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Tag: speculation

Authority v. Tradition Is Central to Your Speculative Decisions

Posted on by Michael Covel

“Because we’ve always done it that way.”

Those are the words of someone likely to lose big–soon. Authority is not a wise foundation for speculative moneymaking decisions. Consider:

Appeal to authority is bad, but appeal to tradition is even worse. Experts aren’t infallible, but at least expertise is usually hard-won and retains some applicability over time. By contrast, tradition is often totally arbitrary or based on reasons that retain no relevance whatsoever. Also, an expert can issue a correction but tradition remains immutable and sacred (source: Jeff Darcy).

I would argue that almost all fundamental style investing falls into a category of tradition. Very few look for an alternative such as trend following. They figure that since it appears that everyone has invested or traded a certain way–that it must be the only way. They forget to dig deeper and forget to look for the truth behind why investing/trading works. Always searching for the “why?” is part of my February 25th presentation in Tokyo.

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10 Most Spectacular Speculations of Past 300 Years

Posted on by Michael Covel

More.

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1907 Stock Market Wisdom: Trend Trading Never Dies

Posted on by Michael Covel

Timeless wisdom! Consider winning trend following charts over 2010-11:

Sugar

Corn

Cotton

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Speculation as a Fine Art: Dickson Watts

Posted on by Michael Covel

A great little read (PDF) from Dickson Watts.

Watts list of ‘Essential Qualities of the Speculator’ show the timeless value of his insight:

1. Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.

2. Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.

3. Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.”

4. Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.

5. Pliability. The ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.”

The qualifications named are necessary to the makeup of a speculator, but they must be in well-balanced combination. A deficiency or an overplus of one quality will destroy the effectiveness of all. The possession of such faculties, in a proper adjustment is, of course, uncommon. In speculation, as in life, few succeed, many fail.

It’s hard to find much on Watts, but I added more here.

Speculation as a Fine Art: Dickson Watts
Speculation as a Fine Art: Dickson Watts
Dickson Watts Trading Laws
Dickson Watts Trading Laws
Dickson Watts Trading Laws
Dickson Watts Trading Laws
Speculation as a Fine Art: Dickson Watts
Speculation as a Fine Art: Dickson Watts

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The Winton Papers: Speculation, Wise

Posted on by Michael Covel

While I have not seen it, apparently Gordon Gekko opines in the new ‘Wall Street’ that:

“The Mother of all evil is speculation.”

Let’s hope Oliver Stone doesn’t actually believe that (if he does, fantastic moron). The counter? An excerpt from the publication ‘The Winton Papers’:

“Speculari, the Latin root of the verb to speculate has the literal meaning ‘to observe’, and a study of speculation will show that most successful speculators can be well described as ‘observers’. To be successful this observation must of necessity be detached and unemotive and thus where great social and moral issues are at stake, it is perhaps not surprising that this view point should arouse some distrust and hostility among the general population (particularly when the speculator profits at a time of general discontent). Yet this detached observation is clearly in the spirit of the natural scientist and the act of speculating for money is in the spirit of the empirical scientist’s restless yearning to add to empirical knowledge and put theories to the test. Thus making money from mathematical models [systematic trend following] is in one sense less about the corruption of intellectual endeavor than about the appropriate statistical test of the utility of such models for the development of scientific theory.”

Note: ‘The Winton Papers’ were published by Winton Capital.

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“Speculation is Evil… You Greedy Bastard Covel!”

Posted on by Michael Covel

Alexander Ineichen writes:

“The financial crisis was not ’caused’ by a single event or a single group of investors. More likely, a series of conditions needed to be met for the dominos to fall one by one and the system to crack. The idea that hedge funds were the first stone to fall and thereby causing the chain reaction, seems infinitely improbable from what we know today. However, a disproportionate amount of regulatory zeal and political energy is spent on regulating ‘alternative’ funds. This we find odd, especially given that the ‘too big to fail’ issue is the single most important aspect related to systemic risk and is far from being resolved.”

He adds:

“Politicians blamed speculators for ‘causing’ oil to go to $147. However, politicians didn’t thank speculators for ‘causing’ oil going back to $35. This seems odd. In the Greece situation, it’s again the speculators who get blamed. Bismarck often remarked that if one likes laws and sausages it is best not to see them being made. This is probably also true for the price mechanism in a free market economy, as the impact of the market responding to bad news isn’t always pretty.”

Ineichen stop being so right.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.