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.



Write to us at: (address is not clickable)

J.T. Reviews "Famous Financial Fiascos" by John Train

On a less predictive note and corporate corruption theme, I just finished reading John Train's "Famous Financial Fiascos". This is what Mr. Pomada calls a cookie and milk book? Took ninety minutes for a slow reader (myself) to finish! Mr. Train wrote this in 1985 so the aforementioned fiascos today mentioned on List might make newer edition? The usual Tulipomania/ Ponzi/ Whitney/ John Law things are among the list of famous mistakes. Ones that were newer to this greenhorn that others on the list might want to chime in about are: 1) ContiCommodity advertisements and advice that they ended up following themselves. 2) I.O.S. Bernard Cornfeld's Follies (never tells what IOS stands for though). 3) Whiskey in Mali. 4) Xerox discovers the Computer: S.D.S. debacle and Max Palevsky. 5) Flameouts of Technical Analysts ala James Dines, Joe Granville, and William Finnegan.

Mr. Train in summation feels that there are three typical causes of disaster which we should all be on the look out for:

1. Confusion of purpose. in the foundation of a successful enterprise we must be single-minded in our financial pursuit.
2. Over-generous investment or over-capitalization of ventures which may be sound in themselves.
3. The last cause lies in the mistake of timing. "a good idea can be put forward some fifty years too late. A still better idea can be advocated some twenty years too soon."

Four things that I took away were:

1. The Pruitt-Igoe housing project went along w/ the LeCornBusier's theory of low-cost housing. Minoru Yamaski was architect of this failed infamous housing project that cost multi-millions to build and continuously renovate. It eventually was voted on finally by tenants not gov't to Blow it Up! due to rape, robbery, filth, vermin, roaches, graffiti and the most deplorable of living conditions. Yamaski was also architect of World Trade Center. This was so frighteningly ironic and horrific on so many levels, I wonder if Mr. Train knew this in '01 what he wrote back in '85.

2. Mr. Train's summation on the Technical Analysis Flameout passage was ended w/ words that have sounded in the hallowed halls of this List and have been written about in two of the best books on Speculation I know.

"Why is technical analysis so difficult, not to say impossible? Perhaps because the technical analysts, like alchemists, seek a simple solution to a problem more complicated than they realize. The stock market is the encephalogram of tens of millions of investors, who transmit their greed and fears to each other through the ticker tape and the media. The rules, if any, by which this movement occurs are as complicated as the human psyche itself. The technical analysts who try to reduce itto an orderly formula often forget that the game is changing continuously. In other words, rather than asking what tomorrow will bring if the future is like the past, one should be asking how the game is changing, and how, therefore, the future will be different from the past." p76

3.Ivar Kruege, the Swedish Match King had done many times over that which some accused today are going up against. My favorite to ward off the inevitable is to overpay his taxes by 150,000 to keep the dogs at bay. Also, to arrange to have staged business done over dummy phones w/ conversations w/ Premier Poincare, Joseph Stalin, Mr. Rockefeller, and Prime minister Baldwin.

4. The Kuwait Stock Exchange explosion of the late 70's early 80's is by far one of the best examples of leverage unwinding that I have read. It was on the heels of high oil prices, Shiites vs. Nejdi, the old saying "every betrayal begins with trust", and the fact that families and gov't can't support markets- they need to be free and left alone.