Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.



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Dgard expounds on Weightlifting:

This is a post I have been working on for some time, but the recent message from Allen has spurred me to complete it. A theme on the List is to "Write what you know". In this regard the subject is well within my field of knowledge. Those on the List who know me have only seen a shadow of my former self. I was an amateur bodybuilder, and in my prime weighed 225 with single digit body fat percentage. Does this illustrate knowledge? Not in itself, but I have trained several champion bodybuilders and Olympic medalists. I hope relating the Markets to Weightlifting will impart some new perspective on the Markets, and maybe impart a new appreciation for the importance of exercise for one's longevity.

The ways the Market correlates to Weightlifting are numerous, and as I began this missive I realized one could write an entire book on the subject. I will try to be brief here. First, I have learned you cannot go against the Big Boys without "juice". In weightlifting this means steroids. I do not care how good ones genetics are, you cannot compete against those who have a pharmaceutical edge. If you think that star athlete is not on steroids, then you are probably mistaken. I personally know Olympic medalists in several sports who admit to me they have used steroids and their competitors did too. The fact is, at the elite levels of most sports, some steroid use in today's world is a must. Arnold Schwarzenegger, who competed at 225 pounds and is possibly the greatest bodybuilder ever, could not step on stage in today's bodybuilding world. A lot of traders I meet try to implement the same techniques as they read large investors doing. How many people read interviews with Buffett and think they should be trading currencies too? I see ads now for Forex trading courses taught at weekend seminars. How many small investors will line the pockets of bigger institutions after taking these courses? How many small investors were killed from leverage in 2000/2001?

In weightlifting it is important to lift in increments. One warms up, then progressively increases the weight until the target weight is achieved. Similar to the trader who buys into a position in increments, not committing his money to the full position sought in one transaction. It is more important to know more than just how to lift the bar. Learn kinesiology, physiology, nutrition, etc. Knowing how a transaction is performed is not enough. Weightlifting is largely mental. A large part of lifting a weight believing you can and being mentally prepared to do so.

Ever-changing cycles exist in the gym. There is a saying... "Every workout works, and none of them work." People who espouse workout programs as "The one" workout are doomed to fail eventually. The body adapts to the stimulus very rapidly. To continue to be successful, one must change their routine. In this regard, I meet people every day who believe they have the one way to workout. Any other method is wrong. In the same vein, when someone tells me they are not making progress in the gym I ask them two questions: 1. What is your workout now? 2. What was your workout 6 months ago? The answer for both questions is usually the same. There is more than one way to skin a cat. How often do we as traders feel those who trade a different philosophy from our own are wasting their time? TA is a waste. Fundamentals are a waste. Etc. Much of weight training is contradiction to what medical science claims. If you believe what the scientific community tells you, then you may be short-changing yourself in the gym. There is no quick and easy workout. You are not going to develop an athlete's body in 6 minutes per day. Do not try to copy someone else's routine. The best workouts are the ones that are derived from one's own thought process and study.

As we age, past the 30th year, the body starts to lose muscle mass. Weight-training is important to one's health as they age. Lifting weights helps prevent osteoporosis, retain muscle mass and thus keep the metabolism elevated, helps keep joints functioning (when done properly), and negates the effects age can have on posture. Age on the human body is like inflation on one's savings. One must do something extra to prevent the effects of aging. Be honest with yourself. You only impress novices with big talk. Walking around a gym, it seems everyone can bench press 315 pounds. The reality is a very small percentage actually can. Generally the ones who talk about it the most are the ones who you never see under a bar. Every amateur trader I know earned 50% or more last year. Most investors swear they beat the market every year also. The reality is something totally different.

Start with the basics. "Gentlemen this is a weight bar...." Many people go into the gym without any idea of what to do when they get there. They injure themselves and end up wasting their time in the gym. Many traders and investors do little more than line the pockets of others because they have no idea what to do after they open their Schwab account. Move in small increments when you have to. Adding 10 pounds to a 135 pound bar is not a difficult feat. When I was attempting to bench press 315, I was stuck at 305. Adding 10 pounds was impossible for me. Instead, I bought some 1 pound plates and benched 307, then 309, etc. In this way I was able to achieve my goal. In the pose down of bodybuilding show, the smallest contestant will often jump in front of the biggest guys. He believes this prevents him from being hidden by the larger competitors. Actually, it just highlights how small he really is. Stay away from the crowd and do what the others are not doing. You will be more successful.

There are very few new discoveries in bodybuilding. Workout science has not taken physiques to new extremes. That has been done with drugs. Financial product growth has done more to expand markets than knowledge of new trading/investing techniques. Work in the gym is more than just weight x sets x reps. You have to divide the above formula by time. A lot of traders fail to acknowledge what commissions and taxes, etc do to their returns. What you do outside the gym affects your performance in the gym. It is hard to lift hard after you were out drinking all night. It is also important to expand your knowledge of exercise, nutrition, and psychology. Eating properly and resting is more important than the weight training in the gym. Knowing what you are going to trade, why, and an exit strategy is more important than submitting the buy order. Each action builds upon itself. The eventual goal is achieved in the gym by the cumulative effect of each workout. Building a portfolio is the result of many successful trades. I do not know anyone who became a millionaire off of one trade. Most people in the gym make no progress. Why follow their advice? Why seek trading ideas from people who make more money doing trading seminars then they do from actual trading.