Interview With Jack Schwager: Masters in Business (Audio)

it up. Uh was recruiting me to, uh come right from Bloomberg and I said, listen, you guys have a website. I have a website. Why do I wanna publish for for you guys instead of on my own site? And he said, well, look at this fantastic playground that we have here at Bloomberg. Look at the technology, the facilities. I have to tell you that was really a very persuasive argument. The Bloomberg Building, if you've never been, is it's mind blowing. It is a purpose built technology and

media high rise in the middle of midtown. It's really an amazing, amazing place. And if there's any way you could find uh, the opportunity to come here professionally, you should. It's pretty awesome. And when Tim was showing me around the facilities, I noticed all these super cool um radio booths and studios. Now I've been to the Bloomberg Building numerous times before. I've been on the radio here, I've been on the Bloomberg TV set, I've been here for conferences,

so I'm somewhat familiar with the space. But when you're looking at it not as just a guest who's blowing in and out in order to do a television show, but as a facility. The if that someone says, hey, you have access to all all of these really cool toys,

you see it from a slightly different perspective. And so when we started chit chatting about what we could actually do with these facilities, I started to get all sorts of interesting, interesting ideas, the first of which was I would love to do a podcast and actually talk to some of the most intelligent and influential and important people in the industry in business and finance on Wall Street. Uh.

We kicked a few ideas around. Someone had suggested, how about a television show I said, no, go get Joe. Reason thought to do that. I don't want to do TV. I I don't want to wear a suit and tie every day, and I want to shave. I don't want to have to go on a diet. Um. I've dropped about twenty pounds, but to do TV I would have to drop another twenty and that would be a lot of work. So when they said what do you want to do? My answer was I'm want to sit with

these people and have an adult conversation about important things. Well, podcast, what do you mean? And the elevator pitch was Mark Marin's WTF meets Charlie Rose. But I went back and looked at my notes, and my notes said a podcast version of Jack Schweger's Market Wizards. And that was really the motivation for this show. And so who better to do our hundred podcast? Then the man the legend himself, Jack Schweger. He is the author of numerous market wizards books.

The first one is Market Wizards, the second one is New Market Wizards, the third one is Hedge Fund Wizards. Uh, plus a number of of different books on options and trading and futures. And you know he he has been a trader his whole career, and and the writing and editing started as a sort of side project, but obviously it blew up on its own. Um A quick another digression about Jack and I. So, I don't know. I'm a new being in the industry. I'm around for less

than ten years. The first book anybody gives me UM to read when I'm studying for my series seven a hundred years ago, uh was Market Wizards, and I just devoured it. And I wasn't fascinated by the fact that all these different traders and fund managers in all these different fields somewhere commodities, somewhere where equities, somewhere, bonds, somewhere, more complex products, somewhere really simple strategies. There was a

theme that ran through all of these interviews. And so not only did I devour the first book, but I reread it every five years. I find it to be absolutely fascinating. And the second time I read it, I want to say that was nine or two thousand or something like that, I decided to do something I almost never do, which is write a review on Amazon dot Com for the book, and you'll see, other than whining about you know, a poorly made product. I almost never do book reviews. Uh, I got stuff to do. I

would rather read books than write book reviews. So I happened to be so moved by market Wizards that I wrote a review of it. This was I don't know one oh three something like that and posting on Amazon completely forget about it. Fast forward to episode I don't know fift something like that, and Jack Schwager is one

of our early guests. He was nice enough to come on, and he not only reminds me that I wrote a review of market Wizards for Amazon, but yeah, Amazon does this sort of crowdsourcing thing where you could thumbs up or thumbs down a review, And it turned out that the readers of the Amazon page on market Wizards had made that at the top review of market Wizards. Go to Amazon click positive reviews. It's the first one, Jack says, it's it's been the first one for over a decade.

Who knew. Just one of those funny little ironies. Fifteen years ago, I wrote a review of a book that I thought was really really interesting and important, and now in it turns out that our one guests on Bloomberg Radio's Masters in Business show and podcast is the same gentleman Jack Schweger. So with tremendous amount of excitement, I am thrilled to present our podcast here. He is author and trader Jack Schweger. This is Masters in Business with

Barry Ridholts on Bloomberg Radio. I have a special guest today who is should be very well known if you are an investor or trader and like to read books about the craft. His name is Jack Schwager, and I have to tell you the first book I have received in the industry when I began was Market Wizards. I make it a point to reread it every five years

or so. There are now three versions. There's Market Wizards, New Market Wizards, and Hedge Fund Wizards, as well as an audio book of actually all of them are three are now Jack Schweger. Welcome to bloom Thank you very good to be here again. So so I really didn't give your your background and introduction enough of a play up. You're you're in addition to being an author, you're a trader.

You've written a number of books on technical trading and future trading along those lines as well as an entrepreneur. I cannot under estimate I cannot under emphasize how influential Market Wizards was. When when did the first book, first Market Wizars came out, and how many copies has that, you know, printings? It first of all, has been translated in so many language I mean weird language, I mean languages I wouldn't all expect, like Turkish and Croatian and

the Vietnamese and whatever. You know. So, and you have no idea they sell these books. They make it a contract and you have no idea what it sells. So and the China and China is like there's two official language versions, not to count the bootleg versions. But that's true of everything. But absolutely, when whenever someone talks about China, there should be implied in parentheses not to count the

bootlet that's that's that's a given. So in other words, but I would guess, I would guess between all the you know, all the books I've written globally, i'd say

probably a couple of million sold. That's huge. And for those people who may not be familiar with Market Wizards, the premise of the book is essentially, let's speak to some some very six sucessful investors and traders and see how they do and what their secret sources and what's fascinating In the book, you spoke to people who are commodities traders, bond traders, equity traders, currency traders, and there

were some really consistent themes. No matter what these people were doing, whether whether they were long term investors or or the shortest of short term traders, certain themes came out in the book over and over again, right, And

and that was what I was trying to do. I was write, what is the secret source, what separates this group of extremely successful successful and just off the child and some of them, I mean just extraordinary and and and the people I've interviewed included sort of the most famous traders. We're gonna go into the specifics about some of them, Okay a few minutes. So so as far as the the lessons, and there are tons of them.

And I probably in the later books when I did summaries, I might have had, like, you know, forty points forty points, and you had all or if you had ad all the like all the common denominators, I wouldn't be surprised if it got close to a hundred. So it's kind of hard to just say which ones, but what the fact that they were radically different from each other was maybe one of the most important common denominators, because what it spoke to is they each found their own way.

I can't tell you how many times people, uh, you know, we'll ask me or write me, what traders should I follow? That's right, what trader should I follow? Or who's the best trader you know? And and you know to me that that's it has no that question has no answer, And the question actually makes no sense. It makes no more sense than somebody calling me and asking me, I've got to go buy a suit, what side should I get? And I've never seen the person. I mean, it's as

relevant to question as that. So these people found would work for them, and it was always different. So let's talk about a couple of themes though that run through all the traders. Let's let's start with discipline, probably the single most important lesson at least that I took. What was the general take on being a disciplined persson when I asked? I asked that question to a lot, you know, some questions I I tried to count the interviews and

conversational format. You know what you're like? You you do right? So we'll discuss. You are the inspiration, so and you know, don't start. I would have like questions sort of back up, you know, but I'd like talk and talk, you know, and sometimes going at two days of conversation sometimes and only the end would I like, look, did I miss anything? And usually nothing, you know, usually picked up everything. So, um, I got off a tangent to it. I was kind

on The original question was on discipline. Discipline, right, So one question I asked, did ask everybody or just about is what what separates you know? What differentiate too? What? What? Why are you different? And and discipline was the single most answered, you know, answer to that. That was the most common answer to that question was discipline. Now, when let's let's dig in a little bit. When they say their disciplines, are they referring to keeping them most in check?

Are they referring to I have a methodology and I find it follow it no matter what? What did they mean? And and those two are not separate? Um? Yeah, but they mean primarily I've got a methronology and I'm not gonna straight from it. And I know you at your trader and I'm I'm a trader. And but anybody's trade and knows this that if you if you've got an approach that sort of work. And to be clear, no approach work, no, no approach works any great amount of time.

Everything falls into that affairs just just a question of probabilities. But if you've got an approach that over time probabilities are in your favor and you make more money than you lose and you keep control. If you've got that approach and you've got rules or trades that you do, uh, and you're losing some of them, that's fine because you're gonna lose on a certain percentage. But when you do stuff that is counter to what you're supposed to do, like well, I got, I got. This is how I

get into a trade. And then you look at the market. Gee, you know, let's take it. We got Brexit going on here, you know, and you've got this market crashing. Boy, this must be really over sold. It's not really part of my trade. But I'll take a flyer the pounds down eighteen cents, you know, that's probably good for a balance. I'll buy it. Those type of trade. So that's breaking discipline. That's not part of your plan, that's not part of

your approach. Unless your plan is unless randomly file the headline and the news and chase everything, well, those people don't stay in business that well, or that this is this is actually going. My my example wasn't just the opposite sort of like you're gonna you're gonna try to pick the bottom and you know you're gonna try to catch the falling knife, so to speak. Um and and some people could that could be, that could be in a strategy in fact, catching a following knife. I've been

through traders who do trade like that. But you have to have um. But then you know what you're getting out. You know you you think it's gonna hold here and

if it doesn't, your out. So that's but just to blindly take a trade that's not part of your your approach, that's where that would be breaking discipline or more more important, even more important is is not getting in and we we and I know I'm sort of preaching to the choir when I talk to you, but you know all of this stuff, and this is I know you've got the exact same view. Getting in is the least important part.

Getting out. That's what you gotta worry about. That's what people don't worry about I used to jokingly sell there's a million books on what to buy, but other than justin mamos what to sell exactly. Hey, here's your exit and that and that's when the discipline and that's where the discipline comes in. Yeah, exactly. So let me back up and talk a little bit about you, because people may not be familiar with with your background. So how

did you find your way to finance? Oh? Purely accidentally, I graduated, um, you know, from from an Ivy League school for which to ground. I went to Brown with a master's in economics, and I kind of expected sort of day after graduation, i'd sort of stick my head out and I'd have five offers, you know, and all that. And I didn't know how to look for a job.

And my first maybe, I mean, I had the temporary point, but the first real job is looking for So I went to employment agencies and I get they probably haven't chased since that they don't exist. Yeah all right, So but they weren't very effective, and I like a two weeks I think, you know, I didn't hair back anythings.

I got frustrated. So I just at the time New York, the New York Times had a help not a help wanted, but but position wanted a section and so for about six job secret so like I think it costs me like fourteen dollars or fifteen dollars. I put a two line ad in and something along the line, uh, you know, masters and an economics minor and math looking for an analytical job pretty much. And I had about I don't know the sixteen seventeen responses to that, uh all but one.

All but one were come ons. In other words, the people they want you to say, they want you exactly they want you to buy. It was like these chain cell you know you they'll sell you, uh two thousand dollars worth of soap bubbles and you go find double people to sell at that type of thing. I went. I went to one of these, uh thinking I was going to a meeting of the company, and uh that

it was a manager. I said, well, I said, I asked even the phone, this is not a sales we have sales, but this is and I'm expecting to meet this group of uh you know, at ah at the quarterly meeting or whatever. And I walked in. It is like this huge auditorium and it's like a display in the front. And then and they have her on a film with I think of Sebastian Cabital telling you, telling

how great this product. And then they have a guy who has some sort of chemist who fell off a roof supposedly, and while he was in the hospital to think how he can make his life his wife's job easier, and sort of came up with this miracle cleaning product and anyway, and and then they have a guy come out and tell you how he drives a portion uh makes uh you know, how you can make ten dollars spare time. Really literally, this was it. Uh. I went to one of these obviously, and then any calls I

got there after. But there was one legitimate call, and that legitimate call, as fate would have it, was a research analyst position that was being vacated by Michael Marcus. Michael Marcus who ultimately who was leaving to become a trader, and um, he ultimately became an incredible trader. We can

talk more about him later if you want. But he and I met as he was leaving and I was going in and sort of he still was in New York for a while and he would get together for lunches, you know, because this uh well, this was a firm called at the times called the Rentals Securities, which then mergeds the Dean Withino Reynolds and went into you know, multiple ultimately it became well yes or who, I don't know where they ultimately ended up. I didn't stay. I I stayed for two years, and you know I was

I started out like making two thousands less than my secretary. Um, why shared with the research director. And I was doing I and enough analyst, we're doing really almost all the work. Um. And then after two years, I just stuck and I was writing for for the Predecessor. Now it's called Modern Trading, and then before that was called Futures, and before that it was originally called Commodities Magazine. And that's why I started writing. As I started writing, and you know, column

I came. So so two years I had a little bit of a reputation. I went and stuck my head out, you know, instantaneously got a job, uh you know as research director. Triple my salary, triple that salary, and so so I left it that so, I you know, I didn't stay at Reynolds too long. I'm Barry Rihults. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Jack Schweger. He is the author of the famous Market Wizard series of books, as well as

being a trader and entrepreneur. UM, let's talk a little bit about the role of luck and skill with traders. And I want to ask, what is a deceptively simple question, how difficult is trading as a profession, as a as to a profession when you can actually earn a living, extremely extremely difficult than I don't think most people are cut out for it. In fact, I don't think I'm cut out for it. I know I've never wanted to. Uh. If I were really good, then I maybe would have

entertained the idea of being a full time trader. But I never was good enough, you know. UH, Being good enough to be net profitable in the markets as very very different from being good enough to your living, coming from that you're you know, you're you're you're paying for your expenses. So I never had that particular confidence that I was I was good enough. And the only reason I'm even profitable as a trader, uh is just because I've I've just spoken his own e people, and I've

had so much experience. I actually as my my natural instincts, uh are pretty poorly attuned for trading. I think most people. Yeah, well actually most people's are, and I'm no exception. And in fact, some of the traits that are important for good trading. Which something you asked before, what one? That one that comes up all the time is patients. Um, you know, somebody like Jim Rogers has a great line.

He says, I don't do anything until there's there's money lying in a corner on the floor, and all I have to do is to go and pick it up. So yeah, yeah, patients, just to wait for something that's like a real setup, you know, a real fat pitch um. And and similarly to stay with a position. You know that the famous line from Reminiscences of a Stock Operator, which I like the girl paraphrase, but I think it was it might be the exact quote he said. It

was never uh. And for those listeners who don't know the book, it's it's a book with the father's book about Jesse Livermore. The Livermore is never identified. Everybody knows it's Livermore and where the protagonist says. Uh. Talking about what his success was due to, he says, it was never my thinking that made the money. It was my sitting. Got that my sitting. So he said, hey, I'm not so smart. It's just I was able to stay and stay and stay with a position I was working out.

So those that all speaks to patients. And it's a trait that I my wife is listening to this recording in the next room and actually probably would not ahead when I say, you don't want to be with me in the same car during a traffic jam. I am not a patient person. That's that's that's interesting that there's a wonderful book, you know, given all the wonderful books on behavioral economics and and how people's cognitive issues are

are so very suspect. Frank Portnoy, who's probably best known and for writing the book Infectious Greed, wrote a book a few years ago called weight Um and it's a fascinating look at the psychology behind that exact thing behind patients. And it really is a trait that can be learned. It's so important for for both traders and investors. Uh,

just look, you mentioned Brexit in the crazy market. You know, I'm pretty confident that twenty years from now, when we look back, this is gonna be a blip that we will have forgotten, just like Abola was forgotten. Just like you know, zekea I suspect is the next one that makes huge headlines and then two years later it's like, oh, whatever happened to you know, whatever happened to the chicken flu?

Wasn't that a big thing that was coming along? And so anyway, um, let's so let's talk a little bit about Look, how can somebody who's had a good run of trades identify the difference between trades that are based on skill and just getting lucky in there? Right? You can never identify any particularly group of trades whether you're just lucky your skill and it's always luck involved. But luck is is the longer you go, the less luck

will win out. In other words, you can you can have a streak, have a hot streak for a while, and that could last for days, weeks, maybe even months, but that's not gonna go on for you, right, So um, eventually skill wins. Yeah. And and so if you're kind of almost most years a year in, year out, you're you're kind of that profitable. You never put your account

into real danger by allowing a deep draw down. And so if if you're doing that, that's probably skilled then because luck alone, unless unless I should make a provis so you can have more bull markets go on for multiple years. So if your approach is just to to just go long, uh and stay long, and it's and you're making you're doing well, and it's in a bull market, all you can assume is you've been long during a bull market. You have no idea what's gonna happen when

you have a bear market. So well, but there is some skill to being on the right side. Well it's fine, but if you've only been on one side in your trading. You know, people saw trading, they saw trading. How many people thought they were genius as they saw the trading in the right so uh, and they you know, but they continue trading through two thousand and two thousand and

one thinking it was gonna be the same thing. And so yeah, they may have doubled their money, tripled their money, but then draw down takes care of all of that. That that's the famous Buffett quote is when the tide goes out, we find out who's been swimming naked. And so that that that no doubt about that. You go through a full cycle, you find out if you actually yeah, so that's that's only you can't tell if anybody is good or not, uh without you know, out really seeing

them through through a bare phase. And actually just to criticize myself here, um, there was one I have another have A fourth market was a book called stock Market Wizards, which I wrote right at the tail it was right to turn you know, night late, so really at the end of the bull market. Um. And and I was specific to make the book different from the other market was the books. I took the theme just stock marks.

I was interviewed only stock traders. So by by definition, when I was doing the book, I was doing a book of only stock traders right after a long long act. Bullmarket was eighty two, right, we both know that. So and but I tried. I thought I was taking people who you know, also had the control, you know, who would who would do okay uh in a bear market? And oh would survive? But it turned out that yeah, some of them did, but but quite a few didn't.

And so no, the book is out. The book is out, and some of the guy you know, there are some there are some famous people in there, like the Shaw and and well controversial on Stevie Combe. But regardless of what a yeah, regardless of you know, my my thing about Steve coolee I I don't know anything more than anybody else knows how to reading the press and all of that. Uh. I know if that if there was anything really obvious, they would have certainly have loved to

nail him, and they never did. Um. But if people want to argue that he made so you know he made inside of trades, I don't. I don't know. I don't know the question with him, But was there a lack of supervision over the pel Well that's that's that's question, right right. But so but even if you wanted what I'm saying is evening people want to say, hey, you

know these people work for him. He would have known he was, but he there's a guy who does, like god, thirty thousand trades a year, who knows why he's half the volume and you look at his record. You could cut his record in half and you still have one of the best records of all time. So you know, so what if you if af you trades it doesn't make it. It doesn't from him. He is an incredible trader, didn't no matter what anybody says. So let me ask

you one question that I've always found fascinating. And this has to be right in your in your sweet spot when you talk about skill and luck and psychology. We all know traders who are like this. They take credit for all the winning trades, but there's always an excuse. They're always casting blame on any of the losses. Why what's that about. That's well, actually the trader. If trader does that, I'll take I'll give you better than even I'll give you two to one odds. They're gonna they're

gonna they're gonna fail. They're gonna blow up, They're gonna blow there. They're gonna fail anybody. And that's when I talk about trades. I mean, any decent trader will admit that it's his, you know, or hard fault, who pull the trigger, whose fingers were right? And and and the

bad luck comes into it all the time. I can't tell you how many times I get, oh, the other thing, the one for the last week, I uh, it was like a coco trade, and uh, I kind of picked my and one of my one of my types of trade is I'd like to buy markets um counter trend uh at spots where I think that they'll they'll be sold sold out, aboard out or whatever risk reward and or you get a bounced dealing exactly. And so my my er, my order rests there, and I have a

stop that dress there. So one morning, well you know, I like up and I look at the trades, and boy, I'm in and out of the coco trade um. And this was the one day was like bizarre. It was like, you know, the market that day, don't even know if there was any news, but it traded like about twenty times the range of normally trades. And I remember that one day and its spiked down in one minute. I don't even know if there was any news. It spiked

down a few under points in one minute. My so here I get in, which would have been I think a great entry. But then like and within one minute's time, I think, you know, within seconds, it's like ticks down sort of like three ticks. You know, I had two stops when you know one is it like right almost at a low one thing but like a second apart or whatever. And then it goes right back up again. So sure you could say that's bad luck. And maybe you know that trade I think was bad luck. But

that does make a difference. The point is, over time, Uh, it should make any difference, because I'll have good luck to you know, just the bad ones. You really notice the good ones, you figure the good ones. You're small on on the bad ones of bad luck. Right, So in the old days I would have blamed the specialist for I don't know if we could do that. I'm very hults. You're listening to Masters in Business on Bloomberg Radio.

My special guest today is Jack Schweger. He is the author of the Market Wizards series of books, as well as a number of books on futures trading and technical training. Uh. He's also has been a trader for for several decades. You know, the last time you were visiting us, you were just in the process of launching a company called fund Seeder, and you're using some technology to try to identify the new emerging traders that are coming up through the ranks. Tell us a little bit about about how

this works. Sure, so the concept of fund Seeder is globally now, not just the US or industrialized nations. There are there are just who knows how many hundreds of thousands of millions of traders. Now most of them are not gonna be any good, but you don't need You only need a tiny fraction of one percent that are good. And that's a realistic expectation. But don't have it. They'll never be discovered. They might be in countries where there's

no no real place for no institutional infrastructure exactly. Yeah, you've got people. Let's say you got a mathematician in East and Europe. Let's say right comes up with a great algorithm and making money on markets. It doesn't have much money to trade. Nobody will discover them, nobody will

speak to him. So you know, our idea was create a central spot on the web where traders could go get their track records verified on daily data and by verified, verified by because the track records and the numbers come not from the traders, but they come directly by linking their account from their custodians. Yeah, it's from the broker. So so we're getting downloads direct of course with the traders or for rization, we're getting downloads of the daily results.

So so let me, let me stop you right there. I know that when guys are launching hedge funds or any sort of proprietary trading operation, the first question that gets asked is show me your ordered returns. This really is a way to say without spending tens of thousand dollars on audits and with out going through the whole process which could be thirty or fifty or a hundred thousand dollars to tee up a fund, this at least gives you a way to rank different traders on their

at least recent performance. Yeah, or actually as depending on what broker, could be their entire performance. Uh. But it's not mentor as replacement for a lot, but it is meant as getting really numbers we believe are probably quite true. It's an initial screens initial screening, right, So before this, how would any of these people ever be found? They

were seen? They wouldn't. I mean they wouldn't. And that's why I mean, I think, what is like something like six or eighty um plus billion dollar funds controls sort of of the I think the numbers like any it's a very I mean, it's just super and it gets more and more concentrated seams over the years. So we live in a world where big money, all the instance, tuial money goes to the same big traders, and everybody

else has sort of left out of it. Robert Frankl's this the winner take All society, And uh, it's true about movies. It's true about you know, there's a handful of superstar musicians and then everybody and we're trying to swim in the other direction. Our our though, it is is a lot of talent out there that just has no way of getting found. If we provide a venue where they can be found discovered, then we can utilize that database to uh even introduce them to invest So

that on one side is fun suitor technology. So this is how you you're screening for these people? Well yeah, and what what what fun see? The technology The main technology there is it's a platform for traders traders. First of all, it's the link you know, traders can get their track records linked through the broker and getting verified daily record. But then it does nice neat stuff which like a trader would love to see a daily equity curve,

it's let be very difficult to get. I don't know if any brokers that have daily equity curves, and and I find what that is because I'm when I think here curve, I'm thinking yield curve. No, No, so your equity day by day, you know, you think simply he's trying to start off a hundred thousand, you make five thousand, got a hundred five, you lose seven, you got ninety eight? That track record over time? What does it look like?

You know? So HOPEFU up the right right, but when are you starting to deviate comm you know on pattern? What what does it look like over time? What are the what are the average or what are the We have all sorts of analytics on that. So but just to saw the basic equicur of just to be able to see how your equity is fluctuating over time itself is a really good important thing to have. So that

that's the find these obscure and unknown that's what they get. Well, that's what they create, and then they can do all sorts e finality, they can create underwater curves. Also the stats, all sorts of studies like what happens like you could apply moving averages, let the cross over moving average your equity curve and say what would have happened if every time there's a tenant forty moving average cross down, I stopped trading and I didn't start until the cross stop

questions like that. So that that stuff is there and it's free. So let's take the flips oute of this. What is okay? So we can't do any investment on that for compliance reason and all that. You know. So we have a separate company called fund Seeder Investments, which will use the database created on fund seater Technologies, which is the fund seater dot com side is fund Seater Technologies, and we'll find the you know, by ranking, by searching. We got search fielders and all that will find the

best traders. Those traders we that we leave have potential. We may have investors who are looking for certain types of traders. We can play the introductory role or one of one. One of our plans is hopefully by next year we'll have an emerging manager fund and so we'll take a bunch of these guys and gals and put them into one fund and UH and also create a

fund and this is important. Our our plan right now is to create a fund that also is much fairer to investors because as you're being part of this is this industry. No, it's you know, it's heads head's eye win, tails you lose, you know, I mean it's like you can't. The trader, no matter what happens, always has a free call. I'm Barry rid Hilts. You're listening to Masters in Business

on Bloomberg Radio. My special guest today is author and trader Jack schweger Uh, author of the famous Market Wizards series of books. So let's let's go back to those three books or four books. And I wanted to ask you mentioned the idea came to you because you really just wanted to chat with some traders and maybe maybe learn some stuff. Um. The response had to be really tremendous.

Were you surprised at how well received the books became? Yes? Yes, And but it always sounds a little bit kind of conceder what I did when I wrote the book I mentioned like Reminiscences of a Stock Operator originally right, Um, I did. I did have a goal of doing a modern day version over my formats totally different, But I didn't. The thing I had in mind is I was reading Reminiscences, which I've always the best book on trading that I

ever you know read. Um, I was reading at sixty five years after his publication day, and it was still totally reliant even though the market today, Yeah that is today is too right. So my goal was to do a book that hopefully in sixty five years from then, you know, people would still be reading because it's still

totally relevant. So that was my goal. Uh, the fact that, yeah, you had to feel like as you were working your way through it and and re editing it and rereading it, you know, you you had to be hey, this stuff is pretty I thought, well yeah, and and and to that the editing part is interesting and you maybe appreciate it. Um. You know, people sometimes think, hey, one comment I get is for you know, you're you're a great interview you know,

you're a great interviewer. You know you really ask great questions. You're really you know, and I say, no, I'm not a great interviewer. When I'm what I am is I'm a really great editor because I because I got like, you know, I have like ten or twenty times and

material I actually used for the book. And not only that, Um, you know a lot of times you have these guys, you know, you get conversations people go off from tangents, and it works well in this type of format, right, It's okay, you don't notice it because that's the way we speak. But in a written in a written format, if you if I did verbatim of what everybody said, it would sound deliterate, confusing, boring, you know. So my goal, and a journalist, I guess the journalist goal is, would

be exactly word for word accurate. My goal was to be as accurate to the truth that I could. So if I if a trader was like going somewhere, it didn't finish the point. I knew what he was going to make the point, I would finish the point. But of course the traders I get. Let the traders read the end of product, and they always so they actually reviewed and said, well, the words, well, they never even

knew I changed I mean anything, you know. They what I was trying to do was get as close to what they were trying to say in a most readable form, throwing out the stuff that was didn't have anything to say. And I was boring and and keeping the best parts and and reshuffling it so it's flowed so you don't

discuss the same thing in eighteen different spots. And but it was all It was a combination of trying to be as true as possible to what they were communicating while making it as readable as possib so trying to really serve both purposes. And that was that was what I was trying to do. And nobody ever thought that I had changed. I don't think they ever realized that. They probably thought it was verbat him because that's what I was just pretty close to. It was what they

hoped for being a Yeah. So, so, over the course of the fore Market Wizards books, did you notice anything that had changed in the world and in the markets or was it the focus just simply in a different aspect of of in the world. The world marks to change. For one thing, I had like people who had floor trading experience, and some of the most colorful stories, and in Market Wizards come you know, like Paul tr To Jones with the trade that almost blew them out of business.

You know where we he puts on a trade way too large, and and it's in a cotton pit, and and that the broker who almost kills himself trying to get to the the opposite side of the order. Has they is they broken? For the merchant that owns all of the Liberals supply, and Paul knows he's dead in the water and he really almost completely wiped out in a trade. But stories like that, those couldn't not more because the floors don't exist anymore. So those things change.

But but the realities and what what makes trading successful and not successful, those things happened. So last question before we get into some of the specific trades that are so fascinating. Um it has to be just tremendously gratifying to see how successful the books have comes you do you ever stop and say, I never in a million years expected this that. Yeah, I guess I didn't think that far. I like, I say, the fact that the visual market was is now is going on, I don't

know twenty Uh, well it was past. It's well eight and two years we will be eight now, something like twenty eight years since I wrote it. So um, so that is really was like the goal I was trying to reach, and my surprise, I don't know, maybe I was. Maybe I was didn't realize how difficult, how difficult that should be, but it, uh, it was what I was trying to achieve. So let's talk about a few specific traders who I find to be uh fascinating. Um ed,

I want to pronounce his name Dakota. Dakota. So he says he doesn't trust publish his track record, but he was rumored to have started with five thousand dollars and turned it into tens of millions of dollars. Yeah. So, so here's the thing with Sakoda. Um And this is the thing. I try to verify people as much as I can in any ways you can, but sometimes you're you're dealing with people that are just probably not managing

people's money that you're lucky to get them to interview. Now, Sakoda, his name came up because I didn't know who he was. I had interviewed Michael Marcus, who I knew personally mentioned and just so people have context, Michael Mark, we're talking about a guy that Commodity Scope, which used to be a different type of firm, but they were like a

prop trading firm, future traders. Uh. They gave Michael thirty thou dollar account and about a dozen years later that that account was worth eighty million, and that was with them taking out like a year for expenses. Uh. So I just the normally that track. He had a string of year Marcus. Yeah, Michael Mark said triple digit returns for you know, he might have had a quadruple digit I mean he had he had just astounding, He did astounding.

That was all all. This was all futures, and this was in the seventies and early eighties and these markets were just but he he knew how to He just knew how to exploit that type of market and so he built a fortune in that period. But when I interviewed him, he said, you know, he should speak, and he didn't. He didn't want to do the interview because he's a very very private person. He's never done another interview as far as I know. Uh yeah, he nobody

would have known who he is. He's very shy, very quiet, very photos Uh yeah, that doesn't give any talks, doesn't Yeah. I don't think you'll find a photo of him. Uh So that's Michael Marcus. And he agreed reluctantly and only through the intervention of a mutual friend to do the interview, and I flew out the Malibudha interview him, spent the day, spent two days at his house, and the day we did the full interviews all over the on the beach

and walking and sitting and whatever. You recording it, are recording it? Yeah, oh yeah, yeah, you know every mean I had two recorders. I didn't take any chances. And uh, anyway, at the end of dinner, which cooked by his ship, you know, his his in house chef, and and uh he puts pull push us back the chair, and he says, you know, you know this wasn't half bad. This was kind of a cathodic experience. You know, I kind of find the found that much of that strong praise from

not half bad. So he was the one who said, then you too, you know you should didn't the view, you shouldn't use Sakoda be courts. Dakota is the best trader I know. Really, so this is a guy that turns. Coming from a rock star, he turns so so I know sa Coda is the real thing, because I know this guy I worked to come out in his corps. I know he's real. I know he did this amazing sting.

And and Michael Marcus not only that, he Michael Marcus hired Covenor and was you know Covernor worked with you know that was that was Marcus protege Covenan had his own style. And and Caxton, you know, getting one of the greatest traders of modern times. You know he can that that and and so just to give you an idea, so so Mark, So somebody like Marcus is telling you about the best trading he knows. Um, you know, means that's real, that's real. Yeah. And was it like with Sakoda?

How Sakoda is a very odd character, very very kind of galactic. If you could use that as a colorful. He'd like to free He had all he had a phrase for everything, you know. So I noticed, like I was there and I said, you know, hey, I noticed you don't have a quote machine on your desk. And he said, he said, having a coute machine in your desk is like having a slot machine on your desk and the feeding ofod quarters all day. So his idea

was he picks his trades. You know, he did a sustematically he put it in, he doesn't want to watch it, doesn't want to be he doesn't want to be enticed by the market to do stuff that's outside of what the approaches. So the noise uh in the background is can be compelling and attractive and he basically, so I'm gonna assume no TVs in his office? Well no, and then this is back into this is what we did this in the eighties he off to TVs and stuff, but it was it wasn't as prevalent to have the

big screens and all that. How about Marty Schwartz, Schwartz was, Yeah, he was very intense. Schwartz is a very intense guy. Schwartz, by the way, also had this when I and people, these people can't keep up records like this, but Schwartz, Uh, like a ten year record, which he had ordered. This is one of the times he was very proudly showing me his numbers because I know it. I want you. Yeah, okay,

it is nobody's gonna believe this. It's twenty five percent a year, a month, a month for ten years, for ten ten years. Uh stock only stock index futures, stocking. He just traded stock index futures and and he had only he only had I think two or three losing months in the entire period. And I think his worse than losing Hi ups like a three percent loss. And he went out and it was two and he went out of his way to tell me that those were the months his kids were born, so he had distractions.

That's fair enough that those are some astonishing numbers and and let's do uh Stanley Drucon Miller. Yeah, so you know, Stanley Druccon Miller again one of the incredible traders of all time. I think people don't know how great he he was. I mean, first of all, he ran his own Docane fund for close to forty years and probably

average around compounded trading billions of dollars. Uh uh. People also a lot unless they read my book, would not necessarily know that druck and Miller ran the Sources Quantum Fund for a long period the when Source was in Eastern Europe kind of doing of his stuff that he was interested in doing, and so uh, really an extraordinary trader. So if people want to find out more information about either yourself for a fund seat or a market, wizards

with the best fund seater dot com. You know, just a fun seater is like one word and what it sounds like. And I have my own side which I didn't do anything with. But you know, if you want to get the books or any other links to any stuff. Jack Schwegger dot com Jeff, thank you so much for being say your time. We've in speaking with Jack Schwager, author of Market Wizards. If you enjoy this conversation, be sure and stick around for the podcast extras, where we

keep the tape rolling and continue chatting. Be sure to check out my daily column on Bloomberg dot com or follow me on Twitter at Rid Halts. I'm Barry Rit Halts. You're listening to Masters in Business on Bloomberg Radio, brought to you by B A s F. We Create Chemistry. Welcome to the podcast. Thank you so much, Jack, Thank you so much for doing this. You're you're one of our few repeat guests. And I know I've said this before, but I really have to reiterate. This show came about

because of because of Market Wizards. It came about because I said, that looks like so much fun. When I first started writing for Bloomberg, they said, hey, we have these great facilities, it's a playground. What would you like to do? And my answer was I want to find intelligent, accomplished people, both from in investing and outside and sit them down and have a Market Wizards like conversation. And they were, okay, go do that that's really how this

came about. So the last time we spoke, I would be I would be remiss if I did not point this out. You reminded me of something fairly hilarious that I had forgotten about, which was Amazon review of Market Wizards from two thousand and three. So I actually went out and pulled that review today and I just have to share this with the audience because it's so funny. Um the market strategist for New York City Investment Bank

bl blah blah blah. So when gave me this book when I first got into the industry a decade ago. So this is written in oh three, God, we are getting old. I find myself rereading it every five years. Quote. I highly recommended to anyone who was involved in the markets, say we stated, this is the book for anyone who wants to learn about trading or investing. It is simply a must read. What's so utterly compelling about the interviews is how consistent the themes are that arise from so

many different traders. This is true regardless of the markets they work in, commodities, equities, currencies, bonds, or the style they employ technical macro economic, fundamental quantitative the basic concepts revealed by the Wizards or these discipline, capital, preservation, risk management, individual responsibility, flexibility, intellectual honesty, and consistency. Now that's pretty fascinating. And and that is a in the mouth the words

you use. You couldn't capture the book better. I mean that really is what the what the book had said to me. And I completely forgot about that. And that is that. Yeah. But the thing is your review. You know how Amazon has, uh, if you like a review, you know it was helpful. Yeah, And so that review, like I I don't know what it was like in you know, ninety eight out of nine and nine people found it helpful or something like it shows up as the top reviewed review. And I completely so it's the

top ranked review of market Wizards. If you go to the people, it will be always be the first one. And nobody's ever going to replace that. Because so you reminded me of that, and I hadn't a I had no idea that was of all the little of all the little ego things to go out and google yourself or whatever. I just and by the way, I almost never never write reviews of stuff. Usually it's because something is this is not how it's advertised. This was advertised as a twelve pack and only one showed up or

whatever it was. And and I was moved enough by the book to write that review, and then I never thought a second And I'm sure it was very helpful. I mean that because when people go to that and then the first thing I see is your you. It's it's it's sincere. It's honest, it's sincere. So so let's talk a little bit about about some of the other wizards, because I think people are are genuinely interested. During the broadcast portion, we didn't get to Richard Dennis. Uh. Tell

us a little bit about Richard Dennis. All right, Richard Dennis h started out as a floor trader. Uh. He started on the Mid America Exchange. Of course, we don't have any floors altogether, but the midor Erica for people who were unless their old time is like us. Uh. Mid America's change was exchange for people small conquered mini contracts, so people who couldn't afford the trade to regular grain contracts, which weren't that big really, they would trade the Mid American.

That's what he started out. And he started out literally, I think we're about the two hundred dollars and uh uh you know, eventually got it up a few thousand. But he that that that the little steak got multiplied ultimately a couple hundred million dollars a couple hundred yeah, two hundred million plus whatever I mean to two hundred ye yeah, yeah yeah, Uh. It could be the greatest compounded return of Yeah, there's uh, there's quite a few. I mean that would certainly if you want of them,

for sure. Yeah. Uh. And and now Dennis ultimately went on to manage money that didn't work out so well. Uh, he did much better for his own money, and he he started he started blew up, you know, back he got stuck in the big thing that that hurt Dennis was And that was also a bit of bad luck, I would say, uh was the eighties seven crash. Uh. And everybody thinks that the eighty seven crash. Of course, it was like the the immense decline to stock market.

But what also happened in eight seven crash was this amazing rally in in the interest rate markets and your dollars which nowadays you think of your dollars, we'll trade a cup, you know, they go five or ten points right there, there was an overnight move of two hundred and fifty points. I mean, think about that. That's like in that that's per contract, you know. So uh it was like a seven thousand dollar move roughly. I think it was per contract, and we're talking a guy who's trading,

you know, thousands of contracts. Uh so, but that and he couldn't do anything. It was like, oh, it was instantaneous. It's just like it was the gap. You couldn't do anything. So that that trade I think pretty much wipe. You know that. That that killed his first advent or one of it would adventures and so but he never again reached that. Uh but what was he especially famous for? He was a trend follower, and part of it I think maybe was like he when he operated when the

markets were conducive to that. Now, trend following, we can get into this if you want. I mean, there's a reason why trend following works to some extent all the time. Over time, there are elements of momentum and persistency that exists in all markets because people's mood tend to not flip flop from day to day. If there's an expansionary period.

It has a tendency that that's one. It's more it's more that it's more fundamental than that is because the things that really drive the big moves are things that blasts. So it's it's a central bank decides to secular. So yeah, they decide, well, we're gonna weekend the dollar or strengthen

the euro, whatever they're gonna do. Uh And they're not gonna just do it for two days or two weeks and these day or or there's a move to say, okay, we're gonna start lowering interest rates, and usually when that happens or raised interests, once that trend begins, it usually goes on. So trends have a way of persisting. And even if it's something like commodities or whatever, if there's a shortage of metals, it takes kiars to open new minds and stuff. So these trends can go on for

a while. Uh. So that's why it works, But it's gotten much more difficult to exploit because the markets there's so many people who try to do this. When we were starting this early on or why should say we but the trade aside, somebody Dresy interviewed you know, they were the early ones doing this stuff, and they were doing trend following techniques, and but now there's so many people doing it that you've got a lot of a lot of false breakouts, and it's much more difficult to

make money that way. That's that's fascinating. So not only was he a big trend follower, but there's a famous total story with him with the turtles. Well yeah, I mean, well there's a group of traders called the Turtles, uh, which where the name comes from the story is that he was in Singapore and he went he saw a farm where they were raising turtles as Vada turtles. By the tens of that. His thought was, Gee, wouldn't be being interesting if we could if I could trace traders

like their raising turtles. Here you trying to do with which is why we're trying front seat or except we're not trying to train them or anything. We're yeah, and and and Dennis and another trader we talked about an intermission. Neck Cart who was his partner, trained a group of traders called the Turtles, and some of them went on to do quite well. Uh. And so that's kind of a famous story. And they put an Times and yeah, or not think we actually was the Wall Street Journal, right,

the Wall Street Journal. They did two years, uh, and they picked about twenty people each time, and they had no previous way. They were not looking for training. They were looking for people like game inventors, they were looking for chess players, they were looking they were looking at people who kind of had create to an analytical and thing. But they didn't want people who actually know anything about market any want they want. They don't want to be

sullied by the wrong approach. You know. So Renaissance Technology out out in Umsa talking near Stony Brook, Jim Simon's he doesn't hire Wall Street people, you know, well that but that's a that's a pure that's how that's a really pure deep quantitative really you know, really deep quantitative stuff. So people like Simon's yeah, and and and Shore is similar, you know, uh, they basically very highly quantitative approaches. So so those are some of the uh, those are some

of the people you mentioned. Druck and Mill. We talked about Marty Schwartz and any Trader in particular. You think, uh, we're worth mentioning that. Yeah, the one trader we didn't talk about who I I just think is a phenomenal, phenomenal individual is and and probably in in some ways, of all the great people that I interviewed, is probably the most amazing. And that would be that would be Ed Thorpe. Sure be Eat the Dealer, his first book,

and then beat the market, Beat the markets. Right, he was out in Stanford or yeah, yeah, he's out in California around. He's still around. He's now when I interviewed him, he think he was like interviewed two thousand and twelve. I think he was seventy eight or so or seventy nine, so he's low low eighties. Now this is you know,

he's a just he's a mathematician, PhD mathematician. He actually the way he became a PhD athetician, which tells you a lot about the man, is he was doing his PhD. And this is a kid who grew up in the Depression um in a poor school district, very bad education toward himself physics at at a young age, got you know, got accepted into uh, you know, top universities in California, and was getting his PhD, was working on his thesis

and PhD in physics. Decided he didn't he decided he didn't have enough math knowledge, started the order thing courses in the graduate math courses, ended up with the PhD. Math never rots thesis, so he you know, in in physics, technically speaking, he's not a PhD in physics. They never bore writing the but some some stuff he did. He actually and he has this amazing track record. Uh his first fund nineteen years, um, nineteen years, he only had uh like two or three losing months in all those

nineteen years one percent losses. The largest loss ninete cent compounded. But that's the that's that's that's a track record. He also did stuff like the reason he did so well. He he came up with the Black a mathematical equivalent formulation of the Black Shows model about five years before then, famous paper that want the nob prize. And he didn't publish it because why I asked him, why he was

too busy. Yeah, think of it for five years. He's he may be the world the only person in world who knows how the price options correctly at and and and that's what he made it. And he he was. He had the first the first war you know type option fund. He had the first convertible bond fund. He had the first statop fund. He came up with all of these things on his own. He and when he was before his trading career, then he was doing stuff like UH. He was the first person to h with

with UH. With an MT Professor Shannon, who was the father farther information theory, they did the first miniature computer. This is back in the sixties when god, you know, we had we had IBM IBM mainframes as large as the room to do simple calculations. They created their own own mini ministure computer and did the studies to use Newtonian physics to beat Roulette wheel, just to show that it could be done. And they got like a forty four percent edge on the Roulette um. And and so

he did all these amazing things. That's fascinating. Why do you say he's the most interesting character. Well, because he has all that those elements. You know, he figured out how to beat you know, the casinos at their own game. They changed. In fact, they had meetings about what to do about Thorpe, you know about this man, professor. Yeah, and and there's a story and they were they thinking about banning him from the worst band. Let's put it

this way. One of those stories in hedge fund markt Wizards tell us about and this is like out of a movie with his brakes not working, you know, going downhead car on the car and just throwing the corn reverse and and finding out that the car has been you know, tampered with, you know really Yeah, yeah, so we had the vegas. We had so But anyway, So had that side of his life and then he did all these He was the creator of so many catch fund strategy He's the first guy to do it. Um

and uh uh and there all sorts. The thing that I can't even think he was a made off. He he kind of he he knew made off. He figured out what made off was up to like a dozen years before. Uh. And he had he investors because investor, one of his investors said hey, what do you think of this? He said, give me the trades. And he he's a mathematician. He he gave mateen reasons why it was why he was out. That's fascinating. It's a shame

he didn't go public with that. Yeah, I think he I think I think I might have discussed that in the book. And there were reasons why. You know, he just felt that you know he couldn't get and of course that you know, Actually, uh, I should know the name the fellow went public um uh mark uh Greek name uh Marcot pop Harry, Marco, Marco Polos, Marco Polos, right, Uh, I mean he wrote this great paper which beautifully beautiful analysis,

and they ignored it. I thought from Marco Polos's paper the most compelling thing was if he's doing this by right strategy, there aren't enough options in the world that this isn't complicated. He's got to be like he's doing trades and markets that had no volume on that day, and he's doing what he's doing tens of thousillions of dollars right, and tens of thousands of trades and a market that didn't even have any option trades. It's it's hindsight.

Bias is always present. But that was foresight of market Polosis party he was. It was foresight that that's quite that's quite fascinating. So let's talk a little bit about technical Since you've written a book about trend following and market trading in futures, I shouldn't really call it trend following. Yeah, it's not yet. It's really more technically answered. The book that got me into this whole thing writing was was was an analygical book called Complete Guide to the Futures Market,

which was the catalyst for the Market Wizard books. Because that book, I told you had the idea of years before. That book did well for an analytical book. I had some publishers say, hey, why don't you do want you to do a whole bunch of analygal books. I said, no, thank you, I've done that once. It was a lot of work, and so I did the Market Wizards. But that book is now getting redone. I have a co Aufered Markets going and doing a great job, doing great

legwork getting it updated. And UH so that the updated version the new the new version of the Complete Guide of the Market. Uh, Complete Guide to the Futures of markets, like guid the Future market is fundamentals, technical options, etcetera, etcetera, etcetera. Trading. Uh that comes out this fall sometimes that's that's interesting. So so how did you find your way to technicals? What made you like? Ah? Yeah, so I said, you're looking at somebody who started out as a fundamental analysts.

I hear this on a regular basis, starts out as a c f A or or a macro economist. And then because I come, you know, I come from an account what's my education, I'm I'm I've got a degree in economic so so, uh, you know you're to be inclined to look for a statistical analysts, you know, that

type of analysis approach. Um. But I found that the fundamental analysis was very poorly attuned to trading, because fundamentals don't give you timing, uh, And it's worse than Actually, I say, the only way that fundamentals are useful for

timing is in a contrarian way. So in other words, if you have something that's supposed to be bullish for the market and it doesn't cause the market to go up much or as much as you think, or cause the market goes down, that might be very useful bearish information, but used as the way it's intended, fundamentals do not work for timing because they're just too broad, much too broad. Ralph Acampora, I think had the greatest explanation on the

tension between fundamentals and technicals. I actually have a quote of his Fundamentals tell you what to buy, technicals tell you when. Yeah, that's a good way to do it and you could use fundamentals of that you can't say you can say well yeah, and if you're a good fundamental analyst, you can get say well this market should go up over time. I wanted to look for only by trade. That's that's a that's a good use of fundamentals.

And the way I got into technicals because I was a research director and uh, one of my analysts was a technical anals. So I didn't do anything, but I noticed that of all the analysts, he was the only one who was doing well, right, And so I didn't want I like to think I was a little bit

open minded. So I said, Steve, you tell me what you do and he started, you know and Steve who which okay, So I showed that absolutely Steve Kronowits And unfortunately Steve Proms was I know, he was a very close friend and he unfortunately died just a couple of months ago. So I was, you know, probably the big the worst loss I had as a friend in my life. Yeah, yeah, just like he was a great person. Um, but Steve

was the one who talked me techno analysis. When when you said tell me what you do, how does he So he said you know, well, he made me understand why these things work. You know, so I came in with the well, this is the pocket of stuff work, and they appreciate that it works because it reflects everything going to market. It's reflecting the psychology of what you're seeing. You're seeing fundamentals in the charts. It's just you're seeing him through the price action. And that's what the people

don't understand that. People say, oh, it's a bunch of mambo jumbo and all that. Well, no, because anything that's fundamental, people who were moving the markets for fundamentals, you they can't hide what they're doing. It shows up in the supply, it shows up in the price. So so that leads to a question I had written down to ask you, what do you think people misunderstand about technicals? That that that's that's the key thing, that that the technicals aren't

some mysterious thing. They are the reflection of all the participants in the market. So they do reflect fundamentals. Another thing, and this is one of the main one of the main things, like my complete guard the futures market, one of my main points is you don't when you and I go through lots of charged analysis, techno analysis all that I say, it's not so much interpreting when these

patterns and it's a lot of subjectivity. What's even more important is when things that should work one way based upon the techno analysis don't work. So what I call a sort of a failed signal is more important than than a classical signal tells you something is happened. So if you get a you get a market. Hey, this is actually my favorite example is this is really terrible news and and the stock actually rallied on. That's right,

that's that's the type of thing. And but I'll give you like one example that the personally, Uh, it was a week or two ago. It was along the bonds of the market was going up, and then one morning gaps into highs. I'm I'm doing great, right, and it's sort of and then during the day just goes down and starts going down and down and down and down, and I say, hey, that is just not the right type of action. And I had stops in so if it got close to unchanged, I'd be out. I got out.

And yeah, now with Brexit is going back up again, but it had a good size reaction, and that's that's a good example of you had a gap breakout, it should have been strong, and it failed. It came back into you know, so that's again so to me, that's a that's a much better signal than the breakout. So today we're sitting in this room with one to three, four, five like ten monitors and you know, five computers hooked up to a network of industrial military grade computing technology.

What has all of this computing horsepower and and all of this charting software done to the world of technicals? And I say that with with the admission that I came up with guys who would do charts by hands every night. And and the traders there, traders who are interviewed who still in system. You know, it's a little insistem to or met you know, that was a little system doing it by hand. Uh. And as far as I go for exam call, I don't use any of the indicatorsn't I just look at charts. I mean, I'm

more comfortable of that. And my attitude is I think all these indicators are just vivetives or price anyway. Yeah, so and my eneving averages and oscillators and all the Yeah, they're just they're just formulations of price, so you're really not getting anything more and price, you're just getting it in a different type of picture. And my analogy for that is it's, you know, you take something like sunglasses, and some people are like an amber collar better. So

I'm like, you know, bluish callar better. You know, it's a personal taste. And and some people who work one call it work better. For some people who one call it work better. For other people, it's amount of personal taste. So in my case, I just like the plain charts, plain vanilla clear. But but not you're not an Elliott wave guy, You're not a demark. I'm not out of again, an analyst or Fibonacci or my approach, and again I'm not a great trader, but my approach basically is just

look at the charts for an opinion. Could be trend, could be trend following type, trade, could be counter trend. But evil way, it's got some sort of reasonable of the charts while I'm looking at it that way, And in every case, I'm putting in a stop along with the entry. So so does all let me ask you a slightly different questions, does all this charting software that's out there. Uh so anyone could have access to an immense amount of technical analysis that really wasn't all that

available when I was starting. What has that done to the world of trading? If anything? I don't know. Yeah. I think for some people they learned to use some of those indicators in certain ways that work for them, and so it gives them there's like it's much more variety. And then so far as people need to find a way that works for them, it makes it possible. Just multiplies tremendously the amount of ways people can trade the markets.

So I guess in that way it's probably useful. But no matter back then and now there's only gonna be all, you know, smaller number of people that will excel in the markets. Alright, so I know I only have you for a few minutes longer. Let me get to my list of favorite questions and start plowing into this. Let's let's jump right in with the mentors. So you mentioned my mentors. Yeah, so the one mentor I really have one mentor, and that mentor would be would be Steve

Chronowitz because he's he's a fellow. Taught me classical chart analysis and uh yeah, and I didn't read actually never even read and I never I had to ment this. I never read the classical charge books and everything else McGee and yeah, which was not. I just ended up not because I learned. I learned the basic things from from Steve and then from probably markets. I fund everybody, if you look at charts, you get your own biases certain things. And uh, I I'll mention another fellow who's

a close friend, Peter Brandt. And not that he's a friend, although Pete is well known on Twitter and traders who follow him. Yeah, so uh not that not that I meant to say, not that he's a mentor um because but but he is. He and I are very similar in the type of approach. I mean we may not look at the child and get the same opinion sometimes yes, sometimes No, that's not what we're similar. But it's the same type of thought that you know you're only gonna

win a certain sentences your time. You always know your risk point is much more important. To keep your losses controlled and uh, and be unemotional and just use just use the information. Don't try to make the markets work, you know, do what you wanted to do. Just follow what the markets are telling you and it's a lot of similar philosophy, so not not necessarily a mentor question, but what other of all the traders and investors we mentioned,

who who influenced you philosophically? It sounds like Brandon you are very sympatico. But in the formative days. But yeah, in the formative days. Um well, I I would say, of all, there are a number of people who made the same point. But as a line that sticks in my mind, U maybe the single most important sentence that anybody uttered, you know, okay, that that's a that's something to get people right right is Bruce Covernor's line is always know where you're gonna get out before you get in.

You know, I started on a desk with the head of the desk was a marine jungle combat instructor. This is a big, badass guy, and you know, he had the same exact line, but he would always couch it in marine terms. He said, before you take you're gonna take a village, You're gonna take a house, You're gonna take a hell. You have to know we're getting in, we're getting out, but we have to know what's our exit, and if that exit is blocked, what's our plan B

and what's our plans? Say you always have if you want to get out alive, you have to know what your exit strategy is and what the alternatives are if something MUCKs up that person. And that sounds very much like what what Coke said, only only that's got a little more mud and and and teeth in it. Well, the one thing I would add to that is also that the key about it is that what he's really saying there is dude, before you get in, because that's

when used to have objectivity. You're your objective kind of motion it. Don't do it, don't have bullets or your analogy works. Don't do it in the heat of combat when you're playing. That's exactly right that that's my analogy is you know that that card in the seat back in front of you, Well you're on the ground. That's when you want to read it and see where where

the right, where the exits, where's the flotation devices? Not oh look the wing is on fire, which was on the news today at thirty feet probably not the time where you're gonna have the presence of mind to learn anything from that. So so let's talk a little bit about books. We've been talking about your books? What other books have you read fiction, nonfiction, investing, not what other

books have you found to be Hey, people should read this? Okay, well, I I'd recommend as as authors um for for if no, even for entertaining purposes. You know, anything Michael Lewis has written is just I think Michael is one of great authors of all time. I mean just surmendously entertaining any but also a brilliant talent. You take a book like The Big Ord, and I gonna appreciate this because I wrote an ente for the market Wizards, I had to

cover some of the same territory. Uh To take the complexity what went on there and to make it entertaining and understandable is a talent. Uh So anything he consistently finds these angles to to bring and these personalities to tell the story just just wonderful. I will admit I have never read one of his books. I've read all of his books except one. It's eat Way to Say It.

And I'm saving The blind Side from my next vacation because I always read his books and I will plas him in a day, The Big Short a day, Flashboys a day, money Ball a day, You sit on the beach, it's like, wow, yeah it was. It's it's it's it's entertaining, you learn stuff, it's insightful, it's creative. Yeah. So uh another offer I would put you know, very high up and and who influence I think will stay for a long time does not seem to tell that. Uh So,

I guess Xwan is probably the most famous book. Personally by randomness is more famous and more useful, well, personally fooled by randomness and and tally would not agree with me.

But but because I think he thinks block Swan is his best book, I think I'm not sure, but I I think Fooled by Randomness he is not, just because it was the first of those type of books, but it really got all the key lessons and it's it's so much captured how a lot of what people think is skill is really luck and and confused two and and also not appreciate the fact that there are the tail nature of events in the markets as uh, and that and and so all those themes really come out

very well. It's a shame that he's not going to hear this interview because I tweeted, I retweeted something somebody else had written and he was so angry at that person that he not only did he block them on Twitter, but he blocked me. Oh, I know it was. It was Noah Smith, who writes for Who's and let me go? So let me give Aroduce here. Noah Smith, who's a blogger, economist, blogger, and tollaly By. Noah hates him. But Noah Smith is for a guy who writes short, succinct articles on on

economics that are pertinent. They're they're just extremely well explained. He's not He's not a liberal. He's not a conservative. He's That's why I love about Let me let me share a little inside baseball with you about Noah Smith. So I'm the guy who brought Noah Smith to Bloomberg View. How how do I know Noah Smith? So he comes. Listen to his background. It's really fascinating. I think he comes out of Berkeley with a degree in physics. Then he goes to Michigan University of Michigan to to get

his PhD in economics. Then he's teaching at my alma matera State University of New York at Stony Brook in the economics department I've spoken to his class a couple of times, and when Bloomberg View was coming together. Um I every now and then would say, Hey, are you looking for a guy to cover this or that? Yes, send the name. So a number of people I referred them to ultimately became writers here. I always loved for the same reasons that you do Noah Smith's work. He's

a fascinating guy. Then add to that just absolutely brilliant, smart as a whip. Add to that, PSC speaks fluent Japanese and spends summers in Japan every year for the past decade. This is really an interesting, unusual talk about eclectic physics, economics Japanese. But he right, and he writes very clearly, very very understandable, takes really complex issues and makes it really accessible. From what I followed with him and Teleb, he used the concept of a black swan,

apparently in a way that Teleb was not happy about. Now, last I checked, TELEB doesn't have the trademark on a black swan, meaning we were expecting this and we got something else. Oh and by the way, it was a tail event. It was a low probability but significant outcome event. I think the two of them use the phrase slightly differently. And look, I have no beef with with to Leb, and I love Noah Smith's work. He went so postal at him. To Leb went so postal at Smith for

for writing this. He was so angry at me merely for retweeting it. He goes, I just can't continent you you retweeting this, and I have to block you so and we should tell people for Noah Smith. His his blog is called no No No opinion, with the word Noah an opinion to combine sort of a uh, I forgot the word of what what what that's called? When you when you combine? Uh, it's on the tip of my tongue. Um. I I don't have an issue with Teleb,

but I find his his work to be fascinating. I don't think he what he does on Twitter is a good look, crushing it, you know, getting into fights with people at the time. But I understand it. Listen, we all have a certain amount of road rage that doesn't suffer that doesn't suffer fools, but exactly exactly. But I think sometimes maybe he may confuse you know, uh, who

the fools are? You know? So yeah, no, that that's exactly listen if when over the weekend following Brexit, I saw a data point that said, um, you know, you look at how the older folks voted, they voted overwhelmingly

to leave. And you look at how the younger folks vote, and they voted overwhelming in these stay And I saw I tweeted this data point out that had come from one of the UK papers, and and someone tweeted tweeted the line with there's a British soldier saluting in a in a huge cemetery and they tweeted, yeah, what did the old folks ever do for the UK? And I had to call the guy out. I'm like, well, if

you're eighty and you voted for Brexit, that's fantastic. You were three years old when World War two started, so please do some basic math and stop lying about this. You already won, but you don't have to. You could stop lying now that you won. You don't have to. And I just I felt myself wanting to go full

talent the guy. But there's a difference between calling out someone who's intellectually dusanest someone who's a liar not suffering fools glad, And I was very surprised when I saw there was some you know, comments that he was inking. I didn't really read the whole thing, not see him come back on BlackBerry and and no, we we miss you, we love you, and and be less of a By the way, he's another guy that I would love to have on the show, but I'm afraid he'll just chew

the furniture. He's you know, I've met him, I've had lunch with him. I think he's an interesting guy. He's certainly smart enough. I maybe it's a generational thing. I got enough of a foot in the under fifty, asked him. I'd ask him on Twitter, but I'm but I'm blocked. But all right, let's let's not um have this. Let's let's go back to what other books besides Michael Lewis and Not seemed to like. Okay, what are the books

do you find? Well? I mentioned Reminiscence of the Stock Operators, Beat the Deal or Beat the Market, and then my, uh yeah, my favorite book, my personal favorite book of all time. One of the only books I've read several times is a book called Endurance about Shock Shackleton's uh endurance Endurance, So it was original book there has been several books about Shackleton that the Anton. Now, yeah, there's

a movies and stuff I think well have been. Uh, but that first book, I think it was by Lansing, which was written if I remember I remember, I think it was written fifty five. But it is the most compelling story. Uh. It is just just so tell quickly tell the shaff So the shack the story an antontic expedition bottom line gets stuck trapped in the ice. Uh and in middle life is no, they just have nothing

and uh they by all means they should have been. Yeah, they hunted to some extent, but they couldn't be rescued for for years. But I almost don't want to say what happened or what happened with survival because because it's because you don't know. If you don't know, it makes much more interesting. But as a tale of survival, it is. If it's not the best tale of survival ever written, it's um and you you know you an endurance, I

mean the endurance. Endurance is well titled and there are so many images in there and so many, so many it's the story itself is so compelling. Uh, it's just a great reason I'll put that on my list. That sounds fascinating. Um So since you joined the finance industry, what what are some of the most significant changes that

you've you've witnessed. Well, we talked about the floors disappear ring, you know, tremendousity, the computers, I mean, the whole why I started out in the day or we we you know, most people, we didn't have quotepaciet you know, on desk. We had these giant wall boards where the click and that was technology, the board wall boards which you know,

clicked every time the price changed. Technology has been a tremendous change, and that's that's brought into uh into existence a whole bunch of uh the approaches that would have been impossible because of the calculations of all the just two intends to do any other way. So you have a change the nature of trading in that sense. Um, I guess a lot more strategies. I mean, it used to be much simpler and you got you got a fifty eight different head fund strategies now all sorts of

arcane stuff. So those are some of that changes. But human nature doesn't change. And that's where the similarity of markets remains so given the technology changes in the past, what what do you think might be some of the next major shifts we see going forward? See, I'm not a predictor. I don't know. You know that's the right answer, don't. I always like that answer. If nobody if you don't know, you're better off saying that then then guessing. And so

few people in this industry of willingness. I never I never answer a question. You know, I don't think I know the answer to right now. But by the way, I've done enough TV in my career that when someone asked you a question and you say I don't know, it throws them off. They have no idea what I've done that? So where's the down gonna be? Right right? I don't know. They look at you like you have

two heads. Come on, give me a number seven I've done in three I remember doing inenter you in Australia and I said, look, you know, I can talk about training and I can talk about this. I don't but that because I don't ask me. I'm not. You don't ask me, I'm not and I'm not fo First question, what do you think the Australian stock Market's gonna do you know, I have no idea and it's basically what I answered. So, um, so let's get to our our two are too, uh A two favorite questions that we

ask all of our guests. So a millennial or Reese graduate comes to you and says, I'm thinking of getting into finance as a career. What sort of advice would you give them? Oh that's a tough one. Uh you're talking about trading, You're talking just finances, anything and anything, and uh, well, uh, first make sure it's what you really want to do. I mean, it's not you're not just looking to do for the money. Um, you know.

I guess in terms of finding a job, probably the only effective way to do it these days is networking. Umbo career itself. The treer has to be geared to something that well, you want to go with your strength. So, uh, if you can write, you want to try to find an angle it and fanthasized writing. If you can do analytics, he didn't do that. If you good in computers, you know, so take advantage of your strength and try to break

into the career on your strong point. Basically, focus on your strong point and and our last question, um, what is it that you know about investing today you wish you knew thirty plus years ago when you started. Well. Uh that one of the themes of Marco Wizzards is that the risk of management is more important than than trading strategy. Uh. Oh you know what. Uh And this is what I've made mistake I've made made made more recently, and I wish I learned much quicker. And even if

I learned it, I kind of repeated it. Hopefully I'll never repeat it again. But um, and maybe my my biggest flaw as a trader is be careful of getting too complacent when you're doing very well. Uh so all my you know, for for years and years, every time I've had any significant draw downs, that's always been after I've done extremely well. Yeah, you know that I've witnessed

that and experienced it. So I'm I'm actually I'm actually superb at not at coming in for a small steak and even just controlling the lost tiny amount or not losing anything and just getting ahead and never being behind. I'm really really good at that. Um. But I'm really been terror ball about once I get ahead, not a lot, you know, than than giving back a chunk, which I would, But because I do things or take more risk, or do things differently than I would have done when I

was being so super cautious. So when i'm when I thought out in the beginning, I'm every time I got and I don't trade all the time, so it depends on how busy i'm. But every time I saw trading, I started very small and very cautious, and that's when I'm best. So it's so funny you say that when I when I began as a trader, I ended up creating a number of rules, one of which was never let a profit turn into a loss. But then mid nineties, just like you talked, what happens when you have these

giant winners. So that's where the rule came from, which is when you're up x percent and x has to be substantial. If you give back, that's it cut cut your losses, and I think, and there's something along there. So in other words, you you're up a hundred up, now I'm alling up seventy five. That's it. I'm out. Otherwise we've all seen those round trips too many times. Jack. This is absolutely fascinating. Thank you so much, Thank you so much for doing this, for those of you who

are still with us almost two hours later. Um, we've been speaking with Jack Squager. He is the author of the Complete Guide to Futures Trading. Look for the new edition coming out in the fall. Market Wizards, Stock Market Wizards, New Market Wizards, and Hedge Fund Wizards, as well as the Little Book of Market Wizards. Diday I got I nailed them all. Uh, and be sure and check out Jack's new entrepreneurial venture UH fund seater dot com, where you could see how they are trying to find the

new uh, the new emerging managers. Perhaps, if you're an active trader, you might want to register at fund seater and see if eventually they find you as as one of the outstanding performers. If you have enjoyed this conversation, be sure and look Up an Inch or Down an Inch on Apple iTunes and see any of the other nineties seven or so such chats that we've had. Check out my daily column on Bloomberg dot com, or you can follow me on Twitter. Are you on Twitter these days? Jack? Yeah?

I am Jack Schweger Jack at Jack Schweger. Um, I would be remiss if I did not think Taylor Riggs my booker, Charlie Volmer our producer, and Reggie our recording engineer. You've been listening to Masters in Business on Bloomberg Radio, brought to you by B A s F. We create chemistry.