Friday, August 21, 2009

Harlequin trading books

I have never read a Harlequin romance in my life, but the genre is obviously addictive. A whopping 32% of adult mass-market paperbacks are romances, and Harlequin dominates the field. Moreover the genre seems to be recession proof; in the last quarter of 2008 when the economy was tanking Harlequin’s profits rose by 11.2%. And why do I bring this up? Because among books on trading there are some with striking parallels to Harlequin romances. And I fall for them over and over. I know that I’m reading a “Harlequin” trading book, but the read is so easy and so seductive that, voilĂ , I’ve reached the end in no time at all. Have I learned anything from it? Well, can you imagine learning anything from a Harlequin romance?

My most recent “Harlequin” read was Rob Booker’s Adventures of a Currency Trader: A Fable about Trading, Courage, and Doing the Right Thing (Wiley, 2007). It tracks the trials and tribulations of Harry Banes, who morphed from a file clerk and “the worst trader in the world” to a big-bucks hedge fund trader. You can probably fill in some of the plot details, though perhaps not the fairy godmother Harvey Winklestein thread. So why am I even mentioning this book? Because, believe it or not, I did have one takeaway. And that was the chapter on homework.

Every trader worth his salt does homework, but this challenge was different. A hedge fund manager that Harry met thanks to the good graces of Harvey gave the wannabe an assignment: to figure out a way to take the carry trade on a retail platform. Harry barely knew what a retail platform was let alone the carry trade. But after a lot of research and mental anguish he came up with an imaginative solution, I assume a Harlequin denouement.

Well, my stream of consciousness kicked in. I remembered, however vaguely, accounts of self-defined but nonetheless mandatory homework assignments in high performance arenas—to wit, hedge funds and Google. Members of a hedge fund team sit around a table and each has to present and defend a new way to make money. An empty brain is a quick ticket to the egress. More bizarre is my memory of Google employees who were supposed to come up with original ideas no matter how whacky and report on their progress weekly. Bizarre because a quick Google search doesn’t confirm it.

What’s the moral for the self-directed investor or trader? And what’s the takeaway for me? Well, I’m going to try once a week to give a presentation to a group of imaginary sophisticated hedge fund traders. It will be my homework assignment—undoubtedly my most difficult homework assignment ever--and will take me outside my comfort zone. And since I refuse to be laughed out of the room I’ll try to come up with a defensible idea that, minimally, my imaginary colleagues haven’t already discarded and, in the best case scenario, haven’t thought of.

Maybe someday I’ll even be brave enough to share my homework with you, my readers. Alas, I can’t manipulate your reactions in my imagination.

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