The Stealthy Sisters of Spin and Speculation (Part 5)

I highly recommend the book Practical Speculation by Laurel Kenner and Victor Niederhoffer (2003).

Part 1 [no need to waste your time reading Part 2] talks about a variety of ways people in trading/investing circles spin things. Kenner and Niederhoffer discuss unfounded claims, bogus statistics, and an overall lack of science that exists in the financial industry. I believe this is mandatory information for anybody aiming to make a serious go at trading/investing. Understanding the dangers/limits of speculation can help keep traders safe.

Speaking of making a “serious go,” remember my “forest for the trees” analogy that suggests many people think they are doing the right thing when in fact they are merely speculating. I regard speculation as gambling and one reason so many traders [allegedly] fail. To satisfy the ego, people may wager on things and boast loudly when they win. Like the slot machines at a casino, the loud boasting is an advertisement to others that they, too, can be right at sometime in the future and win big. The boasting therefore serves to sustain the speculative enterprise.

The losers will probably exit the spotlight quietly with tail between their legs. All the better if nobody notices them slinking out the side door to save embarrassment and ego insult.

Speculation is not the way to make consistent income in the markets. Speculation is the only thing many people know, however. These folks have not learned any “responsible trading/investing” strategies. They haven’t studied the markets enough to understand what risk is really about. Some think they know to varying degrees but they land far short. For them, the intermittent trade or investment and the occasional winner produce a feeling of mastery. That will likely come tumbling down with tragic consequences later if they have been “fooled by randomness” for far too long.