If Mr Trump has his way, other countries will probably respond by slapping their own tariffs on America. The spread of universal tariffs would be akin to a giant tax on cross-border transactions, making international commerce less attractive. Meanwhile, Mr Trump’s hopes of shrinking the trade deficit would run headlong into the economic forces that actually determine the balance of exchanges between countries. In America’s case the crucial factor is the country’s low saving rate, which is almost certain to continue as a result of persistently high consumer spending and widening government deficits. Project 2025, a coalition of conservative groups, published a book earlier this year with blueprints for almost every facet of government during a second Trump administration. In principle, reciprocity could be achieved in two ways—either by persuading other countries to lower tariffs or by America raising its own.
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One of the strengths of “A Man for All Markets” is Thorp’s ability to explain complex financial concepts in a clear manner. He provides readers with detailed explanations of rewarding https://forexarena.net/ investment strategies. These included quantitative analysis and his approach to risk management. And give a behind-the-scenes look at his life as both a gambler and an investor.
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There are plenty more ideas and lessons that I took from Thorp’s memoir, but I prefer to end the post here. If you haven’t yet read Thorp’s book and hold an interest in blackjack and/or investing, do check it out. As an independent learner and critical thinker, Thorp preferred to check things for himself – a recurring rule in his book. He approached life rationally and witheld judgement until the evidence arrived.
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- It also means that better situations tend to come towards the end of play.
- This is part of an attempt, still in its infancy, to lessen dependence on China.
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Although Mr. Buffett’s style of investing extended far beyond Mr. Thorp’s activities, he apparently had a positive overall assessment since Mr. Gerard ended up investing additional funds with Mr. Thorp. Throughout his life, Thorp has been recognized for achievements in mathematics, finance, and as a professional player. He became a Blackjack Hall of Fame inductee in 2002 and the Gambling Hall of Fame in 2017.
Ed Thorp’s Life Story
He recalls how ‘experts’ would tell him about the futility of beating the house at blackjack. But Thorp checked the math himself and devised a winning system in turn. While this example speaks more to his genius, the practice of checking things for ourselves is a good one. Thorp highlights the power a man for all markets of models for decision making and how we should discover the rules to models through experiment and observation. But we have to remember that models are only a “simplified version of reality”. Unlike the physical laws in science, theories that describe human behaviours are rarely unchanging.
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This was the first hedge fund to use quantitative analysis and computer modeling. The fund was incredibly lucrative, earning an average annual return of over 20% from 1983 to 1988. “I formed the habit of taking the result of pure thought—such as a formula for valuing warrants—and using it profitably,” he writes. It’s the kind of thing any would-be investor, to say nothing of casino cowboy, ought to read. “Beat the Dealer” is regarded as a classic book on blackjack strategy and card counting.
His subsequent book, Beat the Market, co-authored with Sheen T. Kassouf, influenced securities markets around the globe. Thorp is one of the world’s best blackjack players and investors, and his hedge funds were profitable every year for twenty-nine years. Thorp’s early focus on the nuances of blackjack card counting may not be of great interest to money managers, but he provides enough details on his research process and trade testing to keep readers engaged. From blackjack and roulette, where he helped develop the first wearable computer, Thorp moved on to the “big casino”—that is, Wall Street. Professional investors can learn much from Thorp’s application of his gambling-based methods of solving problems, measuring probabilities, and formulating choices to stock and options trading. Ed Thorp is not well known among money managers, but he is held in awe by traders as a polymath, successful card counter, mathematician, finance specialist, and hedge fund manager.
When Thorp’s blackjack reputation gathered acclaim, he found casinos taking increasingly aggressive stances to limit his returns. This ranged from the reshuffling of cards after every hand to outright barring from play. But eagle-eyed management countered with even greater surveillance. Since much of it serves to drive excess returns away, continued innovation appears key. Your odds in blackjack can improve or worsen as the game progresses.
As he admits himself, his motivation isn’t that much the hope of making large sums of money rather than the chance of doing something which people thought is not possible – to beat the house at roulette/ blackjack. Winning is the driving force and the world of gambling is the stage where he can try different strategies and techniques – counting cards, programming machines, portable computers, game theories. After getting an MA in Physics from UCLA and marrying his wife Vivian, Ed Thorp starts taking courses in mathematics and due to his natural curiosity begins a series of experiments with the game of roulette.
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One of my all time favorite books is A Man For All Markets and I was glad to see Todor Kostov picked the book to review. Todor is an experienced finance and investment professional who is captivated by the financial markets and is always passionate about reading, learning and exploring new things. A child of the Great Depression, legendary mathematician Edward O. Thorp invented card counting, proving that you could do the seemingly impossible—beat the dealer at the blackjack table—and in doing so launched a gambling renaissance. His remarkable success—and mathematically unassailable method—caused such an uproar that the casinos altered the rules of the game to thwart him and the legions he inspired. They barred him from their premises, instituted new rules, and put his life in jeopardy.
Edward O. Thorp is a legend in both the gaming and the quant worlds. The author of Beat the Dealer and Beat the Market, he went from math professor and blackjack whiz to renowned hedge fund manager. In A Man for All Markets (Random House, 2017), he reflects on his life and the power of thinking differently—and deeply. The eagerness to explore new ideas leads him to the opening of his next hedge fund Ridgeline Partners in August 1994.
So, Thorp has a warning for those who believe fervently in perfectly efficient markets. History has shown how cognitive dissonance can fuel “the lunacy of lemmings”. Thorp for example recalls the narrative between “fraudster or investment genius” that surrounded Bernie Madoff, long before his collapse. While Thorp was suspicious of Madoff’s strategy and returns early on, other investors found it easy to believe the genius narrative while Madoff’s returns were other-worldly.