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7/29/05
The Memoir, by Victor Niederhoffer

American Sucker by David Denby  is about loss of balance during the Nasdaq crash of 2000-2002, and how the hopes of a movie critic were raised and lowered. Also the breakup of his love affair with Sam Waksal of ImClone and Henry Blodget, the pathetic nature of his muddling with his family, the greed that led to loss of romantic ardor and financial stability as the market gyrated, the similarity between the decisions that a movie critic makes and those that an investor makes, the general limitations and persona of an average investor, successful in his own field, who is seduced by a desire for more power and perks, the strident voices of the envious and promoters who goaded him on, the interplay of chance and choice that sealed his fate, the asides drawing parallels with the conspicuous consumption of Thorstein Veblen, his independent development of the theory of reflexivity and feedback as it applies to the market, the weaknesses in his investment approach that guaranteed his ruin, the revitalizing power of real estate, his heroic Markmanesque spirit even at the end as he hopes for a killing in WIFI, is well worth reading as a rudder.

Victor adds:

Here is how Denby, a layman with no training in economics or investments, but a sincere desire to get rich writes about his discovery of the feedback between news and price action. " Suddenly a result causes the momentum to turn good or bad, takes on a life of its own, until extreme measures are needed to reverse it, and these new measures in turn become a danger, and on and on , forever and ever. In the market you never come to stable point. A given fact, Low employment, (he was writing during a period when bad employment was good for the stock prices, and is too lazy and ignorant to check out that relations change) determines a mood, which mood produces new facts, and these facts further enforce the mood. Causes emcee effects. which turn into new causes..". The Palindrome said it much worse. vic

Tom Larson contributes;

I'm trying to decide if Denby was a Hoodoo. He didn't really try to drag others into his delusion, although his family certainly suffered from his hubris. I suppose the thing to do would be to steer clear just in case his "bad luck is contagious" as Martin says in EdSpec. Reading it, you feel like you are watching a crash in slow motion--there is an air of inevitability to the tale. As pathetic as the story was, I think it took courage to tell it and hope that it was redemptive for him.

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