What I Learned Losing a Million Dollars

by Jim Paul, Brendan Moynihan, Jack Schwager (Foreword by)

Overview

Jim Paul's meteoric rise took him from a small town in Northern Kentucky to governor of the Chicago Mercantile Exchange, yet he lost it all—his fortune, his reputation, and his job—in one fatal attack of excessive economic hubris. In this honest, frank analysis, Paul and Brendan Moynihan revisit the events that led to Paul's disastrous decision and examine the psychological factors behind bad financial practices in several economic sectors.

This book—winner of a 2014 Axiom Business Book award gold medal—begins with the unbroken string of successes that helped Paul achieve a jet-setting lifestyle and land a key spot with the Chicago Mercantile Exchange. It then describes the circumstances leading up to Paul's $1.6 million loss and the essential lessons he learned from it—primarily that, although there are as many ways to make money in the markets as there are people participating in them, all losses come from the same few sources.

Investors lose money in the markets either because of errors in their analysis or because of psychological barriers preventing the application of analysis. While all analytical methods have some validity and make allowances for instances in which they do not work, psychological factors can keep an investor in a losing position, causing him to abandon one method for another in order to rationalize the decisions already made. Paul and Moynihan's cautionary tale includes strategies for avoiding loss tied to a simple framework for understanding, accepting, and dodging the dangers of investing, trading, and speculating.

Product Details

ISBN-13:	9780231164689
Publisher:	Columbia University Press
Publication date:	04/30/2013
Series:	Columbia Business School Publishing
Pages:	192
Sales rank:	499,844
Product dimensions:	5.90(w) x 8.40(h) x 0.90(d)
Age Range:	18 Years

About the Author

Jim Paul (1943–2001) was first vice president in charge of the Morgan Stanley Dean Witter & Co. International Energy Unit in New York City. Durgaing his twenty-five-year career in the futures industry, he was a retail broker, floor trader, and research director and served on the Chicago Mercantile Exchange Board of Governors and the Executive Committee.

Brendan Moynihan is a managing director at Marketfield Asset Management LLC, where his understanding of markets and the media helps shape their macro views and allocations. He is an adjunct professor of finance at Vanderbilt University's Owen Graduate School of Management. He is also the author of Financial Origami: How the Wall Street Model Broke. He lives in Barrington Hills, Illinois, with his wife and two sons.

Jack Schwager is the author of the best-selling Market Wizard series as well as the three-volume Schwager on Futures. His latest work, Market Sense and Nonsense, was published in November 2012. He is currently the portfolio manager for the ADMIS Diversified Strategies Fund. His experience includes twenty-two years as director of futures research for some of Wall Street's leading firms.

Table of Contents

Foreword
Preface to the Columbia Edition
Preface
Part I. Reminiscences of a Trader
1. From Hunger
2. To the Real World
3. Wood That I Would Trade
4. Spectacular Speculator
5. The Quest
Part II. Lessons Learned
6. The Psychological Dynamics of Loss
7. The Psychological Fallacies of Risk
8. The Psychological Crowd
Part III. Tying It All Together
9. Rules
Conclusion
Postscript
Appendix
Notes
Bibliography

What People are Saying About This

Edward M. Moldt

Seldom do we hear the message that the management of risk, not just the taking of risk, is at the heart of success in habitual entrepreneurs. Just as the professional athlete learns to play his or her game mentally before the actual contest, so the successful entrepreneur reduces the risk of the new challenge by planning before implementing.

Editorial Reviews

The attention-grabbing title summarizes Paul’s transformation of personal experience into a trader’s primer: before people try to make money in financial markets, they need to learn how not to lose it. Paul (1943–2001), who was first v-p in charge of Morgan Stanley Dean Witter’s international energy unit and governor of the Chicago Mercantile Exchange, and Moynihan (Financial Origami: How the Wall Street Model Broke) detail Paul’s fascination with making money and recount the collapse of his freewheeling life as a commodities trader. Paul mourns his inability to glean universal guidelines from the aphorisms of market experts. His acknowledgement that small losses are inevitable for all investors provides no guidance on more basic questions, such as whether individuals should stay with long-term mutual funds or avoid investing altogether. Although Paul states the need to distinguish between gambling, investing, and trading, his apparent assumption that investors can readily adjust their behavior remains unproven. Paul’s soundest assertion may be that it is essential for each market participant to find, and follow, a system of analysis that works for him or her. Investors and would-be investors may heed Paul’s advice, but it will be for them to measure their actions against his golden yardstick. (Apr.)

Publishers Weekly

One of the rare noncharlatanic books in finance.

Nassim Nicholas Taleb

Worthwhile reading for those who don't believe in the holy grail in the markets; a must-read for those who do.

Jack Schwager

[An] enlightening read.

Investing.com - Brenda Jubin

A novel approach aimed at pushing you inside your head and outside the losing habits most folks adopt right after multiple successes. A must-have for traders blessed with a string of hot trades.

FORBES - Ken Fisher

At Ned Davis Research, we like to say that we are in the business of making mistakes and that the only difference between winners and losers is that winners make small mistakes and losers, big mistakes. This book does an excellent job in explaining in simple English the potential psychological 'flaws' that cause investors to make big mistakes.

Ned Davis

The book points out very early that many successful investors have opposing styles and theories on how to make money, and that they can not all be right at the same time. The most important point to take from the book is how to avoid losing money...

Financial Times Advisor - Steve Osbiston

Plenty of books recount past successes or focus on how to make money in the market, but what about keeping the money you already have? This may seem like a high-class problem, but it is a very real challenge for investors with substantial capital.

Beyond Proxy - John Mihaljevic

A must-have for traders blessed with a string of hot trades.

— Ken Fisher

Forbes