Thursday, June 7, 2012

Book hubris



A couple weeks ago I was in the exchange's library and was looking for books that I previously haven't seen or read and found a few remotely interesting ones to order.  One such book was West of Wall Street which was written by a S&P trader and published in 1988.  My interest in reading it was figuring that there might be some funny/interesting 'war stories' of the pit although most of the book was 'how-to' techniques which didn't interest me.   What did turn me off about the book was all the declarative statements mostly on making X or occasionally losing X, but heavily oriented towards making X and when anyone talks like that it's always a huge red flag for me indicating a bad aura.  

Anyways, I searched about the author since he mentioned in the book he was managing money while in the pit and it turns out he received the largest fine in exchange history (which is double in 2012 vs. 1989 dollars) and also was banned from the exchange the year following publishing.  That is some seriously bad juju and obviously he was relying on different and illegal techniques rather than what he wrote about.

I've seen similar falls from grace other times w/traders who publish works w/an ulterior motive on not just simply expressing or sharing knowledge but to accumulate investors or clients.  There is a stark difference in chattiness about performance between independent locals and money managers which is best expressed in the following chart, w/managers generally clamming up about losses to not look bad and independents straightforward about it because they don't have a concern about outside opinion.  On the flipside, independent locals will guard against hubris by speaking little when experiencing upside vs. managers who wish to parade returns. 


(Is blogging about hubris, hubristic?  I don't know and don't think so, hope not as well!)