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8/22/2005
Three Variations on Duplicity, by Victor Niederhoffer

When I read anything by O'Brian I learn a million things about duplicity, economics, medicine, food, strategy, geography, and the eminent traditions of the British Navy that made the world free.

Most recently I read the Ionian Mission, and found that Jack had to take the helm from Pullings. The Admiral had ordered his ship to head out on the tide but Maturin was late as usual, this time because Yagiello had been howling in the Armenian manner at his horses, and a lower class horseman from England had not deferred. But Jack had too many hands on board who were masters at deception and he was afraid that they'd overdo it under Lieutenant Pullings, and they'd be smoked. So he had to master the extent of deception so it wasn't too obvious that they were trying to make it look like they were working hard by doing nothing. This is at least a third-level form of deception.

It's practiced by Gail Niederhoffer's dog Lucy as well as the proverbial monkeys. Lucy likes to feign a bark and a rush to the front door to greet a visitor when good food is on the table so the dinner people will get up and she can rush back to steal the food. Apparently this is common among high-IQ dogs. My four year old niece is very good at doing this, pointing to the apple juice when her mom isn't looking so that my mother will give it to her without arousing suspicion and then giving her back the package so she won't be smoked by her mother.

There is a certain rule of law to the level of deception used in Naval morality. It's acceptable to feign a flag of a friendly county when you're a belligerent, but never to surrender and then fire, or indicate you're drowning on a rock and then start shooting. That would get you executed or ostracized.

I finds the same kinds of deception on the floor. There's the first level, where you put an order in and the member immediately puts his order in at the same price and you can get filled only after after him, when it goes bid or offered against you. And there's the second level deception, where the member knows you are going to have to buy or sell more and runs ahead of you to telescope the ultimate price. Then there's the third level, where the member tells you he has a big order or an announcement is coming and it's good to get out before the announcement comes because it's going to go against you, a process that will enable him to extricate from the position he's put on against you.

Of course many of these processes are indirect, and not done with agita but are merely the final outcomes of the mysterious and horrible workings of the mistress of markets, and one hastens to add that even with this duplicity, the customer gets an infinitely better deal amidst this den of vipers than he does on the gentlemanly rings and booths of the monopolistic specialists on the white-shoe exchanges where individual shares are traded.

As for how the levels of morality of deception on the floor and how it corresponds to not pretending surrendering, I have never known a broker to overtly pretend he is bankrupt and then wait for you to put on a small position and then bury you with big size. That, if it occurred, would be done with indirection.

Big Al adds:

We have two Australian shepherds, Dignan and Trevor. One night, around midnight, the two humans are asleep in the bed, and Dignan, is curled up in the space between, near the foot of the bed -- the only available dog space. I wake up to see Trevor casing the bed on each side and snorting quietly in disgust that Dignan occupies the prime spot. So Trevor goes down the hall into the TV room and lets out a there's a cat in the back yard bark. Immediately, Dignan leaps up, runs down the hall, through the  TV room and out the dog door, barking at the non-existent cat. Whereupon Trevor trots down the hall and into the bedroom and hops up into the warm, vacant spot. And Dignan prowls the back yard wondering where that darn cat is. I try not to fall out of the bed from laughing silently....

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