Jack Schwager on the Glory Days of Trading (Podcast)

the sixth book of market Wizards he's put out. And when I was a young stud on a trading desk back in the eighteen nineties, Um Schweger's book Market Wizards was was one of the first books I picked up uh to learn a little bit about the idea of of markets. And I found the book to be tremendously a formative to me. Not so much because it said by this cell that, but it was very revealing about discipline and risk management and mental models and containing your emotions.

And that book really was one of the early books that sent me scampering off to learn more about behavioral

economics and and behavioral finance. Not so much because he was channeling Um Traversky and Conoman or Sailor or any of those folks, but it was pretty clear from the successful traders he was interviewing, that consensus was problematic, that examining your motivations was really important, that being aware of of not only your own emotions, but your own biases and some of your own cognitive deficits and blind spots

was really really important to individual traders. And you know, I wouldn't call Market Wizards uh behavioral finance book, but it certainly touches on so many of the same issues. I find these books to be absolutely fascinating as he's put them out over the years. The first book really was just a pure interview book, and and it's evolved over all these decades. I think the first book was eighty six or eighty nine and the most recent book

was twenty. He not only gives you a summation at the end of each chapter, each trading wizard of of their rules and and what guidelines you can pick up from them, but at the end he summarizes it with something like forty six trading rules that you can learn from these people. And really he's made it easier and easier to consume um the information. I know what he's trying to do. He wants to educate people. For me,

as a young guy on a trading desk. I found it really helpful to sort of that journey of of learning what I was doing wrong and why in order to get better. Was was really helpful. Um, but I don't think people have the patients for that these days. I found the book to be really intriguing and I think you will also, And if you haven't read the first one, or the second, or third or fourth, but go back and read that first Trading Wizards book. It's

really quite astonishing and has held up over time. You could read it today and it looks like it came out last month. So, with no further ado, my conversation with Jack Schweger. This is Masters in Business with very Renaults on Bloomberg Radio. My special guest this week is Jack Schweger. He has written five books on market wizards, and in fact I found his first book, I think it was the Market Wizards Book, to be enormously useful in my first job as a trader on Wall Street.

He is also the founder of fund Seater, a platform designed two matched undiscovered trading talent with capital worldwide. His most recent book is Unknown Market Wizards, The Best Traders You've Never Heard Of Jack Schweger, Welcome back to Bloomberg. Hey, good to speak with again. Barry, same same, It's it's been too long. Let's let's let's start out talking about your first Market Wizards book, which I've told you before.

Not only was it enormously influential to me when I was a trader, but it was part of the motivation for this Masters in Business format of talking to people who have achieved a level of accomplishment and excellence, which leads me just to my first question, what what made you decide to write that first Market Wizard's book. Yeah, so I had the idea actually for several years. At the time, I was a future prorector of the Futures Research Department, which is kind of a full time job

on its own. To do a book, you really have to do, like commit tonight's weekends. I had. I had done a a book before, the Complete Count Futures Market, which was like a seven and fifty page home and I didn't want to do that at anything like that again, but I want to. I had this idea that, gee, wouldn't it be fun to go right? And I knew some great traders. I said it wouldn't be fun to just kind of do that as the theme of the book,

but it was just amount of time. And then I got invited by to a lunch by some other publisher who wholi the analytical book I wrote. They want to do a bunch of analytical books, and I said, no, no interest, but I've been thinking of this, and they said, okay, why don't you do that? And so that was the catalyst, and I guess I just needed a little bush to get going because I thought it was a good idea.

So so this is now over three decades that you've been sitting down with traders talking to them about their process, their methodology, and where they've gone wrong and where they've achieved success. I can't help but notice that the world of the twenties, at least the trading world, is so very different than the trading world of the How does that impact the sort of conversations you have and how does that affect the methodologies of these different types of traders. Yeah, so,

you know, that's a good point. You're absolutely right. I mean, it's been enormous, you know, really enormous changes, as as you all know, you've been business a while as well. But you know, from the time I did the original Market Wizards book, which was the late eighties, and talking to people at that point about that career is really going back to late sixties, seventies and into the eighties, but to that period of their you know, their their

trading history. You know, it's pre pre prepcs, you know. Uh, of course we had in futures and basically dealing with fits, not electronic trading. But the big changes is this computerization element. And uh, we went from a world where where we

didn't even have PCs. Too, we're not only everybody has a PC, which is quite a full and in this tremendous amount of data, but you're also dealing now actually for decades where you have firms who have taken quantification to the extreme, might have PhDs and maths and physics and so forth. Uh, you know, trying to work on the markets give from from from that angle. So so that that's been I think that the really big change plus the electronic trading, to switch from from jets to

electronic trading. So, um, how does that change you know? Of the enough for since I end up interviewing mostly discretionary traders, we can talk why that's true he has a separate tension if you want, but that tends to be the reality. I mean, there are some systematic but

then mostly discretionary. Um. It turns out that for the most part, a lot of approaches really go fall into the same categories, and there's still a place for the individual discretionary later and and I would say, the biggest surprise I had doing this this last book, I know, MARKT Wizards, was I didn't expect to find people of track records like those in the first book, somebody you know, people like the Govenors and the Jones and so forth.

And to my amazement, I found people, you know because and I say that because of this great quantification in all this competition, you know that now exists, into my surprise, I found people whose records were every bit as good, if not maybe as good, as any others found. So that was my surprise, and it basically speaks as evidence that somehow, despite these enormous changes, it's still possible for the individual trader too, who has talent and has a

specific methodology that really works, to do enormously Well. Yeah, we're going to talk about some of the specific traders and some of the eye popping um track records that they have a mass later. But you mentioned Um Jones, Paulled Tutor Jones. Of all the people I recall from the first book or one of the early books, he seems to be the loan standout who continues to be active, who continues to trade and continues to make money. I mean, he was very early to bitcoin, and I believe he's

still a holder, you know, twenty percent later. Um. What makes Jones stand out and be so different from his peers, He's he's much more open minded than I don't know, you can you can compare him to Druck a Mill or a Dahlia or he seems to be a thirty something not a sixties something. Well, the thing that that struck me about Jones that was different, I guess is yeah, I wouldn't say. I'm about to say less rebroke, but

that's not really fair. I mean, I'm sure he's quite so, but he is he was much more um sort of act and and and um, you know, somebody like a like a Drucker Miller. I didn't see him trade. I spent the day with him, but you know, I kind of picture him, you know, more thoughtfully going through and

designing on trades and pretty traded. But but you know, Paul, I remember sitting in his office that he you know, screamed, you know, while we're doing the interview, screaming orders less than rightness in the day where they were you know, phones down to the pits and you know, so he's he's he's doing these orders, he's looking at the screens. He's just very almost mannic in the way he trades. So, um, I had that that's almost physical image of you know,

trading more so than anybody I guess that I ever interviewed. Uh, that's one difference. And there are certain things I still remember about that interview is it's kind of insistence that you know, every days he started from flying slate, So just because he has a position doesn't mean that that position is still something to be held. So yeah, he talked about wanting to evaluate every position while I have this, would I would I still want to I still wanted today,

you know that type of thing. So this this is constant renewing of his analysis and assessment of the market. And I think particularly very much a tune I think to to market action in a very addresceral way. Just those are some of the ways I, at least from my memory of that interview that I that he struck me as being a bit different. So so let's stick with that first book. I mean, the list of people you got to sit down with you for a day

is pretty impressive. You mentioned Bruce Governor. We're just talking about Paul Tutor, Jones, Richard Dennis eds Skoida, Marty Schwartz, Tom Baldwin, Michael Steinhardt, um Druct Miller. I mean that's some murderers, row of of fund managers and traders. Yeah, it was, And I was lucky to I guess I didn't even realize how lucky it was because just about

everybody I as agree. I had some edge there because I knew some traders, uh personally Michael Michael Marcus, who's who's actually a chapter one in that book, is not somebody who would have been known word not for the book, but he he is one of the greats, and uh he you know, so I knew him personally, you know, we were friends. Uh. I actually took his My first job on Wall Street was vacated by Michael. He was cleaning out his desk when I came in my first day.

We talked a little bit. He was going, in quotes off to become a trader and uh, you know, leaving his analyst job, and I took his analyst up. But he was in New York for a few years before he went out to Malibu and and you know, and you know I moved from the ly there. But um, while he was in New York, he used to get together from lunch was every couple of weeks, so we had a relationship. Uh so he agreed to do it. We have not easily. He's a very shry guy, so it took a bit of convincing and I had a

mutual friend kind of pushed a little bit. But you know, then he felt satisfied with with our interview after I had spent a day too there. That is how that was when that I did Actually when he was out out in California and um, he said, you know you should Rick, and hey, you know, he said you should interview Sakota And I never heard Sakota, but apparently Dakota was his mentor and somebody who he considered the best trader that he knew, and so he set that up

and then I flew out into Sakota. Governor. I knew because Michael had a hired covernor and so I met him through Michael, and I had actually worked because of Michael. He hired me to be analysient, you know, remotely why the commodities called making all that money and and so you know, so there were these I had a bit of a jump because I knew some traders and then some of them recommended other traders. You know, interesting, really interesting.

So so last question on on the early book. Some of some of these guys have been trading for decades, and the risk that you run into relates to what one of my colleagues described as the paradox of experts. People who are experts have their expertise in the way the world used to be in an earlier version of the world that doesn't exist. When you look around at at these traders who've been at it for a long time, do they have a difficulty and adapting to the new world.

I noticed most of the guys you interviewed for the newest book are fairly young. Yeah, um, so well, of course, you know you go back to the original book. Uh, you know, a lot most of them, Yeah, one at least ones I know continued continuing on for decades, uh, you know, like the companies and the drug of Millers and so forth, and it you know, did quite well.

And John Owens et cetera. Um, in the case of you know, but I can think of it except for somebody like like Richard Dennis, who was who had one of the most incredible stories ever turning literally a sub one dollar steak when he was trading to mid Am ex change these mini contracts and at some point amassing a couple of hundred million dollars that got to be

one of the great multiplication deeds of all time. But but in subsequently, uh, the years after our coninued, Uh had I had had some some had problems and and never conte But besides not continuing, I think had that loss is probably so um not everybody you know, none everybody uh necessarily continued forever um. But but I think the majority you know continued to continue to adapt the markets.

And and in Dennisis case, I think it may be an issue of of the markets I think did change um trend following back you know in Dennis's hey, they which I would say re late sixties through ladies. Those were kind of glory days for for trend following. You had had a couple of things working together at first, because there was before more technical analysis that came so popular.

He was before most of that. Drey was before a lot of the computerization, so people who who were early on on trend following kind of didn't have a lot of competition. And also you had the inflationary seventies and us some giant trends and futures and currencies and so forth. So the times were very good when the times came more difficult, uh Or and many more more people. Yeah, it's just to turn this amount of trying to increase in a number of people using these those type of approaches,

the approach naturally degraded. So I think that was the issue there. And uh and could explain why somebody like Dennis didn't continue the way he did while some of these more discretionary traders like Covenor and Jones did. Uh. My big takeaway from the early Dennis chapter was all about training traders. The way they raised turtles on farms in Singapore. That that concept that hey, you could teach anybody how to trade if they're disciplined and will follow

these sets of rules. I was. I was really impressed with that, and that was I don't know, twenty five years ago, do you think someone like a modern version of Richard Dennis could still train traders the way he did. I have some skepticism there, uh, and that's developed over the years. I kind of troubly is you, if you train somebody, the person you're training has to be kind of adaptable and amenable and be a good fit for

whatever the methodology you're training. And what my perspective is that to be successful the method you use, if it's not amount of being trained by somebody, you have to it has to be a method that's compatible with who

you are and how you're thinking. What's comfortable. So if you're you know, you're somebody who say doesn't feel comfortable delegating decisions to a systematic approach, somebody can teach you a system, but it's gonna be a very difficult feed of follow because you're always gonna want to be second guessing it or jumping a gun or not taking signals. So it has to be compatible with with with what's what works for you. And and I think that's the problem.

I don't think you necessarily can train everybody. Now at the time of Dentist, did it? You have turned following being a very effective methodology. So if people follow the rules, they could be successful. But I think that's more the exception than the rule. So you can you certainly can learn from a mentor if the mentor is compatible with with the methodology that fits who you are. Makes a lot of sense, Jack, I was kind of struck by this book, and I'm curious how did you go about it?

Was it was it different versus your prior wizard books? Did did your methodology change? Sure? Did you interview process change or was it you know you have a process and you stuck to it. Yeah, No, I've had um I've had the same methodology from the from the first market Wizard's book, so um uh and it works. So there's no if somebody works, you don't know who he's

gonna change it. So my process first of all, and the actual as far as the actual uh interviews and turning into a text when I do the interview, and this is kind of important is and I'm sure you could relate to this very well, Barry, Um, I try I do what you do really, which I which I send you do is have a conversation. Uh So I

don't go in with a list of questions. And you know I've been interviewed by people and that you can tell they have a list of questions you no matter what your answer put you know, there's no follow through and it goes to the next question right And it sounds very stiff and bored, and it is so. Um what I try to do an these things is really

just literally have a conversation. And there are times there have been interviews where I literally could be it could be two hours before I get the first thing that's any value. Now you don't have that luxury that I do because there's a book, not a live interview. Um. But but that's that's so that's very important. And I do have like a list of questions that I know

I want to make sure I hit those topics. And after I spend any number of hours which could be which could be as little as a few hours and in a short and to the YouTube as much as a day or more. Um, then I'll just check the list and see if I missed anything. But so that's one important thing and the other part of the process that doesn't change is just the way the interviews are transformed into texts. And uh, there you know, obviously I'm

doing so much, so many hours. You know, you couldn't any a lot of these interviews could be a book along by themselves. But besides that, if I used every thing, it would be deadly boring. So you're really what I'm really trying to do is basically extract out everything that is one of two things. One it has something meaningful to say about trading, or two it's interesting, you know, So it's one of those things. So and that's the

material that that forms the chapter. And then the thing you do fixing up of you know, people, the way people speak doesn't translate well int into written text as you as you will know, I'm sure, uh, and you may talk about the same topic in eight different places, and that's fine if you're talking, but it's not fine if you're reading. So you know, But that's that's the

basic process. Uh. The difference in this book though, was the focus, and in prior books, I guess they have been more more heavy in well known professional traders, although not necessary all the time, there's always been individual traders as well. And the most recent wizard book before this one, back I guess two thousand twelves or so, was Hedge Fund Market Wizards, which you can tell by the name is you know, obviously not individual traders right there, their

traders and organizations. So this this one was the exactly tended to be the exact opposite. It was literally to try to find those people who were trading in a home office doing extraordinarily well, and nobody knows they exist, nobody knows who they are, and and so that was a difference in this book. So one of the differences I suspected when I went into reading this book is all of the subjects of your prior books, all of the various traders, you know, you could do a search

on them. You could you could read about them. There's newspaper articles in the days before Google, and certainly since search engines have been around, you can find a ton of stuff on each of the people um that you interview. I got the sense from each of the chapters in this book that you had a bunch of arrows in your quiver, but you didn't know which ones you're gonna use, because you're kind of going in a little a little in the dark. Is that a fair assessment or am I?

Am I projecting too much? You're projecting too much because especially since I was doing these individual traders and uh, you know, it's unlike there's a public fund out there or something like that. Uh, so I had to really really be careful this time about well I always but I had to get the track records and um, and so I knew, you know, I knew what their track records were before I went in, and uh, you know,

like I'll give you one example. One of these traders, I got an email and this is about a year before I did the book, and you know, saying something like you know, hey, I'm you know, my name is you know, and I turned a few thousand dollars ins but a million of whatever, you know. So yeah, your initial reaction would be sure, right, Um, but uh yeah, I'm always I think if people, you know, people may claims,

they know they're gonna have to prove it. So anyway, said, look, I'm not planning another book at the time, I wasn't to playing view this book. And I said, but your story sounds very interesting and if you can confirm it, you know, um, you know, it would be sounds like it would be really good fit. And uh, if I

do another book, I'll get back in touch. Turns out that nine months later I do decide to do do do another book, and I get back to them, and and so you know, I got he started trading back I think around two thousand and six, and literally got that'd be monthly state from two thousand and six forwards.

So so I knew while the story sounds unbelievable, I knew it was real, you know, I you know, actually they were in this particular case that they were there Merritrade accounts, and I have an a Merritrade accounts, even though it would accounting you know, fathoms look like so the was no there was no surprise there. I kind of knew what. I knew what his track record was like. I didn't know what you'd be like, or what did you have to say or anything like that. That's always

the case. But I knew that the track records reel. So so let's jump into some of the details of various traders, starting with the first chapter. And pretty much the only um person you interviewed who has a has been trading for for decades and that would be someone I follow on Twitter who I've always been intrigued by named Peter Brant. What what drew you to him as a trader and what makes him so unique? Yeah, So, as you said, Peters is a long career. He actually has.

His career is broken into two segments. Um he uh, and each one is like, I think it's the exact number of years, but let's eleven years apart. Yeah, eleven years apart. But each one, each of the segments is let's say, sixteen seventeen years, so it's got over thirty

years of the gift trading experience. He went cold. He stopped trading totally for eleven years in between, because at the end of the first period is fun and going out of it, and he just he just decided I didn't want to do it anymore, and then out of blue, eleven years later, decided to do it and had had a second phase graded very well. So so he had sover three decades of you know, of experience and so forth. Okay,

that's that's that's part. That's that's the beginning the thing that Peter and I shouldn't I shouldn't meant I should say that Peter actually is a grightened so I knew him personally. One thing that I was talking about Peter was he just had a lot of what I thought valuable things to say about the markets and trading. And I remember him being on on a on another podcast and listening to it, and the questions would be asked and I would mentally answer him, and you know, it

was striking how similar his answers were. So it's not just that, it's just I just really related to the way he he looked at at markets and risk and had so many so much good advice and just just wisdom that that that I felt I wanted to capture that Peter is uh, you know, it's giving his early seventies, and I literally and he was kind of a catalyst to do the book. Uh at the time, he was in Colorado as I am, and I thought, well, I'll say myself, you know, I knew, I knew if I

didn't know a market. With his book, I wanted that Peter in it. He was going he was gonna be moving. I think, well, I might as well stay my trip because I might as well do his chapter. Now, it turns out, by time I got around to doing it. He had moved, and uh so I ended up playing out, you know, to Arizona anyway. But the thing about Peter just just to capture I wanted to capture his his market wisdom, posterity. It's probably the most straightforward way I

can put it. And it's notable that several other wizards in the new book reference Brand's approach to risk management. For forget stock selection. They are just completely impressed with how disciplined he is and how he manages risk. First and foremost, the stocks, the trades that are working out, we'll take care of themselves, he says. It's ones that don't work out that that require all your tension. Somebody else said something that really intrigued me the chapter on

Jason Shapiro, the Contrarian. I love this quote. There aren't good traders you can make money on by doing what they're doing, but there are terrible traders you can make money on by doing the exact opposite of what they do. Tell us a little bit about Jason Shapiro. Yeah, so, yeah, Jason is the contrarian in the book, and that's the nature I mean, he if you beat him, um, he's just to be I would think he has to be argumented, but he always has to be on the other side.

And he admits really like he he goes to a party and and it's mostly liberals, He'll all give the conservative side. It was mostly conservative, He'll all give the

liberal side. And he's fine doing that. And as his premises that there's no absolute black and white, there is truth from some truth from both sides, and and people who insist everything is, you know, one side or the other just wrong the themes always arguing it, but that his nature is always to be arguing and to be counter so it be natural that he evolves into trading methodology. That that's that's contrarian and uh, and that's what he literally does. He he uses the commitment of traders as

his primary source of trying to establish market sentiment. But also, you know, it's also watch you know, CNBC and shows like that, the four contrarian ideas, and in his career has come across p well um that are just invariably wrong.

And in fact, he kind of picked the exact bottom of the you know, the the the pandemic bottom in March because he was on a sort of this call between some ex colleagues, and and this one guy who was always bullish on the market was bearish, and and he was looking for the bottom anyway, because the sentiment that was they were seeing in the uh in the numbers, and that was a trigger from the almost drump begun

just the mat just thought the establishing a position. So h and he to be fair here, I don't want to make it sound like he's just you know, kind of you know, ragging on people, he says, basically. And when he first of this part, and we did this chapter in student on this this chapter was done the only chapter I remember that I did in pseudonyms at his weekend, was at his request. Bit and people who read the chapter, it is quite obvious why student hims

were used, because it's not all very complimentary. So he but he says, it looks it's it's not that this, you know, when I see you know, let's call it Mr X, I see myself, you know, for those years while I was losing, I see him making all the same mistakes. And so it's because he recognizes something that he himself had done. He recognizes the mistakes that he had done, that these people are falling prey to which are which are emotional and and and not having the

risk management and so forth. Um, he can see himself and he knows that that turned out, and he knows therefore that the opposite side is the way you should be right. That that's a very fair way to describe it. When when he is ragging on financial television or market consensus, he very specifically said, I see the errors I made

early in my career. I recognize that consensus. And and for people who are not familiar with a Commitment of Traders report, it shows the commercial hedgers positions relative to the speculators. And historically, the commercial hedgers have a whole lot more insight than than the jobbers and the and the speculators who are just taking a flyer. Um. And that's why he likes the Commitment of Traders report. Is that a fair way to assist that? Yeah, that that's

that's a good way to summarize. Let's talk a little bit about mindset. I was impressed with the discussion with Richard Bark talking about things that most people don't think have anything to do with trading, state of flow, optimism, confidence, managing your emotions. Tell us a little bit about Bart yeah, Barnes is a quite interesting fellow. So actually, uh grew up in a farm in England. Um, sort of got his trading job as his first job. And he's I

guess his approach. The thing that struck me about Barge was how how much he weighed psychology and the whole into all of trading and everything he did. And he was very meticulous. So for exactly he like would bring out a binder you'd have like litterally thousands of pages of just keeping kept keeping notes on everything, not just the trazy that why did him? And now he did him? But what does emotions were? And you know, and even as he even showed me a spreadsheet like I don't

know what you give become spreadsheet? We has all these different types of emotions and every day he will check if he was subject to any of those. At the end of the week we review it, and if there's too many checks in a certain column, he knows that something he has to work on. So he's he's alway, he's kind of combined an analysis of his own psychology

as an integral part of of trading. And um, yeah, so and and this this whole psychology thing, not only comes up with Barge, but it comes up with a number of the other traders as well as being sort of highly critical to their approach, someone like Sal talking about how you know, it affairs for a trade mentally and getting in, you know, getting himself calm and and getting totally focused, and um, is that the former marine you're referring to? No, it's no, Sal wasn't the marine

that that? The marine is John nettoon, Yes, I was one of the other UK traders. Actually he was the gooko who actually was partially a mentor to the Barge because it turned out that three of the traders at one time worked at the same prop trading firms and they knew each other, you know, so so Salin Netto both discussed doing something that I was kind of intrigued with and reminded me of some former traders I worked with who were in the military, which was envisioning the trade,

envisioning what could go right, what could go wrong. Not just working out a plan, being the plan see and all the contingencies, but imagining what your emotional state would be if something is going good or going bad, and prepping yourself so that when those emotions bubble up. You can sort of shove him off to the side and remain objective and focused on the task at hand. It's a very military trained methodology. Yeah, well, that of course

is the Marine. But the one who probably most epitomize which you're describing, is Salum because he would literally for and I think we should explain his background that his primary trading methodology is to look for special situations like a Central Bank announcement or something some event and do enormous preparations for that and think of every contingency and no, so he would literally plan out what do we do under no matter what was that, how it was that,

and just just would have in his mind every possible fork in the road on that trade and be totally prepared. So that was that. That is actually essential part of the way he approach approaches market um and really interesting when when I was a new beyond a desk, I sat between these two monsters. One guy was a former Marine jungle combat instructor, the other guy was a former ranger, and after work we would have these conversations about what

it was like. Ps. You go to bar with these guys and I could be the biggest wisest I wanted nobody was. People would look at me and then they look at these two monsters with me, and I would be like, yeah, we're not going to get involved in that. But what I was these guys weren't just big and fit. They were really savvy and smart. And I recall hearing some of the Army Ranger prep discussions where you map out literally every step along the way. Here's where the

helicopter is gonna pick us up. Here's what happens if the chopper is laid, if it doesn't ride, if this happens. Here's what happens when we're flying to the target. Here's what happens if we have to make an unscheduled landing. And they literally sort of I guess the right word is war game, all the various scenarios that could happen that might go wrong. That what what your plan B,

C D E. Is. But what I was so taken by, and I sort of reminisced of it going through the book, is how they think about what is your emotional reaction going to be if you show up here and your gun uh is jammed and it doesn't work, or if whatever the task at hand, we're missing a piece. How do we improvise like the preparation for a mission and the prep of some of the traders in anticipation of a giant trade, very very parallel. Yeah, and actually you

mentioned read in the book NATO here's approach. Me I should end up spending years systematizing you computerizing it. But but his approach is exactly that sort as the reports could could be coming out, kind of figuring where the

probabilities are, where it might happen. You know, what if its falls and this range warderfals and this range worderfals in this range and every contingency have having that you know that like a systematize, so computer will will know what to do no matter what which which of those things happen. And it isn't that anticipating all different types of scenarios as part of the trading plan. And and it does sound very much like what you're describing your

personal experience with these army ranges of marines. And there's one other element of it, uh, I should say Netta wasn't the first marine. I think in the course of the market Wizards books has probably been thinking about form marines that I interviewed and and X Marines. Uh, and if it's not an accident, and I think it's not just planning, but I think it's a discipline. And you know, because because to be successful you really need rigorous discipline. Uh.

That's something that's inbred innate in X Marines generally. So can I tell you right now that that there would all tell you the same thing. There's no such thing as an ex marine once a marine. Well that's true too, and that yeah, I wouldn't surprise me if they said the same thing. And it really shows up in the description. I was flashing back to my days on the desk because that's the exact description. So let me ask you these three concepts that I really struck me from the book.

The first was know your edge. Tell us a little bit about why you have to know what your edge is? Yeah, because there's two things you need, maybe over simple mind and not really, there's really two things you need to be successful in training. One you need a methodology of an edge, and two you need risk management. So how people sometimes go too far by saying, well, Chris, management is is absolutely critical and mandously important. But bottom line,

if you don't have a methodology that has some edge. Uh, there's no reason why you should you should win. You know, it's just simple probability. So you do need some edge, and you need to obviously know what it is meaning Uh, you know, you're not truly from the hip. You've got an approach and and you've got to follow that approach and and then presumably that approach has some edge and I and you have to obviously know what it is.

You can't you can't just sit at the front of your screen and say, oh, I think this is going up, I'll buy it. That's that's not a methodology. So essentially that's the simplest that But it's not knowing where your edge is. And it could be it could be it could be anything. It could be, you know, in any realm. But it has to be something specific to your approach. And let's stay with the idea of the methodology. You have to number two, you have to make sure your

trading style and methodology fits your sonality. Let's let's talk about that for a moment. Yeah, so that's that's one of the things I kind of leaded to earlier. It's really everybody I think has uh, you know, a natural affinity for certain types of ways of doing things, or when it comes to trading, for certain types of trading and and whatever you do, it has to be compatible. If you're if you're impatient, it's not gonna work. That

has to do a long term trading approach. If you're oriented to wanting to you believe everything has to have economic reasons. Uh, and you're disdainful of things like charts, you know, trying to do charts. It is not going to necessarily be compatible. It doesn't mean those approaches don't work. It just means they won't work for you. So this is it's a discovery process. You have to find. You have to find what fits, what fits your for yourself.

For example, I started out trading based on fundamental us why because I had an economics degree, you know, and I and it uses natural to think in those terms. But I discovered that, hey, you know, but the mentals didn't work for me, and I have problems, you know, doing the fundamental approach and combining with proper risk management, which is a separate tangent, but to me, the two were almost in confidence sometimes. But I found that technical

analysis worked much more naturally resource management. So I ended up evolving from somebody who thought it was purely fundamentals for trading and then end up being somebody who and he just uses technicals for trading. So you have to find what's compatible with your philosophy, what feels right, what you're comfortable. This is important. You have to use an approach that's comfortable for you to trade. So, for example,

at one point my back the number decay. Once I, you know, gone to techno analysis, I thought, gee, you know, I don't think it liked the emotion to any e'll goo systematic, And for a while I traded systematically, but I discovered that I just actually that was more that was more uncomfortable. I didn't have to make decisions, but I had to wait for the dance system to change signals, which I just didn't like. So I felt uncomfortable relegating the ability to act in the cut losses to assist them.

So I eventually just went back to the discreptions trading. And it has to be something that you're comfortable with makes sense. And then the third one um that I thought was kind of interesting is understanding the market narrative and recognizing the consensus tell us a little bit about that.

Well that that comes you know that that applies to certain traders, not everybody necessarily, but for somebody like we talked about as somebody like a Shapiro, you know, understanding why, you know, you know, how the market is thinking why in this case eventually going against it is integral to the approach. But so it really depends on the trader. But for some traders that is how they look at markets, and they need to they need to know what story.

Netto is another one where that comes in. You go, he wants to understand. That's part of his approach. He wants to understand what what is a story that's driving the market, and uh that understanding that is critical to being able to trade the markets. Quite quite interesting. Let's talk about some of the people you interviewed in this book. I like the guy whose name is the Unicorn Sniper. His track record you alluded to earlier up three hundred and thirty seven for thirteen years, and I want to

clarify that that's not a cumulative return. That was his annual return over thirteen years. Before we get into what he does, you have to explain how you're verifying that those are real numbers because those are just you know, he's saying, you're saying sorts of returns. You started out with a few thousand and turned it into fifty million. Oh no, that's Jeff Newman. Oh really yeah, yeah, so this is somebody else, the Unicorn sniper. Unicorn snipers actually

sell Okay, gotcha? What was So let's talk a little bit about his track record. What did he start with? And what did three d and thirty seven percent a year for thirteen years compounding two? Oh? So the thing about these percent returns is you have to keep in mind that they're not they're not letting. He's not keeping the money in and compounding out. Yeah, he's pulling it out.

So he's he's always treating a few million dollars or whatever it is, and he keeps them pulling it out, you know, best thing or whatever uh in other things. So you I think he couldn't do He couldn't get those type of returns if he were trying to, you know, if it was compounding. The money just doesn't scale up to bill You couldn't trade hundreds of millions forget billions. And his approach essentially is is UH is highly selective.

As picking certain events very tremendously, uh, just being super expert on on that on those situations, and that's why it calls he's been he said, people have described them as as unicorn sniper. The point being that it looks for the rarer event that provides tremendous opportunity with much less highly asymmetric, big, very big opportunity that can be realized without taking commender at rescue, thank you, by smaller risk.

Go ahead, I'm sorry, Yeah, that's okay. So, so while while he may have these really high returns but are in very high, very individual trades to make a lot of money, he cuts his losses very quickly, so he doesn't have really large losses. You can go through his record, you can probably find thirty days where he's made you more. I mean like a lot of days he's made like these very large returns, but you won't find any days where he's had the reverse um And the line that

really stuffed stuck out from amrit cell. Right, if if I'm getting his name is of the time the market is not providing any opportunities I make of my money the other ten percent of the time that that's pretty astonishing talk about waiting for your pitch. Yeah, so that's that's it. That's critical critical um and a lot of people, a lot of people make that mistake and it relates

to human nature. Is we're just not patient, right, so, uh, people want to people can't can't stand around, you know, a few not do hally anything and then wait for that month. But but that's what stal does it even there's no opportunity. I mean, he may trade a little bit, but the with the trades where he takes these big positions on they're isolated and they're not that many, and he makes most of his money, you know, probably less than a half a dozen trades a year. But he

has the patience to wait for That's that. That's kind of the sniper thing, you know, just you're waiting for the shop and the unicorn is it's not that, it's it's it's it's rare. So that those two words really describe him extremely well. And h it's difficult to do. People don't have the patients. And one of the points that I made, and I get it was Stala one of the other traders, but he makes the point that trying to be consistent and this is again very counterintuitive.

But the point makes is that people who try to make try to make money every month for saying, you know, a certain amount of money every month the same way he is a he says, in this experience, those traders will fail because they're the markets will not provide opportunities every month, and if you're trying to if you're trying to make the same target every months, when the opportunities aren't there, you're actually gonna end up losing money, not

making money. So that's actually a negative, a negative trade, not a positive thing. M really quite quite interesting. Um. Somebody who had a very different approach than a lot of other people was Chris Camillo Um who who specifically I love this quote. My trading is depending on my ability to identify meaningful off radar information, early information that's either not recognized or underappreciated by the investing public. Very reminiscent of the Peter Lynch methodology, as you point out

in the book. Tell us a little bit about Chris. Yeah, so, Chris, I mean, this is a truly kind of almost remarkable. I won't go in through your career expanse from the early seventies in the markets and through all those years, with those decades, I just naturally resumed there. You've got two general approaches. You're either will be you know, using some sort of fundamental analysis or using some sort of technical analysis, or you might be combining the two, like

somebody who like a Covenant does. But what else is there? Right? And the amazing thing about Camillo was turns out here's a guy who's done phenomenal. I mean, he turned eighty thousand to twenty million plus and he did that, and he doesn't use fundamentals and he doesn't use technical and people listening to this probably scratching a head whole what do you mean? What else? What do is to do? Well?

He uses social media and he actually started out just by observing, as you say, Uh, Peter interes the perfect example. He talks about as a kid that I think was with the Arizona Stougher or whatever it was. But he had a distoted that he that he liked, and uh, he would go to Snap and they coolidated it and here's this new company, Arizona. I stay, yeah, so yeah, so he goes one day may mean they he on the weekends he would go to auctions try to buy

stuff that he could resell. And he was very like as a teenager was at the topic and he would get he would get us. He would go to get a Snapple and me that was a street. And one day he goes and there's no h you know, the the Snapple columns were replaced by all. The don was very know that and he asked to be the big proprietor and he says, well, you know that's this is a new but it's a new brand of adding more this. And then he asked his brother, hey, is there anyway

his brother was a talckbroker. Is when I could take advantage to this? You know? His brother explained options then and that was his first train. So he was he was, you know, he was that he because of naturally went to the Peter Lynch approach. And there's interesting example he talks about sort of um, the Wendy's pretzel bacon cheeseburger. I never heard of this. That just cracked me up. Yeah I didn't, Eve I don't either, But does this type of stuff he did. He does. Eventually he ended

up building a company computerized us all approach. But so he would go to one of these seasonal specials that the one you just mentioned, and he went he would go to the managers at these doors and how are they selling it? Talk to customers, and he found this was and they were telling him that this has been the most popular sandwich we ever had. We've never seen anything like this before. It's just even though everybody else

does this seasonal thing, this one really had tracked. It was that it was Wendy's, it was under Armours, New Cold Gear, Netflix, Stranger Things, National beverage about some of those, Yes, the Stranger Things is a good example. So, yeah, everybody was a popular show. But by that point he had kind of he was using a primarily Twitter but as a social media but and he had also, like you know, he built a company to do all these tags and stuff like that word tax, combination phrases to search for

things that were coming up a lot. But in this particular show, what he noticed was not just that it was popular, but he had the data so he would see that it's stayed popular for a very very long time. And other big hits on Netflix, yeah, they were popular for a few weeks and then and sort of died down.

But he could see that this chatter was like that he had this data on his Twitter chatter was staying at a super high level for a long time, and I told him this was different, and so he anticipated the earnings were being to be, you know, much better, and he was sort of you know, he dissipated this before anything showed up, very early on. It was basically

just a matter of this social media analysis. So so this raises some really interesting question because, uh, Camillio learned from his Snapple put purchase and that was a winning trade. But but when you read through the chapters, it really seems that losing trades are far more instructive than than winning trades. How how important is failure as a feedback mechanism? Uh, extremely important. And that that's a theme that comes up, that comes up repeatedly in you know and every Market

wizard book. And I think that the one I would highlight the most because I think it's so core to his philosophy in the Firmly Built would be Ray Dalio Um. And Dalio's whole philosophy is is to learn from mistakes. And that's and and and his whole you know, bridge imbued in Bridgewater with that philosophy, and and I think Dalue would himself say that his successfu he would lie

in his ability to learn from mistakes. And in this book you have you have traders like we went we talked about Barge and as example, so uh, and he'll record every trade and you know, whatever mistakes he's made, and mistakes and trading mistakes in emotional state, by trading when he's misertain emotional state. So so recognizing mistakes he is really important. How you can approve as a trader is by being able to recognize the mistakes you make and to minimize or idea the eliminate but at least

minimize repeating those mistakes in the in the future. I mean, that is probably the most effective way anybody can as a trader. Really quite interesting, Um. One of the things that comes up pretty consistently is when you're when you're having a losing trade, you're looking to do two things conserve capital. But to think that really struck me was how often people said I need to conserve my mental bandwidth.

Tell us a little bit about how how a trader conserves mental bandwidth as opposed to either being distracted or just exhausting your bandwidth on on a losing trade. This is sort of there are a number of trade but Barge is a good example because he does this uh if if if he's something goes wrong, there are he gets he gets knocked off his equilibrium by the market. He'll he'll just stop, he'll he'll he'll take a breather, you know, he'll go away for the day, for a

few days whatever. Uh, he breaks that, he breaks that cycle. Um, And it's important not to let your bad events in the trade or negative negative outcomes and trading affect your your mental state. And so and style makes the same point. You you have to preserve your you're kind of mental validity. And uh if you don't want to get into this cycle where you have a bad trade and another bad trade and you start getting negative on yourself, you don't want to let that that that get out of camp.

So you need to break that cycle because being in the proper mental state is essential at least discretionary trade is essential to being able to trade effectively as a discretionary trader. So so it's not just it's not just a loss, it's the impact of that loss uh on on other trades if you let it happen. And that's what that's something people don't realize. It's just not you take a loss and where you make a mistake. It's

not just that trade. But if you if you're not careful, it can start affecting other trades and and and and it can result in missing trades as well. So that that's that's that's something that does come up thematically in many interviews. Well, one of the traders referenced to quote that I think was French composer Claude Debussy who said music is the space between the notes, and that was their parallel for their trading approach. Tell us a little

bit about the space between the notes. This is actually something that I that I used that I thought of, um when I in the case of one particular trader, and this is this is a trader in in hedge fund market wizards and I follow. My name is Kevin Daily. Now he uh, he's a what he calls himself a

long short, you know, long short equity trader. Um. I kind of put a quotes around the short because when I interviewed him, turns out he has never had more than a single digit short position's primary long for a little bit of sprinting of shorts. Uh, Kevin starts starts his hedge fund in October nine. Now I don't know, but to me, October ninety nine is not the best time to start a hedge fund which is gonna be primarily long. So I I interviewed him a decade later, um,

a decade later or or maybe twelve years later. H And at that point, yes, twelve years later. So it was after the financial crisis. Yeah, it was after yeah, so so so so daily basically trades through the bear market in two thousand, two thousand two, and the financial crisis. He does made you know, all the smoke clears by the time I interviewed him. He since he started his head fund, and in October nine that there was it was, you know, there was some There was six months when

the market was still going up early on. But anyway, during that interim, turns out the SMP was pretty much close to dead flat. You know, his record cumulatively before fees, So we're just looking at the training aspect of it. His his his record accumulatively. I think he's up eight under a nine. So the question is the question is how does somebody cuninally make it under nine under the

and at the same time the market's going sideways. And yeah, so he in that chapter he really is pretty specific and quite detailed and all the all the he's he's a fundamental guy, and he he talks about all the things he looks at and yees, so he's a good

stock picker. Yeah, that's something out of it. But really the essence of it is that, um, when the market environment wasn't good, like two thousand, two thousand two, uh, he actually during that three year period, even though he's mostly long, he trades very little, and he's actually up slightly to that period in two thousand and eight. He you know, when the markets you know, down, he's down like single digits. He's not trading that much. He recognize

that the environment is bad. So essentially his success can be attributed, to my mind, more by when he didn't trade than when he did trade, because he had the right times not to trade. And that's why I used that quote that that reminded me of that the beauty quote that they that music is the space between the notes, and so to my mind, the analogy was, you know, good trading is the space between trades. Makes a lot

of sense. You were a trader for a bit or I have to ask, are you still trading or you step back and more of an investor these days? Yeah, So I was never an investment. What I invest in. An investment is basically real estate, you know, just you know, but that's kind of always I've had a bias to just that being a safe place to to keep money.

You don't get a print every second, so that's the But it just makes just stakes in true of sense to me, and and particularly in environments where the markets have had long runs and an interest rate in the user, it just seems like like like the best place I can think of to keep money. Uh so, you know whatever. But anyway, I actually clarify that unlike the people I interview,

I actually don't see to myself a trader. I consider my off a lot of things before I said myself a trader, and trading for me is just a hobby and it's and it's something that I don't do continuously. And certainly you know those beers where those decades where's working you know, full time or whatever. It was always a side issue, and even even a six side of that. It depends on a certain circumstances, depends if on the

mood of trade or whatever. So I'll there be periods where all trade and the peris but you don't trade. And strictly it's more of a hobby to me than than anything else. And and if I start not doing well in my trading, I'll stop trading. And then you know, a few months later I said, oh yeah, maybe I'll feel it trading. But so so one day, the one day the sidles feels right again. So that's that's it. So it's like again, it's it's a it's a it's a hobby, nothing, not a not a not a full

time endeavor. But but you've clearly picked up some things from from some of the traders you you've interviewed, which raises which raises the question, um, how different is it this time? You know, there's there's been people scoffing um at the markets. I don't know for since O eight oh nine, I've I've continuously read about people who are pushing back against the FED and zerup and keewee and and pretty much, but for the COVID pandemic, the market's

gone mostly up over that period. How do you how do you respond to people who tell you, hey, this is a bubble, you can't trade at the fittest ruins everything. What's the standard response to that, Well, apparently it's not the case because there are people trading very effectively and not necessarily, not necessarily because they're long a biased uh.

In many cases. You know a lot of these traders in the book are are an equity raders at all, so so their their success is not coming from the market. And even when the requity traders, they could be both on the walk short side. So I think those traders who are in this book equally traders are are on both sides the market. So I would say it has nothing to do with the market being in a pown market.

Being successful trading is is more, you know, man, that matter the the individual methnology and as far as the whole premise about well, at some point they're gonna be right. But you find where I find that traders who are successful that the forecasting is not the is not the thing. If they may think of markets going to act in a certain way, they they have plans to to to act, you know, to respond to that, and they'll they'll be

out quickly if they're wrong. You know, the best quote here is uh is speed of Graham, and and it is the UH. I like his quote so much that I think I used it as the title of the of this chapter, which is strong opinions weakly held. So he puts on a trade, he has a strong opinion. But if he goes, you know, with in his words for paraphrasing, if the market puts and in this pocket, he's out. So you can have a strong opinion, but you have to be very like Peter says, you know,

you have to hold it weakly. And if if they're not right, you have to you have to ment you wrong and just get out of the way. So people who have this premise that the market is going to do this, or the forecasting it's going to do that, that's usually not only not helpful, but it's usually counterproductive. I'm with you on that completely. Um let me let me ask you an interesting thing. That the book is

really divided into two halves. The first part is futures trading, the second part is stock trading stock traders, and then you have rules and there's in appendix and there's additional stuff. But I can't help but notice given how crazy n f T s and crypto and bitcoin and all that stuff has gone. There's not a lot of there's not a whole lot of mention of of crypto trading in this What are your thought it's on this space? It's pretty clear some people have made hundreds of millions, if

not billions. I think the the Winkle Vieys funds is now up to something like two billion dollars from what they rolled over a few hundred million in Facebook stock. What what is your thoughts on that space and how people might be trading it? Yeah, well, for for all, there's the one Jeff Newman, you know, is the one trader who did mention who did trade crypto, and it's

because it fits into the way he trades markets. He's looking just for being early to anticipate when something's going to happen, when the markets just getting interested in something. So crypto was just another thing and it had nothing to do with crypto itself, and it's just it was like a new product in a way. So um, so it's come up in that chapter. You know. My own feeling, I don't know, I'm kind of old school and I

always look uncomfortable. My my initial in commination was the say the looks like, you know, it looks like a bubble and I, you know, uh the thing that but I've avoid it, uh by and large, I don't. On one hand, I kind of it looks bubble like in a lot of ways. But there is a The one thing I guess has kept me away is there that there it's kind of odd for something like bitcoin, you know, the main some a bitcoin like bitcoin was the main one.

There is actually there's an apple. There's two things that counted that argument. One there's actually a use for it, and the use is not The use is not what people say. It's not an alternative currency. No reasonable alternative currency will swing in a short period of time, not usable as as in that way. But what it is useful for is actually quite It's an a various usage, but the market doesn't care. You know, it's you don't like ransomware or other things of that nature. Black market.

So there is a there is a use for it, right so that it's not like some other things, like like internet companies that started out losing money and never made a dimond. Just the longer there just the more money they lost, there's no way they could do. So that's an example of a bubble where there was just no no rationale whatsoever. Here's a rationale. It's not particularly attractive rationale, but it's a rationale. And if this be used,

the market will put a value on it. And then the other thing is a scarcity to the only bitcoin. There could be only a certain number of bitcoin. So so that's a you know, defined maximum numbers. So there there are countervailing arguments and and that's what. If it wasn't for those two things, I think I would have been inclined that you know, to look at it as a bubble. But certain other things like dose coin, which starts as a joke and then goes you know, it

goes up, but you know, God knows somebody percent. I think a lot of those me two coins over time will eventually my own feeling probably go don't go to nothing. Um And you know, so I think there are certainly elements of of of a bubble bubble in this whole sphere. There might be some you know, some that survive and maybe go much higher. I don't know, but not my expertise is just kind of my thoughts. Huh, very very interesting.

Um So what would you need to see from one of these traders before you hand it over your capital to them to manage for you. And really, this is a broad This is a broad question. It's not so much literal as what do you need to see before you write a check? But you've witnessed a ton of different um traders and fund managers. I think your perspective would be helpful for those people who wrestle with what do I need to do in order to feel comfortable

giving money to a third party to manage from me? Yeah, well a few points. First of all, I would focus more on return to risk rather than just return, because you do have managers out there that that will put up spectacular returns, but they also have spectacular losses. And the truth of the matter is, even if it's over the long run, they turn out okay. But if you have these giant drawer downs, the reality is even investors

don't survive. They they just mail out. So you may look at it the benefit of hindsight, the track record that look has a good return and with a lot of volatility, and you said, oh, well it all works out fine. Yeah, it works out fine because you're looking with hindsight. But believe me, if you're going fresh and you have that type of track record, you're gonna blow out somewhere in the middle logue or or plus investors will. So I think it's important to look at the return risk,

not just not just to return. Uh. Another element is you want to have a sense that there's some explanation of why that person has done particularly well, that that would there would be a reason to expect it to continue. And that's not would always easy to do, but that's I think important And and I guess another the last time I was making it's very difficult, like the old cliche, and it's not a cliche for no reason. It's a past performance is not a is no guarantee of future performance.

So you can do everything right and the person could still end up not doing well. And there is a there is a regression to the mean problem here, because when you pick people who have done very well, it's hard for them to continue with that extreme and there's it's almost natural for to have aggression to the mean. Uh and uh, so I would expect that. I mean, even if people who have done extream well, I would not I would be unrealistic to expect them to continue

to do as well. In the future. You have to be comfortable saying, well, even if they's great this much, it's still fine, really really intriguing. Um. We mentioned Peter Grant has been around for quite a while, but it comes back to just about everybody else in the book. Are are on the youngest side. There are a few people who have been around for for a decade or two. Do you get the sense that trading is a is

a young person this game? How how does this new crop of traders make you feel about the previous traders you looked at in the past couple of bucks. I guess you're right on that. I didn't think about it, but I guess with a couple of exceptions there, they're younger as a group. I I did. I I do try to get people who have at least a decade or longer of trading. And I think Barge was the one exception I made at the time I interviewed me only any about eight years, but I thought it was

so exceptional that it it merited being in there. Um, So even though they're young, they still have Yeah, I wouldn't take anybody was like a three or four year ago or something like that. So they still have a decade plus in almost all cases, the fact that I I, you know, it just ended up being maybe because I was looking at individual traders, it just turned out that those that proper traders and being on the on the younger side, this problem maybe more interest now among the

people of trading than than previously. Maybe that's another bias. It just it just just ended up it wasn't I don't know if that's if that's representative of traders as a whole. It's certily hard, too small of a sample, and and everything only about the less than a dozen traders, and a couple of them have been around for quite a while, so even there, it's not not exclusively you really really kind of kind of interesting. Let's stick with the current environment. Um by the dip has really that

mentality has really taken hold. We saw the thirty pandemic sell off and what was that barely five or six weeks and and market I think it bottomed the end of March and the market had recovered by August. What what does this mean? Is this suggest relate in the cycle, or hey, if it's been working for the past ten years, people are gonna keep doing till it's doing it until it stops. How how do you how do you look at this? Say, okay, so that almost approaches forecasting zoom

begetting something. That's not a matter of advice. But I will say this. I did a book seven eight years ago called Market Sense and Nonsense, And in one of the chapters in that book, I basically well and so there I try to dispel some of these some of the myths and misconceptions and mistakes people making markets. And one of them was this idea of and of investing when things are you know, when things have been good.

And I didn't now actually going back you know, back in the eighteen fifties in terms of data, uh, and just show that I took five year periods and fifty and I showed what happened in the next five and twenty depending on on the previous and and not surprised only to be at least is you know, when you invested when they're when the last five and twenty years were relatively poor, you did extremely well. And vice versa,

if you invested if they're really well. So the fact that now we've had a pretty much as you say that, minor exceptions here and here we've had a running bolt market since two thousand and eight. It's getting a bit old. And so I would say probability wise now investing over the next five, ten years, fifteen years has become at the at this point has become much less attractive. Just some straight statistics and numbers and and that's just the reality. It's not a forecast. So I just put to put

that in perspective. And my advice, especially when they speak to younger people, always is putting party of money long term in the market is a good idea, but try to but it's best to do it when everybody hates the market. It's much less attractive when you've been on a low long, long long bull market like we are now. So yeah, I don't know, could could then you could end next week, could then two years when I don't know. But I would just say the probabilities now are much

less favorably skewed than they would have been. You know what's earlier on So you're you're touching on one of my pet peeves, and and so let's talk about this. You know, when we look at these long term bull markets following World War Two is forty six to about sixty six um following the inflation and oil embargo in the sixties and seventies. The new bull market started in eighty two and ran to two thousand. But in in historically, when we look at these bull markets, we don't date

them to the bottom of the prior low. We we date them to when the market breaks out from that prior long trading range. So the Dow kiss the thousand and sixty six, it didn't get over on a permanent basis till eighty two. We we don't date apple market v. Four bear market lows. Why is everybody so fixated on March O nine? That's the low of arguably a thirteen year long secular bear market that started in March two thousand and it ended in March when markets got over

and above that trading range. Does that make any difference to how you look at markets? Am I being a little pen pedantic here or you know, everybody just seems

so hyper focused on March O nine. Well, what it has to do with, you know, the point I just making before is is what the prior record was, so, uh, you know, from from that point forward, years work now, so you have a long period of favorable returns and and that's the type of statistic when I'm looking at what the market do in the past thing or fifteen or twenty years, that's the type of statistic that that would be relevant. That's a type of statistic that's gonna

look strong. It's not the fact just that it was the bottom. It just happens to be that for a long period of time the market has had very, very above average returns. Huh. Quite interesting. And then the curve ball question I have to ask you before we get to our favorite questions is simply, are we going to see yet another market Wizard's book after this? Are there's still more traders to be uncovered? Yeah, well, there's certainly more traders to be uncovered. Uh, but that's not necessarily

correlative with another market wizars book. So um, whenever I finished one of these, I don't anticipate another one, and so far always another one I just didn't want to and typically no complete reception of the second book, which which I did a few years after the first one, because the first one was such a big hit and I still had a number quite a number of trainer as I hadn't gotten to. So I did that those

only three years upon. But than that, the books have been space seven or ten years apart, and I don't have to spay do one anywhere in the foreseeable future. And I kind of I'm skeptical if I'll do another one, but I guess I haven't been right about that in the past, so I will make that an absolute prediction. Never never say never. Alright, So so let's jump to our favorite questions that we ask all our guests, starting

with tell us what you're streaming these days? Give us your favorite Netflix or Amazon Prime shows or whatever podcast you're listening to. What's keeping you entertained during the pandemic? Sure so, so really strong recommendation here for a UK program called Clarkson's Farm, which I like, that enormously entertaining about Jeremy Clarkson, who, during the COVID year he owns Farmly, it's a big farm in the UK, in the UK,

and he besides, well why not following himself? So the reason I like it one, he is it's just a great sense of humor and it underlies the whole show. And second, it gives you to appreciate issue that just how dawn and difficult farming is. So the combination of that, I made that a great series. And then there's one I just watched recently, which is which is of a one of these eight series type of single story things that maybe call it a thrill or whatever, um, but

really well done, holds consistently way above average. Is a typical one, and it's called clickbait. So I would recommend that. And oh and recently I this is decades old, probably, but I finally got around to Washington. Of course, of course they see's uh documentary on on Dylan. It's like three half hours long called No Direction Home. And if if you're a fan of early Dylan, it's it's a

high recommendation. And one last one on the podcast. I've got a new favorite podcast over the last couple of years, and it's called Cautionary Tales and it's by it's Tim Tim Harford, whos goes by the name of the cover Economists. It's a phenomenal, phenomenally well done show. Uh, he's so so many interesting things he pulls up just just not

only highly entertained. But didn't you if you're interested in in um in the pavial economics that really uh, it's not it's not educational in that way, but it comes out of the story and so to speak. And uh, he does a great job in doing the narrative. So um, like I said, highly recommended courtionary tales really interesting. Uh, tell us about some of your mentors who helped shape your career over time. There really is only one mentor

in my case, and he was a close friend. Unfortunately he had a few years the number of years ago named Steve Chronowitz. Um. And you won't find anything about Steve because he never wrote anything. Uh. Yeah, but Steve he when I was back in the day, when I was a director of research, he was He was an analyst who work for me and he he was the technical analysts. All the other analysts for fundamental analysts and I and Steve and I shared this large office space

and so we were friends as well. But I noticed that all the analysts they were right, they were wrong, you know, lucky to break even, you know, over the total. But Steve was the only one who was right more than wrong. And this is back in the day. Coming out of graduate school for an economic street, I was very very skeptical of of of technical analysis. But I was open and open mind enough to talk to him about it and okay, tell me what you do, and

and I do him. At first I understood why the premise of why technico analysis can work, And to put it simply, it's that when you think about it, everything that happens in the market, everything that's known about the market, every trade that's done in the market shows up in price. You can't hide it, right, so we're even insider things. It shows up in price. So there's a logic to it, this reason why price could be meaningful as a reflection of everything that's known about the market. So it's not

black mumbo jumbo, it's it has a rationaley. That was one thing that I understood and learned from him, and then he showed me just basic you know, charred analysis and more appreciative risk management. So he really he was the one who kind of was an influence for me that switch over from fundamental technicals. That was where I kind of transition from losing to being that profitable. Um and I would consider him basically my mentor. M let's talk about books. What are some of your favorites and

what are you reading lately? Okay, ironically, uh, top of my list here is the and you had Chaldini and uh, uh not that long. I listened a nice podcast with him. Uh Influence, the book Influence and Uh. I would say that Influence is not just a recommended book. I would

say it is a a great book, a classic. UM. I would say, you know, and I've read a number of behavior economics books and his more of a psychology, but there's probably as much information in that book about useful information about human behavior as any volume I can think of. So UM, if you have any interest in

psychology of human behavior, strong recommendation on Influence. UM. Then I've read two books more than its day side recently which I which are One is phenomenal called In the Kingdom of Ice, which is about the the first x US expedition in the nineteenth century to define the North Pole by boat where they didn't realize that you couldn't do that and they got trapped in one trapped in the ice. And it's an incredible narrative, it's a true story. UM.

It is just a phenomenal read. It's literally one of the best books I've ever read. It's called In the Kingdom of Ice, and UM kind of another similar historic reventure or direct reaction, which I would recommend. It is called The River or Doubt, which is about Teddy Roosevelt after he lose this has been for a third term as president, actually goes off and co co Co has an expedition to explore previously uncharted the major river in

the Amazon. And it's all again a true story and kind of you read that, it's amazing the grit of that of that man, and and you know what the risks he took and uh, and that whole story is a pretty incredible one as well. And it's something I mean nothing about and it's pretty amazing that it's true. So those are some good book recommendations. I literally gave a copy of Influence to my nephew who's in his early twenties and working as a banker. Yesterday so um

today is I'm sorry Tuesday. I gave that to him. He was he was for the days and I uh, it's just a great book to to share with young people. The in the Kingdom of Ice looks fascinating. I'm going to pick that up. Have you ever It's a great read, A great read. Have you ever read Endurance about Shackleton? Yeah? And its funny you say that because because people as one of my favorite book is and Endurance is my

favorite book. That's just unbelieving. It's an unbelievable book. It's it's just it's nothing like Yeah, but you know, this is the thing in the Kingdom in the Kingdom of the Ice is the first book I've read that stands can stand at the exact same level as Really it's that good. Yeah, wow, I'm in count count me in for that. Um, what sort of advice would you give to a recent college grad who was interested in a career as a trader? Oh? Sort of, if interest career

as a trader? Um, there's well one I think of a quote that's the title of one of the chapters in this the latest book, which is don't quit your day job. So U. On the other hand, something like Jeffrey Newman went out to graduated college and went straight to training and became an amously successful So there are exceptions, but I think that's more of the long shot. And Uh, people's perception of what it's how difficult it is to

succeed as a trader are misplaced. And it's particularly difficult if you don't have a real stake in you know to fall back on if you've got to you've got to pay your rent or something like that, and you're depending on making money. That's that's a real big dispantage. So so one piece of advice I would say is you don't really get serious about a training career until you have enough money to be comfortable to take every

basic pences and and be able to give it a chance. Uh. Otherwise it is difficult enough and you're just putting the arts too much against you by trying to do it. At the same time, you have monetary responsibilities that can't be met unless you're making money. And our final question, what do you know about the world of trading today that you wish you knew thirty or forty years ago

when you were first getting started in this field. A couple Well, the most important thing probably is that of everything, risk management is the most important thing, and that was certainly something I had didn't understand at all. It's not an add on, it's not something that you'll get to. It's if you don't have some sort of and it doesn't have to be difficult, doesn't have to be complex, but if you don't have rigorous risk management, the odds

of succeeding are very low. So that's something I fully that's burned into my bones at this point. But I didn't understand it all when I got in. And I guess the other thing is is that no matter how good you do at any point in time, don't get complacent. The market at least has a way of surprising you. So I've kind of learned at this point if I'm doing really well, I'm probably gonna have a lousy period coming up. But you know, you got to learn to

not assume that you've discovered it because you never do. Uh. It's always an ongoing thing. And and like I said, the market will always surprise you quite quite fascinating. Jack. Thank you for being so generous with your time. We have been speaking with Jack Schweger, author of about eight books, most recently Unknown Market Wizards, the Best Traders You've Never Heard of. If you enjoyed this conversation, well be sure and check out any of our previous almost four hundred

prior discussions. You can find those at iTunes, Spotify, wherever you pick up your favorite podcast from. We love your comments, feedback and suggestions right to us at M I B Podcast at Bloomberg dot net. You can sign up from my daily reads at ridlts dot com. Check out my weekly column on Bloomberg dot com slash Opinion. Follow me on Twitter at Ritholtz. I would be remiss if I did not thank the crack team that helps these conversations

come together so nicely each week. Charlie Volmer and Tim Harrow are my audio engineers because this particular podcast required two engineers. Paris Wald is my producer. Uh Tico val Bron is our project manager. Michael Batnick is my head of research. I'm Barry Hults. You're listening to Masters in Business on Bloomberg Radio.