(Beijing, China) This book gives treasure maps, minefield maps, and road maps for the market. The treasure maps tell you how to make money by analyzing the balance sheet, (beware of inventory and accounts receivable), by buying the growth companies in the first and fourth quarter, by following after interest rates, by buying the biotech with the insider buying, by bargaining for a good price, by waiting after a bad year, by waiting until real estate is down.

The minefield maps tell you how to avoid the blowups from earnings propaganda, the heads and shoulders and all that, the low book value stuff, the short term mentality, the boastful companies, the propagandist who's always gloomy, the road maps show how to use scatter diagrams, return data from all countries, the value line, the conservation of energy, tennis, baseball and chess to provide a foundation for investing. It's all documented with dozens of original tables, also very funny, and scholarly. I think I've read every other book about investing, and this one is head and shoulders way above them. I read a review in Active Trader magazine that said this is the best trading book of this century, and that's an understatement.

(Tucson, Arizona) Here we are in early 2003 after suffering from three straight down years in the US equity market indices. One would think that equity market participants, many saddled with portfolio losses exceeding 40%, would want to re-assess their approach to trading/investing in order to improve for the future. It is in the natural order of things that when the garden is in full bloom, like my flower garden this fine spring day of 2003 or the Nasdaq in the fall of 1999, that the system generates predators and parasites to feast on the public with their tools of mystical prediction, hype, and mumbo jumbo, as nature does have this tendency to relentlessly strive to reclaim its own excesses. But one would think that now, in the season of our market discontent after three years of down-down-down that people would begin to question the amount of mis-information provided to them on a daily basis regarding financial and speculative matters. Unfortunately I see no trend in that direction, and if anything, the predators have become even more cunning as the herd is thinned. Amazingly, despite all of this, Vic and Laurel have quietly, in their typical non-promotional way, have opened one side door to show those of us mere mortals who seek ways of improvement a way to do so - through the use of the scientific method applied to trading. If one was to summarize the theme of this book it would be to please form testable and falsifiable propositions dear reader before committing capital to ideas, and as Feynman was often quoted saying - "if a proposition can be tested then it should be tested". Therein lies the path to improvement no matter what form of analysis you employ or time horizon you trade. This book is a wonderful anti-dote to the mumbo jumbo mysticism and misinformation that pervades the financial media. Besides, the part on Abelson is alone worth the price of the book.

4 of 4 people found the following review helpful:

Excellent myth-buster and trading guide, April 30, 2003
 

Vic/Laurel and I are different types of investors. Vic is essentially a trader. I'm essentially someone in search of a good business selling at a fair price. That difference aside, this book is one of the best financial books I've picked up in a long time. Not only does it bust the myth that "the trend is your friend," it also shows you how wrong it is to be consistently bearish, how mechanical and devoid of thought most CNBCish news is, how hubris signals downfalls and the truth behind Wall Street's earnings propaganda. It's got plenty of wonderful anecdotes, excellent recommendations for further reading, and advice real traders can use to make real money. I'll be using this book as a reference, even though (or perhaps, especially since) it raises serious challenges to my value-oriented investment style. I can't afford to ignore this book, and neither can you.
 

(New York, NY) As a novice seeking guidance on how to make investment decisions I was immediately attracted by the title "Practical Speculation" - seems like colliding concepts but this easy-to-read book makes it seem more like the nature of an understandable beast.

In small, easy to read bites, one can digest and reflect on the information offered. The book is peppered with clues to the content of various sections by pictograms and pithy quotes. A beneficial collection of lessons, insights, and autobiographical experience is provided, opening a window into the unorthodox life and wisdom of a practical speculator.

Perhaps most important to those of us who lost money in the past 3 years, Vic shares, with frankness, the ups and downs he has navigated through during his career. It is confidence-building to know that one may survive loss, pick oneself up and go forward without fear.

The over-reaching value of the book lies in this and in the tools provided for the ordinary person (me) to wade through the river of information out there to evaluate for myself the words of the pundits at large and the numbers they throw about - and to cull out real value.

Thanks to the book, I have better tools to test the theories, challenge the numbers and set up measurements that work for me.

I loved the reference to "Invasion of the body snatchers"... I have the movie, and it scared me to pieces when I was young.

I gifted it to 4 of my colleagues at work and to my chiropractor, and it is fast becoming a valued possession for me for ideas to test, data to collect and thoughts to ponder.

The most scientific stock market book I have ever read  

Practical Speculation by Victor Niederhoffer and Laurel Kenner emphasizes true scientific testing as the only way to approach the market. Every money making assertion the authors make is backed up by solid statistics and thorough testing. Despite the emphasis on statistics and historical testing, each profit enhancing technique which the authors address is readily understandable by any novice. Truly a gem!

The authors show what is wrong with PE ratios as a timing tool, how to use earnings reports and analysts expectations the right way. Certain technical analysis techniques are scientifically debunked. I would contrast this with other investment books which resort to a single mumbo jumbo chart example to "prove" that some technique works all the time. This book is a rarity among investment books because it backs its recommendations with solid statistical proof.

This book is the largest single collection of proven performance enhancing techniques I have ever seen. In the Technical analysis area, the book analyzes the actual performance of trend following, head & shoulders, TRIN, candlestick chart patterns, profitability of daily and weekly price patterns and a fascinating study on the profitability of the previous year's best and worst performing stocks.

The authors don't ignore Fundamentals either but turn their witty and fun magnifying glass loose on PE's, earnings predictions, analysts recommendations, Benjamin Graham and the profitability of value investing. Niederhoffer and Kenner also review how Zacks and the Value Line services have performed and show statistically how to use them to achieve superiors returns. Niederhoffer uses his University of Chicago PhD and UC Berkeley business Professor background to analyze how to look past the earnings and shows the value of dividends, stock buybacks EBITDA, high and low corporate tax payers and how to use inventory and accounts receivable to select profitable stocks.

All in all Practical Speculation is a fun read, made more so by the spicy and undoubtedly controversial pot shots the authors take at such notables as Alan Abelson, Warren Buffet, Benjamin Graham, and Alan Greenspan.

I highly recommend this book.

Reviewer: A reader from New York, NY

Reviewer: Brett Steenbarger (see more about me) from Fayetteville, NY USA