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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7/6/04
Victor Niederhoffer: A Good Lesson.

A friend writes that if you buy the S&P when bonds open higher and sell the S&P when bonds open down, it gives you the weather gauge. A test of this simple rule shows it's a random pattern with the means in opposite directions from those stated. My friends write back that he didn't mean that the rule itself was a great system, but it puts you on the right tack. Without in any way implying that I'm the Tom Wiswell of patterns, I do have a google of very able personages associated with me, and after testing and improving on this sort of thing for 40 years, I feel compelled on occasion to lift the warning finger. 

In markets, life and games, even more important than making the right moves is knowing how tell good moves  from bad moves. I recall my weekly checkers games with the world champion player Tom Wiswell. He would spot me once a session and just say, "You have a good move, or "Be careful." That was enough to make me draw most of my games with him. When I play chess, I don't have this, so I have to think for a google every move, and not knowing when the obvious answers are right or wrong, I play at the lowest possible level.

Many trading systems give random results. An all-knowing trader, observing the struggles of a follower of one of these systems, could comment just a little something like, "Be careful, that's misleading. In the book I wrote with Laurel, Practical Speculation, we tried hard to teach people how to tell good from bad, and we showed that most systems people believe in are wrong. As Bacon says, that's guaranteed to happen; "The public must always be wrong." On this site, however, I will play the role of Tom Wiswell from time to time: "Be careful with that bond stuff. It don't signify."