What I Learned Losing a Million Dollars

The attention-grabbing title summarizes Paul’s transformation of personal experience into a trader’s primer: before people try to make money in financial markets, they need to learn how not to lose it. Paul (1943–2001), who was first v-p in charge of Morgan Stanley Dean Witter’s international energy unit and governor of the Chicago Mercantile Exchange, and Moynihan (Financial Origami: How the Wall Street Model Broke) detail Paul’s fascination with making money and recount the collapse of his freewheeling life as a commodities trader. Paul mourns his inability to glean universal guidelines from the aphorisms of market experts. His acknowledgement that small losses are inevitable for all investors provides no guidance on more basic questions, such as whether individuals should stay with long-term mutual funds or avoid investing altogether. Although Paul states the need to distinguish between gambling, investing, and trading, his apparent assumption that investors can readily adjust their behavior remains unproven. Paul’s soundest assertion may be that it is essential for each market participant to find, and follow, a system of analysis that works for him or her. Investors and would-be investors may heed Paul’s advice, but it will be for them to measure their actions against his golden yardstick. (Apr.)