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The Speculator
25
literary traits every trader can use
Sherlock Holmes noticed
what others missed. Odysseus lashed himself to the mast to resist a
tempting call. Readers offer these and other literary heroes as role
models for today's speculators.
By
Victor
Niederhoffer and Laurel Kenner
"The first thing is to exaggerate my injuries.
Put it on thick, Watson. Lucky if I live the week out -- concussion
-- delirium -- what you like! You can't overdo it.”
--
Arthur Conan Doyle, “The Adventure of the Illustrious
Client”
Listening to D’Artagnan’s plain matter-of-fact
account, the Duke looked at the Gascon from time to time in wonder
as if he could not understand how so much prudence, courage and
devotion could belong to a man who looked barely 20.
--
Alexandre Dumas, "The Three Musketeers"
[T]hese three
desolate men knew nothing of how certain of deliverance and supply
they were, how near it was to them, and how effectually and really
they were in a condition of safety at the same time that they
thought themselves lost and their case desperate.
-- Daniel
Defoe, "Robinson Crusoe"
Last week, we asked readers to tell
us about literary characters who provide lessons for investors. We
were not disappointed; our mailbox quickly filled with fantastic
insights. We've reprinted some of our favorites below.
Ernest
Hemingway's Nick Adams. From investor Duncan Coker, Telluride,
Colo. Adams is “a very practical person who seems at home anywhere,
from stories like 'Big Two Hearted River.' He knew things like to
collect grasshoppers early in the morning while there was still dew
on their wings and it was easier. He would carry a bottle around his
neck to keep them in. He would fish after the sun had risen and the
fish were more active. And he would never fish near the swamps even
though there were large trout there. It was too difficult to land
them, and he would end up losing fish, bait and time.”
Daniel Defoe's Robinson Crusoe. From reader J.
Prokes: Because of his isolation, Crusoe "was forced to be prudent
and economical. At one point, Crusoe raises a fence around his
encampment by driving stakes into the ground; he unwittingly
discovered the process of drywood cuttings when the green stakes
took hold and sprouted into an impenetrable living barricade. A
great return for a small investment!”
Alexandre Dumas'
D'Artagnan and the three musketeers. From Pamela Van Giessen,
our editor at John A. Wiley & Sons, Chicago: “The musketeers are
proud, courageous men without the benefit of a stake. 'The Three
Musketeers' has all the elements of the grand life lived wholly --
betrayal, fidelity, love, honor.”
Sir Arthur Conan
Doyle's Sherlock Holmes. From Ken Sadofsky, Baltimore, Md.:
“Gets clues others are programmed to overlook, with skill,
experience and speculere -- looking and observing with a
non-assuming eye, with imagination to recreate and science to
verify.” Sadofsky recommends the late Holmes stories in "The Case
Book of Sherlock Holmes," as well as Agatha Christie’s "The
Mysterious Affair at Styles," "The Secret Adversary," "The Tape
Measure Murder," "Strange Jest" and "The Market Basing Mystery"
Mark Twain’s Tom Sawyer. Again from Ken Sadofsky: He
praises Tom for his “sense of adventure, openness, alacrity,
resilience, adaptability.” Tom “suffers and goes on next adventure
wiser and still open,” Sadofsky observes. He’s able to get to the
crux of ideas unencumbered by societal notions -- he’s able, for
example, to form his own ideas about Jim. He’s an expert at games
and deception. And his adventure in the cave is classic speculative
symbolism. (A bonus: For perspective on analysts, Sadofsky
recommends Lewis Carroll’s "Alice's Adventures in Wonderland" and
"Through the Looking-Glass.")
Hercules. From trader
Henry Carstens, Tigard, Ore.: His strengths include: " . . . skill,
hard work, intelligence, perseverance. Also stars the weak and pesky
king/uncle hiding in the urn as the government. (And Hera as Hillary
Clinton).”
Hawkeye, Chingachgook and Uncas in James
Fennimore Cooper's "The Last of the Mohicans." From reader Tom
Ryan: “There are many lessons in there about the art of deception,
gaining by letting go, cutting one's losses, the folly of using
inappropriate tactics and the failings of bureaucracy, and an expose
of many human faults and strengths."
Homer's Odysseus.
From Nigel Davies, chess grandmaster, London, who describes him as
one of the greatest masters of deception. "Tying yourself to the
mast to resist the siren call is a useful concept for
investing.”
John D. McDonald's Travis McGee. From Tim
Melvin, investor/broker in distressed companies, Baltimore, Md.:
"Down in Slip F18 aboard 'The Busted Flush,' which he won in a poker
game, the boat bum and salvage expert lives by his own code in a
changing world. He supports himself outside the norm of society,
taking on only those projects with a big enough payoff to be worth
his while, finishes what he starts, is loyal to a fault. He lives
life on his own terms, uses his skills and intellect to make his way
in the world, recovers what is lost for a
percentage."
J.R.R. Tolkien's wizard Gandalf in "The Lord
of the Rings." From reader Gerald Keith Gray: “The world is in
dramatic and irreversible change, and he picks up his staff and
leads through the chaos. All the while having to adapt as events
dictate."
Cpl. Rolf Steiner in Willi Heinrich's "Cross of
Iron. Also from Keith Gray: Steiner's platoon is on rear guard
50 miles behind Soviet lines after being abandoned by his commanding
officer. Their world is hell. He picks up his Soviet submachine gun
and leads through the chaos. All the while having to adapt as events
dictate.”
Stilgar in Frank Herbert's "Dune." From
reader Christian Eyerman: "Totally honest and ruthlessly focused on
his daily and long-term goals. The pure speculative trader must have
the same attitudes (allegorically): ruthless non-attachment to
trades the moment they no longer serve the ultimate trading strategy
(in Dune, the tribe).”
Davey Crockett as he describes
himself in "A Narrative of the Life of David Crockett of the State
of Tennessee." From John Lamberg of Minnetonka, Minn.: "Perhaps
not a great literary character, and certainly not one to be
nominated for a modern PC award anytime soon." But, John adds,
anyone who claims to have killed 105 bears in a year "has to be a
model for investors.”
Ayn Rand, we
shrug
Three from Ayn Rand: Dagny Taggart, Hank Rearden
and John Galt: From Judy Rosner of Elmhurst, Ill.: "Honesty,
integrity, plain-spoken, everything anyone would want in a friend or
colleague.” Reader Pete Earle reminds us of a pertinent quote from
Galt’s speech in Rand’s 1957 book, "Atlas Shrugged":
"The symbol of all relationships among such men, the moral
symbol of respect for human beings, is the trader. … [A] trader is
a man who earns what he gets and does not give or take the
undeserved. A trader does not ask to be paid for his failures, nor
does he ask to be loved for his flaws. ... [T]he mystic parasites
who have, throughout the ages, reviled the trader and held him in
contempt, while honoring the beggars and the looters, have known
the secret motive of the sneers: a trader is the entity they dread
-- a man of justice." Our own picks: Patrick O'Brian's Jack
Aubrey and Louis L'Amour's Chick Bowdrie. Aubrey, O’Brian’s sea
captain hero, and Bowdrie share many of the characteristics that
lead to investment success. They were masters of deception and
tracking; were handy at going for the jugular with guns, swords and
fists; were completely honest and persistent; loved their vehicles
of transportation and worked to make them the best; and were loved
by their employees.
Our suggestion that Jack Aubrey is a
worthy model for speculation elicited bottom-line analyses from two
aficionados. Dick Sears of Palisades, N.Y., noted that Aubrey’s
character was based on the life of British naval officer Thomas
Cochrane, whose entrepreneurial spirit confounded the Spanish and
French navies. Cochrane, observed Sears:
“ . . . was not bound by traditional thinking. In attacking an
enemy, he was bold, creative and fast. Where other commanders
might win a small victory and then retreat to savor it, he would
use that moment when the enemy's guard was down to turn it into a
major victory. His single-minded persistence was very much in the
entrepreneurial mold.
“But the establishment doesn't like
it when new people succeed in new ways. It highlights their own
laziness, timidity and lack of imagination. Thomas Cochrane's
accomplishments and outspokenness made important enemies. These
enemies saw to it that an absurd charge of stock market fraud
resulted in his conviction, imprisonment and dismissal from the
Navy.” Aubrey’s case, Sears added, eerily resembled that of a
later entrepreneur -- Michael Milken.
Jack Tierney, an
aficionado of "Ivanhoe," summed up the Aubrey books admirably:
“Never relax for a moment; defeat is just around the corner.”
We nominate both of these wise owls as chairman and
president of the Old Speculators’ Club.
Putting it all
together, we came up with a list of trader traits:
- Acts with lightning speed
- Adaptable
- Common sense
- Courageous, but prudent
- Curious
- Discreet
- Forceful, but self-controlled
- Forms own ideas
- Gets to crux of matter
- Hands-on
- Good in a fight
- Honest
- Independent in thought and action
- Loved by subordinates, colleagues
- Love his vehicle of transportation
- Master of deception and tracking
- Observant
- Optimistic
- Poker-faced
- Practical
- Resourceful
- Persistent
- Unassuming
- Unencumbered by societal notions
- Uses scientific method and insight
We think that the
investor will receive 100 times more wisdom and value by reading the
above books and stories than from dutifully keeping up with the
endless parade of mind-numbing publications parroting has-been
investment strategies. (The books mentioned here are also much more
fun to read.) Life is too short, and the moments are fleeting. We
hope you’ll be able to spend a few hours in these later days of
summer with Aubrey, Bowdrie, Crusoe, D’Artagnan, Holmes, Tom Sawyer
or some of the other great models for speculators we found.
If you have learned trading lessons from a literary
character, let us hear from you. If we use your contribution, we’ll
send a cane from Stan Novak, the last cane purveyor in Manhattan, to
signify your membership in the Old Speculators’ Association. Send
your missives to The
Speculator.
Final
note
The market went from March 28 to July 29 without
three consecutive daily rises in the S&P 500 ($INX).
Then, it had four within three weeks (ending July 30, July 31, Aug.
8 and Aug. 9).
Four months of a dry spell, then four streaks
in three weeks -- sort of like life itself, but highly non-random.
We’d like to know what our heroes would have made -- and what our
readers make -- of this change in the tides.
At the time of publication, Victor Niederhoffer and
Laurel Kenner owned shares of WorldCom, and Niederhoffer owned
shares of IBM.
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