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

". . . 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." (<i>Active Trader</i> magazine) <p>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.<br /> 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.<br /> 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?"<br /> 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.<br /> 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.<br /> 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 acquisitions. Since all companies eventually suffer some sort of bad news, the disasters are more likely to occur after the honours are awarded. When the queen brings the sword down on an executive's shoulder, the blade of Damocles may not be far behind it. <i>*Practical Speculation</i>, published by John Wiley & Sons (<i>The Financial Times</i>, June 4, 2003)</p> <p>"...At last, some modest proof of what some of us have long suspected - beware of lords on boards..." (<i>Financial Times</i>, 3 June 2003)</p> <p>"...will enable the investor to make independent decisions about their investments with confidence..." (<i>Portfolio International</i>, June 2003)</p> <p>"...shows how far pension fund figures are out of line with long -term share market expectation..." (<i>Liverpool Daily Post</i>, 6 August 2003)</p> <p>"Niederhoffer and Kenner dispense pearls of wisdom for both the seasoned professional and the novice about investing and much more. Though you may not agree with all that they write – I can’t imagine anyone would – they will compel you to think and very often, cause you to smile." --Mark P. Kritzman</p> <p>I consider Victor Neiderhoffer's highly entertaining <i><u>Practical Speculation</u></i> to be a modern classic. In <i>Practical Speculation</i>, Neiderhoffer explores a wide range of fascinating topics ranging from the wisdom of value investing to the implications of a company slapping its name on a shiny new stadium. - Street.com</p>

VICTOR NIEDERHOFFER's storied career as a speculator spans more than twenty-five years. In the introduction to Practical Speculation, Vic describes the rollercoaster his hedge fund rode from No. 1 in 1996 to the debacle in 1997 that forced him to close his fund. Rather than giving up, he wrote this book "figuring that by trying to teach others, I might learn something myself," apparently with some success. Niederhoffer was ranked No. 6 for the year 2003 among 200 managed futures hedge funds in the TASS database, and is No. 4 in the performance rankings through mid-2004. Niederhoffer is the author of the critically acclaimed Education of a Speculator as well as numerous groundbreaking academic articles about markets. A magna cum laude graduate of Harvard, he holds a doctorate in economics from the University of Chicago Graduate School of Business. He is a five-time national champion in squash and claimed the world title in 1976. <p>LAUREL KENNER has written several hundred columns on the stock market with Victor Niederhoffer for CNBC money, Active Trader magazine, worldlyinvestor.com, and TheStreet.com. She previously spent five years as chief U.S. stocks editor at Bloomberg News and five years as an award-winning aerospace reporter for Copley Newspapers.</p>

Praise for Practical Speculation <p>"More trading 'truth' than a dozen typical market books combined. It's in a league of its own."<br /> —Active Trader magazine</p> <p>"Victor Niederhoffer and Laurel Kenner probably know more about short-term movements than anyone else . . . an invaluable guide for speculators."<br /> —James H. Lorie, Eli B. and Harriet B. Williams Professor Emeritus of Business Administration, Graduate School of Business, University of Chicago</p> <p>"A Rabelaisian romp down Wall Street . . . this book is fearless and occasionally shocking, but always the conclusions are backed up by supporting numbers. Recommended to those seeking both fun and profit."<br /> —Richard Zeckhauser, Frank P. Ramsey Professor of Political Economy, Harvard University</p> <p>"Practical Speculation is so good that I'll guarantee it. If it's not for you, just return it to me with your sales receipt for a full prompt refund."<br /> —Martin Edelston, Publisher, Bottom Line / Personal</p> <p>"Pearls of investment wisdom from a Wall Street legend. I recommend it to anyone with serious financial aspirations."<br /> —Andrew Lo, Harris & Harris Group Professor, MIT Sloan School of Management</p>

"Niederhoffer and Kenner dispense pearls of wisdom for both the seasoned professional and the novice about investing and much more. Though you may not agree with all that they write – I can’t imagine anyone would – they will compel you to think and very often, cause you to smile." --Mark P. Kritzman

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