The Speculator
Readers offer proverbs to trade by

The old sayings have staying power for a reason: The kernels of wisdom inside still hold a lesson, if only investors will heed them

By Victor Niederhoffer and Laurel Kenner

Posted July 24, 2003

The proverb “It’s an ill wind that blows no good” comes to mind vis-à-vis bears who cite low interest rates and falling inflation as reasons for pessimism. Low inflation actually has been good for the economy, increasing jobs and our real wealth. But as they say, “The grass is always greener on the other side of the fence.”

Common proverbs contain much wisdom that can be applied to the market. True, some of these old sayings directly contradict each other (“Haste makes waste.”… “Delays are dangerous.”… “Faint heart never won fair lady.”) But as Louis Berman writes in “Proverb Wit & Wisdom,” such contradictions are the gestalt -- the total pattern -- that must be embraced to understand the psychological meaning of an event.

Scholars differ as to whether proverbs are merely a prop for the inarticulate or a store of wisdom. For our part, we find many old sayings quite poignant for speculators. (When Gitanshu Buch, head of trading in Vic’s office, was asked for a pertinent proverb, he didn’t hesitate: “When it rains, it pours.”) Certain Yiddish sayings seem particularly applicable. Our trader friends, pressed for insights according to our usual practice, sent in favorites with alacrity. We offer the best as a refrigerator collection in the hope that they’ll be tacked up for viewing on the way to retrieving a summer cool one.

Yiddish proverbs
“Don’t rub your belly when the little fish is still in the pond.” The equivalent of that good old trading saying: “It’s not a profit until you take it.”

“A meowing cat can’t catch mice.” (And the American version: “A howlin’ coyote ain’t stealing no chickens.”) We analyzed hubris in our book, "Practical Speculation," and had the pleasure of quoting Ed Gross, a card counter and former options trader who recently won the biggest game at the biggest poker room in the world at Texas Hold'em. Ed observes that it’s easy to tell who’s going to lose: It’s the person who walks into a casino boasting about what a big winner he’s going to be.

“A fault-finder complains even that the bride is too pretty.” The leaders of the pessimistic cult, having encouraged their hapless followers to sit out the entire bull market of the 1990s, now write dismissively that this or that huge rise is merely a bear-market rally.

“Nerve succeeds!” As a great sociologist, Arthur Niederhoffer, once noted, there is a big difference between chutzpah (the nerve of the underdog) and hubris (arrogance and abuse of power.)

“The reddest apple has a worm in it.” In 2001, for the first time since Benjamin Graham’s glory days in the Depression, scads of stocks were selling below their cash. We couldn’t resist the temptation to grab one of these marvels ourselves -- and quickly learned that companies are quite capable of burning through great piles of cash between quarterly reports. The great impostures of financial accounting also come to mind.

“Trying to outsmart everybody is the greatest folly.” Our friend Irving Redel, a consummate 80-year-old trader and former chair of the Comex, jokes that he likes to buy at the high and sell at the low -- an ironic acknowledgment that no trader can catch the entire move every time.

“If you can’t endure the bad, you’ll not live to witness the good.” Need we remind our readers to keep adequate reserves at all times?

“He who praises himself will be humiliated.” Experience has made the Spec Duo feel this one in their very bones. That is why you’ll never hear from us that we had a winning trade.

“Ask advice from everyone, but act your own mind.” Your trades are ultimately your own responsibility, so you better have your own edge.

“If you have money, you are wise and good-looking and can sing well, too.” Self-evident.

Readers’ favorites
J.T. : “All good things come to those who wait, but only that which is left over from those who hustle.”

J.T. adds: “The one that keeps coming up lately goes, ‘The public lost its money in 1929; the smart people lost their money in 1931, and the really, really smart people lost their money in 1932.’ Funny, but I don't think the Baruchs, Kennedys, Livermores were that stupid during that time frame. In fact, I am pretty sure that they -- the really, really stupid people -- participated in the Dow’s 198% run from 1933 through 1936.”

Easan: “Perhaps the Irma Bombeck version: ‘The grass is always greener … over the septic tank.” Easan also likes the one from Anais Nin: “We don’t see things as they are. We see things as we are.”

Art Cooper: “’He who hesitates is lost.’ Those who are too late in reacting to market movements will frequently end up losers.”

Tim Melvin: “When it comes to pundits and prophets and their profundities from on high, I prefer the old Irish proverb, ‘A silent mouth is sweet to hear.’”

John Lamberg offered three from “The Wisdom of the Chinese” (Garden City Publishing, 1938):

“It is too late to pull the rein when the horse has gained the brink of the precipice; the time for stopping the leak is past when the vessel is in the midst of the river.”

“A man without thought for the future must soon have present sorrow.”

“In making a candle we seek for light, in reading a book we seek for reason; light to illuminate a dark chamber, reason to enlighten a man's heart.”

Mike offered an anecdote about Napoleon that investors might take to heart:

Napoleon: I wish to plant trees by the side of the French roads to shade the marching troops.
Officer: Sir, it will take 20 years to accomplish!
Napoleon: Yes, indeed, so we must start at once.

Value of persistence
Bonnie Lo: “Two in hand is worth one in the bush.” (Somebody pointed out that the proverb usually goes the other way around, with one in the hand. But Bonnie is a trader with a moneymaking personality and we think she has it right.)

Here’s another one of Bonnie’s favorites: “A stupid man moves mountains.” She explains: “This is related to a Chinese folk tale of an old gent who didn't like the mountain blocking his view of the sky and decided to spend many days, many years moving piles of dirt and rock. The other villagers nicknamed him ‘Stupid.’ But one day, the mountain had been moved. It’s like the minuscule movements of numbers moving little by little.”