Thursday, March 29, 2012

Upcoming half (Amazon) price book sale

As I await a spate of books to review I figure it’s time for some spring housecleaning. I have about fifty books that I’m willing to part with to make space for the new. On Monday I’ll post the available titles as well as the rules of the game. Stay tuned.

Wednesday, March 28, 2012

Sears, The Indomitable Investor

Steven M. Sears, options editor and a columnist with Barron’s and, has written a first-class book for the retail investor. The Indomitable Investor: Why a Few Succeed in the Stock Market when Everyone Else Fails (Wiley, 2012) draws on the wisdom of top investors, academic research, and insights from the options market to steer individual investors in the right direction. Even when the material is familiar, Sears manages to make it compellingly fresh (and freshly compelling).

I can do neither in this review, which means the book may seem to be one you’ve read a hundred times already. Well, I figure I’ve read more books on investing than most folks, and I haven’t read it before. This book may not break a lot of new ground, but at critical junctures it has a way of pushing an investor’s reset button.

Akin to Hippocrates’ admonition to do no harm (yes, I know this phrase is not in the Hippocratic oath itself), Sears implores the investor to focus on risk rather than profit. The critical step in changing how you approach the market is the “good investor rule—thinking first of how to not lose money, rather than how to make money.” (p. 12)

After chapters on greed and fear (note the inversion of the most common ordering of these two investing emotions) and an “anatomy” of information, Sears turns to volatility, “the stock market’s central nervous system.” Volatility, Sears argues, “is globalization’s destructive side effect.” Especially troublesome is the fact that “everything is touched by derivatives contracts that sit in all the spaces between bond and stock markets, essentially unifying all the world’s markets so that if one part stumbles, the problem infects other markets like a super virus. This makes volatility a constant market hobgoblin, and one that is increasingly violent, as the world’s largest, most sophisticated investors are increasingly chasing fewer and fewer opportunities to make high returns on money.” (p. 82)

Sears suggests that all stock investors should follow the VIX because “it is to investors what canaries are to coal miners.” (p. 88) He also recommends that the investor make his volatility analysis more accurate by tracking skew. (The CBOE’s SKEW Index—symbol SKEW—has ranged historically between 101.09 and 146.88; a high reading indicates greater odds of a sharp market decline.)

Sears introduces the reader to three cycles that influence stock market activity: seasonal patterns, secular patterns (which “occur when a stock or sector creates its own reality independent of the overall market”—think Apple), and economic patterns. To keep an investor’s information flow manageable, he suggests focusing on seasonality and the ISM data.

The investor is usually his own worst enemy, as has been amply demonstrated by behavioral finance. This literature has been summarized to death, so Sears relies on less familiar material to make his points. For instance, according to a recent presentation by Whitney Tilson, 19% of people think they belong to the richest 1% of U.S. households. Talk about an overconfidence bias!

The Indomitable Investor is full of insights, recommendations, some funny stories, even a couple of jokes. Sears skewers many on Wall Street and in Washington, yet the thrust of the book is not negative. Sears is trying to make the retail investor savvier, a worthy opponent of the so-called smart money. All in all, a well written, thoughtful, useful book.

Monday, March 26, 2012

Protect and Enhance Your Estate, 3d ed.

I don’t normally review books on personal finance for this blog, but I decided that perhaps it was time to read something about estate planning. The odds are overwhelming that within the next 30+ years someone is going to inherit the fruits of my earthly labor.

Although I come from a family of pretty compulsive planners, I am decidedly less so. Yes, I have taken care of the basic documents. But, as the authors (Robert A. Esperti, Renno L. Peterson, and David K. Cahoone) convincingly argue in Protect and Enhance Your Estate: Definitive Strategies for Estate and Wealth Planning (McGraw-Hill, 2012), I haven’t done nearly enough. In fact, in some cases I may have done the wrong thing. And you may have too.

This paperback devotes 43 chapters to a wide range of topics. To mention just a few: probate, step-up in basis at death, the revocable living trust, disinheriting (or, the more loving alternative, planning for) a spouse, planning for unmarried couples, discounting the value of your estate, and giving it to charity.

The authors outline the pros and cons (mostly cons) of wills. Instead of using the will as the cornerstone of estate planning, they argue that “estate planning professionals should use the revocable living trust as the main or foundation document to accomplish most of their clients’ estate planning objectives.” (p. 94) It’s not just for the 1%. The revocable living trust has a host of benefits. For instance, not only can you give what you own to whom you want, when you want, subsequent to your death. “A revocable living trust can control, coordinate, and distribute all your property interests while you are alive, if you become disabled, and on your death.” Property placed in such a trust does not pass through probate, and “continuity of cash flow and investments in your portfolio is not interrupted by your death.” (p. 95)

The authors, all lawyers, explain some of the intricacies of current federal tax law as it relates to estate planning. Of course, tax law is constantly changing, but the authors’ guidelines are extremely useful.

They also list techniques people often employ that don’t always work—such as cross-ownership of life insurance, joint tenancy, Minors Act custodial accounts, and general powers of attorney. Then there are the gimmicks that never work. Hiding property in a safe-deposit box falls into this category.

The book is sweeping yet thorough, clearly written, and potentially worth its weight in gold for the high net worth individual. I can’t measure it against other estate planning books since it’s the first one I’ve read, but I learned an enormous amount from it. Of course, as the authors stress, reading this book is no substitute for hiring a professional to help you plan your estate. Estate planning should not be a do-it-yourself project.

Wednesday, March 21, 2012

Schulz, The Intelligent Chartist, part 3

Three themes for my final post on this book (and I will have dealt with only 43 pages in a 275-page book), the first one being “chart playing” vs. “chart reading.”

Writing about trading ranges, Schulz notes that “Chart trading ‘methods’ that dispense with critical analysis and therefore lean heavily on lagging indicators – that is, on ‘signals’ – are at a special disadvantage in these situations.”

. . .

“At this point, I should like to differentiate more clearly between what I have been referring to as ‘chart playing’ – that is, crude speculation responding uncritically to so-called chart signals – and what can more properly be described as ‘chart reading.’ … In my view, chart reading begins when automated response to signals is rejected as the only or predominant feature of the ‘method.’ From this rejection it necessarily moves toward recognition of earlier indicators and, in the process, is constrained to become more discriminating, if only because the leading indicators are inevitably more equivocal than the lagging indicators. The search for leading indicators and the need to interpret them involves a measure of critical and analytical reasoning. In its most fully developed form, chart reading searches for the earliest possible indications of trend changes; it can then be appropriately described as chart analysis. If the process is extended to include critical examination of other technical evidence, it can qualify for the broader classification of ‘technical analysis.’ With every step toward greater critical refinement, the process moves further away from being a method virtually devoid of reasoning and closer to the ideal of pure analytical reasoning, internally consistent and taking account of every available item of technical evidence, and designed to produce a fully integrated view of the price movement in all trend perspectives.”

Second, pattern recognition.

“[I]t is necessary to realize that pattern recognition lends itself very well to popularization because it calls for visual comparisons rather than for the mental effort of careful analytical reasoning. (Bar charts are frequently offered under the motto ‘a picture is worth a thousand words’; under many conditions, in my opinion, it can be worth less than silence.) Pattern recognition is also an especially tempting technique because its emphasis on numerous historical models leads the chart reader to assume, if but subconsciously, that there is something of the inevitable about the relationship between chart pattern and subsequent price performance.”

Finally, and critically important, historical models. Here I will quote more extensively. I call attention to Schulz’s claim that fundamental analysis relies more heavily on the notion of the past as prologue than does technical analysis—essentially a defense against one of the most frequently advanced criticisms of technical analysis.

“At bottom, reliance on historical models must assume that earlier cause-and-effect relationships are being and will again be repeated. But, certainly in the stock market world, it is as a rule very difficult – if it is at all possible – to assign specific effects to specific causes in the present with any kind of assurance that the connection being made is a correct one. The attempt to relate effects and causes is constantly being made by professional and amateur alike; for current conditions, it is called explanation; for future conditions, it is called forecasting; in either case, it meets with a not very remarkable lack of success.

“To establish the proper cause-and-effect relationship for a past stock market event, selected to serve as a model, should be more nearly feasible, provided an adequate labor of research is performed. But even if the relationship of the past is satisfactorily demonstrated, the much more difficult task of establishing the similarity with current conditions still remains. It should be apparent, therefore, that insistence on multiple precedents (and expectation of multiple repetitions) aggravates the problem instead of easing it. Most likely, the problem has no workable solution since the necessary amount of research may conceivably exceed in cost the tangible benefits of the result.

“It is, however, possible to argue that the problem is, in practice, more serious for fundamental analysis than it is for technical analysis. … [In technical analysis the problem] ought to be more readily coped with because it exists within a more limited focus. Technical analysis functions on the premise that cause-and-effect relationships in the stock market can be most practicably investigated at the level of supply-demand shifts as the most direct cause of price and trend behavior; and that these shifts can be best – if imperfectly – appraised through analysis of price and trend changes themselves. This part of technical rationale can and should be qualified and refined. But certainly the view of supply-demand changes as the least equivocal of cause-and-effect relationships is tenable.”

. . .

“From this viewpoint, the essential function of technical analysis is that of accounting for current and historical price movement; and, in my opinion, that is its proper and most fruitful function. The accounting is done primarily in terms of trend development, and its emphasis should rest much less on historical parallel than on the historical evolution of trends. In other words, it assumes that past supply-demand relationships have a bearing on subsequent supply-demand relationships, and that this bearing arises more clearly from the internal logic of the subject than from a process of repetition.

“The basic premise for this assumption is the view that the movement of stock prices is a coherent process; and that it is an orderly process in the sense that small price fluctuations link up to form short trends, that short trends link up to form trends of a larger order, that these in turn are the components of still larger trend categories, and so on. It follows logically from this assumption that the several trend categories are interdependent and interactive at every point in the price movement, and that technical analysis should strive to allow for this mutuality in accounting for price behavior, past and present.”

Monday, March 19, 2012

Schulz, The Intelligent Chartist, part 2

Today’s theme is trend chasing, exhibited both in running after an “obvious” trend in earnings (fundamental analysis) and in jumping onboard an “obvious” trend in prices (technical analysis).

“At a certain point, a price trend will become obvious [to the average chart player] on the chart; and by having reference to the charts, he can pick out ‘the best-acting issues, those going up the fastest.’ When can he identify a stock as a fast climber? Not until it has been going up quickly for some time. But that means it has come some distance already, that it has exhausted a worthwhile part of its ultimate scope, and that it has clearly entered the trend-chasing phase. The ‘technical approach’ at this stage looks just as logical to the chart player as the fundamental rationalizations look to the growth-stock investor, and just as sound as the economic reasons look to the business man in search of wider profit margins and untapped sales areas. The chart player’s ‘signals’ work – for a while – and his sell stop orders don’t get touched off very often: he’s found the ‘system.’ Actually, all he has found is a different vocabulary for what everybody else is doing at the same time.”

. . .

“[O]ne of the few flat statements you can make about the stock market is that any price trend will eventually be carried to excess. Actually, this holds true for all kinds of stock market trends, big and little. In the gentler trends, the ‘extreme’ is just comparatively moderate, because they don’t attract so many followers. The more pronounced trends are noisier and very much self-advertising; so they pick up a steadily increasing population as they proceed, until finally and inevitably they become overcrowded; when they reverse, the bang is that much louder. You can demonstrate the process and consequences of overcrowding in terms of the simplest arithmetic: a great deal more stock can be bought during the late (irrational) stages of an uptrend than can be sold at its final peak. (In reverse, the same fact is true of downtrends.)”

. . .

“A primary rationale of technical stock market analysis rests on the tenable assumption that the price movement itself is a function of all the variables – fundamental and otherwise – that motivate changes in supply and demand; the conclusion being that careful analysis of the price movement can yield results of superior quality because it has, in effect, taken ‘everything’ into account.

“The original premise for responding to so-called chart signals therefore is that no worthwhile trend can materialize without valid non-technical causes; thus, there is no need to investigate these causes themselves, - the signals will suffice. This is not essentially a ‘know-nothing’ attitude; it is merely an attempt to find the easy way out of a difficult problem; and because there is no easy way out, the attempt eventually must fail.

“It fails because, as noted above, all motivations become hollow in the final phase of an ‘obvious’ trend. Somewhere along the line, fundamental motivations begin to lose the impact needed to produce the signals that presumably indicate another extension of the existing trend. The signals still ‘flash’ because some fundamental trend chasing does continue to the very end, but the response to the signals now comes overwhelmingly from the chart playing sector. And after the chart players have made their commitments, there is little or no follow-through from other quarters, technical or fundamental. The signal traders thus find themselves locked into stale positions.”

. . .

“The lure of the unearned increment and the wish to obtain it with a minimum of mental effort have helped to perpetuate the signal as an imperative. But in spontaneous price trends, the signal is no more than evidence of continuing trend momentum, - which may be strongest and least mistakable in the late, irrational stage of an established trend, where it is also at its least reliable. It follows, with a certain irony, that the signals will ‘work’ most satisfactorily in the early and middle phases of a price trend, where its rationale is still entirely or largely intact, but where it is also less ‘obvious’ and where the signals appear to be relatively vague and premature.”

Friday, March 16, 2012

Schulz, The Intelligent Chartist, part 1

The inter-library loan system worked its magic and I managed to borrow a copy of John W. Schulz’s 1962 book The Intelligent Chartist. For those who don’t hang on my every word, I referenced this book in my recent review of Deemer on Technical Analysis where, in his bibliography, Deemer described it as “the most intellectual discussion of and reasoning behind technical analysis ever written.”

I assume this book is now, according to copyright law, in the public domain even though it’s not exactly easy to find. So I’m going to devote three posts to sharing material that isn’t covered in the standard texts on technical analysis or Dow theory. Expect lots of quotation marks.

Let’s start with the author himself. Schulz is described as “a nationally known stock market analyst. His 26 years of professional activity in Wall Street furnish a deep background in the fundamental as well as in the technical approaches to stock market problems. As a partner in the New York Stock Exchange member firm of Wolfe & Co., he is a working stock broker and investment adviser. For the publishing affiliate of his firm, he writes ‘The Interim Technical Review’ and produces ‘The Annotated Portfolio of Selected Point & Figure Charts’, - subscription services offered under the Trend & Value masthead. He also contributes a semi-monthly column on stock market matters to Forbes Magazine.”

This book was published by WRSM Financial Services Corp., a corporate affiliate of Wolfe & Co. The publisher didn’t do its author proud. The book is a paperbound typescript, produced in the days that typewriters were omnipresent and typesetting costs were steep.

So much for the preliminaries. Let’s move on to the material that I’m brazenly lifting without commentary. I’m not even bothering with page references. The theme for today is the relationship between price and value.

“Under practical working conditions, neither the professional fundamentalist nor the professional technician have the choice of waiting for the exceptional cases, - ideal because their extreme price distortions produce stark contrasts and tend to minimize doubt. Cases of radical overpricing and radical underpricing, like major-trend highs and major-trend lows, are comparatively rare, by definition. … So the mutual problems are generally those that the analyst encounters in the large gray area between crass extremes. This is the great middle ground across which a trend – of price or of value, depending on your analytical viewpoint – moves between peak and trough. Here is where you spend much the best part of your time; and here is where conclusiveness is at a premium. Here is where you need your head most; at the extremes you may mostly need guts. Or, to put it differently, when the circumstances aren’t critical, you must be.

“What makes the problems basically identical for either analytical persuasion is a very simple fact of stock market life: a common stock is a two-dimensional thing, - it has value and it has price. The fact itself is simple, all right, but it’s really the source of all our troubles. … In the vastly overwhelming majority of cases, these two qualities are firmly attached to the stock.

“They are also firmly attached to each other; that is, they never break the bond between them, but that bond is extremely elastic. You could call it the factor of relative desirability. Now, it takes no particular experience or insight – just some reflection – to conclude that price is more volatile than value.”

“In a sense, perhaps the crucial peculiarity of the price-value relationship arises from the fact that the rubber band of desirability pulls both ways simultaneously. If value exerts a pull on price, it is also true that price exerts a pull on value. The idea may strike you as odd until you start to think about it. The point is that, except in ‘special cases’, every attempt to define the ‘intrinsic’ value of a stock calls for a certain amount of estimating; and this, in turn, calls for the exercise of judgment and also gets involved with prejudices and preferences. In other words, the notion of intrinsic value, which sounds so positive and objective, really includes a large dose of valuation, which is largely subjective and quite elastic. There is a large component of valuation in price, too; and it is actually from this component that the connecting rubber band of desirability grows.

“To put the matter simply, desirability – and with it, valuation – tends to rise and fall with the price of a stock. Intrinsic values always look bigger in a strong market and smaller in a weak market.”

Wednesday, March 14, 2012

Connors, How Markets Really Work

In this updated and enlarged second edition of How Markets Really Work: A Quantitative Guide to Stock Market Behavior (Bloomberg/Wiley, 2012) Laurence A. Connors (with Cesar Alvarez and Connors Research) offers a plethora of trading hypotheses based on market data from 1989 through the third quarter of 2011. There are two main themes: (1) despite the radical shifts in longer-term market conditions short-term market behavior rarely changes and (2) “on a short-term basis, oversold markets tend to move higher over the next few days and overbought markets tend to move lower on a short-term basis over the next few days.” (p. 5)

For those who read the first edition, what’s new in addition to the updated data? Three chapters. The first explores the two-period RSI, which “may be the best oscillator to identify overbought and oversold market conditions.” The second looks at the one-year performance of low volatility as opposed to high volatility stocks. The third describes a short-term strategy that trades only in S&P 500 stocks and that has outperformed the index by over 10% a year in simulated trading and did so with 70% lower volatility. Is your appetite whetted?

I suppose I should ask another question: do you like text far more than tables and graphs? If you do, you’ll be sorely disappointed. This is decidedly not a wordy book. In each chapter the authors look at a few market scenarios such as the SPX having risen three days in a row or having made a new five-day intraday high and then ask how the market performed one week later. They provide charts and graphs showing the average one-week returns of both the S&P 500 and the Nasdaq 100. They also have tables showing the performance over the entire timeframe of one-day, two-day, and one-week returns in a variety of scenarios.

Among the themes analyzed are market breadth, volume, large moves, new 52-week highs and lows, the put/call ratio, and the VIX.

The authors caution the reader not to use any of their indicators blindly. “No matter how big the edge has been during some of these times, there have also been large drawdowns in many along the way. Prudent money management and portfolio management (risk control and position size) is a must.” (p. 164)

Swing traders, especially those who are trying to develop algorithmic systems, can definitely benefit from this book. It offers case studies in hypothesis testing and explains (admittedly very briefly) how the described systems can be improved upon. And it takes no time at all to read.

Monday, March 12, 2012

Brown, Backstage Wall Street

Joshua M. Brown of reveals “the reality behind all the false glamour, contrived accuracy, and manufactured confidence” in Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments (McGraw-Hill, 2012). Brown escaped from the brokerage business in 2010 after a decade of being in “the very worst profession in all of financial services.” As he writes, “I will starve on the street before I will ever be a retail stockbroker again.” (p. 34)

By relating in graphic detail how brokers’ interests were misaligned with their clients’, Brown brings to life a story that investors may have heard before but most likely didn’t heed sufficiently. He explains how ordinary folks got involved in the stock market in the first place, how financial entrepreneurs created enticing investment products (think mutual funds and ETFs), and how stock brokers didn’t care what they sold—they just had to sell, sell, sell.

He caps off his tale with the script for the Straight-Line Pitch (also known as the Lehman Method). This “infamous but never-before-published script” has “sold thousands of stock ideas and opened millions of retail brokerage accounts over the last 50 years.” (p. 173) In a call that can last between ten minutes and two hours, the broker makes a pitch, encounters an objection, rebuts that objection, encounters another objection, rebuts that one as well, and eventually aims for the power close. The script is almost thirty pages long. He describes common objections, such as “let me call you back,” “I don’t like the market right now,” “send me some information on the stock or your firm,” or “let me speak to my wife about this.” For each objection there are at least four rebuttals. Apparently “one out of ten qualified investors will open a new account when a broker uses this pitch.” (p. 173) Frightening! By the way, men are much more receptive to the straight-line pitch than women are.

Major traditional brokerage firms no longer pitch to the small account; for the most part they’ve moved into wealth management. For some time online brokers have at least partially filled that void, catering to the do-it-yourself investor. Brown recalls the days of the frenzy, describing the “borderline psychotic” advertising campaigns of online brokers. “The central conceit of the online brokerages’ ad campaigns back then was that any schmuck could be a billionaire and that riches were only clicks away.” (p. 71) His criticism is on target. But I think he’s too kind to today’s online brokerage campaigns to enlist clients, asking for instance “who doesn’t love the E*TRADE Baby?” Me, for one. And he doesn’t mention those “trade free for 60 days” come-ons that encourage overtrading and that are designed to generate lots of commissions after the initial free period. There’s always a pitch somewhere.

Brown offers tips for staying out of “murder holes”—such demonic investment vehicles as SPACs (special-purpose acquisition corporations), Chinese reverse mergers, one-drug biotechs, and private placements. Even as you’re avoiding these murder holes, beware of other investor traps as well. My favorite is: “Brokers with thick New York accents and Boca Raton area codes. (Florida’s Homestead Act has led to a preponderance of bad guys from New York setting up shop in southern Florida; the civil courts can’t touch their property.” (p. 220)

Backstage Wall Street is a quick-paced, well-written book by someone who’s been there and done some of that. And who reformed. It’s an enjoyable and scary read.

Wednesday, March 7, 2012

Enlisting your help

One of the reasons I haven’t been posting as frequently as usual is that I need more books to review. Publishers are normally generous if I request a review copy. The problem is that I simply don’t have the time to scan a host of publishers’ catalogues for potential review candidates.

So, if you know about a forthcoming book that might be of interest to readers of this blog, please shoot me an email at my under-used address: One of my readers was ahead of the curve (thanks again), and his info prompted my request for your help.

And, as long as I’m enlisting your help, if you have topics that you’d like me to write about (recognizing my limitations—I could write tomes, rife with humor, about breeding basset hounds and absolutely nothing about the principles of astronomy) let me know. I enjoy researching a topic, so I might actually come up with something worthwhile. Just keep it within the realm, writ large, of trading and investing.


Tuesday, March 6, 2012

Foer, Moonwalking with Einstein

When I saw a prominent ad in The New Yorker for the paperback edition of Joshua Foer’s Moonwalking with Einstein: The Art and Science of Remembering Everything (Penguin Press, 2011) I decided it might be worth a quick read. Not because I’m trying to improve my memory; it works about as well as it ever has-- good on names and words, rotten on numbers. (Put those laugh cards down!) I have no desire to learn how to memorize the sequence of cards in a shuffled deck, and, assuming that I don’t end up in jail somewhere in solitary confinement where being able to recall poetry might provide some solace, I’m happy to rely on external memory—my print or digital library.

Foer, a recent college grad still living at home, was a freelance journalist in search of a compelling story. He not only found his story, he lived it, going from having a run-of-the-mill memory to U.S. memory champion in the space of a year. Before you get too excited about your own prospects, consider this. Foer admits that “a few nights after the world championship, I went out to dinner with a couple of friends, took the subway home, and only remembered as I was walking in the door to my parents’ house that I’d driven a car to dinner. I hadn’t just forgotten where I parked it. I’d forgotten I had it.”

Foer describes an ancient and still almost failsafe memory crutch, the memory palace with its vivid and often raunchy images, to help remember an ordered sequence of words and, tougher, numbers. He offers portraits of savants and amnesiacs. He dips lightly into the literature on the nature of memory. But that’s not where I want to go today. Instead, I’m interested in how he became the top U.S. mental athlete.

And that takes me to the OK plateau.

Before he started training for the memory competition Foer met with, and was tested by, Anders Ericsson, an expert on expertise, and his graduate students at their human performance lab on the outskirts of Tallahassee. Foer and Ericsson struck a deal, part of which was that Foer would give Ericsson the meticulous records of all his training, and Ericsson’s grad students would analyze that data in search of ways he could perform better.

A few months into his training Foer’s memory stopped improving; he was stuck in a rut. Ericsson suggested that he check out the literature on speed typing. Most people reach a point at which their typing skills stop progressing. Even though “we’ve always been told that practice makes perfect, and many people sit behind a keyboard for at least several hours a day in essence practicing their typing,” they don’t keep getting better and better. They’re on auto pilot, pecking away on the OK plateau.

“When you want to get good at something, how you spend your time practicing is far more important than the amount of time you spend. … The best way to get out of the autonomous stage and off the OK plateau, Ericsson has found, is to actually practice failing. One way to do that is to put yourself in the mind of someone far more competent at the task you’re trying to master, and try to figure out how that person works through problems.”

Practice, in brief, has to be deliberate. It has to be tracked and analyzed. Foer set up a spreadsheet to record how long he was practicing and any difficulties he was having. He made graphs of everything. And he tracked his scores in a journal.

Foer had two mentors—Ericsson (and his staff) and Ed, a twenty-four-year-old British memory champ. Ed set a practice schedule for Foer, complete with benchmarks he was supposed to meet along the way. And, Foer writes, “a computer program tested me and kept detailed records of my mistakes, so that we could analyze them later. I e-mailed my times to Ed every few days, and he would write back with suggestions about how I could improve.”

For inspiration, Ed sent him a quotation from Bruce Lee: “There are no limits. There are plateaus, but you must not stay there, you must go beyond them. If it kills you, it kills you.” Foer writes, “I copied that thought onto a Post-it note and stuck it on my wall. Then I tore it down and memorized it.”