Succinct Summation of Week’s Events 5.20.16
Succinct Summations for the week ending May
20th 2016
Positives:
1. U.S. stocks end their 3-week losing streak;
2. Existing home sales rose 1.7% m/o/m and 6% y/o/y to a 5.450 SAAR
3. CPI rose 0.4% m/o/m, with the core rising 0.2%;
4. Housing starts are 1.172M SAAR, ahead of expectations;
5. Industrial production rose 0.7% after falling 0.6% last month;
6. Housing market index came in at 58 — a solid reading, in line with expectations;
Negatives:
1. Empire state manufacturing survey came in at -9.02,well below expectations, and down from 9.56 previously;
2. MBA mortgage composite index fell 1.6% w/o/w. Purchases fell 6%;
3. Jobless claims are ticking up, albeit very modestly. The 4 week average is up from 268.25k to 275.75k;
4. Philly Fed index fell to -1.8, down from -1.6 previously.
Revisiting The New Market Wizards — A Quarter Century Later
Jack Schwager is the Chief Research
Officer and Cofounder of FundSeeder and the author of the bestselling Market Wizards book series. His other books include Market Sense and Nonsense and the Complete Guide to the Futures Markets. He formerly spent 22
years as a director of futures research for some of Wall Street’s leading
brokerage firms and 10 years as a partner in a hedge fund advisory firm.
(check
out his MiB
podcast).
This is his
first post at The Big Picture. Enjoy.
~~~
Recently, I had the opportunity to
manage the process of creating an audio version of The New Market
Wizards—a task that was previously handled by publishers for the audio
versions of other Market Wizards books. I used ACX, an Amazon platform, to
produce the audio. The way ACX works is that you post a short excerpt from the
book and invite their narrators to submit auditions. Judging by my experience,
ACX’s talent pool of narrators is amazing. In the first few days following my
posting, I received about 40 audio audition samples, almost all of them good,
and quite a few excellent. I was having such a tough time narrowing the choice
down to one that the last thing I wanted was more good submissions. So I pulled
the post after a few days. I eventually narrowed the list down from 40 to 4, all
of them superb. To pick the final candidate, I did an email poll with 10
industry professionals (e.g., podcasters, traders). To my surprise, one
candidate—DJ Holte—was totally dominant, being the #1 pick of the majority
polled and the #2 selection of all but one of the remaining 10 respondents.
DJ sent me the chapter audios for review one
at a time as he completed them. I listened to these audios on my daily walks on
the trails of Boulder, Colorado. Besides the joy of hearing my words brought to
life by to a talented narrator, this review process exposed me to my own
material for the first time in nearly 25 years, raising the question: What had
changed?
One of my concerns was that, after the space
of so much time, I might come across material where my opinion had changed. This
project after all was a translation of the original work (from text to sound)
rather than a revision. In that sense, it needed to stay true to the original.
And yet I thought, What would I do if a passage I wrote decades ago
no longer matched my current beliefs?
To my relief, I discovered that while many
details had changed, nothing substantive had. As an example of one such detail,
the futures trading pits, which figured prominently in some of the chapters, no
longer exist in the current age of electronic trading.
Even accepted science “facts” have changed in
the interim. Consider the following exchange in my interview with Victor
Sperandeo:
Why do you think the majority
of people you trained lost money?
They lacked what I call emotional
discipline—the ability to keep their emotions removed from trading decisions.
Dieting provides an apt analogy for trading. Most people have the necessary
knowledge to lose weight—that is, they know that in order to lose weight you
have to exercise and cut your intake of fats. However, despite this widespread
knowledge, the vast majority of people who attempt to lose weight are
unsuccessful. Why? Because they lack the emotional discipline.
Do you see it? The culprit is the phrase, “cut
your intake of fats.” Based on the preponderance of current scientific evidence,
there is now widespread acceptance that sugars and simple carbohydrates are the
primary villains responsible for obesity and related health problems, not
fats.
What has not changed since I wrote The New
Market Wizards, however, is everything related to trading. Amazingly, or maybe
not, I didn’t encounter a single underlying trading principle that I felt needed
revision. The only item that I thought I would alter somewhat if I were writing
the book today is a comment I made regarding risk control. In the final chapter
I wrote, “Never risk more than 1 to 2 percent of your capital on any trade.”
Today, I think that this statement is too aggressive. If I were writing this
chapter today, I would be more comfortable phrasing the concept as, “Ideally,
target keeping your risk per trade to a fraction of 1 percent, with a maximum
risk level of 1 to 2 percent on any single trade.” So, in the one example I
could find where I would alter a trading comment that I had made in the original
book, it was a matter of making the point even stronger, not disagreeing with
the original concept.
The key and reassuring conclusion I walked
away with after listening to my own book so many years later is that, while
markets may change (e.g., the transition of futures trading from open outcry in
the pits to electronic exchanges), sound trading principles don’t.
And now for a shameless plug: The
narrator DJ Holte did an incredible job.
There is a 5-minute sample (preface and beginning of first chapter) on the Audible site:
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