Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

Home

Write to us at: (address is not clickable)

12/9/04
Navigating the Unknown: Charts End, by James Sogi

In the early 1400s many Europeans believed that the earth was flat and that if you sailed over the horizon the ship would fall off the edge. Primitive navigators relied on dead reckoning, measuring the speed of the boat with a line with knots tied in it and a sand hour-glass. We still refer to a boat speed in "knots." To this day, nuclear submarines use dead reckoning but with super-accurate gyroscopes and inertial detection instruments and figure their position within inches thousands of miles from their start. Primitive navigators in time realized that the Sun and Polaris were angled overhead and could give an estimate of the latitude when measured with a crude astrolabe. But since they didn't know without accurate time clocks when noon was, they could not determine their longitude and were often off by 175 miles or more, which often spelled disaster for the mariners. The invention of an accurate chronometer in 1764 by John Harrison opened a new era in accurate navigation and hence reliable shipping trade, and was instrumental in the dawn of the industrial revolution. Utilizing modern mathematical tools and more accurate measurement devices, navigators could travel the globe with confidence and ply their trade to their enrichment. Now, with modern tools any person can determine a position within 50 feet.

Modern speculators are navigators of the markets. Many still believe that as they sail off into the blackness where the charts end that they will fall of the edge of the earth. Others rely on mystical jargon and mumbo to predict where the charts will end up in the black right edge of the market world. Other scientifically minded speculators have devised new methods beyond dead reckoning to determine their position and the ultimate landfall of the voyage in the markets. These speculators use scientific methods and tested hypotheses to map a course into the unknown of the chartless blackness of the future. The new alchemists of the markets confidently predict the future utilizing complex physics, math and statistics, the same tools that allowed us to navigate the oceans and now the stars. Even with modern tools, like the ancient navigators on a cruel and fickle ocean our modern speculators are subject to the whims of a cruel market where vicious storms can sink even the most sophisticated. May you have a fair wind at your back and a smooth sea in your travels and trades.