Academia and the markets

I am in what I believe to be a very unique situation. I'll be heading to a school that has honed a huge number of successful money managers in the past 30+ years - especially for its size.

I will come to this program with few pre-concieved notions. I've watched how markets work from an "outsider's" perspective. By "outsider" I mean that I have not had formal accounting classes, nor have I ever taken a university-level finance course.

But, I have observed the markets for years. I've been a participant for even longer - and I've been an investor as a complete market idiot. Thus, I've some great experience in what NOT to do when buying a stock. Don't buy them because someone gave you a tip, or you like a company's product / think the product is cool. Don't buy when you simply *think* that a stock's price cannot go any lower. Don't even buy them just because a P/E is low.

I've also had quite a bit of experience as a much better investor. I've studied, and even profited from some of the runs that stocks like Research in Motion (RIMM), Apple (AAPL), and Valero Energy (VLO) have had in the past year. I've read countless numbers of trading, trading psychology, general investing, and money management books. I've won on positions, and I've lost on positions. LOTS of positions, sometimes using options as a tool to hedge risk or leverage price. Does B-School teach you what to look for en route to a possible short-covering rally? What, exactly, is WRONG with short-term profits? I'll tell you what, a dollar in my pocket today is much better than 2 in 10 years! I am not saying this is the only way to play in the markets, but they are ways that money can be made.

After all, that's the only reason the markets exist. The purpose the markets serve is to provide a place where cash transactions take place. In short, they exist to make money.

I will, nonetheless, come to the Applied Security Analysis Program at UW with an unusual, "real-world" perspective. In fact, my knowledge of the "real-world" way that the markets work in terms of greed, fear, and frequent irrational exuberance got me into ASAP. Had I not known about such things, I would have bombed the interview - the interview was a very specific and potentially intimidating exercise (however, I would like to toss out that my FBI interview in 2003 was much, much more intimidating - don't ask me for details, I signed a form that said I'll never disclose them and I am true to my word).

From my observations, the academics of the markets are great, but they are not always the most important thing. I have yet to even begin my copy of "When Genius Failed: The Rise and Fall of Long-Term Capital Management", but I plan on reading it during my off-time this summer. Just because a stock is "worth" something, doesn't mean its price will get there. I've seen it. Frequently. Sometimes it will get there, and sometimes it won't. The markets are a great price wargame, unfolding every second of the day.

So, will I battle the very people I am paying to teach me in B-School? I don't know. Time'll tell on that one.