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I wandered past the stacks of drying wood, thinking about how many great skills the world had lost, how many things of value had passed without any of us even noticing. The old men with their chisels and handsaws would have once been the most highly paid members of their community and what had we put in their place? Financial engineers and young currency traders.
Terry Hayes (I Am Pilgrim)
The entrepreneur who is reckoning in terms of a currency with a stable value is unable to compete with the entrepreneur who is prepared to make a quasi-gift of part of his capital to his customers. In 1920 and 1921, Dutch traders who had sold commodities to Austria could buy them back again after a while much cheaper than they had originally sold them, because the Austrian traders completely failed to see that they were selling them for less than they had cost.
Ludwig von Mises (The Theory of Money and Credit)
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Making money in the markets is tough. The brilliant trader and investor Bernard Baruch put it well when he said, “If you are ready to give up everything else and study the whole history and background of the market and all principal companies whose stocks are on the board as carefully as a medical student studies anatomy—if you can do all that and in addition you have the cool nerves of a gambler, the sixth sense of a clairvoyant and the courage of a lion, you have a ghost of a chance.” In retrospect, the mistakes that led to my crash seemed embarrassingly obvious. First, I had been wildly overconfident and had let my emotions get the better of me. I learned (again) that no matter how much I knew and how hard I worked, I could never be certain enough to proclaim things like what I’d said on Wall $ treet Week: “There’ll be no soft landing. I can say that with absolute certainty, because I know how markets work.” I am still shocked and embarrassed by how arrogant I was. Second, I again saw the value of studying history. What had happened, after all, was “another one of those.” I should have realized that debts denominated in one’s own currency can be successfully restructured with the government’s help, and that when central banks simultaneously provide stimulus (as they did in March 1932, at the low point of the Great Depression, and as they did again in 1982), inflation and deflation can be balanced against each other. As in 1971, I had failed to recognize the lessons of history. Realizing that led me to try to make sense of all movements in all major economies and markets going back a hundred years and to come up with carefully tested decision-making principles that are timeless and universal. Third, I was reminded of how difficult it is to time markets. My long-term estimates of equilibrium levels were not reliable enough to bet on; too many things could happen between the time I placed my bets and the time (if ever) that my estimates were reached. Staring at these failings, I realized that if I was going to move forward without a high likelihood of getting whacked again, I would have to look at myself objectively and change—starting by learning a better way of handling the natural aggressiveness I’ve always shown in going after what I wanted. Imagine that in order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have to make.
Ray Dalio (Principles: Life and Work)
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And I’m not kidding when I say “craziness.” The University of St. Gallen, Switzerland, has come out with a study that compares traders with psychopaths. The study reviewed the results from an existing study comparing 24 psychopaths in German high-security hospitals with a control group of 27 “normal” people. The funny thing is, this control group of “normal” people turned out to be traders. Stock guys, currency and commodity traders, and derivative types happened to be the normal control group that was stacked up against the high-security, barbed-wire-enclosed psychopaths. In the end, the performance of the trading group was actually worse than that of the psychopaths. The study indicated that traders, “Have a penchant for immense destruction,” and that their mindset would lead them to the logical conclusion of “beating one of the neighbor’s expensive cars with a baseball bat with the sole objective of owning the most beautiful car in the neighborhood.” In other words, traders are nuts. Indeed if you look up the textbook definition of a psychopath, here are some of the tidbits you’ll uncover: antisocial behavior, poor judgment and failure to learn from experience, inability to see oneself as others do, inexplicable impulsiveness … sounds like a typical trader who is struggling against the market and can’t figure out why.
John F. Carter (Mastering the Trade: Proven Techniques for Profiting from Intraday and Swing Trading Setups)
centuries-long debate over the nature of money can be reduced to two sides. One school sees money as merely a commodity, a preexisting thing, with its own inherent value. This group believes that societies chose certain commodities to become mutually recognized units of exchange in order to overcome the cumbersome business of barter. Exchanging sheep for bread was imprecise, so in our agrarian past traders agreed that a certain commodity, be it shells or rocks or gold, could be a stand-in for everything else. This “metallism” viewpoint, as it is known, encourages the notion that a currency should itself be, or at least be backed by, some tangible material. This orthodox view of currency is embraced by many gold bugs and hard-money advocates from the so-called Austrian school of economics, a group that has enjoyed a renaissance in the wake of the financial crisis with its critiques of expansionist central-bank policies and inflationary fiat currencies. They blame the asset bubble that led to the crisis on reckless monetary expansion by unfettered central banks. The other side of the argument belongs to the “chartalist” school, a group that looks past the thing of currency and focuses instead on the credit and trust relationships between the individual and society at large that currency embodies. This view, the one we subscribe to and which informs
Paul Vigna (The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order)
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By this time (in mid-2012) the country had been without a functioning government for more than twenty years, and the city was a byword for chaos, lawlessness, corruption, and violence. But this wasn’t the Mogadishu we saw. Far from it: on the surface, the city was a picture of prosperity. Many shops and houses were freshly painted, and signs on many street corners advertised auto parts, courses in business and English, banks, money changers and remittance services, cellphones, processed food, powdered milk, cigarettes, drinks, clothes, and shoes. The Bakara market in the center of town had a monetary exchange, where the Somali shilling—a currency that has survived without a state or a central bank for more than twenty years—floated freely on market rates that were set and updated twice daily. There were restaurants, hotels, and a gelato shop, and many intersections had busy produce markets. The coffee shops were crowded with men watching soccer on satellite television and good-naturedly arguing about scores and penalties. Traffic flowed freely, with occasional blue-uniformed, unarmed Somali National Police officers (male and female) controlling intersections. Besides motorcycles, scooters, and cars, there were horse-drawn carts sharing the roads with trucks loaded above the gunwales with bananas, charcoal, or firewood. Offshore, fishing boats and coastal freighters moved about the harbor, and near the docks several flocks of goats and sheep were awaiting export to cities around the Red Sea and farther afield. Power lines festooned telegraph poles along the roads, many with complex nests of telephone wires connecting them to surrounding buildings. Most Somalis on the street seemed to prefer cellphones, though, and many traders kept up a constant chatter on their mobiles. Mogadishu was a fully functioning city.
David Kilcullen (Out of the Mountains: The Coming Age of the Urban Guerrilla)
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When a young employee gasped at his blue language, Simons flashed a grin. “I know—that is an impressive rate!” A few times a week, Marilyn came by to visit, usually with their baby, Nicholas. Other times, Barbara checked in on her ex-husband. Other employees’ spouses and children also wandered around the office. Each afternoon, the team met for tea in the library, where Simons, Baum, and others discussed the latest news and debated the direction of the economy. Simons also hosted staffers on his yacht, The Lord Jim, docked in nearby Port Jefferson. Most days, Simons sat in his office, wearing jeans and a golf shirt, staring at his computer screen, developing new trades—reading the news and predicting where markets were going, like most everyone else. When he was especially engrossed in thought, Simons would hold a cigarette in one hand and chew on his cheek. Baum, in a smaller, nearby office, trading his own account, favored raggedy sweaters, wrinkled trousers, and worn Hush Puppies shoes. To compensate for his worsening eyesight, he hunched close to his computer, trying to ignore the smoke wafting through the office from Simons’s cigarettes. Their traditional trading approach was going so well that, when the boutique next door closed, Simons rented the space and punched through the adjoining wall. The new space was filled with offices for new hires, including an economist and others who provided expert intelligence and made their own trades, helping to boost returns. At the same time, Simons was developing a new passion: backing promising technology companies, including an electronic dictionary company called Franklin Electronic Publishers, which developed the first hand-held computer. In 1982, Simons changed Monemetrics’ name to Renaissance Technologies Corporation, reflecting his developing interest in these upstart companies. Simons came to see himself as a venture capitalist as much as a trader. He spent much of the week working in an office in New York City, where he interacted with his hedge fund’s investors while also dealing with his tech companies. Simons also took time to care for his children, one of whom needed extra attention. Paul, Simons’s second child with Barbara, had been born with a rare hereditary condition called ectodermal dysplasia. Paul’s skin, hair, and sweat glands didn’t develop properly, he was short for his age, and his teeth were few and misshapen. To cope with the resulting insecurities, Paul asked his parents to buy him stylish and popular clothing in the hopes of fitting in with his grade-school peers. Paul’s challenges weighed on Simons, who sometimes drove Paul to Trenton, New Jersey, where a pediatric dentist made cosmetic improvements to Paul’s teeth. Later, a New York dentist fitted Paul with a complete set of implants, improving his self-esteem. Baum was fine with Simons working from the New York office, dealing with his outside investments, and tending to family matters. Baum didn’t need much help. He was making so much money trading various currencies using intuition and instinct that pursuing a systematic, “quantitative” style of trading seemed a waste of
Gregory Zuckerman (The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution)
Markets are voting machines; they function by taking referenda. In the new world money market, for example, currency values are now decided by a constant referendum of thousands of currency traders in hundreds of trading rooms around the globe, all connected to each other by a vast electronic network giving each trader instant access to information about any factor that might affect values. That constant referendum makes it much harder for central banks and governments to manipulate currency values.
Walter B. Wriston
One of the standard arguments used in the 1990s to justify the introduction of a common European currency was that exchange-rate instability would disrupt trade in the common market. A monetary union between Canada and the US, however, has never been seriously considered even though the trading relationship between these two countries is the largest bilateral trading relationship in the world, see the preceding section. The fact that Canadian and US traders continue to operate, apparently with success, using their own currencies shows that the argument about currency swings dampening inter-state trade is far from convincing. Trade is also booming between Canada, Mexico and the US, the three members of NAFTA, in spite of the coexistence of three national currencies (Vega Cànovas 2010).
Giandomenico Majone (Rethinking the Union of Europe Post-Crisis: Has Integration Gone Too Far?)
Sparta’s new currency was made from iron and coated with vinegar, making it frail and worthless to foreign traders.
Enthralling History (Sparta: An Enthralling Overview of the Spartans and Their City-State in Ancient Greece along with the Greco-Persian Wars, Peloponnesian War, and Other ... Spartan Army (Greek Mythology and History))
One of the reasons I was so bullish on the Deutsche mark was a radical currency theory proposed by George Soros in his book, The Alchemy of Finance. His theory was that if a huge deficit were accompanied by an expansionary fiscal policy and tight monetary policy, the country’s currency would actually rise.
Jack D. Schwager (The New Market Wizards: Conversations with America's Top Traders)
What happened in 1970 in Los Angeles was the worst economic episode I’ve ever had to fight through. Unlike the post–Cold War Recession, we did not have the waves of in-migration from Mexico, nor were drug sales as great. I believe the underground economy was a silent savior of Los Angeles during 1990–94. The Kent State Massacre and the Pentagon Papers scandal didn’t help the 1970 scene. Furthermore, things didn’t get better in the early 1970s. The sharp recession of 1970 was followed by a sudden inflation caused by Vietnam spending. Nixon “slammed the gold window shut.” From 1945 to 1971, the U.S., under the Bretton Woods Agreement, had agreed to back its currency to a limited extent with gold at $35 per ounce. Other nations’ central banks were withdrawing our gold so fast that Nixon had to renege on the promise. This was followed in 1973 by the end of fixed currency exchange rates. The dollar plummeted. Traveling to the wine country of France in the summer of 1973, I was unable to cash American Express dollar-denominated traveler’s checks. Inflation jumped with the 1973 Energy Crisis. Nixon imposed wage and price controls. Then Watergate, accompanied by the Dow Jones hitting bottom in 1974. Three Initiatives to Turn the Tide Against all this, Trader Joe’s mounted three initiatives. In chronological order: We launched the Fearless Flyer early in 1970. We broke the price of imported wines in late 1970 thanks to a loophole in the Fair Trade law. Most importantly, in 1971, we married the health food store to the Good Time Charley party store, which had been the 1967–70 version of Trader Joe’s. Together these three elements comprised the second version of Trader Joe’s, Whole Earth Harry.
Joe Coulombe (Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys)
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