Mephistopheles from Cleveland

For the descendants of John Rockefeller was the real embodiment of the American dream. She started her career as a simple accountant, by the forty years he became the richest man in the world. Philanthropist, and a ruthless businessman, Rockefeller gathered in all the vices and virtues, which have existed in the wild America in the late XIX century. Now published in Research "is preparing to release a book of American author Howard Minza" Money and power. The history of business "dedicated to the history of the life of an entrepreneur. The material for the article kindly provided by IR "Analysis."

Reduce and conquer
From the age of sixteen, John Rockefeller was forced to earn his own living. However, salaried employees, he worked for three years - in the office of a Cleveland accountant trading firm. In 1858 John, together with a friend, opened a small grocery desk "and Clark Rockefeller." Cases partners were quite good, and the twenty-four years Rockefeller saved over 4000 dollars. For all the money he bought shares of refinery, built just outside of Cleveland. The first oil field in the world, opened in America seven years earlier, caused the country's present oil rush. This was akin to a frantic race for gold, which then tells not one generation of American writers. Do not resist, and the young John Rockefeller, kinuvshiysya to head the new business.

In 1870, he founded the Cleveland company, Standard Oil. However, according to the businessman, a registration clerk in the House, his firm became the twenty-sixth on account of oil company incorporated in the state. Cut-throat competition does not leave any chance to the entrepreneur.

While oil prices have changed with incredible speed. For example, a barrel of oil, stoivshy the morning of 13 dollars, in the evening to fall to 10 cents.

Penetrating into the subtleties of business, young entrepreneur realized that victory in the competition can only be achieved while reducing the cost of transporting oil from wells to a processing plant. At that time, all oil is produced in only one field and processed almost at the same plants with the same technology. Therefore, price advantage can only give lower transport costs. "Decide a transport puzzle in its favor - and you can conquer all of America!" For the Rockefeller Foundation has had such an opening force of the Holy Scriptures. He concluded a secret agreement with three state railways. "Standard Oil" had pledged to use only those three firms. In turn, the Rockefeller Foundation, the railroad promised to substantially reduce tariffs for the transportation of oil. Business has gone up the hill. While revenues grew entrepreneur enormous pace, its competitors began to gradually broke.

Scandalous fame
Although the contract was a secret, about him all the same soon pronyuhali leisurely journalists. Against diabolical John Rockefeller rebelled all American oil. Crowds of angry people with burning torches scrambled to destroy cars with the words "Standard Oil. Rockefeller, whose name has previously heard only the business people of his native city, trice became known throughout the country. Press called him except as Mephistopheles from Cleveland, and the riots of 1872 known as "Cleveland massacre." After just two months since the conclusion of a secret pact the court found the agreement illegal. But this time, John Rockefeller quite enough to buy a song for 22 of the 26 state oil companies. All of the first in a short period, he acquired 53 refineries, of which 32 were immediately closed, retaining only the most profitable.

During the massacre, "the businessman controlled 10% of U.S. refining industry. Ten years later, the share of Standard Oil "had already processed 90% of all the world's oil. It was then that John Rockefeller became a truly rich - the richest man of America.

Two dollars per second
A Rockefeller was the idea to close all the oil business itself: beginning with the oil and sell petroleum products to the consumer. He invented the first vertically integrated company.

Traditionally, oil is sold on the market by independent brokers that have earned five cents per gallon of kerosene. Rockefeller thought it unforgivable. He wanted to earn that money! "We had to create methods for sales, far surpassing that then existed," - he would say later. To get started, Rockefeller destroyed the independent oil dealers. In their place came supply units "Standard Oil.

By the end of the century company, Standard Oil controlled nearly all the refineries in countries that produce a third of the crude oil in America, owned the second largest steel manufacturer, and managed a fleet of thousands of rail cars, barges and ships. Its property is a lot of coal and iron mines. By the mid 90-ies of the Rockefeller Foundation, the company evolved into a fully vertically integrated oil company. Oil escape from the well "Standard Oil, traveled through the pipeline" Standard Oil, clear on refinery Standard Oil, shipped in the tank "Standard Oil" and even sold to the end consumer sales agent "Standard Oil. Control the entire production chain, Rockefeller is no longer dependent on any vendor, nor of the incompetent distributors of any other vagaries of the market. He reached the order.

Since then, the money in the pockets of millionaire polilis river. At a time when most Americans were at two dollars a day, Rockefeller earned nearly $ 2 per second - more than 50 million per year.

It managed to create a Rockefeller with the best management structure. Instead of trying to personally manage their business through fear, as did most big businesses, it has delegated some authority to managers. In the "Standard Oil" was even created specialized committees: the production and procurement. Now we are not aware of other governance structures, but a hundred years ago it was truly a brilliant invention. "By creating incomprehensible complexity of the empire, he was sufficiently clever to be able to dissolve their identity in the organization," - says Rockefeller biographer Ron Chernou. Specialist in business history, Alfred D., Jr. Chendler. Rockefeller called the invention of the creation of a new subspecies of economic rights - to the salaried manager. " According to the Brookings Institution, in the period from 1880 to 1920 the number of professional managers in the United States has more than six-fold - from 161 thousand to a million or more.

Charitable bribe
The famous rich man loved to observe, that to him and to his business law applied only to ex post facto. Secret railroad transaction that led to the massacre of Cleveland, in fact, become illegal only in 1887 when the Commission was established on interstate commerce. Combinations of restriction of trade, is a vital foundation of the vertically integrated companies have been recognized as illegal only after the adoption of the Sherman Antitrust Act in 1890.

In gathering material for a biography, Ron Chernou found in the correspondence Rockefeller numerous confirmed instances where the business simply to pay bribes to politicians to influence the outcome of legislative activity. 250 thousand dollars spent by the Rockefeller campaign McKinley in 1896, were only the most dramatic episode of the activities that Rockefeller saw as a necessary business expense. " Neither the Commission nor the antitrust act did not affect the ambitions of the entrepreneur. On the contrary, since this is the first he had to redouble their efforts to treatment of legal obstacles erected in front of Standard Oil. Rockefeller is constantly "buying" politicians, is simply not knowing how else can you have with them. He saw himself in the service of higher interests. For him, cleaning business was a matter of inefficiency, pleasing not only the economy but also the country, and God. But businessman underestimated the extent of public outrage.

May 15, 1911 the U.S. Supreme Court finished hearing Rockefeller, consisting of 23 volumes of testimony, totaling 12 thousand pages. At last, the eleventh-account process was caused by 444 witnesses, in the presence of which the Court ruled that Standard Oil was a monopoly and is subject to fragmentation.

The news caught Rockefeller playing golf. After carefully listening to the message, a great entrepreneur turned to its partners in the game and said: "I recommend that you immediately buy shares of Standard Oil." Perhaps it was the wise counsel, who ever gave Rockefeller, preferring to enjoy alone the fruits of their mind. As a result, Standard Oil was broken into 34 separate companies. But John Rockefeller has managed to retain control over each of them.

Subsequently, many of these firms grew in the industrial giants such as ExxonMobil, BP Amoco, Conoco, Inc., ARCO, BP America and Cheesebrough Ponds.

At the time of sentencing condition Rockefeller was estimated at approximately $ 300 million. Two years later, as a result of the execution of the penalty, that figure has tripled, to 900 million (equivalent to the current 13 billion U.S. dollars). For comparison: the entire federal budget in 1913 was only 715 million, while public debt was 1.2 billion dollars. The wealth of the Rockefeller Foundation has reached approximately 2.5% of gross national product, while the current state of Croesus Bill Gates is only one fifth of this figure. Lose antitrust process resulted in the greatest career success Rockefeller. In addition, it is time for a new market, the largest consumer of oil - the car.

Germ of laziness
Rockefeller once said that if it were not for charity, it would be three times richer. Indeed, the businessman handed out money to those in need with the same ease as they worked.

Contemporaries said that apparently John Rockefeller looked real curmudgeon. But it was impressive, he handed out to children dime-desyatitsentovye coins - has become a true legend. During his life, Rockefeller, and based his funds donated to charity more than 530 million dollars. One only has received from the University of Chicago, a famous entrepreneur of 35 million dollars.

Through its "Sanitary Commission," Rockefeller helped to destroy the South ankilistomidoz - the so-called "germ of laziness." One way to combat the disease has become a mere distribution of tens of thousands of pairs of shoes. The world's first organization devoted entirely to human health has been the Rockefeller Institute for Medical Research (now Rockefeller University).

Snake oil
In life, Rockefeller was a man of relentless controversy, almost all of whom were brought to absolute extremes. The philosopher William James once said that John Rockefeller - this is a very bad and very good man, whom he had ever seen. "This is a man deep in 10 tiers and completely incomprehensible to me - he wrote. - On the top surface of a seemingly perfect and integrity and all the accused that he was the biggest villain in the business ever created by our country."

From his mother Eliza Rockefeller inherited the best of human qualities: istovoe piety, moral austerity, frugality, hard work, self-discipline and social consciousness. But when civil war broke out, John for 300 dollars to buy from service in the army, because it was a true abolitionist. Moreover, he married a girl from a family whose members were conductors on the "underground railroad" and at one time hid in the house of the famous American abolitsionistku Sodzhorner coward.

Rockefeller's wife, Laura Spelman Ketty, with whom he lived for more than half a century, as Eliza, was the standard of piety. Over time, the family oil tycoon has four estates with beautiful trails for horseback riding and golf course for nine holes. But inside the house did not have any luxuries.

Even at home they had not lost in vain. John Rockefeller, Jr., their only son, once uttered, that until the age of eight was only women's clothing - obnoski sisters. Ketty and I were their own social aspirations. She founded the first school for freed black women's education - Spelman College in Atlanta.

But from his father, Rockefeller Senior inherited directly opposite tendencies, for example, the ability of low cunning and designing. William "Devil Bill" Rockefeller was the so-called "snake oil merchant" and dvoezhentsem. He traveled throughout the country, selling worthless medical medicine, and gave himself for it "botanical physician, for the" well-known expert in cancer ", in the impoverished deaf and dumb. Finally in 1855, Bill devil ever left the family, marrying at young girl who knew him as Dr. William Livingston. According to Ron Chernou, stepmother great entrepreneur Margaret Livingstone Elien only in recent years to learn that her husband was the father of the richest man in the world.

Sam, John Rockefeller of affairs more than once resorted to various tricks, and even threats. One day he told his wife that people succeed in life, must sometimes go against the current. "You can not fear that you bran hand - he said one of its competitors - but your body will suffer." When the threat fails, he falsified the transaction. When this did not help, he simply bought the people, their voices and support of the newspapers. One senator from Ohio, Rockefeller handed over 44 thousand dollars that he discredited the Attorney General of causing discomfort to the activities of Standard Oil.

Rockefeller was a man of tireless repetition. Every morning he was at the same time, play golf, chewed each piece ten times before you swallow, and rinse your mouth ten times each gulp of liquid. He possessed a great deal of willpower, and he seldom failed to get what is wanted. One of the goals of the Rockefeller Foundation was celebrating its 100 th birthday, and he nearly achieved it, died in 1937 at the age of 98 years.

Grand Dynasty
Son dvoezhentsa and devout Christian, Rockefeller gave birth to one of the most prominent and generous American families. John Rockefeller, Jr.. devoted his life to philanthropic and civil cases, giving to charity an additional 400 million dollars. To send a gift to the federal government, he bought land that later became the American National Parks Grand Teton and Acad. The grandchildren of the famous entrepreneur, too, played a big role in the history of their country. Nelson Rockefeller became governor of New York, has run for president from the Republican Party, then - the Vice-President of the United States. His brother Uintrop was governor of Arkansas and chairman of the board of Colonial Williamsburg, the basis of which the important role played by John Rockefeller, Jr.. Lawrence Rockefeller, a recognized defender of natural resources, the State donated the land for the creation of Virgin Islands National Park. John III was led by the Rockefeller Foundation, brought together one of the world's largest collections of Oriental art, and funded Linkolnovsky Center of Fine Arts, New York. And David Rockefeller was chairman of the bank Chase Manhattan, the head of the Council on Foreign Relations, as well as mainly due to the Museum of Modern Art - another project the Rockefeller family.

Now great-great-grandson of oil tycoon John D. IV - member of the Democratic Party and a third term as senator from West Virginia. A beautiful name for the future.

By Julia Tikhonova

Nobel psihoekonomika

In 2002, the Nobel committee awarded the first prize for economics adherents of two opposing points of view. Vernon Smith experimentally proved that in a situation of massive purchases and sales team of people behave rationally limit. Daniel Kahneman et al confirmed the opposite point: the person is of conduct other than that attributed to it by the economic textbooks.

Experimental economics
The classical economic theory, taking its roots from Adam Smith, assumes that all people are selfish and their behavior is determined exclusively by personal gain. At the time, A. Smith, market players, whose behavior is defined by the cold rational logic, «homo economicus». The best minds of mankind good hundred years, under the influence of classical economic school and its concept of homo economicus.

Refute, like just check the rationality of economic agents could not be identified. And today's economy in many areas is a bezeksperimentalnuyu science, where researchers can not test the theoretical assumptions in the experiments. According to an authoritative professor at Harvard University Gregori Mankiw, whose textbook on macroeconomics translated into Russian, the absence of controlled experiment is the fundamental problem of all economic science. In a sense, the impossibility of conducting a controlled experiment brings together the economies of such sciences as astronomy and meteorology. Specialists have to rely on the so-called field data, the results of direct observation of the real world without the active intervention by the researcher. This depressing situation lasted quite a long time, while economists were not involved laboratory experiments. Under the influence of laboratory experimental economics has undergone a significant process in the last two decades of XX century. Controlled laboratory experiments have become an integral component of any full-scale economic research. Thanks to them, many of the theoretical postulates of the classical school have been refined or refuted. The process of change mainly affected two major areas: cognitive (cognitive) psychology, studying human thinking and decision making, and experimental economics, whose task is to verify theoretical models in research laboratories. The recognized leaders in both directions are Vernon Smith and Daniel Kahneman, by October 9, 2002 was awarded the Nobel Prize in economics.

Dossier

Vernon Smith (Vernon L. Smith)
Prizes awarded for the «use of laboratory experiments as a tool in empirical economic analysis, especially for the study of alternative market mechanisms».
Date of birth: 1927
Citizenship: USA
Current work: Interdisciplinary Center for Economic Science George Mason University (Interdisciplinary Center for Economic Science of George Mason University, USA)
Education:
• California Institute of Technology (1949),
• State University of Kansas (1951),
• Harvard University (1955).

Recent publications:
• Papers in Experimental Economics, December 1991;
• Bargaining and Market Behavior: Essays in Experimental Economics, June 2000;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Paving Wall Street: Experimental Economics and the Quest for the Perfect Market by Ross M. Miller, Vernon L. Smith (Foreword), January 2002;
• Essays on Genetic Evolution and Economics by Terence C. Burnham, Edward O. Wilson (Editor), Adam M. Brandenburger (Editor), Vernon L. Smith.
Personal pages on the Internet:
1. http://www.gmu.edu/departments/economics/facultybios/smith.html
2. http://www.er.uqam.ca/nobel/d133140/first.htm
E-mail: vsmith2@gmu.edu


Seller and buyer in the «limit»
Early experiments carried out by economic science enthusiasts, are fully devoted to the audit of the basic theory. The first test was subjected to pricing in the classical models. Classical School of Economics argued that under conditions of perfect competition, market prices balance supply and demand at a level that the price offered «limit» buyer (marginal buyer), compared with the price «limit» seller (marginal seller). The first checks for the neoclassical theory of perfect competition has taken a well-known American economist Edward Chemberlin [1]. It was the beginning of the 1950's laboratory experiments have taken a great interest many future Nobel Prize winners for economics, for example, Reinhard Zelten, and John Nash. At the forefront of the experimenters was Vernon Smith. Encouraged by the ideas Chemberlina, Smith's teacher at Harvard, he organized a number of laboratory experiments with students. Smith set out to determine whether the hypothesis of perfect competition in practice. They used stochastic model, where buyers and sellers act with different ranges acceptable price for the goods. Ranges cover the spectrum from least to most acceptable commodity prices. Given the price distribution, Smith was able to determine the theoretical equilibrium price of the goods, ie price acceptable to the majority of buyers and sellers. The obtained results of laboratory experiments, they were first published in 1962 in the «Journal of Political Economy» [2]. To his considerable surprise, the prices obtained during the simulation, consistent with the prices, the theory predicted, although the actual experiment, participants did not have full information as required by neoclassical theory. In order to find out whether this is mere coincidence, Smith and several other researchers have repeatedly recheck the results of laboratory experiments. In 1978, during a better experiment, Vernon Smith, in collaboration with Charles Plottom obtained similar results, but his work, he summarized the caveat that market institutions «relevant» for pricing [3].

Types of auctions
Much time Vernon Smith gave the theory of auctions, which emerged at the intersection of microeconomics and game theory in the early 1960-ies. Virtually all of the theory of auctions has been established by William Vikram, a Nobel laureate in economics of 1996, but his work lay solely in the theoretical field. Really nobody knew what the results provide any types of auctions.

Meanwhile auction mechanisms play a key role in the markets of raw materials and financial instruments, where the specifics of trading systems directly affects the outcome of the tenders. In the 1990's. challenge the adequacy of the auctions came to the fore - in developing countries in connection with the transfer of state property into private hands, while in developed countries with regard to deregulation and privatization of television and radio. In the theory of auctions is allocated only four basic types of auction for the sale of one product or service.

1. Normal, or English auction (English auction): in an open disclosure of the price bid ends when none of the buyers do not want to increase the price of the goods. English auction can be seen in the sales of antique collections of trading houses such as Sotheby's.
2. Dutch auction (Dutch uction): if there is transparency in prices start from the maximum bid price bids, and ended with the issue of a minimum acceptable price. Dutch auction Orgbankom actively used until 1998, Bank deposits exhibited at an auction, where potential investors are gradually reduce interest rates until it was the only investor with the lowest rate offered.
3. Closed the first price auction (the first-price auction, with sealed bids): No public auction, each buyer only once anonymously offers a price, eventually wins the party with a maximum application. According to the scheme to sell the domestic industry in the collateral auctions in 1996-97 years.
4. Closed the second price auction (the sealed-bid second-price auction): an application filed under seal actors, and the one who proposed the highest bidder, must pay an amount equal to the second highest offer. Currently, such a specific type of auction is not widely used.

A Dutch-something cheaper
Enter a controlled experiment, Smith with his colleagues in the scientific arena began to find out the same whether the actual results of auctions with the theoretical predictions of the outcome of the tenders. He found that, like the theories, identical results show English auction and second price auction is closed. At the same time, Smith denied the suggestion that the outcome of bidding for the Dutch auction and the auction closes first price match. Ranzhiruya auctions in terms of maximizing the final price tender, Smith found that most prices are fixed in the English auction and second price auction closed. Second place is the first closed auction prices, and the last - Dutch auction.

Dossier

Daniel Kahneman (Daniel Kahneman)
Prizes awarded for the «work of combining psychological studies and economic science, especially for the study of human thinking and decision-making under uncertainty».
Date of birth: 1934
Nationality: dual, the U.S. and Israel
Current work: Faculty of Psychology, Princeton University (Princeton University, USA)
Education:
• Hebrew University of Jerusalem (1954),
• University of California at Berkeley (1961).

Recent publications:
• Choices, Values, and Frames by Daniel Kahneman (Editor), Amos Tversky (Editor);
• Heuristics and Biases: The Psychology of Intuitive Judgment by Thomas Gilovich (Editor), et al, July 2002;
• Well-Being: The Foundations of Hedonic Psychology by Daniel Kahneman (Editor) et al, July 1998;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Judgment under Uncertainty: Heuristics and Biases by Daniel Kahneman (Editor) et al, April 1982.
Personal Page on the Internet:
http://www.princeton.edu/ ~ psych / PsychSite / fac_kahneman.html
E-mail: psych@princeton.edu

Smith Plottom conjunction with one of the first began to use «Progonnyj tunnel», or method of wind tunnel (wind tunnel), in laboratory experiments. Using the verified mechanisms lifting of state regulation, privatization and tendering for the procurement of goods for the state. At present, these mechanisms are so complex that modern theory is unable to give an accurate predictive assessment of the results. For this reason, the only possible solution to the problem of becoming a pilot method. Smith used the «Progonnyj tunnel» for constructing an optimal schedule of take-offs and landings at airports. Moreover, its recommendations on the results of the experiments were taken into account in the deregulation of electricity markets in Australia and New Zealand. It is regrettable that privatizatory of the Russian Federation State Committee on the eve of large-scale sales of state property has not been familiar with the writings of Vernon Smith.

Happiness is not about money, but their numbers
Modern economic theory at the center puts material wealth. The well-being, life satisfaction or happiness in the minds of economists are inextricably linked to material prosperity. The well-being or utility (utility), the individual is determined to consume goods and their quantity. To maximize the utility of an individual chooses a particular course of action in certain circumstances, which may be uncertain (uncertain).

Generally, the preferred course of action the individual is fully within the rational-logical patterns of human behavior. All these assumptions are the basis of expected utility theory of von Neumann-Morgenshteyna (Neumann-Morgenstern expectedutility theory) [4]. According to the individual making the greatest values of utility function, seeking to adequately assess the probability (expectation) of events with which it will face. As a psychology dominated by a view of human behavior. In the cognitive psychology of human beings as a system that deliberately encodes and interprets information available. At the same time, the decision-making process directly influenced by subconscious factors. Among the factors that determine the interactive process of human thinking, the number of perception, mental models of the interpretation of life situations, emotions, the nature of relationships between actors and the memories of the earlier decisions and their consequences.

Based on the extensive theoretical work and experiments on human behavior, Daniel Kahneman and several other psychologists have criticized the assumption of individual rationality that exists in economic science. According to critics, in fact, the individual ignores the evaluation of uncertainty according to the theory of probability. Moreover, it is far from maximizing the utility, which insists on the theory of von Neumann-Morgenshteyna.

A number of studies, Daniel Kahneman, in cooperation with other Israeli psychologists, Amos Tver, has shown that people are not able to fully analyze complex situations in which future events are hidden by fog of uncertainty. In the face of uncertainty, the individual relies on a short heuristic analysis (heuristics), or on a rule of thumb (rule-of-thumb).

The process of human thinking for example, studied a group of people who had to assess the probability of random events. Most participants in the experiment gives the same probability estimates both small and large events, without taking into account that with the increasing significance of the events likely to be reduced. In other words, people follow the law of small numbers (law of small numbers), completely ignoring the law of large numbers (law of large numbers), on which the theory of probability.

According to the law of large numbers of individual events are vulnerable to random and non-factor than the mass of phenomena in general. When a large number of observation random fluctuations are mutually canceled, and it becomes visible to the general pattern of phenomena.

However, in two experiments, psychologists have demonstrated, individuals sometimes paradoxical behavior. They believed that the probability of birth of a boy in a large urban and rural hospitals are equal and amount to 0.6.

Similarly, investors believe that the investment fund manager more competent than the market as a whole, if the fund shows its best financial results in comparison with the stock index over the past two years. Although the validity of statistical sampling (number of observations) is too small to make such conclusion.

Subjective perception of individuals of events in the real world allows you to explain the various irrational phenomena in financial markets. In particular, the assessment of market shares from the perspective of the law of small numbers of permits to explain the appearance of "bubbles". The use of psychological analysis of the financial markets eventually led to a theory of behavioral finance (behavioral finance) [5]. The most typical case of inadequate investor behavior can be illustrated by the following example. If the action is, the investor bought, rose in price from $ 20 to $ 50, then, fixing the profit he will sell it without thinking. However, if the price of first foam from $ 20 to $ 80, then dropped to $ 50, the investor with great displeasure give an order to sell.

Unexpected perspectives
Not satisfied with the standard theory of von Neumann-Morgenshteyna, Kahneman and Tver offered his own theory in his article "The theory of perspective: an analysis of decisions under conditions of risk" in one of the rooms authoritative magazine "Econometrics" [6]. According to the theory perspectives (prospect theory), individuals make decisions in two stages. First, they limit the problem to be solved by some framework to study it in isolation.

In other words, the issue is edited by comparison with its original, resulting in a complex problem is transformed into a simple perspective. Then, individuals maximize the value of the function of perspective (prospect value function). It is composed of different perspectives are assigned probabilistic weights, reflecting the psychological norms and expectations of the individual. In general, there are four key differences from the traditional theory of the prospects for utility theory.

"For the individual is important, not so much the absolute value of his wealth (or value of any other economic variable), but its relative change.
"The changes are evaluated in terms of losses and gains with respect to some reference point (reference point), and as a rule, the loss of re, and the acquisition of undervalued. As a result of this rejection of losses (loss aversion) is not so much an individual actually maximizes utility, but minimizes antipoleznost ( disutility).
"Deviations from the reference point perceived by the individual with lower sensitivity (diminishing sensitivity). A smaller variance is seen much more painful than a larger deviation.
"Probability weights assigned to different perspectives or upcoming deviations, are assigned to non-linear law. Most of the probabilities underestimated, but very low probabilities, on the contrary, overestimated.

In 1992, Tver and A. D. Kahneman expanded the original theory of perspective, bringing to light an aggregate theory perspectives (cumulative prospect theory) [7]. An updated version of the theory takes into account a number of shortcomings of early authors. First of all, it is designed to analyze a large number of prospects being faced by the individual, resulting in the offspring of two close to the standard theory of probability. Testing the theory perspectives in practice shows that individuals make mistakes in dealing with the problem of optimal allocation of resources, such as the formation of the equity portfolio. Rather than risk diversification, they "put all your eggs in one basket", ie concentrated risks.

The theory has been able to explain various behavioral anomalies: why do investors ignore the recommendations of the Portfolio Theory Markovitsa; why shoppers doing the long road to take advantage of small-scale discount stores, why the staff member in no hurry to reduce excessive consumption, etc. For answers to these and many other "why "Kahneman and was awarded the Nobel Prize.

Awarded the prize Vernon Smith and Daniel Kanemanu, adherents of the two opposing points of view, the Nobel Committee allowed the long-running dispute among scientists, as early as 1991, Smith blamed Kahneman and his colleagues in the one-sided and ignoring other concepts. Now, the collective behavior of individuals susceptible to the irrational rational explanation.

Sergey Moiseev

References:
1. Chamberlin E. H. An experimental imperfect market / / Journal of Political Economy, 1948, ? 56, pp. 95-108.
2. Smith V. L. An experimental study of competitive market behavior / / Journal of Political Economy, 1962, ? 70, pp. 111-137.
3. Plott C. and Smith V. L. An experimental examination of two exchange institutions / / Review of Economic Studies, 1978, ? 45, pp. 133-153.
4. von Neumann J. and Morgenstern O. Theory of Games and Economic Behavior. - Princeton: Princeton University Press, 1944.
5. Shleifer A. Inefficient Markets - An Introduction to Behavioral Finance. Clarendon Lectures in Economics. - Oxford: Oxford University Press, 2000.
6. Kahneman D. and Tversky A. Prospect theory: An analysis of decision under risk / / Econometrica, 1979, ? 47, pp. 263-291.
7. Tversky A. and Kahneman D. Advances in prospect theory: Cumulative representation under uncertainty / / Journal of Risk and Uncertainty, 1992, ? 5, pp. 297-323.

Unknown pages In the Biography of George Soros

The dossier, which should be lower, based on the record bureau EIR (Executive Intelligence Review) at Wiesbaden in Germany, published on 1 October 1996, called "Summary of mega-speculator George Soros."

The magazine "Time" described the financier George Soros as "a modern Robin Hood, who rob the rich to give to poor countries in eastern Europe and Russia. It claimed that Soros makes huge financial profits spekuliruya against the Western central banks, and uses the profits to help the postcommunist economies of Eastern Europe and the former Soviet Union to help them create what he calls "Open Society."

The man who broke the Bank of England?
Analysis of clandestine financial networks, Soros is vital to understand the true dimension "problem Soros in eastern Europe and other countries.

After the crisis of the European exchange rate mechanism in September 1992., When the Bank of England was forced to abandon efforts to stabilize the pound sterling, from the shadow of a little financial shape, saying that he personally made a $ 1 billion in speculation against the British pound. Speculators were Hungarian origin George Soros, who wait the war in Hungary under false papers. Soros left Hungary after the war, and received U.S. citizenship after several years in London. Today, Soros is based in New York, but it says little about who he was and what he said.

After his impressive claims to possess "Midas touch", Soros has allowed public use of his name in an apparent attempt to influence the world financial markets.

Soros loudly announced in March 1993. That the price of gold should rise sharply: he said he had just received "inside information" that China is going to buy a huge kolichetvo gold for its rapidly growing economy. Soros was able to raise the demand for buying gold, which allowed prices to rise by more than 20% over four months to the highest level since 1991. And that is typical for Soros, when prostachki scrambled to buy, pushing prices higher, Soros and his friend Sir James Goldsmith secretly began selling their gold with a large profit.

Then, in early June 1993. Soros announced his intention to cause a sale of German government bonds in favor of French. In an open letter to the editor of the London "Times" Anatole Kaletskomu, Soros said "Down with the D-mark!" At various times, Soros attacked the currency of Thailand, Malaysia, Indonesia and Mexico, entering the newly opened financial markets which have little experience with foreign investors, which allows it alone, with large cash resources to manipulate the currency. Soros is beginning to market to buy assets in the local market, while the other is that naive to assume that he knows something they do not know. As in the case of gold, when the smaller investors begin to follow Soros, pushing prices up, Soros begins to sell, with its 40% or 100% profit. He then proceeds to other markets, and often, and to a new country in search of another goal for his speculations. This technique is called "hit and run."

The secret fund "Quantum Fund NV"
Soros is the visible side a vast secret network of private financial interests, managed by the leading aristocratic and royal names in Europe, centered in the British House of Windsor. The network, called its members "club Islands", was created after the collapse of the British Empire after World War II.

Instead of using the powers of the State to achieve its geopolitical objectives, has been developed by the network to stay in the private financial interests, tied to the old aristocratic oligarchy of western Europe. Center of the "Club of Islands" is the financial center - London. Soros is one of those in the Middle Ages were called - Hofjuden, "court Jews", which was deployed aristocratic families. The most important of such "Jews who are not Jews" are a Rothschild, who started his career thanks to Soros.

Soros is American only on the passport. He - the global financial operator, who happens falls in New York, simply because there is money. Soros speculates in world financial markets through its offshore company "Quantum Fund NV", a private investment fund. His hedge fund reportedly manages some $ 11-14 billion of investors' funds, the most prominent of whom, according to Soros, is the British Queen Elizabeth.

"Quantum Fund" is registered offshore in the Netherlands Antilles in the Caribbean Sea. This helps to avoid taxes and conceal the true nature of his investors and what he is doing with their money.

Soros has taken care that none of the 99 frequent investors who participate in its various funds was not an American. Under U.S. law on securities, hedge funds should not include more than 99 wealthy investors, the so-called "sophisticated investors". In creating its investment company as an offshore hedge fund, Soros avoids public research.

Soros himself is not even in the government "Quantum Fund". Legally it is an investment adviser "Quantum Fund" from another company "Soros Fund Management" in New York. In the board of directors "Quantum Fund NV" as not a single American citizen. His directors are Swiss, Italian and British financiers.

It is clear that Soros and the Rothschild chose not to show their relationship, nor does it advertise its links to London, the British Ministry of Foreign Affairs, Israel and American influential circles. Therefore, a myth, that Soros is the sole financial "genius" who through their talent detect future changes in the markets, has become one of the most successful speculators. According to those who did business with him, Soros never makes important steps without a substantial investment information on the person.

The board of directors of "Quantum Fund NV" Kets is Richard, a man Rotshilda, who is also a member of the board "London NM Rothschild" and is the head of "Rothschild Italia SpA" in Milan. Another link with the family Rotshildov is another member of the board of "Quantum Fund" Nils O'Taube partner the London investment group "St. James Place Capital", which is the main partner of Lord Rothschild.

Frequent business partner of Soros in various speculative matters, including the manipulation of the gold in 1993., It's not related to the "Quantum Fund" directly, is an Anglo-French speculator Sir James Goldsmith, a family cousin Rotshildov.

From the first days when Soros created his own investment fund in 1969. He was bound to its success to its relation to the banking network of family Rotshildov. Soros worked in New York in the 1960's in a small private bank was closely associated with the Rothschild, namely, "Arnhold and S. Bleichroeder. Inc.", Bank name, representing the interests of Rotshilda in Germany during the time of Bismarck. To this day, "A. and S. Bleichroeder. Inc." remains the primary holder, along with the "Citibank", the funds "Quantum Fund" Soros. George K. Karlvays associated with the scandalously famous "Rothschild Bank AG" in Zurich, gave Soros of seed capital and led the first investors in his "Quantum Fund".

Patronage Rothschild
The attitude of the financial terms of the Soros Rothschild is not accidental. Will make a small digression into history to explain the extraordinary success of a mere private speculator, and a strange ability to Soros "to play" so many times on these high-risk markets. Soros has access to "inside information" in some of the highest government and private offices in the world.
Since World War II, the Rothschild family tried to create a public myth about its own insignificance. The family spent substantial sums to create the image of a family of wealthy, but quiet "gentlemen", some of whom prefer to do fine French wines, some of which have dedicated themselves to philanthropy. They were involved in the creation of Israel and other high-profile projects, but in addition to such public events, were less plausible case that the family prefers to keep away from its headquarters in London and hold over their less well-known branches, such as "Zurich Rothschild Bank AG "and" Rothschild Italia of Milan "- the bank of Soros partner Richard Ketsa.

According to former CIA officer familiar with the case of Soros, the "Quantum Fund" to accumulate capital (over $ 10 billion), with the help of a powerful group of "silent" investors who have allowed Soros to build capital to disrupt the financial stability in Europe in September 1992.

Soros is one of several important tools for economic and financial control "Club Islands. Because of its connection with their interests had not been previously highlighted, it serves a very useful function for the oligarchy, as in 1992 and 1993, when he began his assault on the European exchange rate mechanism.

While Soros speculation played a significant role in the final withdrawal of British Pounds from the mechanism of exchange rates, it would be wrong to consider his actions as "anti-British." Soros began his education in London, where he studied under Karl Popper and Friedrich von Hayek at the London School of Economics.

Business Soros with Sir James and Lord Goldsmitom Rotshildom approached him to circle Tetcher wing British establishment. Helping to break the UK from the European exchange rate mechanism in September 1992. and has earned at more than $ 1 billion, Soros helped the long-term goal of the wing Tetcher in reducing the economic stability of continental Europe. Starting with the 1904g. This is a British geopolitical strategy - to oppose, by all means is, any economic ties between the economies of continental Europe, especially with regard to the relationship of Germany with Russia and the countries of Eastern Europe.

William Engdal
www.freerepublic.com

Larry Pezavento

When I visited Larry Pezavento in Tucson, Arizona, I was able to talk to Larry about his study of astrological cycles and on their books. Perhaps we know more, just watch as a professional trader, the master of their affairs, served several successful transactions during our two-day stay.

Larry Pezavento is the author of 7 books and, in private, has trained over 300 students. Larry has been a broker for "Drexal-Burnham-Lambert", he is also a former member of "CME", and now a private trader has a large hedge fund.

Larry stated that "the bowls Holy Grail" did not exist, but probably something close to this can be found in the astrological phenomena. Key world to be brought to the attention - it is Mercury, Venus, Mars and Jupiter. He drew attention to the relative positions of the planets, eclipses, using astrological tables.

One of our visits has been monitoring the work of Larry when he traded in shares, currencies, treasury bills, contracts for soybeans, and S & P. His approach was very effective and really quite simple. He used only 2 instrument. Larry said that he was not interested in any tools like moving averages, oscillators (Stochastics and Relative Strength Index) and it does not use any, associated methodologies. I believe that the reason for this is that all these tools and techniques behind the market action.

The tool, which it uses to select the pricing objectives - this is the Fibonacci levels. His homework is to prepare for the next trading day, is to be noted at the time and day schedules Fibonacci price levels, finding the key price and beautiful graphic patterns, such as the model for "butterfly" (for details, see "The Magic Numbers" in the number 17). Multiple Fibonacci tools can be applied to the schedule, and core prices are those where there is a cluster of multiple levels for the same price. Using Fibonacci levels - 0.618, 0.786, 1.00, 1.272 and 1.618. 5 These numbers are 5 "sacred" numbers, which uses the Lari.

Indeed the same wonderful, 2nd tool used Larry - this is his own instrument, which he said, when to enter the market. This tool focuses on the time. Larry said that it is the most important aspect of scheduling. Too many traders focus on price rather than time, and that is why they have not been as successful as could be. Larry is confident in its projected time. They clearly told him where to go a long way, and when in the short. Therefore, it is not glued to the screen of your computer. In fact, he was very relaxed, when traded, and was not absorbed in the supervision of computer graphics. We noticed that Larry knows when the next turn, and while it does not come, he basically had nothing, only waited.

Thus, Larry is armed with 2 effective tools: one that focuses on the price, the other for a while. When the market traded in accordance with these two instruments, Larry places orders for opening positions, which are directed against the current trend in the market waiting for a turn. Larry is in the market at a price which corresponds to one of the Fibonacci levels of the preceding main motion. He always puts a reasonable stop-order as soon as he entered the market. Basically onrasschityvaet on the probability that the market spread and go to his party and the transaction will be successful. If the transaction fails, then its loss will be small, as protected by stop order. On the first day of our visit, he made a 7 transactions, 5 of which were winning and Losing 2, bringing him more than ten thousand dollars. Larry said that in a good day, he makes more than $ 20,000. And, of course, he expects to have good days, 3 times a week.

This method, as I noticed that Larry uses in his daily trade is that it monitors the correlation of its time to turn the market forecast. Let's call it harmony. If the graph shows a good correlation, meaning that the actual Facing occur within 15 minutes of projection time for a turn, and had the right direction entering the turn, then Larry will be confident in the temporal prediction and uses the schedule for the trade. If the correlation is not the case, the schedule is ignored. Thus, the market should be in sync and harmony with his time forecasts at its 2-minute charts.

Then, if the market is time to change the trend, Larry uses the Fibonacci levels from 5 "sacred" numbers, to see what level should be used as a price to enter the market. We watched a deal on the S & P, which he carried out - the market has fallen, but was slightly above the 1.27 level. It was time to change the market, he placed an order for the purchase of S & P at a price of 1.27 and placed a stop order a few paragraphs below. A few minutes later, S & P touched its price, traded above it for a few ticks, unfolded, and then traded up, exactly in line with expectations. I was very impressed by watching the master at work when he chose the time and turning, and turning the price. Then he turned his back to the computer and is fully focused on our conversation, no worrying about their transaction. Time for the next rotation, it was over 35 minutes, respectively, in the next 35 minutes did not require any intervention. Perhaps he had raised would warrant a stop to break even. But he wanted to show high confidence in their transactions and their tools of choice for the price and time.

Larry uses "Ensign", an older version based on DOS, written by "Ensign Software" and very popular 10 years ago. He also has the program "QCharts", but it seems to have used them as a support. His screen shows one or two graphics. He does not use any additional technical tools. During the trade, he just looks at the 2-minute charts. His charts include its own instrument of time, and Fibonacci levels, which take place when the price is to be selected to trade. If the market is at a level of 0,618, the price will be used. He does not know in advance how much profit should be after the transaction from the market. It trades based on knowledge of the next rotation, and takes the price which is at the next level of Fibonacci, when it comes to changing the trend.

While the Fibonacci levels are available, almost any software package, tool timing, which uses GEL, is its own development and not available in other software products. In doing so Larry kept it secret. Therefore, you can either try to find a tool for self-timing, or I can offer you the next set of tools of choice of time:

1. First, the use of Fibonacci levels, measuring the previous motion and calculating the percentage of using the "sacred" numbers - 0.618, 0.786, 1.00, 1.272 and 1.618.

2. Use the method Pyramid points, which suggests price levels, and measures the time. Many of the market turns occur at the end of the square. (for details, see "The Pyramid of the market" at number 18)

3. Use a fan from Hanna held a significant minima and maxima of descending trend upward trends and look for the intersection of the fan lines between themselves and with the contours of the maxima and minima. (for details, see "Market Hanna geometry" in the number 21)

4. Use a series to find recurring patterns. For example, lunar phase, etc. (for details, see "Lunar phase market" in the number 19)

Below is an example of the use of cycles as an instrument of choice of time.

example of the use of cycles as an instrument of choice of time.

This graph illustrates the use of Fibonacci levels in combination with the tool of choice of time (in this case series). Tool cycles shows an example of the minimum opening and a minimum mid-day. Connection tool of choice with the Fibonacci levels would carry out the purchase on 30 May at 12.00 at 127% at a cost of 9.45. This is not an example of one of the transactions Larry, because Larry does not consider any shares and $ 20 cheaper than using the tool of choice for its cycles of time. As an example, was chosen as a random graph to illustrate the principles described.

Of course, the tool of choice of time, Larry uses a more accurate and verified on a large number of data. His instrument gives him a competitive advantage over other traders, and significantly increases the likelihood of a successful trade. This is indeed a pleasure - the work of craftsmen who feel comfortable, confident and very successful.

Howard Arington
www.ensignsoftware.com

The Oracle of Omaha. Warren Baffett

Warren Baffett usually referred to as the "Oracle of Omaha" because he hails from Nebraska, Warren Baffett universally recognized as the most prominent investor in undervalued assets. Due to its ability to identify undervalued companies and buy them on the cheap, Baffett during its fiftieth career made many people very rich. Its share in the company "Berkshire Hathaway" is 38%, giving him a net worth more than $ 32 billion, and makes one of the richest people in the world (the second after Bill Geytsa). He is also one of the few who have earned such an impressive state solely through investment in the stock market.

Baffett realized the error of investing in the University of Nebraska, where he read the book, Benjamin Grehama "The Intelligent Investor." Book Grehama advised investors to look for stocks that are trading significantly below their actual value, which provides a margin of safety.

Baffett fully explores the business and buys it only depreciated prices. This practice, which was essentially invented and defined Grehamom, gives him the so-called "margin of safety to all its investments. This margin is the difference between the true value of the business and the price of his shares.

Baffett invests in companies with superior economic characteristics, which are managed success, qualified team of managers. He also looks for companies with long histories of above-average income growth. And unlike many other investors, Baffett does not pay attention to the fluctuations in the stock market, macroeconomic and market predictions. Instead, he simply maintains its long-term investment plan. While the company's fundamentals do not change, Baffett will not sell it - even in times of economic crisis.

Here are some other characteristics that Baffett consider when evaluating investment opportunities.

Easy to understand the types of business
One of the principles of Warren Baffetta is not much different from the principles of Peter Lynch - works so that you understand and choose investments with which you feel comfortable. Baffett perhaps one of the greatest and most respected investors of all time, carefully selecting the option shares, said investors should not complicate things, looking for challenging us.

Following this strategy, the safest an investor holding a "Berkshire Hathaway" from the fast-growing high-tech shares. Baffett admits that he did not understand quite well the high tech business. Also, it avoids the industry as a whole. Before investing in any business, Baffett trying to predict that the company will present itself in the future, after 10 years. The high-tech markets change too quickly to deal with them so far with some confidence.

High return on assets
Baffett stresses that the return on assets is a key measure of profitability of the company. He prefers to invest in a company where he could confidently predict the future earnings of at least 10 years. He particularly likes companies that do not require large capital investments, because they tend to produce much higher return on assets. Constant flow of cash Baffett also looking for companies with substantial free cash flow. Always mindful of the risks associated with investing, he ensures that his company is enough money to invest in their growth after they have paid on the accounts.

Limitation of indebtedness
In the 1990's Baffett bought the insurance company "Geico" and "General Re", because he liked both companies to limit and manage their debt.

Baffettu also liked "floating money", which involve the insurance business. Policyholder to pay premiums in advance, and payments for claims occurring later, thus, the insurance companies is a steady flow of cheap money that can be used. And who better than itself Baffett will be able to invest the money?

Quality Management
Among the most notable aspects of the selection of shares Baffettom is that he is looking for a quality company with quality management team. When Baffett buys a business he bought with his management. Baffett looking for people who are just as enthusiastic of their business, as he is investing.

* During 2002, we entered the market of foreign currency for the first time in my life. In 2003, we increased our position, because I am becoming more and more are set to bear against the dollar, "said Baffett. He made it clear that he does not quite feel comfortable, personally or professionally, while working in the foreign exchange market. He explained that the trade deficit scared him. He noted that "Berkshire Hathaway" holds approximately $ 12 billion in foreign exchange contracts in five unspecified currencies. He also said that "Berkshire Hathaway" has a high yield bonds denominated in Euro of approximately $ 1 billion.

Forex Magazine
based on streetauthority.com

Revelation Of The Trader

To the world stock market trading, I got when I was 12 years old. It was true. My parents left on a business trip, leaving me in the care of grandparents. Once, he took me with them to lectures by before some very serious people. I was very impressionable child, so after the lecture, attended in addition to its desire, my imagination was shaken to the ground, because within two hours I had to listen to on shares, bonds and currencies. About how they change their prices in a few fractions of a second, as some people make millions in this state, while others lost in an instant that the earning years. Now you understand? I got to the lecture, a discussion of open trade. After it I went to the same door, which went down, but it was a different world. In the courtyard stood the year 1977.

You ask where my grandfather knew about such tricky things in this already seemingly distant 77 th, when the adjustment to be a good decade? It's simple - he worked in the stock market with the 46 th year. No, I live in Russia, and has always lived in it, but my grandfather did not live in America, not Germany, not even in Israel. He was born deaf in the village, where some of Tver, there is nothing left except porosshih thistles skeletonize chimneys. And it did not change citizenship.

He worked all his life to the Party and the Motherland, by some secret business abroad. I do think the grandfather was kontrrazvedchikom, although I do not know for certain - he never talked about it, but I have not tried it out anything. But I know for sure - he was working abroad at that time almost all the major world stock exchanges, trading stocks, bonds, warrants, options and commodities. And as you now guess, the experience he had not a little - no less than 30 years. Experience, respectively, as well.

If you are trying to envy me, then nothing. Grandpa almost anything I have not passed their knowledge. And now I will tell you why. Exchange disease struck me in boyish age, when the thought to pull girls in braids, and shoot catapult read Mayne Reid, and grandfather told me: "Vnuchek, learn, you still is too early, and without any knowledge of you there propadesh" - on the stock exchange, course. Soon he moved to another city, where the climate was better for his health, so I saw it very sparingly - only in the holidays.

Then - Institute, and meetings have become even shorter. But I always remember the contagious sense of delight, which felt many years ago, when he first heard about the exchange. That is why I was looking for every way to it, and now 85-m long, opened her first trading account. Luckily, I knew almost all buddies grandfather, who also knew something, they are something and prompted me, how and what to do. When in Russia running Exchange, I already knew well what it is, and just as many have been encouraged by the new prospects, kazavshimisi such bright at the moment. But I will not trifle soul, revealing the sick, and the better will continue, slowly move quickly to action.

I must honestly admit, I'm not one of the successful traders, although I managed not to lose money. Mistakes were strandartny. I came out of the trend too early, as soon as possible haste to take profits, while you had the opposite - to build positions. A loss allowed to grow beyond measure, and experienced fear from them. Of course, I was able to make money, sometimes substantial, but also had a lot to lose. Therefore, putting a hand on heart, I realized internally that I am either unable to achieve success on the stock exchange, or clearly doing something wrong. But to accept this could not - I do not allow my pride and a desire to satisfy his morbid self-esteem. What I did only try, which only the methods of analysis or engaged - nothing helped.

Being desperate, I decided to go on vacation and went to his grandfather. He lives now in Sochi, so everything was at an opportune moment. Being in a dejected state, I do not udosuzhilsya send him a telegram, so nagryanul as snow on the head. Arriving late at night, I expected a catch dedulyu in bed, and before lamenting the fact that I have to wake him. The mood has improved a little bit of a door, I quickly opened the "incoming" housewife. And the next minute of all my painful thoughts no trace - they completely wiped astonishment, emerged at a time when I entered the office grandfathers. It appears painfully familiar painting, is often a vision in many treyderskih institutions rasplodivshihsya recently in Moscow: my grandfather sat in a huge leather chair, vperivshis four huge computer monitor and to enjoy zhmakal on the mouse, shnyryaya quick look at running a line quotations. He traded in the market! And it was a Level Two NASDAQ!

Yes, in the past he has worked on the exchange, but it was completely different times, when the applications were sent by telegraph or telephone, the prices do not behave madly, and the acme of perfection is the ability to make and read graphs tic-tac-toe. And besides, as far as I know, moving away from business, his grandfather as something not particularly sought for the active exchange activities. "Apparently, something happened," - I thought, and felt right to wait until the end of trading session, to begin to Questions, so after a brief greeting, preferred to move into the living room. Fortunately, had to wait long, bidding in America will soon end and grandfather prisedinilsya to my late dinner.

Dying with curiosity, but knowing that my grandfather was not for that did not break, if it is to ask directly, I made a sly maneuver, beginning with recollections of the lectures in the 77 th when I was infected stock fever, and then moving on to the story their successes and failures in the stock market game, in the course of thinking aloud on the market. As might be expected, at first just to listen to me, a grandfather at one point and led the revival in the conversation. Read more - more, and soon I learned it all: it turns out, intrigued grandfather of the new technology in trading industry, and studied their development, he could not deny ourselves the pleasure of old shake and try to move away from the conservative portfolio, which reviews them every few years, to active management. Quickly found out that this approach allows to make money in the correct and reasonable actions, grandfather and easily without much resistance podsel "at the needle exchange game.

Now I muchil only one question: "How successful have been able to sell grandpa?" Like read my thoughts, grandfather somehow out a subtle gesture from the inner pocket sheets with the lists of transactions, and gave them to me, with the words: "If you do not understand, then I'll explain." Mechanically, I took them and spread. Previously visited my amazement, it was nothing compared to brought before me, when I began to consider recording dedushkinyh trade sledok.

He had no minus!

He sold only with a positive result!

His actions were not flawlessly, but the result still appeared on the basis of positive!

How is it possible? I could not understand, because in reality, the portfolio consisted of a thick batch of shares and options available in abundance and in the short and long positions. I was to discourage, and could not get in the sense where the money is taken. Then I came to the aid of his grandfather, saying that he works mostly with the volatility, which has learned from Western books.

"If you examine some of them, then you will understand how to make money," - said his grandfather, looking cunningly at me. Meaning podkovyrki it was clear to me - these books were published in English, and although he was not a mystery to me, but I am lazy to read, with a propensity to Russian version. "If you prefer books in Russian, then I can reassure you, - said his grandfather - I have heard that is preparing a number of books in Russian. The conversation that took place at the beginning of 2001.

Pogost with grandparents and looking at its strong stock life, I realized: for me all is not lost. Of course, I knew little of the stock prodelok grandfather. But understood one thing: he tried to take a little, fixing the small share of profits through rehedzhirovanie. His only option was a combination of me not entirely clear, although I knew that the options and how they can be used, but never assumed their hidden capabilities and a high flexibility. Returning home, I bought a book recommended to them, but certainly not udosuzhilsya to read until the end because I was scared of enormous thickness, ??????? which was more than my Force. Looking after some time on the Internet, I discovered that indeed - a book: Chekulayev, Tomset, Connolly, and I was among the first buyers.

I read all night, and had not yet reached the last page, could not stop. I have captured the spirit, as understood: all that before I did - it was empty pastime and the money - that they were lying on my legs. Understood the main points and understand the approach to the option trade, where the main thing is to find the right price and performance series, I quickly podnatorel in this field, starting finally to get pleasure from trading on the exchange. My account started to grow, but most importantly - I found that I feel much better because of the psychological mood of comfort.

This is the most wonderful - to be in excellent spirits, without worrying about where to move prices: up or down. In any case, I have a profit, and left only a few - to take it slowly and not greedy. Reading the excellent work of Kevin Connolly "Buying and selling volatility", published in Russian, supplemented my knowledge of the world's stock option trading, which manages all the volatility, allowing you to remain market-neutral, and not even look at where the prices - profits are still provided . Index - all precisely calculated, not to be greedy and have patience.

So, now that I have used in my trading practices? It is very simple, basically - is buying or selling a strangle streddlov. Typically, one "leg" is made up of shares, and another - of options. Due to the fact that call options are traded more actively, personally, I prefer to stand in shorts the stock, while buying some call-laundering, using the delta-neutral. As a result, all my short positions on shares and at the same time I was not worried that prices will rise suddenly. And I must confess frankly: I'll stand in them for years. If you are interested in a list, it is not secret: for example, I am in short on the shares of Microsoft (MSFT), Oracle (ORCL), People Soft (PSFT), Qualcomm (QCOM).

The most curious to me the situation with such a paper as People Soft (PSFT), which I had some interesting conflicts. I ran into it recently, in February when she was in the region of $ 40. Selling 200 shares and ???????? 3 January call with the price performance of 40, I actually created a long streddl, where at the bottom of the market gains, I had a short action, and at the top - long call. This is - a standard initial position, with the purchase of volatility. What happened during that period, while I hold this position? She happily went down to 18, and all the way, I buy little by little his shorts.
In the course of this downward trend, while she was somewhere in the second part all the way down, the unexpected happened: suddenly received a notice from the broker that they could not make shorts for this paper. And I should doprodavat at any price. What to do? What would you do personally?

Fig. 1. Here is a whole period in which the strategy of "buying volatility" by Connolly on PSFT (Nasdaq).

Fig. 2. Type curve gains / losses in the original position on the PSFT (Nasdaq) - turn up in both sides of the legs show profit regardless of the direction of the trend: whether it is up or down. The whole focus is to gain time to collect. The schedule is created by using a program that came with the book, Connolly K. "Buying and selling volatility."

I do not even pomorschilsya, but quickly changed their position, using synthetics, the benefit at that time there were market differences that have led to a further cut in the amount of risk-return 4.5% per annum. Although I have the paper in long, but in reality I was still standing in shorts and all - through the options! If I did not know how to create a synthetic position, equivalent to shares, excluding options, but where there is nothing, it certainly would have been in a quandary.

Now that the action again and went back up above 40, I continue to remain integrated in the short equities, but now I receive benefits from their call options. And it does not matter whether the paper will be to new heights, or again go down. Important variations, and I need every day to produce a minimum profit through the operation with small lots of shares, covering losses from ending the time value of options. I must immediately warn: the main problem with this trade - it is a commission, which must be small so as not to work for a broker. Such cases now. I will not describe the many strategies and approaches - better than you to read these books, even if you're never going to trade options. Because that can always arise, a situation in which for you would be hard to leave the position, but knowing how the options, you will always be able to withdraw from the difficult situation.

And besides, you can not suppress the extremely high leverage inherent in options. For example, recently I watched as an option, worth 75 cents, which was required for a contract total $ 75, the day became cost 1.50 dollars, giving a 100% profit excluding charges. A few days later, the option traded at 7.50, providing the contract price of 750 dollars, that is, profit was ten, with limited risk, which was exactly equal to 75 dollars. And the whole business was something - uglyadet increased activity of buyers and an unusual increase in open interest. So my advice to you: do not pass by apparently attractive opportunities and be more flexible in their views - and the luck is coming to you. Me she smiled when I realized that such options, and how they work, and all that - thanks to a remarkable book, which I highly recommend you. And do not forget: they have no analogs and is doubtful that they ever appeared in Russian.

Vladimir Shapovalov
www.intrend.ru

Candidates for the euro vulnerable to speculators

George Soros, the famous investor, responsible for the fact that Great Britain withdrew from the European exchange rate mechanism, said that the currency in Eastern Europe are "vulnerable", as prepared to be tied to the Euro.

Countries must adopt and maintain corridors Mechanism currency exchange rates as soon as possible, before joining the euro, said George Soros to journalists at the annual meeting of the European Bank for Reconstruction and Development in London. Ten new countries join the European Union on May 1, 2004. and some of them are planning to enter into a mechanism of exchange rates in the near future, so that they can adopt the Euro in 2006.

George Soros in 1992. made more than $ 1 billion by selling the pound because Britain tried to prevent the fall of the rate below the boundaries set by the mechanism of exchange rates. Hedge funds may try to repeat his success, as well as Estonia, Latvia, Lithuania and Slovenia aspire to join the euro, after 10 countries join the European Union.

"There is a risk of breaches boundaries currency corridor," said Soros. "This is a rather precarious situation because of the openness of the currencies and the relatively small reserves, available to governments to protect the exchange rate."

Lithuania, Latvia, Estonia and Slovenia are expected to be among the first to tie their currencies to the exchange-rate mechanism after the accession to the European Union, possibly as early as late 2004.

Lithuania do not have to worry
"We are not concerned about the speculation against the currency because the currency in Lithuania is already pegged to the euro and not floating freely," said Deputy Minister of Economy of Lithuania Neridzhas Eydakevichus at a meeting of the EBRD. Latvian and Estonian officials have also said previously that they do not expect problems with the accession and hope to have the Euro, at the latest by 2007.

Lithuania better all ready to join the mechanism of exchange rates and could be a first, said a representative of the International Monetary Fund Zuzana Briksiova.

The Minister of Finance of Hungary Tibor Draskoviks said that the country will seek to adopt the Euro in 2009 or 2010 and to postpone adoption of a mechanism of exchange rates prior to that time. Hungary meanwhile, will try to convince investors that it will help reduce its budget deficit to a maximum level of the European Union, said Draskoviks.

"Accession to the mechanism of exchange rates to ensure stability in exchange rates, particularly for countries whose policies are" not built "in the accepted framework for the EU," said George Soros. "Hungary has suffered from currency instability," he added.

EU officials said that new members must be able to fulfill the conditions required for the adoption of the Euro, before they join the exchange-rate mechanism, but should not try to restructure their economies, even after joining the Mechanism. Otherwise, this could lead the attack of speculators, they said.

No hurry
"Hungary was advised" not to hurry, better come when the conditions allow, than to join very quickly, "said Secretary of State, Ministry of Finance of Hungary Elemer Tertak in a television interview at the EBRD meeting. "Accession to the mechanism of exchange rates, of course, would have provoked some speculation."

Poland and the Czech Republic, is unlikely to be able to adopt the euro before 2010. Because of their higher budget deficits, said in the "Standard & Poor's" in this month.

Countries participating in the mechanism of exchange rates may allow their currencies to float in the range of plus or minus 15 percentage points against the euro.

Minimum stay in the mechanism of exchange rates, according to the laws of the European Union two years, but several countries have tied their currencies to the euro, including Estonia, will be allowed to move faster because they have already demonstrated the stability of its currency against the Euro.

John Major and Norman Lemont, British Prime Minister and the Chancellor at a time when Britain emerged from the mechanism of exchange rates on 16 September 1992. On the day called "Black environment, Lemont demanded from the Bank of England to raise interest rates to the level of 10% to 15% in the unsuccessful attempt to support the pound. "Quantum Fund" George Soros benefited from this situation, as the pound fell against the German mark and other currencies.

73-year-old George Soros, who now spends much of his time to charitable projects, said he would not speculate on currencies of Eastern Europe.

Forex Magazine
based on www.bloomberg.com

The financial manager and investment guru

Now being retired, Peter Lynch has earned a reputation as one of the most successful financial managers in the history of the time when he led the fund "Fidelity Magellan" in the period from 1977 to 1990. During these 13 years, until his retirement in 1990., The fund has held the top ranking among the lines of mutual funds. $ 10,000 investment in the "Fidelity Magellan fund" in 1977. to 1990. would have grown to $ 288,000. During this period, Lynch has reached an average annual return of 29%.

When Lynch took management "Fidelity Magellan fund" in 1977., The fund had in managing assets worth $ 20 million. By 1990. when he decided to retire, the cost rose to $ 14 billion. During the 13 years that Lynch managed the fund, "Fidelity Magellan fund" has not been able to beat only twice Index "S & P 500." No financial manager in history has ever managed such a large fund has done so successfully and for so long. What is striking is the fact that Lynch was able to maintain such a high rate of return even after the assets of the fund razdulis.

Although it is very difficult to imitate the style of management of investment portfolio Lynch, he insists that small investors can explore market-based instruments better than most professionals. This is because individual investors are often better positioned to identify attractive investment sooner. In addition, they are always free in his actions. On the contrary, many Wall Street professionals with limited committees, guardians and supervisors.

Here are some investment principles of Peter Lynch:

Buy what you know
A key principle of Lynch is that you can identify trading opportunities, concentrating on what you already know. Lynch has always invested in the shares of those industries that he understood, even if it worked in the business sector or industry, forecasts that have been faded. One such example was his investment in Chrysler in 1980th years. Chrysler then has been on the verge of bankruptcy, but after review of test samples of its new minivan, Chrysler Lynch made one of the best assets of the Fund. Chrysler has increased in price more than tripled over the next few years.

Acquire a good opportunity
Lynch has always hunted for profit opportunities than average. Although he loved undervalued stocks like Chrysler, it has also invested in the promising growth stocks, such as "Hanes Co". Shares "Hanes Co" have grown six-fold over time when the "Fidelity Magellan fund" to keep them.

Yield, price, and a good business model
Lynch, in general, considered the three qualities of good company: profitability, price and a good business model.

Key points that Lynch advises to check:
1. If you are impressed by a certain product or service, make sure that this was an adequate percentage of the total sales of the company and made a significant contribution to profits.
2. Give preference to companies with strong positions in the cash.
3. Give preference to companies with a good ratio of price to income, which is currently lower than projected.
4. Avoid companies with high debt to assets.
5. Avoid slow-growing and cyclical stocks.

Do not keep cash
You should always stay fully invested, otherwise you may miss the market rises. Ignore the market ups and downs. Your profits and losses do not depend on the economy as a whole. Buy whenever you hit an attractive idea to the relevant history.

Know when to sell
Sell your shares when the company's long-term growth rates are beginning to slow.

Sell shares of fast-growing companies, which seems to be no room for further expansion or the expansion only leads to poor sales and disappointing profit growth.

Forex Magazine
based on streetauthority.com

Learn From The Legendary Traders!

What distinguishes the best traders in the world of the average investor?

Can the average investor to examine the success stories of the legendary traders and they use the system?

What is common in the actions of the most famous traders, which may take the average talented trader?

Before we will provide answers to these questions, let us look at some of the most successful legendary traders:

- Nicolas Darvas made $ 36,000 to $ 2,000,000 over 18 months!
- Ed Seikota of $ 5,000 was $ 15,000,000 after 12 years!
- Jesse Livermore made a multi-state in early 1900
- Richard Dennis made 100 to $ 200 million
- George Soros is believed to be one of the greatest traders of all time!

The result is very impressive and to this list could easily add some other prominent traders. So why do they have such good results?

There are several common factors that are observed in the majority of successful traders:

- They have a system in which they are strictly followed.
- Most of them has a style of trading following the trend.
- Most of them are medium-and long-term approach.
- They are not subject to either fear or greed.
- They have the absolute discipline and a 100% follow their system.
- Their trading plan in full, they are ready for all scenarios in advance.
- They know that the system passes through the bad times and good times. They reduce the losses as soon as possible and give the profits to grow.
- Their system matches their personality.

Some of these points sound logical and likely, many will agree with them. But in reality, the average investor behaves perfectly in another way. Some of them burned a finger "for the past three years, and some even lost their status. Here are some examples of observable behaviors:

- On time is not reduced by the loss.
- Short-term investments perederzhivayutsya in the hope of a recovery in prices.
- People listen to the advice of his investment brokers and analysts.
- People are investing in hot stocks recommended by your friends friends.
- People do not have any plan for their investments.
- Management of capital is not in any way contemplated.
- People using the styles of trade, which do not correspond to their identity.
- They are filled with greed and fear.

What can the average investor is able to draw from the above, and how to avoid these mistakes? Here are some useful points that can be gleaned from some of the most successful traders:

- Each investor has its own personality. Some investors have a very aggressive trade and trade often. Some preferred shares, as other have more risk and investing in options. Others want to spend a minimum of effort.
Investors should understand your own profile and choose a style that matches his personality.

- Trade should be fully planned in advance. People planning to many of their actions, such as travel on vacation, moving, etc. But whether they have a plan where to invest?
The investor must have a system that will help him be prepared for all scenarios of trade. There is a need to know in advance where to buy, how much to buy, where to go. As a trade, the price instrument (share, option, currency, etc.) may not be influenced by the normal private investor.

- The most important component of the Trading System is the management of capital? Surprised? Many investors and traders spend most of their time developing a very complex system of the entrance to the trade. But the entry strategy contributes only about 15% in the success of the trade system, based on academic studies.
The most important issue of Trading Systems - this is how much to invest and how many positions to keep any one time.

- For a successful trade relationship is required, you can do. " 99% of the world's population may have a dream, to be materially independent, but only 5% achieved this. Why? Because with phrases like "... it would be nice, but I can not ..." or "... perhaps one day I win the lottery, but so far I have to work hard ... they have already lost.

Tom Meier
www.selfgrowth.com

W. D. Gann. The greatest of men

W. D. Gann. The greatest of men, there are ever on Wall Street

W. D. Gann went down in history forever, because he was one of the greatest men of his time, which led to the thinking and insisted on the study. His methods are still used by successful traders in the world. Without a doubt, the name Hanna is legendary in the exchange world.

Biography

William Delbert Gann, better known worldwide as VD Gann is a legend in the world of stock trading. He was one of the most successful ever lived, the market traders.

W. D. Gann was born June 6, 1878 on a farm about seven miles from Lafkina in Texas. He was the first of 11 children of Sam Houston, Hanna and Susan Gunn. Hanna family lived in a small house with no sophistications. They were poor, young Willie walked for seven miles in Lafkin over three years to attend school. His father was a farmer in Angelina Country. They are worried about the price that will bring their cotton. If you asked a young Willy, like whether he will be when older, also treat the soil in the eastern part of Texas, he is likely to say "no", he did not think so - he wanted to be a businessman.

But the work that he could perform on the farm was more important for the family, so that William had never finished elementary or secondary school. As for the eldest son, to him leaving las special responsibility, and those years of work on the farm, perhaps the beginning of his habit of hard work.

A few years later, William worked in the brokerage office in Teksarkane and in the evening attended a business school. In 1903. William made a fateful move to New York at age 25. Gann began trading on the commodity and stock exchange. In 1908. he opened his own brokerage office "WDGann and Co.", at the corner of 18th Street and Broadway.

During the First World War, William Gann predicted the November 9, 1918., Kaiser abdication and the end of the war. W. D. Gann, whose traders are known today, appeared in the "roaring twenties."

Significant predictions and Trade Record
Using your own style of technical analysis, Gann earned more than $ 50 million profit on the stock market! In today's market it is up to about 500 million dollars! After many decades of incredible success, Gann moved to Miami, Florida, where he continued his research until his death on 14 June 1955.

Gann based his methods of trading on the "time" rather than "price", like many of today's systems. This allowed Gannu to determine not only when to change the trend, but also the best price to enter or exit the market. Methods Hanna were so accurate that in the presence of the core financial audience, he made a 286 transactions during the 25 trading days, as long as well as the short positions. Of these, 264 transactions were profitable! In 1933. Gann 479 undertook a transaction during the year. 422 were profitable and 57 were loss making. Revenue at its capital amounted to about 4000%. In most cases, Gann provided in advance the exact prices at which certain stocks and commodities will be sold, together with prices close to the then prevailing values, which were not affected.

During his career, Gunn continually repeating these incredible sales gains, giving the surprising forecast for multiple markets for the year ahead. Gann used the law of nature, and geometric proportions, based on the circle, square and triangle, which is as effective today in the stock and commodity exchanges, as well as 50 years ago. His methods work in any market and time interval. His methods seem to be many traders a bit unusual, even mystical, but in the last century have confirmed themselves again and again.

His instructions were supernatural

In D. Gann was a "scientist of Wall Street." He could predict the peak year for bovine market. One of its remarkable achievements was the forecast for shares in 1922., Released in December 1921. The forecast indicated the first peak of bull wave vaprele, the second peak in August and the last peak and the end of bovine Market October 8-15, and not as strange, the average price of twenty industrial stocks reached their highest levels on 14 October and declined by 10 points in thirty days from the that date. Gann predicted a large decline during the month of November. He said in the forecast: "10-14 November panic fall. During this period, a serious decline in the shares will take place, many will fall by 10 points or more in four days, and 14 November have been achieved the lowest average price for 1,500,000 shares, traded on the New York Stock Exchange.

People were struck by the remarkable results of Hanna predictions based on pure science and mathematical calculations.

His expertise lies in his own words
"During the past ten years, I have all his time and attention devoted to speculative markets. Like many others, I have lost thousands of dollars and experienced the usual ups and downs of a newbie, which is in the market without prior knowledge of the subject. Soon I began to understand that all Successful people, whether they are lawyers, doctors or scientists to spend years learning and study of their profession or occupation before you earn on this money. "

These words of Hanna will go down in history forever, because he was a great man of his time, which stimulated the thinking and research. History repeats itself. Greed and the desire big profits do not change. They are inherent elements of human nature, and these elements affect the average person and lead to losses in its investment or speculation. This is one of the valuable lessons that we learned from Hanna. Without a doubt, the name B. D. Hanna is indeed a legend in world trade.

Forex Magazine