I am very pleased to share this guest blog post from Dwight Sanders of Southern Illinois University. He wrote an extended review of the newly released book It’s All Speculation that it is well worth reading.
It’s All Speculation: Collected Writings on Markets and Trading by Thomas A. Hieronymus was originally titled A Revisionist Chronology of Papers by T.A. Hieronymus: A Consistency of Biases. A copy of the original resides on my bookshelf (shown in the picture below). As one of Ray Leuthold’s students at the time the book was published, I was fortunate to receive a hard copy (I was also fortunate to get to know Professor Irwin during his 1993-1994 sabbatical at the University of Illinois). Over the last 30 years, my original copy has been well-used and frequently consulted to gain insights into topics ranging from margin levels to delivery specifications to government programs. The academic community and futures industry are fortunate that Dr. Irwin has taken steps to make this book widely available. I have found the book to be full of hidden gems regarding topics that are still relevant for today’s futures industry. I am confident that readers will likewise be drawn to Dr. Hieronymus’ straightforward, yet colorful, writing style. In particular, the chapters covering futures trading, speculation, and price analysis are golden…but, first, a bit of background.
As a graduate student working in the Office for Futures and Options Research at the University of Illinois, I vividly recall Dr. Hieronymus (Tom) cleaning out his office in 1994-1995 and creating the first edition of this book. I was a direct beneficiary of the office cleaning, receiving a series of pictures drawn by one of Tom’s former students that illustrate the Chicago Board of Trade building and trading pits. I don’t recall the artist’s name (and can’t quite make out the signature on the pictures). But, the drawings are displayed in my office and are a nice reminder of Tom. One of the drawings is shown below.
Tom would bring in the worn manuscripts and (hand-written) author’s notes into the office I shared with Stephanie Spaulding—who would diligently provide the word processing. As clearly demonstrated in the book, Tom was always willing to provide candid observations and (strong) opinions. Case in point, upon landing my first job as a commodity analyst with The Pillsbury Company, Tom asked what I would be doing. I told him “deciding the best time to buy wheat and soybean oil,” to which he replied with a chuckle, “Be sure to give me a call when you get that figured out.” Bubble burst.
Tom bursts a lot of bubbles in this book. Speculation is good. Government intervention in markets is bad. Capitalism and free markets are definitely good. Socialism is bad. Prices work. These conclusions may warrant a modern trigger warning; but, they ring true upon any reasonable historical scrutiny. Tom plows a lot of ground in this collection. Here, I’ll touch on just one particularly insightful area: speculation and price forecasting.
Chapters 30, 31, 33, and 39 all touch on the interaction of speculation and price forecasting in commodity futures markets. Any trader who wants to better understand the game they play must read these chapters (along with Chapter 13 in Tom’s Economics of Futures Trading). There are thousands of books on speculation and trading, but most of them gloss over the basic realities of trading: “Thus, when the speculator enters the market, he is attempting to take money away from someone else who, in general, is most reluctant to lose,” (p. 262 ) and “It is from the mistakes of others that speculators make money and from their own mistakes that they lose money,” (p. 265) and finally, “…this is a game that requires talent, hard work, and discipline” (p. 266).
Clearly, Tom gave deep and thoughtful consideration to the “art” of price forecasting, speculation, and trading. A careful reader of these chapters will have a much better grasp of the core principles of the speculative endeavor: a point that is often glossed over by modern market observers. Dr. Hieronymus puts a lot of thought into the speculative pursuit and shares that wisdom throughout the book. The analogies and examples in these chapters are timeless. Perhaps he best sums up the crux of the endeavor in chapter 40: “Let he who is without humility trade oats, and he will learn.” (p. 396).
This is not generally a book that you will read from cover-to-cover. But, for those chapters of interest, you will read them word-for-word. Tom chooses his words carefully and the reader can extract real understanding with some close reading and reflection. Upon re-reading the book for this review, it is truly remarkable the insights that Tom had over 50 years ago that still apply today. Likewise, some of his views were well ahead of their time. For example, in 1984 he even hinted at the eventuality that computerized trading could eliminate the historical person-to-person trading in the pits (chapter 41, p. 419). As you read this on your smartphone, that may seem quaint. But, those thoughts were written at roughly the same time that Apple first introduced the Macintosh computer (1984) and well before GLOBEX (1987) or the World Wide Web (1989) were conceived.
Readers will find this book informative, entertaining, and thought-provoking. It’s All Speculation should be a cornerstone reference for all market regulators, agricultural policymakers, merchandisers, researchers, and traders.
Dwight R. Sanders
Professor, Southern Illinois University
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