Stock Market Wizards: Interviews with America's Top Stock Traders

Stock Market Wizards: Interviews with America's Top Stock Traders

by Jack D. Schwager



Product Details

ISBN-13: 9780471485551
Publisher: Wiley, John & Sons, Incorporated
Publication date: 03/28/2001
Pages: 352

About the Author

Jack D. Schwager is the former director of Futures Research and Trading Strategy at Prudential Securities, Inc., where he is currently a consultant. Author of the best-selling Market Wizards and New Market Wizards, he lives in Martha's Vineyard, MA.

Read an Excerpt

Chapter One

Stuart Walton
Back from the Abyss

In June 1999, at the peak of his career, after eight years establishing one of the most extraordinary stock trading track records of the 1990s, and with $150 million under management, Stuart Walton returned all money to his investors and walked away from trading completely. The emotional repercussions of a marital breakup were interfering with his ability to focus on trading, and he did not feel it was right to manage money until he could once again devote "100 percent energy and enthusiasm" to the task. In the preceding eight years, he had achieved an astounding 115 percent average annual compounded return in trading profits (92 percent for his clients after deducting management fees), with annual returns ranging from a high of 274 percent to a low of 63 percent (excluding the 1999 partial year).

Stuart Walton's career as a trader is marked by a string of contradictions and paradoxes. He wanted to be an artist or a writer; he became a trader. Though he valued academics and disdained the financial world, the markets became his profession. He once hated trading so much that he awoke feeling that he couldn't do it for another day and quit his job that morning; several years later, the markets were his endeavor and passion. His initial forays into stock trading were marked by such ineptitude that he nearly went bankrupt, yet he subsequently became so skilled that he more than doubled his money annually.

I visited Walton, a Canadian expatriate, at his office in downtown San Francisco. I discovered that, although managing a nine-digit sum, he had no trading assistants, no back officestaff, no marketing people, no programmers, not even a full-time secretary. His firm, Reindeer Capital, consisted of Stuart Walton alone. His isolation was deliberate. After having gone wrong so often by listening to tips and opinions, he had come to realize the importance of not being influenced by others while trading.

Walton was relaxed and outgoing. We talked for five hours straight without interruption. The time passed quickly.

Is there some significance to the name of the firm or are you just partial to reindeer?

The firm is named after my great-grandfather, William Gladstone Walton, who was given the nickname "Reindeer" for a famous trek he conceived and led. Much of what I know about him I learned from my grandfather, who passed away last year at the age of one hundred, narrowly missing the feat of having lived in three separate centuries. In 1892, at the age of twenty-three, Reindeer Walton left England to work as a missionary in northern Canada. He typically traveled over two thousand miles a year by canoe and dogsled, visiting his far-flung constituency — the Indians and Eskimos that lived around the Arctic Circle.

One year, vast forest fires swept through northern Quebec, destroying almost all the regions vegetation and game, and leaving the native population at the brink of starvation. Reindeer Walton came up with the idea of herding the Siberian reindeer, which are also called caribou, from Alaska to northern Quebec. Through sheer perseverance, he convinced the Canadian government to finance the trek, which he organized and led. It took him five years, from 1921 to 1925, to herd three thousand reindeer across northern Canada. Reindeer are not like cattle; they move only when they want to move, and they go in all different directions.

How did he keep them herded together?

Caribou will follow the feeding path. He used a lot of foresight in choosing the right route. He succeeded in getting three-quarters of the herd to migrate; the remainder died or dispersed. His trek permanently changed the migration patterns for Siberian reindeer. The portion of the herd that survived flourished in northern Quebec, and he became a local hero.

Is there some principle you wish to symbolize by the name, or is it just a matter of honoring your great-grandfather?

I tell people that my great-grandfather added more value to society than I ever will.

When did you first get involved in the markets?

As soon as I graduated from McGill University with an M.B.A. I originally wanted to be a cartoonist.

A cartoonist with an M.B.A.? Were you planning to be the world's first business cartoonist?

No, the cartoonist ambitions came earlier. When I graduated from college, I definitely wanted to be a cartoonist. I sat down with the head of the art department, and he told me, "If you feel you know how to draw and represent the human body as well as one of the masters of art history and are then prepared to make five dollars per hour drawing cartoons, then this is definitely the career path for you." His comments threw some cold water on my plans. I had also done some writing in college, and a few of my short stories had been published. I thought that journalism might be a good alternative career path that allowed some creativity.

Your interests seem to be so strongly artistic. Why did you go for an M.B.A.?

Because the journalism idea fell through as well, and I decided I needed to earn a living.

What went wrong with journalism?

I applied to several journalism schools. That summer, while visiting my parents, who were in Brazil at the time, I received a rejection call from Carleton University, which was my first choice for a journalism school. I received the call during a party. Maybe it was because I'd had too many Brazilian caipirinhas, which is their rum concoction, but I said to myself, "I guess this is another one of life's crossroads." So I decided to give up the idea of becoming a journalist. I guess I didn't want to do it badly enough to pursue it.

In retrospect, do you consider your rejection from journalism school a lucky event?

I consider it a huge stroke of luck...

Table of Contents

Prologue: An Inauspicious Beginningxi
Back from the Abyss1
The Wisdom of Value, the Folly of Fad30
Dialing for Dollars54
Against the Current75
Harvesting S&P Profits95
Win-Win Investing127
From Istanbul to Wall Street Bull148
Stock Around the Clock169
The Ultimate Trading System189
Swimming Through the Markets207
Questioning the Obvious221
Eliminating the Downside239
The Quantitative Edge254
The Trading Room275
The Mind of a Winner288
Wizard Lessons298
AppendixOptions--Understanding the Basics327

What People are Saying About This

From the Publisher

In 1989, professional futures trader Schwager wrote the electrifying Market Wizards, featuring incisive interviews with some of the world's most successful traders, discussion of a wide variety of techniques and markets, and a detailed chronicle of various traders' track records. It quickly became a bestseller. Five years later, Schwager published The New Market Wizards, less detailed and with more generic interviews. Now, six years after, the third installment continues this unfortunate trend. The subjects of Schwager's new interviews are less than impressive, and his questions have gone soft. To make matters worse, subjects were allowed to amend their words later, resulting in many lifeless, boilerplate responses. Instead of analyzing specific trading decisions, theories or track records, subjects spend most of the interviews talking about their childhoods or disparaging ex-bosses and co-workers. Even this dirt fails to engage the reader, since Schwager has changed the names of the maligned parties. Only the author's brief, energetic commentaries on the interviews display the insight of Schwager's earlier work. Inexperienced traders may benefit from some of the platitudes in these interviews, but experienced traders already know to cut their losses. (Jan. 31) Forecast: Bolstered by an author tour (with guest appearances by some of the "wizards") to New York City, Chicago and Boston and a syndicated radio feature, Schwager's third book may get some initial sales from fans of Market Wizards and those looking for more up-to-date trading information. Poor reviews and word-of-mouth, however, probably will hurt this book's sales, as they did the previous sequel. Copyright 2000 Cahners Business Information. —Publishers Weekly

Schwager (Market Wizards, New Market Wizards) interviews 15 top traders, attempting to cull their secrets in order to explain their winning methodologies. It's not a terribly original approach, and many of the questions and answers sound remarkably alike. While none of the interviewees is as recognizable as Fidelity's Peter Lynch, all have produced impressive returns for their investors. Many share characteristics that helped shape their trading philosophies: becoming interested in the stock market through their fathers, experiencing numerous failures in early trading but never giving up, and developing a strong work ethic and self-confidence. Discipline, according to the author, is the one trait that all of his subjects have in common, enabling them to ride out the turbulence of the stock market each day. The book concludes with a list of 65 wizard lessons. One of the more insightful traders described himself and his colleagues as "detectives. We are trying to find out information that is not widely dispersed and then put all the pieces together to get an edge." Reading this book might help readers develop their own edge in investing. Appropriate for larger public libraries.—Richard Drezen, Washington Post News Research, New York City Bureau Copyright 2000 Cahners Business Information.—Library Journal

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