Customer Reviews

Practical Speculation

5 star:		(58)
4 star:		(9)
3 star:		(5)
2 star:		(7)
1 star:		(17)

 

 

This is literally the cost of the wisdom in this book.

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.
No sir,his prediction was a straightforward 19% no strings attached.

At the date of this review,16th of july,the market is up more than 15% from the date the article was published.Now my friend,this is a real time prediction not a retrospective one (I told you so type).

In his short term swing trading using the VIC (a variation from the volatility index)and the stock/bond ration,he caught 960 dow points out of 1050 on 12 trades.
Experienced traders know that predicting reversals in the long term let alone the short term is the hardest task for a trader and that the probabilty of achieving such endeavour by chance variation alone is nil.

In fact,most of the successful hedge fund managers were at one point or another either his students or his employees.

If you already missed the 15%+ return in 3 months or the 900+ dow points, cut your losses short like good traders do and BUY THIS BOOK.
There are two things that experienced traders and squash players of this world do not want: a)being on the other side of Niederhoffer`s trades like the abelsons of 2003.
b)having to return a Niederhoffer`s backhand like the khans of the 70s.
While I was never locked in a squash court with Niedrhoffer,I found myself unknowingly on the other side of one of his IBM trades last year at the expense of my trading account.

Last word of advice,do not let Niederhoffer`s humility fool you.He`s not crawling back slowly up the stairs as he likes to say,he is taking monster steps that neither you or I are capable of taking yet.
Like all the greats,he only talks about his losses and hardly mentions his wins.
If you followed his writings,predictions and recommendations as closely as I did you would quickly realize that the misses don`t amount to more than a very small percentage of the hits.

Laurel Kenner on the other hand is the most shortchanged writer in history.Co-authoring a book with a giant like Niederhoffer is not an easy task.To her credit,her writings prior to joining Niederhoffer at MSN showed a great understanding of the financial mkts and contrarian views on different aspects of speculation (a trait you can`t do without as a trader).

My only minor disappointment was the lack of mention of Livermore.In my years of ignorance I traded using Livermore`s methods and was wiped out few times before realizing that I was feeding the system with my hard earned money by placing mkt orders and only buying on up days and new highs a la Livermore.
Mr.Livermore in my opinion disseminated more ill founded wisdom than Graham since his words became cliches in all brokerage ofices.

On a final note,whether you buy this book or not won`t affect my wealth in anyway SO,IGNORE THIS REVIEW AND THE BOOK AT YOUR OWN EXPENSE

Practical Speculation is one of the two best books on trading/investing on the market, the other book is The Education of a Speculator.

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.

Perhaps the best book ever written for someone trying to establish their own views and beliefs on the markets. If you note the list of people reviewing this book, it is like a who's who of ground breaking work on the markets. Jon Markman, Yale Hircsh, Dr. Steenbab all are on the cutting edge of practical market writing. If you write this off as the authors simply being a "Wall Street insider" you are mistaken. Further, if you let the high accolades of Victor Niederhoffer's brilliance, intimidate you from buying the book., you couldn't be more wrong. If you are just beginning your studies of the market, or if you are a "tried and true wall street insider", there are many lessons to learn.

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. And how to accept the evitable falls as being part of the duty of a capitalist progressive, trying to achieve wealth through acceptance of risk

It clearly shows why others would prefer that you abdicate responsibility. Exposes a journalist with a hidden political agenda, to "balance" capitalistic thrust of the markets. Exposes writers with sole interest of getting most eyes to pay for their latest view. Some blatantly ride the latest fad. Others play on emotions of fear and greed. All with promises of a treasure map to the markets, for the price of their advice.

But perhaps most enriching are the numerous and brilliant ideas on how to get an edge. Not promises of wealth, but an edge. Further, he shows how these "edges" are bound to disappear as markets learn and reacts to them. Victor and Laurel call this the "ever changing cycles" of the market.

Laurel and Vic, however, must be commended for making their method, the "scientific method", easy to understand and interesting to read. They leave it, however, for you and your professors to take the responsibility to learn the nuances of perfecting the statistical method. But give you the overview on how to successfully apply it. The focus is on how to creatively apply this method to the markets. Their narrative is so interesting their presentation of their discovery process, was inspiring to me to develop several of my own statistical indicators. The practical applications for both the billion dollar hedge funds and the few thousand IRA investors are very exciting. This I suspect is the true motivation for Victor writing the book. He had to share his excitement. As the low price and clear time put into it cannot justify the opportunity cost to him. If there was a weakness in the book, it was that after explaining the "ever changing cycle" and power of the method, it seemed clear that Victor was not giving away the shop. Leaving perhaps some of the most potent and recent of his arsenal to himself. Not wanting to hasten the cycle along. Yet, this could be considered it strongest point compared to the books competitors. As they explain the get rich quick authors, either never actually use their methods or only expose their method after they intuitively realize the cycle is about to change. But leave their readers clueless of such cycles. Yet, it is clear that Victor both has invested recently using these indicators and expects to use them in the near future. Perhaps this also explains the low marketing budget. As this clearly is the best investment book you never heard of.

Finally, I must make a comment about chapter 11 on Value Line. This chapter alone is worth the book, and I believe can make or break a investor's career.

I am an economist from the New York area. Long-term investment in the stock market has been quite profitable for most, but attempts to augment those returns by active speculation is not as easy and has cost many far more than they had hoped to gain. As Prof. Milton Friedman has observed, what we assume to be true that is false is far more dangerous than not knowing and knowing that one does not know. Part of the problem is that they are many myths and unproven widely held assumptions that can lead the speculator astray. Even a good number of professionals fall prey to such misconceptions. Victor Niederhoffer and Laurel Kenner's excellent collaboration exposures many of these fallacies and then goes on to show how an aspiring speculator should go about testing and thinking about how to make money. While they provide some useful ideas, cautioning to be aware of ever changing cycles, what they really provide is a way of going about the process and do so in a way that an investor with just the basic understandings of the market can probably follow easily. Victor has no need to write this book. Although he is quite frank in discussing his own investment debacle in 1997, he has been able to recover from that event. His many years of investing have given him experience and understanding of markets that few can match. While providing useful advice, he is not giving away any magic formulas or secrets. I have personally known him for a good number of years and believe him to be a most honorable and generous man. He has gained much from the relatively free economic system of this country and in the spirit of Benjamin Franklin is willing to share some insights with others so that they too can be enriched by this land of liberty and its ordinary people that he so loves. The reader of this book will most likely learn many valuable lessons and be able to avoid many mistakes that might otherwise be very costly. In my opinion, it is a most worthwhile book for any amateur or professional who is serious about speculating.

Some who have reviewed this book point out that some of the points they make are well known. One writes a book for many people, not just one. For many readers, most of what is written therein will be new and useful. For those more experienced much of what they read will not be new, but that is hardly a reason for them to ignore any book that contains familiar material if there are some new gems of wisdom that will be most worthwhile even for them. That is highly likely to be the case with this book because I found many such gems of wisdom and experience. There is also some criticism of some sections dealing with such topics as Alan Greenspan, for example. I even find myself in agreement with some. But just as there are no perfect people there are no perfect books. We do not reject people because they are not perfect or we would have no one to associate with. Likewise we should judge a book by its overall contribution to our knowledge. On this score, this book ranks most highly. This is not a book written in such a way that if will offend no-one but is an honest, tell it like I see it book written by two people with great insights. Those few (and they are few) parts of the book that do not do as well can be glanced over. The attacks on such methods as technical analysis are quite sound and anyone who feels otherwise is just deceiving themselves. Readers will find that most of what is said in this book is not just a matter of assertions but is backed up by the numbers and careful analysis laid out for the reader to see for themselves. The authors do not ask their readers to accept what they have to say on the basis of faith but to test for themselves as they should do with all investment ideas if they wish to prosper. The authors show you how to do just that. There is more to learn than what they reveal, but perhaps they might be persuaded to write more in the future if their current effort is well received.

by Rich Bubb, 6/1/3
During and after reading Practical Speculation, I was struck by many emotions. In other words, almost everything I knew and had been previously told about investing was stripped down to the simple truth and laid bare for examination. And the picture was not pretty.

Initially, I felt trepidation and felt that the journey I was going to be Learning-Through would be formidable. In context it was. In content it was. In level of understanding presented by the authors, it couldn't have been simpler. But is that not the hallmark of superior authors intending to cultivate knowledge in their readers? (BTW: Laurel and Victor also write a weekly column on moneycentral.com titled: The Speculator.)

After shredding sycophantic trading and investing voodoo and hoodoo practiced by the most hyped and ballyhooed Wall Street has to offer, I am eternally in their debt for their opening a window through which one can see the reality of investing and the Market. Not investing without a hope of making a return, not investing without a hope of comprehensibility, and not investing based on hocus-pocus bs. You can easily get that type and level of impostor-knowledge in ill thought out books, websites, and seminars almost anywhere these days. For instance, their chapter on Earning Propaganda delineates in a straightforward manner what works, with the data to back it up, on page after eye opening page (sources always included for those so inclined to do their own checking, and you are welcome to do so. And get into the habit of checking, you'll wonder how you stumbled along without it after a while!). The chapter on what works, and what does not, regarding Technical Analysis lays bare the truths to look at, and demystifies TA to such a degree, it is amazing to me that many Wall Street charlatans are not tarred and feathered by their now severely poorer followers.

At one point I remember I was thinking, "OK, so what does work?" That was so succinctly answered on page 105ff that I started memorizing. No, I won't tell you what it is. Read it for yourself. You were just told where the gold is, mine it yourself.

The beauty of this volume of knowledge is summed up not at the end of the book, but at the end of nearly every convention shattering chapter. Every shattered myth, bar none, is exposed and debunked; illuminated with evidence, data, facts, intelligence, and honesty.

When I was starting "The Finale" chapter, I had an intuitive sense I wouldn't be reading a generalized summation of everything previously explained. I did not. Taking it to another level sounds cliche, but the authors succeeded exponentially to redefine Finale. If the message were musical notes, the resulting crescendo and lucidity of vision are symphonic. For instance, there is an email from "the indefatigable Dr. Brett" that is [IMHO] Beyond Brilliance (see page 350-351) on "Revisiting Complexity in Trading Systems." You cannot find this level of genius anywhere all in one text, at any price. And note the email title begins with "Revisiting", as in "go there again". [One wonders what the Initial Visit was like?]

With chapter titles like: How to Avoid Spurious Correlations; The Future of Returns; The Periodic Table of Investing; Market Thermodynamics (one of my favorites); and News Flash: Computer Writes Stock Market Story, and others throughout, the buyer of this book has nothing to fear. Why, there right on the back cover is a money back guarantee by the publisher of Bottom Line Personal. Checkout "Product Details", then "Look Inside This Book!" on this [Amazon's website], then look at middle of pic of back cover. Seen one of those on ANY OTHER book on investing lately? Heard that at an investing seminar lately? Read that anywhere on a subscription service investment website lately?

Disclaimer: I am NOT a stock market professional. Just a Pedestrian Investor, a very appreciative one.

Thanks Laurel & Vic!

Ms. Kenner and her assistant Mr. Nearderhopper penned a brilliant
work of deep analysis, peppered with nuggets of unusually keen insights into speculation. This book goes beyond simple number crunching and touches that evasive element of speculation: the unknowables. Many traders seek the holly grail of speculation with too-precise tools of statistics and other pseudo-scientific methods. This books puts into perspective the art of analyzing market behavior. Ms. Kenner's experience as a writer shines thru in elegant sentences and coherent paragraphs. It seems as if her assistant co-author mainly helped with the number crunching parts, and the intriguing story about meme eating away everyone's lunch while the world is asleep at the wheel. Nevertheless, it's worth reading. There are many books on trading, and most are nothing more than an exercise in data fitting. This book has substance for the sophisticated reader.
The books is difficult to follow sometimes, as if the authors were confused themselves on certain subjects; however, that is quite understandable given the escaping nature of speculation. For example, the part about interlocking gears, real estate, business cycles, and stocks is simply disproved if you look at the past few years. One thing sorely lacking from this excellent book is careful risk management. Without that ingredient, no speculator will survive in this game, no matter how many doubles he can hit. I'm not sure if the authors know this unavoidable fact as well as they know statistical applications. Each chapter is fairly self-contained, so you can pick up and read them in any order.

if you have a rudimentary knowledge of speculation (i.e. you know how to translate pop culture into hypothesis of mkt bubbles), then this book has absolutely nothing to offer you. if you don't know how to, suffice it to say you shouldn't speculate, and if you still want to, then this book is definitely going to lead you to the same ruin that the author himself found.

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! for the rest of you who would throw your $ into an investment / object of speculation without asking any questions, then vic is your guy.

i often go back and re-read select investing books (eg: alchemy of finance: 3x; reminisces of a stock operator: 3x; intelligent investor: 4x; etc). this book: 1x, and my strongest recommendation to avoid.

This is an investment book for people who like to explore different ideas and enjoy seeing things from a different point of view. One of the ideas that Vic drives home is that most (all?) of what is said in the press about markets is utter nonsense. He discusses the concept of "the meme", were non-objective ideas spread throughout the population like a virus and create their own reality. (Perhaps this is a new word for an old idea that is now supercharged due to technology. See "the crowd" and "popular delusions..") This in and of itself is a valuable lesson.

I noted two big themes in the book: First is the importance of testing ideas. The concept that, "Anything that can be tested should be tested" is a big one. The second theme is that if you live in fear and don't take risks, you can't get the rewards of life. The book provides many examples of both of these ideas.

The book also contains many good stories. In fact, the story of Vic's fall and comeback was one of my favorite parts of the book. It is a story of courage and heroism that I found to be inspiring.

I may not agree with everything Vic writes, but i did find this to be a very enjoyable and worthwile book.

I read Practical Speculation and I liked it a lot. I also read the first book, The Education of a Speculator, which is a great book too, though a little less practical in the short term. I like the style of writing and I guess that's why I always read the author's weekly columns on money central. Being the positive person I am, I am reading with 2 outcomes in mind; 1. to enjoy myself 2. to learn something from it. I reached these 2 outcomes easily, because the book really has a lot of `funny' stuff as well as practical stuff! I can hardly believe that somebody cannot get something positive out of this book for themselves. I have met a few people in life who always look why something doesn't work instead of why something would work. Same thing with dealing with other people; you can catch them doing something right or scoff at them doing something wrong. And what do most people do..? Exactly! Same applies for reading a book. The book is not perfectly written maybe, so is nothing in life.

I enriched my life too with the book recommendations which I otherwise would not have bought, like The triumph of the Optimists, which content surprised and impressed me a lot.

Summarized; whether you are investing or trading, small or big, experienced or not, I highly recommend you to read this book, life will never be the same again afterwards ! If you are an open-minded person, after having read this book, you will definitely change at least something in your future approach to the markets.

In reviewing the reviews of this book, it seems like the reaction is either love or hate. I find myself in the middle. While there are some serious flaws in this book, it does have some useful insights, which, if successfully applied, could easily justify its purchase. All-in-all, however, I found it a disappointing follow-up to the much better "Education of a Speculator."

Some of the flaws include a rather muddled writing style which ranges from the 1st to 3rd person. Also, there is a very strained attempt to blame the recent bear market on a malicious "meme" rather than simply the bursting of a speculative bubble. It seems like the authors have a sort of Peter Pan philosophy where if we only had held hands and said "I believe" to each other, stocks could have flown forever.

In an attempt to discourage conventional thinking (I suppose), the authors attack the work and deed of various personages including Abelson, Greenspan, Buffett and Graham. While the characterization of Abelson as being far too bearish for too long is certainly apt (although rather merciless considering the authors' record), the chapter on Graham is deeply flawed and gets far too personal. They never really attack Buffett head on, but imply that he's a rather unsophisticated (but, somehow immensely successful) member of the meme team that brought down the market. The attack on Greenspan gets really bizarre, blaming him not just for bringing down the market, but the World Trade Center as well. These ad hominem attacks are totally inappropriate in a book such as this. The authors continually seem to be lashing out as part of their deep denial that they were wrong in believing in the never-ending New Era bull market.

Also interlaced in the book is a theme that growth investing is inherently superior to value investing. The authors never give any real support for this assertion - they try to prop it up mainly by disparaging Graham and Buffett. Based on the many studies I've seen and my own experience, I would submit that they are completely wrong on this point.

Their attack on technical analysis, however, is right on the mark. Ironically, this is the part that will probably most upset the speculators lured in by the title.

Some of the statistical work is useful. It brings a sorely needed aspect of science to this area (as did Ed of Spec) - most books on investing/speculation skip statistics altogether. However, much is made of relationships where the r2 is in the neighborhood of 1%. While these relationships may be statistically significant, they are practically useless for actually making money.

Ironically, I actually felt that the best and most useful part of the book was on fundamental analysis. The studies (by others) that are discussed relating to changes in inventories, accounts receivable, etc. are something that I can use and hopefully profit from.

To give the book its due, it is a reasonably good and entertaining read. The authors draw on many ideas and sources to make their points, such as they are. Their take on the market is unusual, eclectic and thought-provoking. The point that they repeatedly try to make, with uneven success, that the scientific method should rule the decision-making process, is an extremely important one. Considering how many totally worthless books on investing/speculating there are, I think the weak competition benefits this one enough to earn it 3.5 stars.