Practical Speculation

From the contents:
Introduction
PART ONE: MUMBO JUMBO AND MOONSHINE - 1. The Meme - 2. Earnings Propaganda - 3. The Hydra Heads of Technical Analysis - 4. The Cult of the Bear - 5. "We Are Number One" Usually Means "Not Much Longer" - 6. Benjamin Graham: Mythical Market Hero - 7. News Flash: Computer Writes Stock Market Story!
PART TWO: PRACTICAL SPECULATION - 8. How to Avoid Spurious Correlations - 9. The Future of Returns - 10. The Periodic Table of Investing - 11. When They Swing for the Fences, We Run for the Exits - 12. Boom or Bust? - 13. Market Thermodynamics - 14. Practical Market Lessons from the Tennis Court - 15. The Fine Art of Bargaining for an Edge - 16. An Amiable Idiot in the Biotechnology Revolution - 17. Earnings Impostors - 18. Finale - Afterword - Notes - Index

VICTOR NIEDERHOFFER's storied career as a speculator spans more than twenty-five years. He began speculating in commodities in the 1970s, and through 1997 held one of the most successful track records of any hedge fund manager. He currently manages money for overseas clients and trades for his own account. Niederhoffer is the author of the critically acclaimed and bestselling Education of a Speculator, and has written numerous articles for scholarly and professional publications including the Financial Analysts Journal. A magna cum laude graduate of Harvard (1964) and the University of Chicago (PhD 1969), Victor taught finance at Berkley and founded Niederhoffer, Cross & Zeckhauser, a mergers and acquisitions firm that was a leader in the field for many years. During the 1970s he dominated the squash world, claiming the world title in 1976. He currently writes a weekly column for CNBC Money with Laurel Kenner.
LAUREL KENNER is a financial writer. Her columns on the stock market, co-written with Victor Niederhoffer, have appeared on CNBC Money, worldlyinvestor.com, and TheStreet.com. Her journalism career includes five years as chief U.S. stocks editor at Bloomberg News and five years as an award-winning aerospace reporter for Copley Newspapers. She holds a degree in classical piano from the University of California at Los Angeles.

". . . the best trading book of the young millenium. . . offers more trading 'truth' than a dozen typical market books combined. It's in a league of it's own." (Active Trader magazine)

"At last, some modest proof of what some of us have long suspected - beware of lords on boards. Authors Victor Niederhoffer and Laurel Kenner* studied the relationship between stock returns and the number of board members with titles in the 50 largest companies by market value in the FTSE 100. Over a five year period, the more titles on the board, the worse the performance of the shares.

Niederhoffer and Kenner even invented a valuation indicator, the earnings/lords ratio, dividing the earnings per share by the number of titles in the boardroom. At the time they did the study, Powergen, with just one lord, looked the most attractive stock on this basis.

The finding raises the obvious question of causality. As the authors write: 'Was it the lords who caused the lackluster performance or the lackluster performance that prompted the companies to use lords as window-dressing?'

That comment, however, suggests a possible American misunderstanding of the British honors system. The presence of titles on UK boards does not simply indicate the lingering influence of the ancient British aristocracy. Charities may still want to recruit Lord Ponsonby-Snodgrass just to make the notepaper look respectable; boards of FTSE 100 companies don't really need to do so.

Instead, the preponderance of titles shows the tendency for the honours system to reward people for business success. Rise to the top of a FTSE 100 company and you can be pretty sure a gong is heading your way, especially if you have the foresight to make some political donations.

The 'lords on boards' effect may thus be merely another indication of the old rule of 'reversion to the mean'. Executives get awarded titles when profits are strong and the share price is rising, not in the aftermath of profit warnings and failed