Sunday, June 11th, 2006
Who’s the Turkey?
Barton Biggs’ Hedgehogging is a romp through the fascinating world of professional investing. If you weren’t convinced that speculation is the most interesting career then the book should do the job.
Biggs is best at describing various investors (controversially using pseudonyms) such as the ‘Dave’ who switched from being a value investor to a momentum guy. Biggs said this is ”comparable to a deeply religious person converting from Catholicism to, say, Judaism.” Dave now looks at relative strength of global markets, sectors and individual stocks. “He lets the market tell him what groups and stocks to own rather than trying to tell the market what groups should do well.” Dave’s philosophy can be summed up as: “Buy and own stocks that are going up; sell and avoid stocks that are going down or sideways,” Biggs said.
Dave’s method sounds awfully like Jesse Livermore’s strategy as outlined in Reminiscences of a Stock Operator under the guise of Larry Livingstone. Biggs describes Reminiscences as “my trading bible”.
My issue with Biggs’ book is that he seems to have co-opted Livermore to defend his value approach. Biggs says that ‘Old Turkey’ is the “protagonist” for Livermore. ‘Old Turky’ makes an appearance in part of one chapter as a wise investor. Larry Livingstone is the protagonist. Biggs goes on to quote Turkey as saying “Don’t over-think it and don’t over-trade. Men who can be both right and sit tight are uncommon.” Turkey never blurted out those words.
Looking at a copy of Reminiscences, apart from a few exchanges with a frantic tip giver, the only words directly relating to an investment philosophy uttered by Turkey were “Why, this is a bull market!” Livingston (Livermore) then himself went on to interpret that sentence. ”He really meant to tell them that the big money was not in the individual fluctuations but in the main movements — that is, not in reading the tape but in sizing up the entire market and its trend,” Livingston said.
Biggs says that during a painful short position in oil that was going against him, he turned to Turkey’s advice. From what Biggs says oil was in a bullish phase but based on fundamentals was overvalued. So as a value investor, he sold! That is exactly what Livermore and Turkey would NOT have done. They most likely would have decided there was a bull market in oil and gone long until it ended.
The issue is that people on opposite poles of the investment spectrum, particularly value investors, have a habit of co-opting great investors/writers to suit their argument.
Word Count: 418. This entry was posted on Sunday, June 11th, 2006 at 2:22 pm and is filed under Books, General investment, Topics, Value Versus Growth. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
