Jack Schwager’s interview with Alphonse Fletcher, Jr. from Stock Market Wizards was a very interesting change of pace. Fletcher’s firm looks at its operation more as providing a service than trading. Through their unique investments, they are able to achieve impressive returns with virtually no risk. I was impressive with the creativity of the positions he discussed, and even more impressed with his methods of hedging these already low risk positions.
While Fletcher’s descriptions of his different strategies was incredibly interesting, most of what he discussed wasn’t really applicable to this site. There were, however, a few gems that I found worthwhile.
Top Five Quotes From Market Wizard Alphonse Fletcher, Jr.:
“I learned an interesting lesson about odds: winning 80 percent of the time may not be enough if the odds are not right.” – Fletcher
This idea had been coming up a lot in my analysis of different trading systems. Fletcher was actually talking about dog racing, but the principle is the same. If you make money on 80% of your trades, but lose everything on the 20% that are losers, then your system is worthless. On the flip side, a system that is only correct on 40% of its trades can be profitable as long as it makes more on the winners than it loses on the losers.
“After I left Ace’s office, I went downstairs to the computer store and bought myself a Macintosh, which I set up on my dining room table.” – Fletcher
Rather than set himself up to have another bad experience working for someone else, Fletcher set out to start his own firm. The entrepreneurial spirit is something that I love to see. It is inspirational. It reinforces my dream of making a living from my laptop and being able to work from anywhere in the world.
“What is unique about our firm is that we never imitate someone else’s strategy.” – Fletcher
Fletcher is his own person. In an investment community where everyone is trying to copy everyone else, it is impressive to see someone so convicted in his own beliefs and abilities. While there wasn’t much for me to gain technically from this interview, this is an example of the strong willed attitude of Fletcher that I would love to emulate.
“Our thinking is: Let the competition move in, we’ll be onto the next thing.” – Fletcher
Once again, we see extreme self-confidence from Fletcher. Once he begins trading a strategy, he doesn’t care who tries to copy it because he is already working on something better.
“We can’t control when acceptable opportunities will appear, but we can certainly try to preserve our capital until those opportunities arrive.” – Fletcher
Fletcher is supremely confidence. Even after underperforming his expectations (despite dramatically outperforming the averages) Fletcher shows no urge to overtrade. He is confident and patient, willing to wait for only the best trades.