Jan

16

The first thing I would like to say is that, of course, I am flattered that Mr Niederhoffer not only took the time to read, but even review the book I wrote back in 2005. I hope he will do the same for my next book, due out in a couple of months!

The second thing is that, unsurprisingly, I do not think that some of the points Mr. Niederhoffer makes are very fair and I thus welcome this opportunity to "set the record straight".Our Brave New World was never a book written for general public distribution. It was self-published and was written as a sort of summary of the more important research reports and research themes we had been developing at our research firm, GaveKal research, since its launch in 1999.

In essence, we wrote it so that new clients of our research service could quickly get "up to speed" on the key ideas and concepts that we had been developing for years (and in much greater detail in our research).

Now, as I am sure Mr Niederhoffer knows all too well, most money managers (the crux of our client base) are inundated with reports to read. Thus, if you want to ensure their attention, reports have to be engaging and to the point. One can not afford to get lost in pages of econometric models_ at least, one can not do if one hopes to make money as an independent research provider!

Now all the themes that we develop in the book are developed further, and in more depth, in our reports (all posted on our website). To be honest, this is the first time that we have ever been criticized for not backing up our assertions with data, charts etc. and I think that, if Mr Niederhoffer did not find his heart's content in the book, maybe he will find it by signing up for our web archive and, better yet, a free trial subscrition to our research?

I also believe that Mr. Niederhoffer's criticism of our views on velocity is not a fair one. Indeed, since 2001, one of our biggest mantras has been that the velocity of money has increased significantly, and that this has had a profound impact on asset prices. We have also spent a lot of time and resources tracking changes in the velocity of money and have built various indicators to do just that.

So in conclusion, I would say that Mr. Niederhoffer's criticism of our book stems probably from a "divergence in goals" as to what the book should be and should do. It sounds like Mr. Niederhoffer was expecting some kind of treaty in econometrics, with pages of mathematical models etc. Meanwhile, we wrote the book as a summary to some of the ideas developed in further depth in other reports.

I am sorry to hear that Mr. Niederhoffer was disappointed and that his expectations weren't met. But to show that we don't hold a grudge, I'll send him the next one free of charge (though I fear that his criticism may be the same the next time around as well!)

Vic responds:

You are well justified in your critique of my review, and there is no need to send me a free copy of your book as I will buy all of your work in the future. I somehow lost the flavor in my review that everything you say about the world I agree with. If you read what I've been writing over the years, our conclusions are identical to yours, and certainly don't have a more rigorous backdrop to them. My reference to Kuhn was that whenever something is very good and revolutionary, first there is disbelief, then hatred, and then the next stage is "my goodness I knew that all along". I didn't make that point very clearly, and you're certainly on the side of the angels.

Despite this, I didn't like your back and forth with Faber because your views seem completely opposed to his, and yet you sought conciliation.

I certainly have much to learn from your group whom I first discovered when one of your readers told us to get this book as "these people are the best, the smartest, and the most insightful." I do agree with this viewpoint, except that I think your investment conclusions have to be sharpened, and that you need to encorporate ever-changing cycles, which is something that I'm sure you take account of in your more timely work.

Feel free to use this as a letter of commendation to you. Somehow my writing didn't get across the point that if only the investment world were to follow your guidance, the rate of wealth creation would be so much greater than it is.

Vic further adds:

 Because their research is related to such important and deep issues as the sources of wealth, the mainsprings of progress, and the creative power of individuals when given proper incentives, it is hard to quantify. With all their faults, they certainly do the best job of putting the weather gage at the back of an investor that I have come across in my 45 years of continuous work in this field. One has a piece of Gorham silver in his collection that shows a mad painter riding a squid, in a squall, with sea monsters attacking him on all fronts, painting a beautiful picture, caressing a magnificent girl, and calming the sea at the same time. It brings to mind Gavekal research. Better yet, from Sound of Music, "how do you catch a cloud and pin it down a fibbertjibbet … a will of the wisp a clown. How do you keep a wave upon the sand? How do you hold a moonbeam in your hand?"

Louis-Vincent Gave replies:

Thanks a lot for the kind, and very flattering words. Now you’ll definitetly get our next book for free! I guess our motto might be what Lord Keynes once said: “I’d rather be approximately right than precisely wrong”. In this fast ever-changing world, that’s probably the best that we can hope for.


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