The Education of A Speculator

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The Book of the Week is “The Education of A Speculator” by Victor Niederhoffer, published in 1997.

Born in 1943 in Brooklyn in New York City, the author sorted “market advisers and investment newsletter writers” into eight different categories, providing a brief description of their behaviors or personality traits. He classified himself as “The Other World Person” because he ignored the overpaid noisemakers and distractions of conventional media outlets that purported to convey information on which securities to buy, sell, or avoid.

The author’s two data sources for his commodities, currency trading and investing ideas consisted of the National Enquirer and his research results from testing all kinds of variables in statistics-calculations of past securities-market data using software. No other sources.

The mid-1990’s saw great advances in statistics software modeling that could process scads and scads of data; hence, market players could erroneously use past performance of investment vehicles faster than ever before for predictive purposes to help themselves and others lose their money faster than ever before. And those advances might have played a part in the scandals and financial crashes that have occurred with alarmingly increasing frequency in the last thirty years. Big Tech’s and Big Media’s incestuous oligopolies (fraught with political donations) just keep getting more hegemonic, so that power and money keep feeding on themselves ad infinitum. Globalization is yet another wrench in the works.

At the book’s writing, global trade had been maturing for decades, but capitalism was still in its infancy in many territories of the world; particularly in ones that were becoming politically democratic again, or for the first time in their histories. Many European countries were in the process of adopting cooperation rather than competition in their financial and economic dealings. A large proportion of them even voted to use one currency among them. The United States kept to itself, but more and more people around the world were starting to trade or invest in foreign securities, currencies and governmental financial entities, so chain reactions occurred more and more.

The Federal Reserve (aka Fed) has always been a major influence on America’s financial markets. The author contended that the Fed was just as clueless as the rest of the country about what effects its making of rate-adjustments would have on the nation’s economy. It is currently just as clueless. But its announcements are made with such confidence and arrogance, that a large number of their listeners are brainwashed into believing they are receiving valuable information.

The incumbents– known names pre-Internet–became the most influential voices in the financial sphere. The wiliest ones use propaganda techniques to paper over their wrong predictions. They never apologize for the losses stemming from their pronouncements. The walls of the author’s business office were lined with portraits of ones who had disastrous losses.

To be fair, the author himself told various anecdotes of his own failures. In 1992, he bought IBM stock for his own kids. That was an embarrassing mistake. He learned to cut his losses at a certain level of the total money he reinvested. And, he didn’t let his greed get out of control when he was winning.

The author was a champion squash player. One similarity between squash and speculating is externalities–opponents’ actions determine players’ actions in the game. So, for instance, in ten-pin bowling, there are no externalities. In squash, there are. In one college finals-match, the author moved his body in a way that tricked his opponent into thinking the ball was going to go in a certain direction, but it went the opposite way. Traders and investors play similar tricks in their communications in the financial markets. Conditions change rapidly so even the market propagandists’ winning streaks don’t last long.

The reason is:

First, independent thinkers make observations or find obscure data that works in making them money. Then software detects their trading tricks. So word gets around, and everyone else jumps on the bandwagon so that the advantage is lost.

Human beings want so badly— to believe they can predict the future, and love to fantasize about getting rich quick– that they tend to look for patterns and order where none exist. The author did provide one vast generalization that might be valuable, though. His statistical analysis between the years 1870 and 1995 inclusive showed that years ending in the digit 5 were good years, and those ending in 7 were bad, for the American stock markets. He didn’t speculate as to why.

However, politics is one major mover of markets, and the collective mood of the United States specifically, might be a bit more upbeat in years when political uncertainty is at a minimum. Presidents and other politicians begin or continue their terms during years ending in 5. The public might be unclear about their future policy directions, or weary of them by the years that end in 7.

Anyway, read the book to learn a boatload more about the author’s philosophy, his trials, tribulations and triumphs in the markets, his research results and comparisons between financial markets and: ecology, games and sports.

Breaking the Ice

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The Book of the Week is “Breaking the Ice, The Black Experience in Professional Hockey” by Cecil Harris, published in 2003. This wordy, redundant volume described the experiences of African Americans who have played ice hockey in North America beginning in the twentieth century. As is well known, Canada’s national sport is ice hockey.

The first African American player in the National Hockey League (NHL) was Willie O’Ree. Originally from New Brunswick, Canada, at twenty-two years old, he played one game in January 1958, was demoted to the “minors” but then returned to play in the 1960-61 season. Professional hockey saw no African American players again until the 1974-75 season, when Mike Marson made the big leagues.

In 1978, the World Hockey Association was competing with the NHL for talent. Tony McKegney, an African-American Canadian, signed a contract with the former, to play with a team in Birmingham, Alabama. When racist white fans found out, they said they would cancel their season tickets if McKegney played. The team owner felt pressured into breaching the contract with him. The player’s agent was a crook, too. That’s another story.

Some newspaper writer in Toronto reported that McKegney was okay with his canceled contract. But the lying writer had never even spoken with him. Anyway, fortunately, McKegney was later drafted by the NHL to play with the Buffalo Sabres.

One major measure of talent is total goals scored in a season. In the winter 1973 season, McKegney scored thirty-six goals and was still a young twenty-five. Yet he was traded a bunch of times, anyway– playing on six different teams (one of them twice) by the time he turned thirty-three. It is certainly debatable whether race was a factor in those circumstances. For the 1991-1992 season, he played hockey in Italy.

Grant Fuhr helped the Edmonton Oilers win the Stanley Cup four times in the second half of the 1980’s and in 1990. He wore a plastic face covering for protective equipment– not because he was afraid of harm from opposing teams and racist fans, although that’s a justified fear. He was a goalie, so no one could see his skin color.

In March 2003, a racial slur led the coach and general manager of the Sault Ste Marie Greyhounds (Ontario League) to resign in disgrace. One black player said in essence, that hatred is taught in families where insecurity abounds, and is a sign of weakness all around.

In the 2003-04 NHL season, there were roughly six hundred players, only seventeen of whom were African American. Canadian hockey players (of any ethnicity) who are professional-hopefuls, can be chosen to live with a host family near a hockey venue to do an internship of sorts, that pays their expenses.

In the early 1990’s, one of the first black NHL players who trained in this manner, at sixteen years old, was Jarome Iginla. He also got to go to New York City to play with NHL greats in a special program, and played in a major international competition in Salt Lake City in 2002.

Read the book to learn much more about racial issues in ice hockey, the crackdown on hate speech uttered by hockey insiders, the childishness of fans (such as the throwing of chicken bones and bananas at black players), and the bygone era of hockey-fighting as sideshow entertainment.

Every Town is a Sports Town

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“Its demise was caused by low attendance, conflicting agendas among the owners, and a number of very poor business decisions.”

MLB? Possibly, but definitely the USFL by 1985.

Regardless, the Book of the Week is “Every Town is a Sports Town; Business Leadership at ESPN, from the Mailroom to the Boardroom” by George Bodenheimer with Donald T. Phillips, published in 2015.

In September 1979, the Bristol, Connecticut-based cable-TV channel ESPN began televising sports-related shows, by means of deals with: RCA (regarding a space-satellite), the NCAA (regarding covering basketball games), and Anheuser-Busch (regarding sponsoring the programs). The initial concept of the then-shoestring operation was to dispense information on sports 24/7, to serve fans. ESPN won contracts to show March Madness games and the NFL draft to start.

The workplace was team-oriented with a family-feel, so everyone was a jack-of-all-trades. In 1981, the author, a recent college graduate, worked as a mailroom guy and chauffeur of sorts, for executives of ESPN. He was later promoted to videotape librarian. He was willing to relocate when the company opened new branch offices, including Denver.

Anyway, ESPN could not survive financially on ad revenue alone, as the company was paying cable operators to carry its channel. It saw a loss of $25 million annually until it negotiated in 1982 to have cable operators pay the company a certain number of cents for each household receiving its channel, and that figure could rise up to a certain maximum percentage during the term of a multi-year contract.

Due to the ultimate takeover by Capital Cities Communications, and a favorable change in media law– ESPN grew by leaps and bounds. Meanwhile, it added professional tennis, golf, NASCAR, World Cup soccer, the America’s Cup yacht race, and Sunday Night Football (for which ESPN had to pay the NFL) to its lineup in the mid-1980’s.

Globalization, recording devices, the Internet and mobile devices have made the negotiations over intellectual-property rights and sports programming between and among ESPN and other stakeholders, infinitely more complicated. In 1985, ESPN could be watched in about 30 million viewer-households in America; in 1999– in about 80 million in America and about 100 million elsewhere worldwide.

Read the book to learn: of how the author achieved a high position at ESPN, and how he boosted the morale, energy and innovative thinking of his fellow employees; what the company did when it saw its ratings plummet; what his executive team did to resolve the controversy that arose when ESPN made a movie in which the “F” word was uttered approximately thirty times; about the author’s business philosophy; and much more about the history of ESPN.

ENDNOTE: The author’s photo appears on the book’s cover with his head very slightly tilted. This flex is pleasing to the human brain, projecting the impression that he is a people-person. His boyish good looks probably served him well, too. [Total lack of head-flex, projects an unfriendly vibe.]

Steinbrenner

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The Book of the Week is “Steinbrenner, The Last Lion of Baseball” by Bill Madden, published in 2010.

George Steinbrenner was born in July 1930 in Ohio. At fourteen years old, he was sent by his father to military school. He was groomed to inherit his father’s Great Lakes shipping company.

In late 1972, he got investors together to buy the New York Yankees baseball team from the media network CBS. His financial interest was the largest, however, so he was the face of the team. After the 1974 baseball season, he was indicted for committing felonies by making illegal, individual and corporate political contributions to the former late president Nixon’s reelection campaign. He never spent a day in jail, but was fined. The then-commissioner of Major League Baseball (MLB) Bowie Kuhn was out to get him for other reasons, though.

Nevertheless, in 1977, after just five years of ownership, Steinbrenner’s Yankees won the World Series, “… in spite of clubhouse dissension, a crazy manager [Billy Martin] and an even crazier owner.” This was due to overwhelming hitting talent. That is the most crucial skill required for a winning baseball team. The reason is– there is limited opportunity to score, unlike with all other major professional American sports (football, basketball, hockey and soccer). In baseball, a team must get its players on the bases and run around those bases in order to win the game. In all the other games, when there is a turnover, any player from the team on defense, can score on the spot.

Aspects of Steinbrenner’s character rubbed people the wrong way. His frequent dishonesty, temper tantrums, impulsive decision-making, micro-management, and excessive spending to recruit players for the Yankees caused emotional burnout and sky-high turnover among his employees. Even so, starting in 1976, there was a major change in the legal rights of Major League players– called free agency– that prompted the average player’s 1975 salary of $44,676 to rise by 1980 to $143,756. Steinbrenner was willing to pay top dollar for the players perceived to be the absolute best prospects for his Yankees, and also for his top executive team.

In 2004, the Yankees’ payroll was $185 million. Beginning in 2005, Joe Torre became the then-highest paid MLB manager, with a $19.2 million, 3-year contract. The following year, Brian Cashman became the then-highest paid general manager with a $4.4 million, 3-year contract.

Read the book to learn much more about Steinbrenner’s career as a professional baseball-team owner, and the constantly changing cast of characters who helped him navigate the Yankees’ ups and downs.

Somebody Down Here… / How Football… BONUS POST

The first Bonus Book of the Week is “Somebody Down Here Likes Me Too” by Rocky Graziano with Ralph Corsel, originally published in 1981.

Born in January 1921, Graziano grew up in Little Italy and the East Village in Manhattan. However, when he wed in 1943, he moved in with his wife’s well-to-do family on Ocean Parkway in Brooklyn; of which he nostalgically remarked, “They got Coney Island and Nathan’s hot dogs and Sheepshead Bay with all that good seafood, and they got Ebbetts’ Field and the Dodgers and a few bums like Leo Durocher…”

Nonetheless, his poverty-stricken childhood experiences and abusive father soured him on life at an early age. He continually ran afoul of the law, but his mother, who loved him unconditionally, kept bailing him out. For such boys in his generation (rejected by the military because he was an ex-con), the only way to escape his bad environment was to succeed in the “rackets” or make it big in show business or become a professional boxer. Read the book to learn how he turned his life around when he put his mind to do two of the three.

The second Bonus Book of the Week is “How Football Explains America, by Sal Paolantonio, published in 2008.

Incidentally, Vince Lombardi sought to recruit wayward boys such as Graziano for the high school football team he coached in New Jersey in the late 1930’s. He used the Englewood police department as his talent source.

Another interesting bit of information from the author in describing how professional football evolved into its current state: safety rules had to be imposed so the sport could turn its barbaric reputation around. For, in 1905, there occurred “…battered faces, broken ribs, bloody skulls, and at least 18 recorded on-field fatalities.”

Read the book to learn many other ways football and American culture became intertwined.

Quiet Strength – BONUS POST

The Bonus Book of the Week is “Quiet Strength, The Principles, Practices, & Priorities of A Winning Life” by Tony Dungy with Nathan Whitaker, published in 2007.

Born in 1954, Dungy grew up to become a professional football coach. In 1999, at an after-game press conference, he expressed his displeasure with the referees’ rulings and instant replays. He was fined by the then-NFL commissioner ten thousand dollars.

About four years later, and again, about six years later– an instant replay helped Dungy’s team win in the last play of the game. The way the former win occurred was unprecedented in that the team scored three touchdowns in the last four minutes of an away game on Monday night, against the latest Super Bowl winners, in his original hometown. On his birthday.

Dungy thought God had something to do with that. Read the book to learn much more about his religious bent, philosophy, and the different roles he played in his life, in addition to that of coach.

Tom Landry

The Book of the Week is “Tom Landry, An Autobiography” by Tom Landry with Gregg Lewis, published in 1990.

Landry was born in September 1924 in the small town of Mission, Texas. He enjoyed a boyhood typical for his time and place– bicycle riding, fishing in the Rio Grande, and watching movies at the local theater every Saturday afternoon. Every Saturday night, Methodist and Baptist families mingled at a block party in the neighborhood. Kids in those days organized themselves in their own pick-up football games at the local sandlot.

Although Landry received a full scholarship from the University of Texas, beginning in 1944, he flew thirty missions for the Army Air Corps in the war. When he returned to school in 1947, he played the position of fullback, but suffered various injuries. By the time he graduated in 1949, he had become a rusher, and gotten signed by the football Yankees of the All-American Football Conference. Some of his fellow players were already in their mid-thirties, after having completed their military service and educations.

In 1954, Landry’s leadership talent was recognized. He served as an assistant coach, punter and played defense for the New York Giants football team in the NFL. At that time, they played in Yankee Stadium. On the day of the Championship game in December 1956, the field was frozen. The Giants’ management provided the team with basketball sneakers so they wouldn’t slip and slide on the ice.

Landry remarked that his and Vince Lombardi’s coaching styles were both successful, although they were starkly different. Lombardi’s team, the Green Bay Packers, played well because if they didn’t, they would receive the coach’s wrath. They emotionally bonded like soldiers (whom they had been) so that they wanted to win for their teammates more than themselves. Landry didn’t make his players fear him, but armed them with knowledge and confidence.

In their generations, Landry and Lombardi experienced an extremely serious: financial crisis, and war. These forced them to adopt a team-oriented mentality in order to survive. Their children’s and grandchildren’s generations– who came of age in the 1960’s– prompted a tumultuous shift in American culture that resulted in the recognition of the value of the individual. Unfortunately, that mindset has been taken to the extreme with the current younger generation. The technology of the Internet allows everyone on earth to express themselves with few filters– making for a very cluttered global communications environment.

Landry opined that Lombardi gave the impression that he was hellbent on winning, but– he still cared about people. These days, the kinds of people who garner the most attention on social media tend to be sociopathic (of course there are exceptions). Landry characterized them thusly: “If winning is the only thing that matters… You’d cheat. You’d sacrifice your marriage or your family to win. Relationships wouldn’t matter.” The god-fearing Methodist Landry believed that his religion led people to behave better, but now he’d roll over in his grave.

Anyway, the summer of 1960 saw Landry talent-spotting and recruiting 193 potential members of the Dallas Cowboys– an expansion team that was later drastically winnowed down to a few tens of players at their training camp in Oregon. In their first season, the Cowboys tied the Giants in the second-to-last game, else they would have lost all of their then-twelve games. Nonetheless, the Cowboys’ owner knew that nurturing a winning football team takes time, and had faith in Landry’s abilities as a coach. In 1964, he awarded Landry a ten-year contract as head coach. Landry took that as a religious sign that coaching a professional football team was what he should continue to do with his life.

Landry contracted with IBM to use a computer program to analyze potential players’ talents in the NFL draft in order to reap the cream of the crop for his Cowboys. After the 1963 season and thereafter, he reviewed films of his existing players in actual games to identify their strengths and weaknesses. In 1965, he hired an industrial psychologist, who helped his players set team and individual goals. Preparing Lambeau Field in Green Bay for the 1967 season, Lombardi installed an underground heating system, which cost $80,000. On playoff day, December 31, the temperature hovered around negative 16 degrees Fahrenheit.

Read the book to learn about the Cowboys’ star quarterback of the 1970’s, the team’s amazing comebacks, and much more about Landry’s trials, tribulations and triumphs in coaching and in life.