professional and the novice about investing and much more. Though you may not agree with all that they write – I can’t imagine anyone would – they will compel you to think and very often, cause you to smile." --Mark P. Kritzman
I consider Victor Neiderhoffer's highly entertaining Practical Speculation to be a modern classic. In Practical Speculation, Neiderhoffer explores a wide range of fascinating topics ranging from the wisdom of value investing to the implications of a company slapping its name on a shiny new stadium. - Street.com--This text refers to an out of print or unavailable edition of this title.
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Top Customer Reviews
Mr.Niederhoffer is back after his fund with $120 million under management,rated the best for 12 consecutive years,lost big and was forced to close in 97.
He`s back explaining what went wrong and how to avoid the mistakes he himself committed before learning (the expensive way)what not to do.
It`s hard for a small fish like myself who lost his small stake (relatively speaking) few times in his years of ignorance to recommend this book since,I consider it a hidden treasure no one has the right to benefit from in this cut throat business without paying at least the tuition fee I and my fellow traders paid switching from one losing system to the next.
This said,Do you accept the gift?
This book is the closest thing to a free lunch on wall street.
The best investment ideas are found in the most unlikely places.
Isn`t Practical speculation,a book written by a hedge fund manager who lost everything and mortgaged his house, an unlikely place to find great investment ideas? Well,think again.
Victor Niederhoffer is imho the world`s best trader.
Now,here`s the man`s REAL TIME track record that you can verify for yourself:
In March 2003,Niederhoffer was THE ONLY bullish trader I know of.
He published his opinion in a very insightful column on MSN -why the market should go up 19%? - while the Prechters,Abelsons and the other trend followers of the world were talking about a 10 year bear mkt and a crash that only Mr.Prechter can help us conquer.
Mr.Niederhoffer`s prediction was not contingent on any break of a trendline or a moving average crossover or a resistance level breakout like most technicians tell you to save face in case their prediction goes astray as it usually does.Read more ›
The Education of a Speculator, was largely an autobiography, in which Niederhoffer shared some of his life experiences and lessons, that helped him become one of the greatest traders in history. Most successful traders will tell you that it is the best book on the subject of investing ever written.
The new book Practical Speculation, teaches you how Victor does his research, walks you through a few examples, and explains why the the research churned out by brokerage firms, and Stock Market Commentators is flawed, and will only loose money for you. Victor alerts you to the pitfalls that most average investors fall in to, and shows how the scientific method can be used to illuminate the path.
This book is well written, entertaining, and filled with great ideas, that you wont find elsewhere. Victor's two books are probabaly the only two books any investor need read. I have read most of the popular books on investing and trading, and Victors books are so far ahead of the rest it is unbelieveable.
I have only just finished reading this book, but I know I will go back to it many times, as it is difficult to absorb all the great ideas in one reading.
I am far removed from Wall Street, and Indiana boy just beginning my "investment career", without a business degree from a esteemed college. Yet found this book inspiring and full of wonderful suggestions on how to approach the markets.
My best sentence summary of this book: "It leads you to personal responsibility for your investments".
You learn of Victor's own dramatic poignant personal acceptance of such responsibility. From his meteoric rise to top of the hedge fund world to his fall, in 1997, only to reinvent himself to make a return. Few have had a more spectacular fall from grace. He admits mistakes and clearly exposes an easy target for his critics. However, I found this most endearing. He gladly accepts the criticism of others more enlightened, to teach his mentors a few lessons. He explains how to avoid being blinded by success, if you are fortunate enough to achieve it.Read more ›
vic knows how to build an audience / loyal cadre far better than he can write, which in turn is far better than he can manage a hedge fund. ---i make this statement on the premise that some 70-odd lunatics thought this book was insightful! ---outside of running some rudinemtary regression analyses that offers support to preconceived notions (i.e. selective interpretations as a result of selective data sets), the authors take it upon themselves, high in their ivory towers, to tear down such sacred cows as value investing, trend following, ben graham (and likewise buffett), and market timing. ---and the fact that the authors have no success to show for themselves is not lost on this reader (whereas buffet's success speaks for his philosophy).
as an aside, i find that any book, ANY, that finds it necessary to put in testimonials and stories about individuals is obviously lacking in content, insight, and data. this book is full of testimonials (both in support and contrast of the authors).
here's a great example of non-information that the authors package as profound: if a stock went up 3 weeks in a row, would you bet that next week it would go up or down? decide! --vic's answer is that its more likely to go up--did you bet wrong? probably. i did....but i don't know, i'd like to look at the stock, the news, developments, chaikin $ flow, inst ownership, overall mkt sentiment, etc etc before i decide, thank you very much!Read more ›
Most Recent Customer Reviews
I have no sympathy for vic for his blow up and loss of his fortune. He who lives by the sword dies by the sword. Read morePublished 8 months ago by VIVEK SHIVDASANI
You got lost while you are reading this book because it is poorly written, I didn't get a single benefit out of itPublished on January 14, 2014 by ADHAM NAJI AL-HARAZI
I am stunned, stunned, that 70 or so people have found this book to be helpful enough to be rate it 4/5 stars, because, in my 5 years of reading 100+ financial books I have not... Read morePublished on January 3, 2014 by Mamiwatah
I think many investment books just tell you what to do. This has a much stronger focus on the how and why.Published on January 24, 2013 by Victor Reichert
Niederhoffer has written a fine book on statistics. Better than most. The point being that most of this knowledge
is already available to the MBA student with a library... Read more
I am reminded of the story about the researchers who studied the hopping of a grasshopper. They clapped their hands to make the grasshopper hop. Read morePublished on June 15, 2012 by Elissa
I find Niederhoffer to be quite entertaining. However, most if not all investors should probably NOT follow his example. Read morePublished on March 3, 2012 by Amazon Customer
I bought this book after reading on Victor Niederhoffer in the Market Wizards books, and after reading an article on him on Wikipedia. Read morePublished on November 26, 2010 by Straddle1985