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Paul,
I have that book, I've wondered the same thing as you, and I have a
theory...
The book was published in Jan. 2001, meaning that all the interviews for
the book were completed in 2000, possibly early 2000. Before the crash, get
it! Statistically, one would expect a percentage of stock-market investors,
who had only been in the markets during the roaring 90's, to have done very
well.
I've often been curious how those guys from "Stock Market Wizards" did
during 2001.
Cheers,
Peter Nelson
----- Original Message -----
From: "Paul Altman" <paulha@xxxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Thursday, February 14, 2002 10:45 PM
Subject: Stock Market Wizards - true or false?
Will someone please tell me what the deal is with Schwager's Stock Market
Wizards, the newest of the three in the series? I looked it up on Amazon:
http://www.amazon.com/exec/obidos/tg/stores/detail/-/books/0066620589/review
s/102-2376513-8178527#00666205895123
...and found the following editorial quote:
>Steve Cohen, a modern-day trading legend who manages billions and who has
>averaged trading returns of 90 percent during the past seven years with
>only three down months (the worst, a minuscule 2 percent loss)Mark
>Minervini, a junior high school dropout, who has averaged a 220 percent
>annual return during the past five years, while keeping his maximum
>quarterly loss to a fraction of one percent
Hey, I'm willing to accept that there's some traders out there that get
phenomenal annualized returns. But with essentially no DD's? Sorry, this
couldn't be. You don't have to do a whole lot of research to understand
that this is not possible, at least not in the real world. Regardless of
the supernatural powers you have to predict the unfolding of the universe,
you're going to be wrong at least occasionally. And if you're wrong
occasionally a few times in a row, you've got DD's from the whipsaws. If
you're playing around with sufficient volatility to provide huge returns,
than a few whipsaws in a row, every so often, are going to add up to DD's
in excess of 0%-3%. Give me a break.
Would someone take a second to explain to me whether I'm missing
something? I don't know if Schwager actually examined account statements,
but you'd think that someone like Steve Cohen would find it difficult to
invent these things, what with any number of sophisticated clients able to
contradict him.
What's the bottom line here? Is it really possible to have huge trading
returns without occasional rough DD's? How would one do that? How could
anyone avoid an occasional string of whipsaws? Even if they were running
100 systems at the same time, there still would be coincidences of DD's
occasionally, that would break their "perfect" records.
Yes, I understand that the DD's are somewhat disguised by the chosen
metrics: "worst month" instead of "worst DD". But still!
Paul
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