My previous mentor, David Weis, has a book coming out, at the end of April. It is an exploration and explanation of the Wyckoff method of chart analysis. It is about reading the markets, bar by bar. It is about big money and how they manipulate the market and how to read their actions in the market, in real time.
It is about reading the market by its own actions.
I have been waiting for this book for at least 3 years. David is a meticulous writer, and he has edited and reedited the manuscript, to get it just right. He has been a trader of the Wyckoff method for 40 years. This is his gift to the trading community. For what you are going to be paying, you will be getting, WAY MORE than your monies worth.
For those who haven't heard much of Wyckoff, he was a legendary trader who use to work in the brokerage houses near the turn of the last century. He noted and re-noted how the big players, like Livermore, would manipulate the market, for their own gains. He put this information together, and that is the beginning of the Wyckoff method. Eventually he made enough money to buy nine acres in the Hamptons, next to Alfred Sloan, the General Motors industrialist. David learned the Wyckoff method years ago from the Stock Market Institute. He has clarified and expanded on this information.
Dont get me wrong. This book will be for those brain surgeons that decided to go into trading instead of surgery. It will take work and effort to learn the material in this book. I have been given some of the material that will be included in the book, as part of my education with David. But I promised that I would not share the information because of its inclusion in the book. The material he gave me was and still is excellent. I learn something every time I read his literature.
Gary Dayton, who has presented a few well received webinars, here on Big Mikes, was also, at one time, a student of David's. Here is a link to one of Garys webinars on Big Mikes - and like I said, he got his real kick from David. And what Gary is sharing here is just a small sampling of the kind of material that you would see in Davids book.
I hope that we can get David to present here on big Mikes. He trains and mentors people, out of the goodness of his heart, he doesnt need the money, so he has no interest in promoting himself, so that may be tough. But maybe I could send him an email, if Big Mike wanted him to present here. He was one of, if not my favorite teacher that I have ever had the pleasure of knowing. He really is a blessing to trading. He also, I believe, will sign books if you get them thru his web site. But I am not sure.
If you arent sure about this, just get the book thru amazon, when it comes out. Look at the thing, and then return it if you arent satisfied. But remember, I guarantee you will be...
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Have to say that I greatly oppose many things Taleb has said, and for the same reason, I've never bought any of his books. Don't get me wrong, I fully agree that we see 10-sigma events - the caveats were already known to us as early as the 1980's so his work is 20+ years late, not to mention that they arrive at the wrong conclusions from this premise. There are also private reasons why I dislike his work, namely that I think his way of running a fund is extremely unethical. Marketing your fund strategy covertly through book publishing, then convincing your investors that they're going to eventually hit a homerun, which gives you an excuse for underperforming continuously while you collect the management fee, is the oldest, dirtiest act in the book. Start a fund, have a few mediocre years while promising your investors better times, and finally close it after you've collected your share. Sounds familiar? Even Paul Wilmott (whom I'm less a critic of) speaks against it.
Last edited by artemiso; April 22nd, 2013 at 01:42 AM.
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@artemiso: I am not a uncritical follower of Taleb, but I find that the book he has written is stimulating and intellectually challenging. Or otherwise put, I enjoy reading it - even if I do not subscribe to all ideas that he has put forward. The books is mainly about having long options. An option comes at a price, and if his own fund Empirica bought options to benefit from disaster that did not happen, that might explain the meagre returns after 2000. As far as I know, Empirica was closed in 2004, and Taleb acts as an adviser to the fund which is run by his former partner. Why would you brand this as unethical? It would be unethical, if his writings were opportunistic and mainly driven by the motivation to lure customers into the fund of his partner. I don't think that this is the case. Should everybody who speaks up with whatever idea should refrain himself entirely from pursing any other activities? I do not see a conflict of interest.
Anyhow, I just wanted to say that I enjoy reading Taleb's book. I do not know, whether I would like him as a person, but anyhow it does not seem to be his primary objective to be liked by others.
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There's nothing ethically wrong with choosing to be long options in your investment philosophy. Or even short deep OTM. As a fiduciary, your duty is to make it known to your investors the downside that they are getting into. If they want short deep OTM, then helping them do it at a lower cost than they would otherwise have paid for is something good that you're doing for them.
The two conflicts of interest are clear as daylight to me.
1. To maximize return from the incentive fee, a manager should maximize volatility - therefore they take the profits on the large upsides and their investors take the losses on the downsides.
2. To maximize return from the management fee, a manager should lock up his investors' funds for as long as possible, even if it's a consistently-losing strategy. Since the Madoff blowup, investors have wisened up with ways to remove this incentive from the manager.
However, Universa has done something half-clever here: by rewording the goal for their investors, so the incentives are very much still there, except now it's what their investors are signing up for. Instead of explaining to them the principal-agent risks, they have made maximum principal-agent risk their investment strategy: their goal is to expect a 10-sigma home run and tolerate losses. (Conflict 1) What I find dirty is that most models tell you that it would take forever to hit that 10-sigma home run, so they are really telling their investors to have faith in a model that can only be proven wrong if they continuously lose money and that home run never comes. That's good for the manager (Conflict 2), but it's as good as Bernie Madoff for their investors.
It's like telling you that you will go to heaven (hit the homerun) in your afterlife (after a very long time) if you have faith and continue to donate (lose money) to the temple (Universa) of the Flying Spaghetti Monster ("black swan strategy"). Is there an incentive for the temple to spread the faith (educate the public by publishing books about the Flying Spaghetti Monster)?
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