Unknown Market Wizards - Jack Schwager - The Worlds Greatest Unknown Traders

welcome everyone to patrick boyle on finance today we have jack schwager on the show jack has been involved in financial markets for over 45 years he's worked as a market analyst a trader he's managed institutional portfolios of managed accounts and has written extensively on the futures industry and on great traders in all financial markets he's been interviewing the greatest traders in the world since the first market wizards book in 1989 and has just released the newest installment of that series unknown market wizards welcome to the show jack thank you patrick it's great to see you so i guess um in order to kind of get going um i thought before we dig too deep into the the stories of the great traders that you've you've uncovered in this most recent book i figured we'll we'll get back to your the book you wrote just before um market sense and nonsense which is one of my favorites and um i guess we should talk a little bit about the efficient market hypothesis and how well you think that holds up yeah so there's no doubt in my mind that the efficient market hypothesis is wrong uh and i have a whole chapter in the book you mentioned with god knows probably a dozen reasons you know or proofs or explanations of why that's the case um it's wrong on so many different levels uh well first basically the basic premise of the official market hypothesis is that the market all information is no um instantaneously and the market response instantaneously all known information so there's no way you can get an edge in the market it's uh you're just kidding yourself and anybody who comes out ahead is just basically lucky you know it's just like hey you know at a roulette table uh most of people will lose uh i guess in the markets maybe the majority traders will lose because they're all on the wrong side of the mid-air spread um and uh although it's different for the markets because you know the contention of many efficient hypothesis is that you can't get an edge but of course in the markets you can in any case uh that's the that's the concept that everything is known you can't beat the market now there's so many examples of of where that is where you had situations where you can't possibly explain uh that the markets are efficient i mean it's just and they're well they take the now one of the big ones nasdaq nasdaq in the late night 1990s so we have in three not three years since uh about 18 months a year and a half the mark the index of of uh i think it's in the nasdaq it didn't the internet stock sector yeah that that sector goes up 600 percent in a year and a half wow there must have been some tremendous information coming in right and then in the next year and a half after it reaches that high it goes all the way back down it's like an 85 loss which you know 600 percent gain 85 loss works out about this come back to the same level so yeah you know incredible astounding bull market an astounding crash and you must think wow what was all the sponsor mission that came in and what was all the bearish information that came in on the decline and i challenge anybody to really go through and explain that what really changed from that big bull market to the big bear market well nothing there's there was a prep near the premise that that was going to be big that's fair but then you had a whole bunch of companies which had no economic no economic reason to exist companies that like pets.com the famous one which the more they sold the more they lost because their shipping costs were higher than their you know then you know what they were getting on a profit and like i i jokingly say sometimes when i talk about this that well they went out of business in 10 months and they would have like that joke they would have lasted longer if they didn't sell so much the more they sold the quicker they went out the quicker they burned through their capital in any case you had all these companies had no reason to exist i mean you know a lot of them went by the wayside but didn't stop them from going from 10 to 200. that was a really bullish news now these companies were never economically viable yeah but you had everybody afraid of missing oh my neighbor just made it doubled as money everybody's just piling into these same stocks so it's purely an emotional thing you can't say you can't explain it by the market you know uh yeah uh reacting to news so that's on a that's a good example one other example throughout i got to see richard taylor's uh one of the pioneers of behavioral economics yeah and you know and i think beyond economics is really i mean they've got it right from the very beginning about the official market hypothesis anyway i saw him when i was living in seattle um and he gave this presentation and he had an example i have a bunch of examples when i give a talk on that on the same topic but he had one that i didn't know about and i just loved it so it's a closed-end phone call with the uh ticker symbol c-u-b-a cuba okay and it invests basically in south and central america or whatever you know that's that's the uh that's the fun and as you know or you might know cl your listeners might know closed-end funds tend to trade at a discount we don't have to go into attention yeah but they're a fixed portfolio and i tend to trade a discount and like most close end funds cube is trading at a 15 discount which is not unusual yeah but discount i mean if you liquidated the entire portfolio it would be worth 15 more than yeah i was trading okay so one day it goes from a 15 discount to a 70 premium i mean you know so what happened well what happened is president obama announced we were going to normalize relationships with cuba now here's the kicker uh cuba doesn't have any stocks so it's just that the symbol of the index without that closing fund was cuba but they hadn't holding because there are no there were no stocks in cuba and even if there were stocks it would have been illegal to invest in stocks in cuba if they even existed so you had this move like an 85 move in one day because of the name now you know you go and tell me the markets are efficient and discount you know the price is right the price is not always right yeah the thing is the markets and i can go on and on and on but let's kind of cut it to this point um the thing about the official market hypothesis is that you know in many situations it could the markets do act like they're random and because the markets are very difficult to beat and because these uh these emotional uh mispricings that occur are difficult to exploit because you know like the nasdaq well it shouldn't have gone up it could have gone up a bit but not 100 or 200 to 300 but you don't know where the top is at 300 percent 400 to 5 so you could go broke multiple times before the market actually stops so even though one can identify this is definitely a bubble without doubt it's still very hard to to take advantage yeah so it's you know for for the most part the markets do act like you're efficient even though they're not well a good example actually is even and i think it's from your book is the example of palm pilot in the late year as well and it was spun off from 3com but the prices just didn't reflect each other these two ways of investing in palm pilots you could buy either company but one had the ticker p-a-l-m and for people who are younger watching there's a palm pilot it's kind of like a blackberry which is kind of like an iphone it was the iphone of its day it was it was a terrible thing as well there was a lot of hype and when when and and three calm was spinning out palm as a separate subsidiary but if you owned three comp you had x number of shares yeah you still so three com was like palm plus the rest of the company and when palm came out that day there was such a demand for the for the farm yeah that when you worked out the value of the palm stock in 3com the rest of the company was trading in a large negative number yeah the market capitalization of the rest of the company was largely negative which is impossible to persist yeah because they they had profitable businesses in there but the funny thing about that even is that wasn't even a big secret like you could imagine even we'll say with the closed end mutual funds that it's sort of a thing that only a few people are watching but this was like there were cover stories on the wall street journal about this inefficiency in palm and it continued on for months absolutely and what i love is people say well the reason they couldn't couldn't correct this because normally arbitrage would take that right back yeah the the arbitrage armature jurors couldn't do it because they couldn't get the borrow to go short the pump and that may be true but what about those stupid investors who are buying pom when they could have more palm stocks for the same money yeah plus plus the rest of the company yeah yeah so it doesn't explain the paradox you could only so i guess my my follow-up question then to to the efficient markets hypothesis is then if if there are flaws and i i think the efficient markets hypothesis is sort of useful for a lot of people in that for for many people i often say if you're a doctor you'd be better off earning a living as a doctor and then investing in an index fund than trying to beat the market but what are your thoughts on the idea like if there are these inefficiencies out there can anyone take advantage of them or you know what's interesting about your book is i i guess many of the people who have done so well in the markets they're they're very interesting people but they're kind of rare people there's not a ton of them out there yeah so first of all you know since you read the book you know the end of the book probably the last point i make is that even though i've written about these people who have done enormously well and i believe that the official market hypothesis is is wrong ironically most people would be better off behaving as if it were right which means for most people the right advice is buy a low-cost index fund and hold it for 30 years you know that's the the exact opposite of trading and uh the exact opposite of believing the official market hypothesis is incorrect but the distinction is i think the world can be divided into two world of traders investors can be divided into two categories those for whom trading or investing is a passion and they've developed a methodology that has some edge uh they've learned proper risk control and they they both enjoy the process and they they have some skill at it so their their training is at least net profitable right so that's one group i mean not necessarily market rates are profitable but but they at least you know and i remember myself in that category i'm a profitable trader but i'm not a particularly good trader so um and the rest of the world who really don't want who they're gonna do they wanna their idea would be maybe oh if i could spend an hour a week and make a hundred percent a year you know that would be okay and that's why they buy all this stuff which is worthless but um but for that world which they're not they trading investing is not a passion they're not willing to vote or don't have the time to devote time to learn the skill to develop a methodology they're better off just you know acting as if the markets were efficient so i think it depends what category uh now can anybody can anybody you know turn into a market wizard no of course not uh no more than any uh any every running uh after condo is going to run a marathon time no matter how devoted they are you'll only have a tiny percentage of in any endeavor whether it's music or or uh sports or trading you know any field there's only going to be a small percentage that are truly outstanding and uh but that doesn't mean that you know there's plenty of musicians around the world that are perfectly good yeah excellent but they're not they're not soloist level in front of the major philharmonio or philharmonic orchestra does it mean that they're not talented you know so it's all there's also and there's any community orchestras have have musicians who are perfectly fine um it doesn't mean that they they're anything wrong they're successful but they're not they're not like out of this world you know skill right so yeah so in any profession that's true training's not different but can people become that profitable i think most people think just like you know running a marathon uh it's you can you can't get closer you couldn't run a mine if you're out of shape you can't run a mile but if you're devoted and even if you're out of shape if you're really rigorous about it you know you can eventually run a marathon almost anybody can it's very difficult it takes a lot of work but it can be done but they're not going to run a marathon you know a world-class time so same with trading devote enough time have the passion do the work develop develop the approach develop enough a capability type of uh uh you know in in which in the endeavor in this case is trading and then you can i think most people could at least get to the point where they are that profitable i don't know what percentage that is but let's say a meaningful percentage i don't know it's more than 50 or less but but a meaningful percentage of people with the proper work and devotion can reach some level of of capability now there was a lot of um in this book in particular i guess in all of the books by i felt there was quite a lot in this book about the sort of emotional difficulty of being a traitor you know there was a one line i really liked and it was someone described it as being a hard way to make an easy living yeah and do you think like i i almost think like when we talk back to taylor and behavioral uh finance do you think that one of the it would seem to me that one of the difficulties in doing well in the market is often it involves stepping away from the crowd like it involves not having a consensus opinion and is that the is there just a certain um mindset of people who are able to really just hold their own way or how how do you think that works is that what trips up the average person well i think the ability to go against a crowd is is a certain type of training and in fact like in one chapter in this book uh which focuses on a purely contrarian traitor that is his approach i mean literally he's always literally you know the old advice of don't try to pick spock tops and bottoms well that's literally what he that is how he orders his living he picks some bottles uh so but that's a specific type of training style it's not right for a lot of people it may be perfect for like he has this net personality which he likes to be on the other that's him you know he just that's just so he found an approach that really works with his personality now you have to marry that risk management otherwise that type of approach will will kill you but he has done that and that's why he's successful um as far as the difficulty or the emotion you know yeah it's not you know i have a line in one of my books uh like there are a million ways to make money in the markets but they're all difficult to find and so it is difficult to find an approach that really does have an edge and that works for the person it can take a and a number of traders talk about it taking they should people should think of at least three to five years before they reach that point you know it could be 10 years you know it could take a long time and and so there is that element of hard work involved and i have found the traitors almost all traders that i interview tend to be by nature hard workers they're really you know uh like i mean you just repeatedly throughout this book you could see these people devoting like one one uh amit sal talking about that when he first got into training he would literally spend 18 hours a day you know just trying to absorb everything and learn and and and to this day and he you talk about the the emotion the emotion of hope keeping emotions and control and focus he literally he will plan he has these big trades he plans for usually centered around events and he will before that of course he does all the research and and preparation and writes out a whole strategy of what he's going to do and he he goes back to all trades in similar markets and he's very prepared but the day of the before the trade it's trade itself before the event itself he'll he'll do meditation he'll do breath work he'll get in what he calls uh he calls it i think a deep now state and he gets just totally focused there's nothing you know his fingers on the mouse he knows exactly what he's do he's waiting for the news announcement and his world is confined to that screen there's not that's 100 of his focus i think the room could catch fire and he wouldn't know he's then focused uh so yeah and that's total control of your emotions basically you've planned everything out you know what you're going to do you've relaxed your your mind and body you're very focused and you if you're going to be wrong you know your reaction is ready people and he's the type of trader that if it doesn't the market doesn't behave as he expects he'll be out he'll be on less than a minute so you know well i actually one of the things i thought that was interesting in this book and in particular it seemed to be a big idea amongst the the group that you met in london there were about three different traders that were all sort of part of a group and there was almost a feeling in there of the idea of trading as a form of self-improvement and this is is slightly something i've felt for years working as a trader is that when you're when you're doing this job when you're when you're buying and selling and you're being right and wrong and i guess the big difference between trading and investing is just the holding period and for at least for me i'm quite a short-term trader and um i really know how much i'm right and how much i'm wrong and maybe that's a difficult thing for people to to get into their heads because i think people want to think that they're they're always right um and and to a certain extent there was a lot of this idea of kind of you know that you had to that trading ex exposes your flaws and i thought that was a very interesting idea because i think it's it's very true yeah and uh you know you mentioned like one of these i think it's true of all three of those traders because they they you know knew each other and we're in the same environment and develop some of the same attitudes and approaches and i think america was the oldest of the one you know the first of the group there was a traitor you know he came uh the alger came a few years later and uh richard a couple of years after that but uh this idea of keeping these daily records of everything that you've done and you know like somebody like richard barge who's the last of the three i mean he showed he like he has a spreadsheet and on the spreadsheet he'll have a bunch of different columns which have to do with different types of emotions and if he displayed that type of emotion or did that type of a emotional type of trade he'll he'll check he'll check that box uh for example he has uh i mean he has like 20 different things but like one of them he calls sugar trades i said what is a sugar trade well sugar trade is any trade that's not pre-planned and that's really not part of your methodology you just want to take the trade you know just like entertainment or excitement whatever and you know of course you don't want to take sugar trades but if he occasionally lapses and does it he'll check that box so at the end of the week he'll see what boxes are checked you know space basically an emotional scorecard and knows that those are the areas he has to work towards self-improvement and uh and richard also interesting in the book any of the listeners who might uh have have dealt with with depression i mean he had really serious problems with depression and uh you know the same types of skills he had to develop for you know the fact getting into trading probably led to his you know getting a you know curing himself up of the pressured in that he realized that he couldn't be successful as a trader if he still had to be dealing with depression so that sort of motivated him to deal with that problem as well but a lot of the same emotional things overlap in both areas and um you know so absolutely you know your your assumption or your premise is correct now and another interesting thing in there is there's often this story with with great traders they're sort of the story of their early failures and then they learn and come back and i i guess i i wanted to ask your thoughts on this idea like is is is failure itself necessary or is that just a symptom of someone who really tries um and is it just the mindset of not giving up that helps or what is it do you think that sort of ties in because some of your traders they they had no history of failure it just worked from the get-go um and i thought there was one idea that was interesting in there where someone put forth that failure is just feedback right because you do a trade and it either works or it doesn't work when it doesn't work that's feedback and you need that feedback in order to learn and to work out what you're doing wrong and that reminded me a little bit of um i can't think of the name of the book but by annie duke the poker player where she talked about how the great players really analyzed their you know the bad players just go oh well that was a bad beat i should have won but i didn't while the great players sit down and say what could i have done differently like where's the mistake what are your thoughts on yes so you raised two important areas firstly the failure at the beginning of a training in the early years of a training career and second about feedback so let me talk about them separately uh so one surprising thing i had from the very first market wizards book was how many of these traders had early training year experiences of wiping out sometimes multiple times and that's still true in this book as well as your note you know uh so there are two lessons to draw from that one is that early failure is not necessarily predictive of futures you know a future failure you know you can fail miserably in the beginning and still be enormously successful and the second is that these people who became marketed wizards obviously had great resilience great conviction and belief and just stay within this uh uh because to to what you know the classic the classic would be michael marcus in the first parker whizzes book and i won't go through it but there is so many repeated failures and i think coming you become exasperated just listening at one point i think i said did you ever maybe think that you weren't cut out to be a traitor and he just said no he kind of just he had its inner voice that just said to you you know you could do this you could and uh i mean he went on to to take a 30 000 account at 80 million uh so but he had you know most people would have quit many times before he got to that point but he had this this inner belief center drive so yeah that is that is an important element now early value doesn't mean so it doesn't mean you're you could eventually succeed but but the important point is it doesn't mean that you that you can't succeed it just means you have to use now we go to feedback you have to use those early failures as as instruction and uh it's this important lesson is the you have to learn from failures this is like i don't know how many times traders have brought this up repeatedly time after time the classic example is ray dalio bridgewater who basically built this the world's largest hedge fund on a philosophy that failure is the most important thing you because from failure you can learn how to improve what you're doing and uh that's his basic philosophy uh and you know like i say but he built the world's largest hedge fund on that basic premise uh in this book is a good example of of learning from failure so the the contrarian uh jason shapiro early first decade of trading he you know managed to run up accounts like from whatever 100 000 to somewhere close to a million and each time he totally wiped out the account and the second time the second time along and while he was making money he bought a porsche which is fortunate because when he wiped out the account the second time at least he had the car you know you had something left over but two times it completely blew around and yeah he went on to be quite successful but what the change was that he recognized what he was doing wrong he recognized that he was fighting yes he's dangerous to fight markets but he finally understood that he he can't fight markets without having a risk management strategy he has to know you know he can't just say i think this market is is overbought it's not going to go short here he had the development methodology that identified particular points where that made sense and that allowed him to place a stop within reason that that he could take the trade and not lose too much if he's wrong he one of the things he says in that chapter is i will never ever ever not you know not let my stop uh operate you know so that's that's a religion now and he talks about how he sees people and he sees himself and what how they were you know how they're making the same mistakes he made and he could use them almost as contrary indicators and he emphasizes not because he says he's smarter than they are because he recognizes himself in at an earlier time in them and therefore and he knows how wrong that he knows how that ends he knows that ends up they'll eventually get wiped out and and he can use he could almost use them as contrary indicators yeah now that that almost leads to another thing that i thought was quite interesting in there was that there was a lot of the different traders from different backgrounds and different approaches um all talked about how markets have changed you know it started out with peter brand who's been at it probably the longest um near the end you you got to a guy a systematic trader which is someone that i can relate a little more to but in his in his story he very much because he kept all of his old programs he was able to say which ones worked which one didn't when they stopped and so on and i've always believed you know kind of from my background of working with vic nader often just from doing this for 20 years i've always believed that markets are continually changing and that you have to expect change now i think with a systematic trader they see the change very starkly because you just see a system that did work that no longer works but to a certain extent i kind of got the feeling that with the discretionary traders maybe they um you know didn't uh sort of outwardly have a statement that a given system was no longer working but that they just sort of adjusted based once again on this market feedback to because brand really described that he had moved uh you know his initial classical technical approach was very different to what he does today yeah so i think for both discretionary and systematic traders this adaptability is important you know is critical and uh so uh you know like a traitor uh like uh amrit uh and downtrend richard all three of them to some extent but in you know one of the things is initially uh they would like have an opinion on which way an event would go or it would be a surprise they would go immediately they would go immediately with any surprise and that that might have worked originally but then you got programming progressing so far that you now had algorithms that would look for words and those algorithms could could respond more much more quickly impossible for human to compete so uh i've got i think i mean i forget which one which one was but mentioned that you know trent changed his approach from that to actually letting the first reaction go and then actually waiting for that to go too far and then trading you know almost the opposite almost a reversal of the original strategy um the the systematic and brand as you mentioned going from a classical chart to analysts seeing chart patterns no longer work working adapting to that and changing still using charts but using them differently and you have the the systematic trainer uh uh martin parker that you mentioned that was fascinating because you know so he saw his he got into training by being a software guy he wasn't a trainer he's being a software developer that he got into it and so he's being having been a software developer every second god knows how many systems he's developed but every system every system variation he could pull it up on a screen you know what it you know what it what it's done from the very start from when he researched it when he traded it when he stopped training it so initially in his early years he was using this uh combination of systems and it was making stella leave it was doing very well and then all of a sudden it started to stop working you know started losing money and he decided that the markets had just gotten quicker he was trading on on close after the close yes he had to anticipate he had to anticipate you know and he used volume as a as part of it so he had he had to anticipate when the market was going to meet the conditions on a close and that and that ended up being a very smart thing but i said you have the original systems you know that you drop and it was a remarkable thing he puts up this chart on the screen and it's like hey it's like a hill it goes steadily up and then it goes starts going down and he gets out after four or five months but that was like 10 years ago whatever number of years and it's never worked since it just continually lost money yeah so and this happened him a number of times so had he not adapted and he said oh i'm gonna this system has worked i'm gonna stick with the system i'm not changing it he would have been wiped out multiple times well it's interesting because it's almost the idea that like we'll say an animal in the wild like you can't sort of feed at the same place every day or eventually the other animals know to stay away and i think even the timing around his first change of markets it reminded me when i first started out in kind of 2000 2001 we had you know the first dma machines for for trading into the market without a broker and i look back at how much easier it was back then simply because you would all the old-fashioned guys at the mutual funds who would just throw these massive trades into the market like a brick and you would just you know in trading futures you could take the other side of either a spike or a decline right at the close and get out of it 15 minutes later when the market calmed down and you know that was something that kind of worked for about five years but then there was just a point at which they weren't making that mistake anymore they had the same machines we had and it just couldn't work yeah so you have to you have to adapt another big team that came up an awful lot in this and it's almost a thing that goes back to you know you read about this when you read um you know jesse livermore's trading system as well the importance of not trading you know there was a lot of the sugar trades is that is the very idea that they're sort of and and i think monroe trout i believe used to have his traders they weren't allowed to look at prices on their on their screens they had to just do analysis and then put the trades in but this thing of um you know if you put someone at a trading terminal with nothing much to do all day long you know it's analysis or you know trade the ticks in the s ps they'll trade the ticks in the s ps even though that's uh you know negative npv trading and i noticed that some of the guys there was one guy uh towards the end one of the stock traders who had had a job and traded and then he quit his job and started trading full-time and almost this was his problem was that now he had a free the free time to trade the ticks and had to stop doing it yeah so that's that's you that's quite an important point is um and i i use a there's a quote by debussy that i like a lot uh which is uh and i see you're a musician i think a very bad one but it's basically uh music is the space between the notes that uh i love you know i love that quote because it's so apropos training because you know in a way training is is the space between the trades now so i can think of one one great example uh uh well there's been a number of examples but uh there's one trader i interviewed in in hedge fund market wizards who basically started he called himself a uh you know he calls himself a long short trainer but when it really got down to digging in and it turns out he's never had a double-digit short position so he's always his shorts are like single-digit and so it's never a big part of his thing so really he really is more like a long only trader started his fun in october 99 uh i mean it could have been worse timing he could have started in january to 2000 but or february 2000 but it's pretty close to a horrible time to start you know particularly for a longer predominantly long-only traitor so when i had interviewed him uh it was uh i guess he had about a dozen years past that point and he was up cumulatively before his uh you know profit and say before the fees but just on his training or you could think of his own account portion he was up like about 900 cumulatively yes s p during the same time was flat literally flat either side of zero by ten percent yeah so how does the guys predominantly long only you know accumulate 900 return you know compounded when when the index is itself flat i mean it was flat because his starting point was near one peak you had the big bear mark at two thousand two thousand two and then you had the other big bear marketing at it too so he his because track recon accomplished two giant bear markets uh so the answer was of course he's a very good stock picker that's part of it but a really important part of it is that he didn't feel he had to trade all the time and so when the market was just not right he just didn't trade much so during 2000 2002 you know he actually was up in a little bit during that period he made a few trades but he didn't trade much and then in 2008 he lost i think single digits but yeah that's a lot better than having a 50 draw there and uh and again because he didn't trade much so his success really was to his ability to not trade and uh and talking about the screens that reminds me of sakota when i when i interviewed sakota i kind of you know one point i looked around and says where's your quote screen and he said having a quote screen on your desk is like having a slot machine you keep on feeding quarters all day long so he just had a system and he put in his orders and he didn't want to he didn't want the temptation of looking at the market intraday yeah now an interesting thing as well in this book like there were some really like massive returns um that some of these guys have generated but towards the end of the book you pointed out i think it was parker was the guy with the longest track record he had been trading i think it was 22 years and i think you looked at a 20-year record of his and he had a return of about 20 percent a year and i guess i wonder because you've you've been following the greatest traders in the world for uh you know quite a while now um what do you think like when we look at often people say to me like what can a what can a great trader earn and i say to them well if you look at the returns of the greatest traders who've been doing it for a long time if you look at people like soros or buffett or jim simons or any of these people to a reasonable extent i would say that your long-term like 20 to 30-year return expectation is probably a little bit capped by at that level like you know there's one of the things that's funny about running this youtube channel is that when you when you put financial content up on youtube you get all these ads on your channel and they're all first at of trading coaches and there's there's one in particular who tells people that they can generate a two percent daily return every day on on their uh on their trading if they if they sell you that system jack for two grand so i would advise you to sign up but um you know what are your thoughts on like what is a reasonable a reasonable hugely outsized return over a long period of time so yeah so actually but i should correct you know uh parker didn't have the law good probably brand is the longest record oh sorry sorry yeah like 35 years whatever but um and and grants over that whole period compounded around 58 but uh so how much i think the classic example is somebody like drucker miller uh who and you know he went on for many years after i interviewed him you know he still traded for like 20 years after i interviewed but i think his career from his his original fun uh his original fun till he retired i think was roughly about 30 years i think he compounded close to 30 percent a year i mean that's kind of sort of like classic phenomenal track record with some size money in this book you do have people like sal albert uh who uh who i guess about 13 years and 300 but but that's a small amount of money and if he had allowed his money to compound he couldn't do that you know it's just he kept pulling money out and even now still trading a couple of million maybe but you know that type of 300 compounding would have made the size so way larger so uh augustine knows what size he can he trades very aggressively and he knows at what size he can trade that at so i think it the question depends not only on the length of track record but whether you allow the account to grow compound uh if you allow the compound becomes almost like something like bruce connor when i interviewed him i believe he had like close to a 90 average return for 10 years which is a long record yeah right but you know i'm sure i don't know what his record was afterwards but he if he found cacson as a firm managing 10 20 billion or whatever surely you know we know i mean i don't have to look i it's impossible to keep those type of returns if you're managing really big size so it's a function of how much money is on the management and the length of track record uh there is one trader in here jeff newman who who was literally started with 2 500 i believe about 15 years ago or so and when i interviewed him he was up to 50 million and the kicker is i just kind of you know he's still he keeps in touch since we uh since i met him and yesterday literally yesterday he sent me a message saying i just did 100 million uh for the year and that's like a crazy number and i say 100 million cumulatively meaning he turned 50 into a hundred though he said no he he's literally made another 100 million to see her so and this is a guy who saw 2 500 and this is 15 years ago and he is you know now trading real money i mean you know i yeah an individual right i mean the 50 million uh so you know it's going 150 million uh in one year so you know there are there are some people who you know but he's extraordinary so i i think there are you know some people can push to the envelope but realistically speaking for what's a reasonable expectation if you could do plus 20 for 20 years plus you you're doing very well one of the things that i really enjoy about the book and and all of the books because by the way i've often recommended your books to people but and they say well which one should i get and i kind of said well you should get them all because they're all you know what i mean they're a series and they all there's not like one that'll tell you more than another one of the things i thought was very interesting about this one is just how fresh it is i mean there's some of the interviews in there that are probably two three months old is that is that correct well i did the interviews uh in uh in 90 in 2019 and i did some i did a a couple that were in this this year uh so yeah they're they're fairly recent uh for the ball you know for the most part yeah it was only there were two interviews that were done this year uh the others were wound up by the fourth quarter at the fourth quarter before the fourth quarter of 2019 the two exceptions were shapiro because he he didn't want to do an interview he didn't want to participate and he was coming he is a he is one of those traitors who my book kind of was the first book he read on trade through a portrait or the first influential book and it sort of got him you know it sort of gave him it was a it was an influential book and he wanted to for him and he wanted to he asked if he could meet me he was i lived i was in boulder and he wanted to he had a wedding of all yes if we could get together i i said sure he was telling me a bit about his history and i said well that's pretty interesting uh you know would you conceal would you want to do an interview and he said no i don't i just don't want that let's say i don't want to do it and he refused a number of times so when i met him we uh you know we just talked for a couple hours and i didn't i didn't turn on because i asked him again is it okay if i turn on the recording so now i really don't want and it was a you know fascinating conversation and sort of when i had gotten the blows working on a book and the next uh so six months or four five months later i figured i'd email i said look you know i still think you'd be great in this book um sort of you know would you reconsider and went back and forth and i get an email finally saying look i'm really sorry i really appreciate what you do and everything else but i don't want to participate and literally literally less than a minute later i get a second email that says screw it let's do it so so i did that uh i did that by uh video conference uh because i had already spoken and i already met him and uh you know so it was you know so we had the conversation again so that what that was the first time i ever did an interview that wasn't live for any of the market wizards books and then there was a second exception because because of covid i was no longer traveling and it was a traitor i wanted to get to that i didn't get to uh there were more than one but there was one and uh so i did that on video uh because that was the only practical way to do it now how how do these people react when you you contact them because just to kind of tell you a funny story when you first called me i think about probably about eight years ago i don't know if you remember our phone call but i i at first i was a bit confused when i was on the phone with you because i've been a big fan of your books for years and i have them all around the office and i recommend them to all sorts of people and so you know a lot of my friends would know that i'm a big fan of your writing so then i got a phone call and it's it's jack schweiker on the end of the line and i was pretty sure that it was one of my friends winding me up you know i kind of thought it was like a an alley g type thing and i'd be told like you idiot jack schweiger wouldn't call you up so how do people react when you contact them because i i got the feeling most of them kind of had read your books yeah at this point you know it's kids you know big difference from the first walker was this book obviously where people didn't know well i knew a couple of traders personally um and now and even the book before the hedge fund market was booked um i'd say that i don't know if all of them you know know who i am i've read my books but certainly a majority of them have and and i it's kind of almost amazing how many of them say it was like the influential book in there you know it was a book that got them into trading and stuff so uh so i get that so that's kind of well that's a that's a big advantage because they already know who i am and they benefited because the book was positively influential in their life and so it makes a yes much easier but you know i i don't know if there's a surprise or whatever uh or not uh i you know usually the first contact is by email so i don't really see i don't see what their response is you know what they answer well i i guess i i would wrap up just by saying that you know i strongly do recommend this book to my my viewers out there and i think one of the one of the real reasons i recommend it because there are other books that sort of interview traders but i think one of the the reasons these books are so good is that jack is a traitor himself and he kind of asks all the right questions like as i'm reading the book i'm going along and i'm thinking yeah but what about this what about this and and sure enough jack will ask the very question that i would ask and actually back to our first conversation you know my partner was sitting next to me when i was on the phone with you and she said to me after a while she said you know after i hung up she said you really gave him an awful lot more information than you usually give out and i said well he just asks all the right questions yeah actually one of my pet peeves with interviewers i'm not talking about training but generally interviews in general you know and is you know ask this girl you wouldn't even ask this question and ask the screen i'm like it's like yeah it's like grading that why don't you know somebody says something that's such an obvious follow-up and they don't ask it it just irritates me but you have then for you have i love interviewers who do ask somebody like terry gross on this uh podcast fresh air who's been a you know great interviewer for a year probably one of the best my my maybe the best ever uh but she always almost always will ask if there's a question i have it's not asked immediately she'll come back to it so if it does yeah and i really like that so i guess i try to emulate that or or at least conscious of it i'm conscious of ask ask the obvious question you know yeah well thank you very much for for coming on my channel i'll put a link to jack's book in the description below and i strongly strongly recommend it and and in true to all of his other books because they're all you know huge value added and thank you again for coming on i really appreciate it thanks patrick you

Channel: Patrick Boyle

Views: 58,845

Rating: 4.954267 out of 5

Keywords: finance, trading, trading and pricing financial derivatives, patrick boyle, on finance, kings college london, business school, quantitative finance, financial derivatives, personal finance, investing, Jack Schwager, market wizards, unknown market wizards, greatest traders, day traders, futures traders, hedge fund market wizards, day trading, swing trading, futures trading, technical analysis, behavioral finance, best books, trader books, chat with traders, cta, hedge fund

Id: Q7GJjr4qJLU

Length: 50min 56sec (3056 seconds)

Published: Thu Dec 03 2020