The Education of a Speculator, Victor Niederhoffer. ISBN 0-471-13747-2. John Wiley & Sons, 605 Third Ave, N.Y. N.Y. 10158-0012. http://www.wiley.com

Victor Niederhoffer. The very name strikes fear into the hearts of avaricious floor brokers, Harvard and Chicago professors, tournament squash players, blue blooded squash committees and clubs, "a certain blue-blooded Morgan firm"--it is an incomplete and long list.

Anyone who knows or knows of Victor Niederhoffer will not be surprised at the polyglot book he has written. Nothing if not a winner, Niederhoffer is famous for his willingness to die for his principles. He was five times winner of the jewel in the crown of American squash, the National Open. Yet he pulled a player's strike in the prime of his racquets career to protest the fact that Chicago clubs would not admit him because, he said, he was a Jew. There were those in the squash community who said it was not religion, but deportment which kept him out. Every story has two sides. So does every trade.

But with Niederhoffer the two sided trade becomes a multi dimensional universe with more facets than the Hope Diamond. And that is why his book is must reading for every serious, or even not serious, trader. Investors will benefit also but will find themselves in a labyrinth of mirrors of such intellectual complexity they will return to mutual funds with a sigh of relief.

Is there any discipline, science, pseudo science, suspicion, or statistical technique which Niederhoffer does not rigorously examine in an unceasing search for the edge? Squash, chess, checkers, music, ecology, fencing, behavioral psychology, evolution, entomology, sex, painting, paddle ball, horse racing...it is a long and incomplete list.

What is not incomplete is Dr.. Niederhoffer's intellectual arsenal. He understands the scientific method thoroughly and knows whatever there is to know about statistics, and knows it right. Numerous statistical relationships are presented in the book, all of them interesting. Many of these will be eye openers for the average speculator who thought he was just making a bet on soybean oil, little realizing the web of market relationships he was poking at. Of how much present value they will be the reader will have to determine through his own testing. It is almost unthinkable that Niederhoffer would print anything which would be of use to one of his counter parties (i.e. the whole trading world). Nonetheless the opportunity to see Niederhoffer's mind at work should be of value to any aspiring trader or speculator. It is a little like having the sound track inside Jack Nicklaus' head at the U.S. Open.

Niederhoffer, if his book is to be believed (and it may not be to be believed) belongs to that small group of size traders who jump like ducks on junie bugs at transient market anomalies and misalignments, slashing and scalping and retreating with their wounds or their booty. As to the question should his book be believed, Niederhoffer expends considerable energy talking about the markets' use of deception and deceit, of feints and misdirection--all true of course. Why would we not expect that Niederhoffer would publish a book to deceive his counter parties (the whole trading world)?

Quite possible, but not important for the general reader, as we are trying to go where Niederhoffer has gone, namely to sneak into the vaults of the professionals and make off with a small portion of the loot. In this process we will find it instructive to follow Niederhoffer's career and education.

Born the son of an educated Brooklyn policeman, Niederhoffer came by his street smarts naturally in the urban jungle. His grandfather was a busted speculator, an education in itself. He cut his athletic and betting teeth on the hand ball and paddle ball courts of Brighton Beach in the University of the Jungle. These are not known as a gentleman's sports (as squash is). There he learned the principles of racquet play which would make him national champion of U.S. squash, a sport he, amazingly, did not take up until he matriculated at Harvard. He also learned money management and betting skills which later led George Soros (the Palindrome) to employ him as a money manager. His school was the sidewalk, the hand ball courts. And the race track, where he learned some of his most important lessons--that form flows away from the public and as Bacon (Secrets of Professional Turf Betting) says, the law of changing cycles is paramount.

It is possible to observe, if not learn, one of the most important secrets of trading from this book: that temperament, character and personality are more important than systems. One could almost say in the tiresome jargon of the self improvement books that Niederhoffer demonstrates the Zen of trading. In an accumulation of wit and irony he draws out the parallels between trading, and such games as chess, checkers, squash in explicit tables--all such examples leading inescapably to the implicit lesson that winning springs from different sources than rigid systems and methodology.

But--for those who are eternally in search of the arch stone, the talisman, the holy grail secret which will make the markets understandable there are innumerable petit studies of market patterns and relationships--when Hong Kong goes down what happens to Mexico? When the US dollar goes down what happens to Hong Kong? What is the hidden samurai sword the Japanese hold over the US markets? Is it possible to understand the Japanese at all? And finally, like a map of the universe (p. 307, Table 13-2, "U.S. Commodity Correlation Matrix: Average Daily Close-to Close Changes") the final and definitive illustration of the web of relationships between the markets. Use at your own risk.

There are no cookie cutter systems in this book. There are no quantifiable methods or algorithms. But there is a picture of a methodology which all market participants would be well advised to be aware of. Not least of all this polyglot story is interesting, diverting, enlightening and educational.

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This is a brilliant and polyglot (or polymath) book. There is something to learn in it for every type of reader. And best of all it is highly interesting to read. And if nothing else it is an opportunity to see the inner workings of a great speculator's mind. (Just because he went bankrupt doesn't disqualify him as a great speculator.) The great speculator who hasn't gone bankrupt hasn't finished his career yet. W.H.C. Bassetti