Nov

22

The best books on deception are the best books about the market. The best book about the market according to Martin Shubik is Ben Green's Horse Trading. I would add that there is a good section on deception in EdSpec. And I would point out that a systematic categorization of deception is essential and this is available in the ecology literature following J.R. Krebs's citations on deception in various species, especially monkeys.

Adam Robinson says:

Of course, as I've eulogized no end, The Farming Game by Bryan Jones also has much to say on deception in the buying and selling of livestock, and does so with wit and insight.

Alston Mabry recommends:

I like A Treasury of Deception: Liars, Misleaders, Hoodwinkers, and the Extraordinary True Stories of History's Greatest Hoaxes, Fakes and Frauds by Michael Farquhar.

Russ Herrold re: The Farming Game:

I purchased The Farming Game on your recommendation and enjoyed it.  It was a bit dated as to price examples (they look like a series from the mid 1960s to the mid 1970s), but the underlying principles remain sound. The book starts a bit slowly, setting up some stereotype character sketches, and then strings them together a bit, a bit later in the book.

Kim Zussman writes:

Here is my Deception reading list:

Stocks for the Long Run, Siegel
Irrational Exuberance, Shiller
A Random Walk Down Wall St., Malkiel (efficient markets)
Beating the Street, Lynch (inefficient markets)
Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies & Techniques to Winning Profits, Altucher
The Intelligent Investor, Benjamin Graham (value)
Common Stocks and Uncommon Profits and Other Writings, Fisher (growth)
Futures: Fundamental Analysis, Schwager
Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, Murphy
Contrarian Investment Strategies - The Next Generation, Dreyman
Trend Following: How Great Traders Make Millions in Up or Down Markets, Covel
Momentum Stock Selection: Using The Momentum Method For Maximum Profits, Bernstein

(eigenvector = deception)

Vince Fulco adds:

To Dr. Zussman's excellent list, I would add another one very much off the radar screen. In Hostile Territory by Gerald Westerby is purported to be written by a former Mossad agent and profiles his adventures in Africa, the ME and Europe.  I consider it of the best books written on the manipulation of human perceptions, mental flaws and frailties.  I try to read it once a year to condition myself to avoid the traps. It is right up there with Cialdini, but the dynamic and life threatening challenges faced by the author are much more entertaining while providing extraordinary lessons on the subtleties of behavior.

I found the walk through on structuring a diversified [here: agri-]business very approachable, and anticipate lending it out to give context for further discussions to some I work with and mentor.

Jeff Watson comments:

The best book I ever read on deception was called The Game by Neil Strauss. This book is the holy grail for pickup artists, but the lessons easily translate into all areas of life from sports to trading to games. It was very entertaining and well written, znd Strauss gives point by point instructions on how to manipulate, deceive, obfuscate, hypnotize, and control your opponent or object of desire. Strauss takes time to delve into the science of how to pick up women, and believes in rigorous testing and the book surprisingly isn't as misogynistic as one would expect.

Bruno Ombreux writes:

One absolute classic is Arthur Schopenhauer's The Art of Controversy. It also goes by a different title: "The Art of Being Right". Here is a Wikipedia article with the full list of stratagems. And it is available for free at Gutenberg.

Kim Zussman writes:

The most respected investment books of the 20th century all have eigenproblem of hidden utility. Even when authors are intellectually honest, it's hard to understand how they could escape distortion induced by rewards.

Some are selling their strategy (read my book but invest with me), talking their book (I'm deep into growth or value, so please buy these), pandering the academy (status as published professor), making a career of teaching how to trade, increasing status, creating a legacy, etc. This is similar to the more general, "how many friends do you have who don't profit from you?"

Bruno Ombreux responds:

I haven't read all the books in Dr. Zussman's list, but among those I've read, I think two are not deceptions:

A Random Walk Down Wall St., Malkiel (efficient markets)

Most investors would be better off reading this book and stopping there. Also:

The Intelligent Investor, Benjamin Graham (value)

I haven't finished this book because after the first two chapters I realized it was just a watered down version of the first edition of Security Analysis, from the same author + Dodd.

Security Analysis is an excellent book that makes excellent points for the era it was written in. Their technique of looking into detail at companies accounts is similar to detective work, which itself is an application of the scientific method. In my opinion, this kind of financial analysis is a valid way to proceed.

Nigel Davies comments:

The nature of deception may be much deeper than many authors make out. I would say that the origin of all deception is in fact self-deception and that the supposed 'deceiver' is doing nothing more than moving into the vacant space within our understanding.

George Parkanyi writes:

There is a saying.  "Fool me once, shame on you.  Fool me twice, shame on me."  To me it's just a given that traders, particularly those trading in size, use techniques to mask their intentions.  And sure, those that have knowledge of them, run stops.  That's just one of many influences that make financial instruments wiggle on a day-to-day basis, and you would not only have to sort out what is "deceptive" behaviour vs stupid vs herd behaviour, but whether the deception was or was not in your favour.  Unless you have a large network of people you can call on the inside that can give you information that helps you take the temperature of a given market, I don't see the point of trying to personify this market move or that market move as "deception", especially in a big liquid market that is essentially a non-linear system subject to multiple influences. If there's a pattern that you detect and can exploit then so be it.  But does it matter if it is "deception" vs. sentiment or just a big whale moving through?

Don't get me wrong. Reading about deception is certainly interesting. As a Scout leader, Arthur Baden-Powell's role in the Battle of Mafeking during the Boer War is an excellent example.  In fact, BP's entire early career was based on deception.  But I personally don't see the value in getting overly concerned about deception in the markets, though I understand that others do.

I think if you have a general sense of the day-to-day character of a market that you have researched and trade regularly, and do some research to try to anticipate macro influences on that market that might cause it to trend, the rest can be handled with money management.

Stefan Jovanovich replies:

Baden Powell's energy as a commander was probably the decisive factor in having the deception succeed:

From British Battles:

Baden-Powell conducted the defence of the town with great energy and resource, leading the Boers to believe there was a larger garrison than was the case. In November 1899 Baden-Powell launched a series of raids on the Boers lines that caused him some casualties but made the Boers wary of the garrison.

Initially the Mafeking garrison had no artillery. Baden-Powell improvised various items to look like real guns and trains, while engineers manufactured a gun, known as the "Wolf", from a length of steel pipe. The Boers used the 2 two inch guns they had captured from Dr Jamieson to bombard the town. Dud shells fired from these guns were reworked and discharged at the Boer lines from the Wolf. An officer found an old muzzle loading naval gun serving as a gate post. This gun was christened "Lord Nelson" and drafted into service. Dynamite grenades were manufactured and thrown at the Boer lines and a small railway line was built across the town.

In sharp contrast to the indolent Ladysmith garrison, Baden-Powell kept his men constantly on the move, raiding the Boer lines and keeping the besiegers on their toes.

Scott Brooks adds:

Atlas Shrugged not only speaks of deception, but the deceivers are open about their deception. The deceivers/looters are like gangsters who are in complete control in kick sand in the faces of the producers, daring them to say A is A and damning them if they do, all the while fooling the masses with their A is B pablum. The parallels to our world today are stunning.


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4 Comments so far

  1. Ralph Di Fiore on November 23, 2009 10:43 pm

    Magic is founded on deception. The key to a good magic trick is that the deception must appear totally natural. The more suspicious a trick, the less effective it is. This translates into the financial markets in the same manner. The most effective forms of deception are the ones in which the audience/Joe Blow public suspects nothing and is mesmerized by the “natural moves”.

  2. douglas roberts dimick on November 25, 2009 12:09 am

    Why is there deception?

    dr

  3. Jaden Zoemus on November 25, 2009 1:37 am

    Interesting personal story of a Brooklyn woman who used deception to break gender sterotypes.

  4. Luis on August 5, 2013 5:05 am

    Ladies and Gentlemen, we must not forget time frame!!!! Time frame is something that can change in a persons mind from day to day, so it’s very hard to define. All this talk of deception is of the order of hours or a few days at most!!!! All your trading decisions better be framed to the time frame of the major tide and not the ripples(deception).

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