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on August 18, 1999
In finance, "The Black Box" describes a hidden and usually quantitative process an investor might employ to select securities or markets. The author clearly employs such a box in his work though it seems completely subjective. The problem is, he does not see fit to explain the inputs; the book reads like a mystery novel without a resolution. In his defense, he does say, at the outset, that he is not going to teach you his methods. Yet you expect more. The book is a long (very long) recounting of his own personal history (including odd digressions on Coney Island, and his father, whom he worships through a nine-year old's eyes) as well as his interests--how these things created the savant. As Flaubert might say, it's the stuff of his "Sentimental Education." But investing is not strictly literary. Imagine a Brain Surgeon explaining his techniques by alluding to his liberal arts term papers and you'll grasp the essential frustation with the book. For example, the author equates trading with the performance and appreciation of symphonic music. Indeed, he says he hires musicians to move millions in options money. Why? He doesn't elaborate; only that they are better. Horse Racing is another analogy he mentions. But what are the statistical underpinnings? How does a Racing Form connect to the Wall Street Journal? One more: He claims that only old literature can train your senses for the markets. This strikes me as absolute hogwash, a philistine bowing to Aristotle to gain class. In all, it's as though he is trying to intellectualize his profession, as if just making money is vulgar; he's staking a claim for traders in the pantheon of artists. Of course, many of his points are good ones, but there are not enough of them (a few equations would have helped). Indeed, the book comes off as an exercise in self-congratulation. And God knows what debt he owes George Soros, venerated here with religous adoration. Strange, indeed. (OK, I admit I bought a Soros book after reading this one. He at least ties his ideas to the markets.) Next time, Victor, tell us your secrets. The good ones.
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on July 19, 2003
The Education of a Speculator is a long, sometimes meandering account of the life of speculator Victor Niederhoffer. There is no particular order to this book, at least that I could discern; Niederhoffer jumps from topic to topic, going backwards and forwards in time. The style is almost stream of consciousness, with the main subject of finance digressing into topics as diverse as biology, music and squash (the author is a serious player of squash and other racquet sports). In addition to Niederhoffer's unconventional style of writing, the book assumes a fairly high level of knowledge regarding financial markets. Those (such as this reviewer) who are not well versed in the kind of articles, charts and data found in the Wall Street Journal or Barron's will often find themselves in way over their heads. For all this, I still recommend The Education of a Speculator, even to people not especially interested in the world of investing. Victor Niederhoffer is what may be called a holistic or macro thinker; he could also be called a Renaissance man. He has knowledge of many subjects and sees the connecting links between all events, objects and disciplines. He may not be right about everything, but his perspective is always interesting, intelligent and original. He combines the streetwise instincts of Brooklyn, where he grew up, with the scholarly mindset of Harvard, where he both graduated from and taught. As for investing itself, Niederhoffer, like many speculators (at one point he describes the overlapping definitions of an investor, a speculator and a gambler), has had many ups and downs in his life. When this book was written, he was at the top of his game; shortly afterwards he was wiped out. That, of course, was several years ago and he is still active as a writer (he has recently written a new book) and investor. I have always been fascinated with the world of investing, especially the kind of volatile speculating engaged in by people like Niederhoffer. Even if you don't understand all the details and nuances, the book conveys the dangers and excitement of this unpredictable universe. The author has spent many years compiling and analyzing data concerning markets, and he discusses how difficult it is to make predictions based on past performance. It is easy to look at a chart and, after the fact, describe how stocks or commodities moved in a logical, predictable manner. Often when you try to apply any seemingly logical system using real money, the results are disastrous. Niederhoffer seems to conclude that markets are paradoxical -they are both logical and illogical; sometimes they follow patterns but sometimes they are chaotic. And, most importantly, we can never be sure when order or chaos will prevail. If there is one overall lesson we can take from The Education of a Speculator, it is probably something like this -reality is almost infinitely complex with every part connected to every other part, the whole thing organized by some vast pattern that can only occasionally be comprehended.
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on April 5, 2002
This is a brain dump written without much apparent discipline. Niederhoffer's egotism and hubris can grate at times and the book is somewhat self serving e.g. the circumstances that led to his quitting squash for five years were not quite as they seemed.
However there is a lot of good material and if you like ideas you will enjoy the way he ties many different fields back to trading. Some of the ideas are baloney but many are not. I found it useful because it does give a lot of insight into how a top trader thinks.
From reading the book it was quite obvious he would blow up at some stage, which he has in fact done.
The chapter on the ecology of markets is worth the price alone. Also the one on the interconnectness of markets, and on deception and gamesmanship.
However this should definitely not be your only book on trading. There is hardly any useful material on risk management.
Worth a read IMO but a lot of people will not like it i.e. those looking for a cookbook approach to easy wealth.
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on March 17, 1998
I began to read "The Education of a Speculator" with much enthusiasm, but I found that seductive jacket-cover promises and excellent marketing were no substitute for overwrought prose, shameless self-advertisement, and simple investment cliches. Indeed, the guise of offering trading advice is merely an excuse to publicly rattle the collection of silver spoons which have fed the author's obvious intelligence (or appearance thereof). Although the book is salted with various investment proverbs, they are rather dim compared to the showcase of the Niederhoffer pedegree in neon lights - not exactly what I was looking for. Check out Jack Schwager's Market Wizards and New Market Wizards for a concise treatment of better traders, superb advise, and no egos. "The Education of a Speculator" promises unique insights into the mind of a successful market guru, and in that respect, it is quite successful - however, it is a mind affected with chronic hubris and a victim of it's own percieved success. I am forced to the conclusion that, in the world of elite traders, Mr. Neiderhoffer's particular mind-set is more the accident than the rule.
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on April 30, 1999
An interesting book about an interesting guy for those readers who like biographies and philosophical meanderings. Unfortunately, few practical investing insights are shared other than the one above (which I agree with!) To his ethical credit, Neiderhoffer puts the reader on notice in the first few pages that no great investing secrets will be disclosed as this would cost him (and the reader) the advantage. However, judging from the way Neiderhoffer lost his clients' money (heavily margined bet long on the S&P500 futures just before the Asian meltdown) with no offsetting put hedge (oi vay!), I am pleased he did not share his "secrets".
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on December 7, 1997
I purchased Mr. Niederhoffer's book after his much publicized debacle in the stock market in October, in an attempt to understand what could have motivated him to take the risks that brought his trading career to an end. What I got out of the book, besides a plethora of shameless self-aggrandizement was reinforcement to the old adage that sometimes, it is better to take than to give advice. Mr. Niederhoffer's herky-jerky style and numerous tangential forays into the "academic & philosophical " foundation of speculation do nothing to keep the readers attention or interest and at best comes across as intellectual chauvanism. This approach to the subject, liberally sprinkled with accounts of what a big lasagna he is (was?), makes for a tedious and sometimes annoying read. A point worth highlighting was, his accurate description of the "HOO-DOO" or "tipster" (in laymans parlance) and his recollection of meeting Ivan Boetsky, in the prime of his career, and regarding him in this light. From Niederhoffer's accounts of how many times he was closing to losing the "farm" and his repeat mistakes in the markets, calling Boetsky a HOO-DOO smacked a bit hypocritical. To say that Victor Niederhoffer was an accident waiting to happen is a fair assesment of the book. (Ironically, his best friend George Soros seemed to think so, as Niederhoffer so proudly boasts in the opening chapter.) Playing the absent-minded professor in the reality of the modern financial world can exact a tremendous price. Sadly, Niederhoffer was too busy telling everyone else this, and forgot to take into account his same weaknesses.
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on December 17, 2000
If you expect something like Pit Bull, Reminiscences of a stock operator, market wizards (I&II), Trader vic, Investment Quotient etc etc, you will be worse off than even disappointed. This book takes you to anywhere but successful investment and trading. I don't understand why some reviewers wrote it's a must read for traders or investors. Quite the opposite, as a professional trader, I would sell this book short.
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on April 12, 1997
The author obviously knows his subject but is overawed
by his own expertise. A trend spotter par excellence, this book both makes a mockery of trends (he always bets against) and also subjects trend analysis to the kind of stupefying statisitical fury which is at core devoid of meaning. In a fit of Wall Street honesty he reminds us that no book of this price would detail any effective scheme of success even if it was available, which perhaps it isn't. (Note: in Niederhoffers World, that conclusion would probably spawn a derivative) Suffice it to say that if you can't spot the fool in this book, then you are the fool. Norm Marcu
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on March 16, 2007
As many already know, Niederhoffer has had quite a volatile, and highly publicized career as a speculator. But it is pure naivety and ignorance for people to brush his work off merely because of the two blow ups he had in his fund. In fact, if anything, these two events have, in my opinion, made Niederhoffer's perspective exponentially more valuable than most modern financial literature on the subject.

With that said, I must disagree with his view on statistical inference and its role in market speculation. Although statistical inference is valid as a data point, when one uses it as their primary and sole validation of any trade premise, the risk they expose themselves to is far too high. The foundation of his theories are based on using prior statistical probabilities to validate a trade. In other words, if the odds of a trade blowing up in your face are 1 in 1000, then it's a good trade. But if you don't consider what is going on in the macro environment, the overall sentiment of market participants, and other "subjective" data sets, then you risk exposing yourself to a situation where you make a massive long bet on the S&P futures at a time when the market is in a freefall because of some geo-political and/or financial event such as a Russian debt default, or Asian financial meltdown. This is the scenario that blew Niederhoffer up, but the interesting thing to note is that the "trade" itself had already caused significant loss in a prior event. So what does that tell you about statistical inference?

The value in this book is what you gain from his anectdotes and insights. Although he has a tendancy to go off on a tangent and lose you, if you can keep your focus, this book will provide you with invaluable insight into the mind of one of this generations most experienced market operators.

And his comparison of a classical symphony with the Japanese Yen is priceless, and can be worth the price of this book in itself.

I have personally read this book over 5 times by now, and I'm sure I'll read it again.
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VINE VOICEon April 3, 2007
I've worked in physics and am heading for a career in finance. In these fields you occasionally run into that guy. The guy who is either so smart nobody can understand him, or he's a manic-depressive frothing in a mania stage. Either way, "that guy's" nervous system is obviously wired to a higher pitch than mine ever will be; at least without chemical additives or surgury. Reading the book is like talking to that scary smart manic guy. It's always humbling running into "that guy." Niederhoffer is that guy. He ranges wildly from stories of his colorful youth in a working class neighborhood in NYC (which actually did remind me of Feynman's stories) to horse racing, to squash, to trading FOREX. He goes so fast, you can barely keep up with him, even in a leisurely read. Why is he talking about handball? I thought he was just talking about liquidity? Checkers? And how does Jesse Livermore fit in? Read it and see.

Niederhoffer is the type of man I admire the most; he has physical courage, he's brilliant, he loves his family and friends, he beats the system with wit and street smarts and he comes from humble means. He managed to get a system for gaming the GPA named after him. He was a world champion at Squash. He was an early pioneer of direct marketing private equity funds. He was an early skeptic of the efficient market hypothesis (what would traders get paid for if the markets were efficient?). He was a professor at U.C. Berkeley. He built (and lost, in a story I hope the next edition of his book documents, and, stunningly, built again) a great fortune. His story is completely mind boggling; the world is a better place for his having lived his story in it, and you'll be a better person for absorbing his insights about the world.

Beyond my gushing over his yarn spinning, if you're a careful reader, and you know something about markets, you can pick up some pretty serious insight from his descriptions of his day to day work. The only other book I got a feel for the markets like this was Larry Harris' book on Trading and Exchanges, and that was nowhere near as much fun to read.
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