Good show
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The book by Victor Niederhoffer (VN) and Laurel Kenner is written in much better style than VN's first book. Unlike his first book, which describes a sort of 'blood and guts' style of investing, the authors believe that a more empirical approach points the way towards investment success even though I did wonder occasionally, if they follow their new investment approach to the letter.
In Part One, the authors pour cold water on the mumbo jumbo of investment analysis and the art of predicting (future) stock prices. Personally, I have always considered technical analysts a bunch of loonies and VN does not offer any evidence to refute this belief. 'The Cult of the Bear' and 'We are Number One' are similarly exciting investment concepts, the world could happily do without. However, they will of course continue to persist; hence do not skip Part One, if only for recognising them for what they are.
Part Two 'Practical Speculation' details the author's approach to investing. Along the way they mention their favourite investment book - I won't mention it (but it is on my shopping list) - quite a few times and it would appear to form the basis for the authors long-term investment strategies. What I didn't particularly like was the chapter on baseball results and long-term market trends. I am sure there is a correlation, but even the statistical approach can be taken to extremes.
This book will not tell you what to invest in - the occasional exception being permitted - but it is in any case a must read. If you are in the market, you should learn quite a few factors to aid your strategy.
The fact that VN has improved on his writing style is a definite plus.
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Highly recommended
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The authors show that in order to think rationally about investment decisions, and the uncertainty of markets, the crutch of received wisdom needs to be abandoned, and an empirical, scientific approach adopted in its place. With easily followed statistical arguments (and a healthy dollop of common sense) the authors readily demonstrate how so much of that which is taken for granted in the financial media is often nothing more than repeated assumption and propaganda. Whilst so much is dismantled and exposed - as either noise or error - this is certainly not a pessimistic book. Instant formulae to riches might not be proffered but the book could certainly help engender an investigative, skeptical mind able to uncover its own profitable trades.
This book stands as a beacon of reason midst the swath of Buffett hagiography and tea-leaf technical indicator manuals which festoon the bookshop finance shelves. It is a wake-up call to anyone who has succumbed to the lazy thinking which gives this vast cornucopia of clap-trap a market. It is also a very lively and playful read running a gamut of ideas from Francis Galton through to memetics, detouring to take in horse-racing, chess and varied other sources of insight along the way.
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