• The New Market Wizards

• Conversations with America's Top Traders

• by Jack Schwager

Reviews

Reviews

• Jack Schwager's "New Market Wizards" is somewhat of an investment classic. He sits down with a select band of traders and investment managers and tries to find out how they make so much money. For utter novices this is a good book. It should say to them, "are you a compulsive with a maths degree, because if you are not, go away and get into statistics and perhaps learn to program while you are at it." Sadly most people will only see the more mystical theme repeated throughout the book, that winning is in your psychology. This is a common theme in get rich quick literature of all sorts, so it grates with me. This is magical thinking. The market is often a negative sum game, especially for speculators outside of equities markets and it performs just like a fruit machine. It doesn't matter how you feel, a fruit machine will take all your money, unless you cheat, find a glitch or own the machine. Psychology has little or nothing to do with it. The preface of the book repeats that 'the market is not random' twice, Schwager clearly means you to know this, but maintains that the markets are 'always changing,' I find this apparent contradiction rather worrying for a statement of principle. Then in the same sentence the author feels that markets are also 'always the same.' I'm glad I didn't learn science this way. Within a couple of pages we are being told, in a Zen like way, to shut up and listen. Happily in a Zen like mood myself I had started reading the book from the back, so had avoided the baloney in the front. Otherwise the book would have found the calm inner centre of my bin. As "New Market Wizards" is a collection of interviews with an intro and summation, its easy to dip into. The chapters are mainly 'war stories,' which in themselves are amusing in a 'talk show' kind of way. However there is little to 'take away' from them, unless you try to parse and whittle the information down to the concrete. I came away with a lot less than the 42 guidelines Schwager proffers at the end. Schwager needs to disbelieve 'random walk theory,' as many of his interviewees might be discounted as simply lucky. However of the solid nuggets in the book, like the relevance of Black Jack to trading, keeping transaction costs to the minimum, the importance of execution, exploiting systemic inefficiencies, many come straight out of the 'random walk' play-book. If you don't know about these already, its worth ploughing through 500 pages for. Believing that 'thinking right' is the way to make money in the markets, seems in tune with Wizardry, but at odds to a game where the quality of your analysis and power of your tools is paramount. In the end I don't care what your state of mind is, if I get the news first or can trade faster or cheaper than you, I'm going to make all the money. The New Market Wizards is a very nineties book. Reading it, recalled to me the boom when the markets just went up and cab drivers wanted to tell you about their tech share profits. New Market Wizards is for Old Market Muppets.
  K Cox