: Ownership in a company through the purchase of stock. As ashareholder one participates in the success of a company without theobligation to attend departmental meetings, company picnics or sensitivity training seminars. And there’s no job interview so you don’thave to worry about concealing your tongue stud or borrowing a suit.Franchise: Information culled from a company’s marketing literaturethat investors interpret as evidence of competitive advantage.Goodwill: The difference between what an equity costs and what it is actually worth.Interest Rates: An all-purpose explanation for whatever happens.
346 Practical SpeculationIPO: The lowest price at which one will be able to purchase shares in anew company until lockup expiration or until the company’s true potential is recognized.Kondratief: According to Kondratief Wave Theory economic cycles lasting 50 to 60 years trump all other factors and render meaninglessour futile efforts to resist the inevitable booms and busts. This theoryexplains why only now, at the beginning of the twenty-first century,have we finally started to pull out of a catastrophic depression.Linux: A late twentieth-century collectivist religion practiced over the Internet.Lockup Expiration: The point at which the full complement of sharesfrom a recent public offering hits the market. See Supply and Demand.Momentum Play: An investment decision informed by the theory thatwhat goes up must go up.Penny Stocks: Extremely inexpensive equities that are worth substantiallyless than what they cost.Phrenology: A science that purports to identify behavioral characteristicsbased upon a mapping of the lumps and depressions in a person’sskull. Now discredited. See Technical Analysis.Portfolio: The itemization of an investor’s current blunders.Rally: A distasteful remedy for unwarranted bearishness. When theprices of equities within a sector (or the market as a whole) move upward simultaneously, the market is said to have “rallied.” This implies that the lower prices that resulted from the earlier “correction”were “incorrect.” Contrast with Correction.Stop Loss: The point immediately below which an equity begins a sustained rally.Supply and Demand: The one true explanation for the price of any equity.Sympathy: A manifestation of the grieving process. If an equity losesvalue because of mismanagement or the announcement of an SECinvestigation, other equities in the same sector may lose value “insympathy.” See Buying Opportunity.Technical Analysis: A form of divination practiced by investors to predictthe behavior of the market. See Phrenology.Turnaround Play: An investment decision informed by the theory thatwhat goes down must go up.Value Play: An investment decision informed by the theory that what hasbeen down for a long enough period of time must eventually go up.
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We began circulating the e-mails of Dr. Brett, Staricka, and other expertswho wrote in. A small feedback group formed. One of the earliest to enter thefray was Mark M. McNabb, a blues-and-barbecue-loving finance professor atVirginia Tech University. It was Dr. McNabb who articulated the approachthat evolved into our mantra:The imperative to specialize in Western society has always been an effort to improve one’s station in life. Walt Rostow, historian and economist, attributes muchof the success in capitalism to the early rise of productivity in agriculture, whichfreed many to carry out commerce and devote themselves to other areas of knowledge, especially scientific and technical knowledge.Today, we find even the most dominant firms, such as Intel, are motivated toacquire the knowledge of others (despite the depth of talent within their firms) inorder to progress and maintain their position in markets that are changing at apace unlike any time before in our history. In finance and business, specializationrequires the talents of many as new problems often materialize in unexpectedareas; a cursory look at the resumes of employees at any leading firm or investment bank, no matter how narrowly focused, will reveal a wealth of talent, knowledge and abilities.Markets today often present the investor with “information saturation” beyond one’s own ability to analyze. What is needed to parse through the mass ofconflicting bits is the views and experiences of many, to sort and order it into a rational framework. The challenge is that the framework is never static. It’s morelike a sandcastle washed out to sea by a torrent of new views and events every dayand rebuilt to a new form by those employing their best vision. By combining thedisparate talents of many, a consensus arises that surpasses the scope of a singleview. Through our assimilating and borrowing from past and present, rather thanrejecting the unknown on narrow ideology and training, the truth reveals itself.
As our group of corresponding speculators grew larger, a technicallysavvy reader, James Cornelius Goldcamp, set up a list so that all the readerscould see each other’s messages to us and from us. The resulting correspondence gave birth to numerous friendships and business relationships. Weheld a SpecList party one summer so that we could meet one another face toface. The event proved so enjoyable and fruitful that the Spec Party has become a summer tradition.We have benefited immensely from the exchange. Most of our columnsfor CNBC Money contain insights, some attributed and some anonymous,from SpecList members. Some members have written guest columns for us.We were so glad to see Dr. Brett land a Wiley book deal and a CNBC Moneycolumn of his own that we were able to overcome a slight feeling of havingbeen upstaged.
348 Practical SpeculationIt was Dr. Brett, in fact, who in 2002 penned the most eloquent explanation of what the SpecList is all about:The patron saint of the Speculation List is not Victor Niederhoffer, although he isnear and dear to many of us. The patron saint is Francis Galton. Galton is the father of modern statistics and an exemplar of empiricism. He collected data onthousands of individuals to ascertain the genetic determinants of intellectualfunctioning. He did not begin from revealed truths or first principles, as wouldour modern-day egalitarians. He collected data and sought to explain the patternshe observed within the data.The heart and soul of the SpecList is the empirical temperament. It is a desireto discover and know. It is a celebration of the human capacity to apprehend realitythrough volitional efforts. In seeking to master the markets, we participate in thevery essence of the heroic quest: the winning of a boon while struggling againstmighty forces. Those forces are many: the complexity of the markets, the perversenature of our own emotions, and the savvy competition. Arrayed against those areonly the human mind and its capacity to transform data into information.
By 2002, the SpecList had grown to 200 members living all over theworld, from South Africa to Slovakia to Silicon Valley. It has been throughvarious permutations and bifurcations. One offshoot became an informalSchool for Speculators, a unique forum for quantitative work on the market.
More about Ever-Changing CyclesOne of the great purposes of the SpecList has been to keep usabreast of the market’s ever-changing cycles. As readers of Vic’sfirst book may recall, the profound principle of ever-changingcycles was put forward by Bacon in Secrets of Professional Turf Betting, now unfortunately out of print. We quoted from this 1956 classic at the start of ourbook, but cannot refrain from doing so again:In actual racing, the percentage of winners does not remain constant as the public’s play beats down the prices of horses picked by any set scheme.Some well-to-do horsemen who sent their horses out to do their best forprobable betting prices of 3-to-1 “cooled off” as the prices sank below 5-to-2. Instead of trying their hardest to win, they sent the horses out to win, if they couldwin easily. But the boys were told not to punish the animals, told to pull themback out of the money in the stretch if they saw an easy winning was not possible.The horsemen knew that this pulling back out of the money would make abad race show as the last outing in the past performance charts, thus putting thepublic off the horse for next time.
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We thought that nobody could improve on Bacon until a reader, MartinKnight, reformulated the principle of ever-changing cycles as a variant ofNewton’s law of cooling. Newton observed that the change in temperature ofan object is proportional to the difference between its temperature and thesurrounding air. Knight pointed out that market cycles obey Newton’s law ofcooling: the greater the regularity, the greater the difference between actualand random results, the more flow of public money there will be to capture it.That flow will bring the regularity back to randomness, or equilibrium, overtime just as temperature will tend to level out in a room. But new heatsources will turn up to create new flows. The beautiful thing about Knight’sreformulation is that it provides a quantitative estimate of the rate at whichcycles will change.Knight, an Englishman living in California, is a humble 38-year-old masterof statistics who became interested in applying behavioral finance theory to hisown investments. He achieved a 77 percent return in 2001 and 33 percent in2000, although he says he feels comfortable with returns less than that.We have come across two other geniuses who discovered applications ofthe principle of ever-changing cycles to markets. The first wrote the Economist’send-of-year forecast in 1986. The anonymous author treats the principle as avariant of a game called “Cheat the Prophet.” In this game, which repeats everydecade, everybody believes that some easily expandable things (say, to name anupdated example, Web page views or energy derivatives trading) are going to beimmensely profitable. But then, in the next decade, a small movement in pricesand the competitive environment caused by these fixed beliefs sends the thingsthat are supposed to be eternally profitable into unsalable, abysmal deficit.“Thus, the areas that are supposed to be immutably set on some particularcourse go on to precisely the opposite one.” The Economist’s writer calls thisprinciple “the law of opposites,” and presciently states that knowing about thiscould make readers quite rich, provided others don’t believe it.3A few years later, Julian Simon discovered this principle independently.His discovery arose from his attempt to find out why real commodities priceswere constantly decreasing and why predictions of commodity shortages arealways wrong. He likened the situation to looking at a tub of water and marking the water level, and then observing people putting water from the tub intobuckets and taking it away. But when the tub is examined again, the level ishigher than it was at the start. He attributes the constantly increasing water todiscoveries of improved methods of production of goods that are in shortageand the development of substitutes. “More people and increased incomecause resources to become more scarce in the short run. Heightened scarcitycauses prices to rise. The higher prices present opportunity and prompt
350 Practical Speculationinvestors to search for solutions. These solutions eventually lead to pricesdropping lower than before the scarcity occurred.”4On July 13, 2002, we received a brilliant post from the indefatigable Dr.Brett that so eloquently summarizes the evolution of his and our own thinkingon ever-changing cycles that we reprint it in full.Revisiting Complexity in Trading SystemsIt seems to me there are three basic positions one could take regarding the stockand equity index markets:1. They are random/completely unpredictable—This is the stance of the Efficient Market Hypothesis and leads to the conclusion that efforts to time the markets are a waste of time and that placing money in a well-diversified index ofcompanies over the long haul is the best way of participating in the markets’ longterm positive risk-adjusted returns.2. They are predictable—This is the stance of most technical analysts and developers of mechanical trading systems, who believe they can exploit recurringpatterns in the market for profit. These patterns are held to be intrinsic to themarkets, reflecting fundamental qualities of human nature (e.g., greed, fear) orregularities in nature (e.g., Fibonacci sequences).3. They vary in their degree of predictability—This is the stance of those whomodel the markets and adjust their models to changing cycles. Predictability is itself viewed as a variable, with markets changing in the degree to which they canbe predicted and in the elements that comprise valid predictions.For traders subscribing to Position #3, any trading system must exist at a minimum of two conceptual levels. The first order trading system consists of a set ofpredictors and a hypothesized relationship between those predictors and marketoutcomes. The second order system consists of a set of conditions for modifyingthe parameters of the first system as cycles change.Stated more simply, a trader who ascribes to the notion of changing cyclesneeds at minimum: (a) a model to trade and (b) a process for remodeling to keepabreast of shifts in the distribution of price changes over time.It is, of course, possible to conceptualize a third-order trading system thatconsists of meta-rules for shifting remodeling processes in response to marketconditions.For example, a first-order technical trading model might buy the marketwhen the 12 period RSI moves from below 30 to above 30 and sell when the RSImoves from above 70 to below 70. A second-order trading system would consist ofrules for using 21 versus 12 versus 8 period RSI readings for the original tradingsystem, perhaps as a function of market volatility and trendiness. A third-ordertrading system might consist of rules for categorizing markets based upon volatility or trendiness and assigning unique remodeling rules for each category (i.e., select from 21 versus 12 versus 8 period RSI readings for a nontrending market of
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high, medium, or low volatility; shift from 30–70 trigger points to 20–80 and10–90 crossover points for trending markets of low, medium, or high volatility).Through the layering of conceptual levels and complexity (as Henry Carstenshas observed), the trading system gains adaptive potential. Indeed, the trader whoadheres to position #3 cannot follow a single trading system, as changing cyclesforce the creation of a branching tree of trading approaches.In spite of this, most discussions of trading systems focus on the first level ofcomplexity (entries/exits/stops) without consideration of how these are modifiedin the face of shifting market conditions. To the extent that this second level ofcomplexity is missing, a trader can be expected to do well under one set of marketconditions and dismally in others—which is what we’re seeing with many traderswho made money in the late 1990s and now are having a difficult time.A straightforward application of evolutionary thinking suggests that thetrader who develops more trading systems across levels of complexity stands agreater chance of achieving adaptive outcomes in the markets. Dean Keith Simonton makes this point in his excellent book Genius, Creativity, and Leadership. CitingDonald Campbell, he writes:[T]he course of cultural evolution is analogous to that of biological evolution.The ‘cultural fitness’ of an individual creator is dependent upon his or herability to generate big ideas, each representing a certain permutation ofsmaller ideas. The more permutations that are generated, the higher theodds that a particular permutation will survive the winnowing process imposed by posterity. A less prolific creator will simply have a lower chance ofleaving intellectual progeny that will endure this selection process.This model clearly predicts that quality is a probabilistic consequence ofquantity. . . .5The idea that there are types of markets and trading systems best suited forparticular market types allows for a higher number of permutations than the ideathat a single set of parameters can be traded across all markets. Jean Piaget heldthat the development of complexity was the hallmark of the maturing mind. Itmay also be the hallmark of the maturing trader.
Here’s a July 26, 2002, post from a veteran Florida trader, James Lackey:My father was a Boilermaker. He was a welder. As a kid I was taught not to watchthe welders arc. It will blind you.When using a torch you can heat up metal to shape it. Or you can turn up theheat and cut metal. I find the same with stock prices.As the velocity of movement in a stock price increases, it cuts through prices.A slow burn, to add heat a little at a time, just bends prices.I have always been a tape reader. I watch the markets very closely all day. Thejoke in the office is, if you stare at the screen long enough you will turn into a badtick. That is something my grandmother would have said.
352 Practical SpeculationIf enough contracts trade a certain price, the price begins to glow. It is redhot like heated steel. Any trader older than 5 years, knows touching it can burnhim. Therefore, that price becomes untouchable, until someone turns up the heatand cuts through that price.It is good to know that price of hot steel exists. There is no way to see it on achart. As it has cooled slightly and no longer glows red. The unsuspecting traderwill come on to the price and get burned. Until the price has been cut with a torch.By that time sparks are flying and the work is done.However, after several minutes prices cool. Limit orders are canceled. Theenergy needed to cut through that price changes with time. Is steel that is hardened with previous heat harder to cut? Are stock prices that trade with more energy harder to break? Are prices forged like steel, hammered and beaten intosuper strength?Once that price is broken, it is damaged. A completely different process musttake place to repair the price. Like welding steel, after it has been repaired. A weldis much stronger than the original piece or stock price.Touching a red-hot price has burned me. Worse, I have been cut to pieces. Bya false belief that an old price, that was previously broken would somehow support me from a fall. Metal slivers in the behind, are very painful. . . . LACK
Gone FishingIn the summer of 2001, we found ourselves grim over a broad worldwide decline. We wanted to knock the hat off of the next broker who greeted us with acheery, “You’re filled at your price, sir/ma’am.” Taking our cue from Moby Dick,we realized it was high time to go fishing. We went looking for rules that holdtrue in the market’s high tides as well as its low tides. Being partial to patient partisans of the pastime, we invited members of the SpecList to weigh in. As always,we were awed by the insights that poured in from all sides. We here present a fewsamples of the resulting discussion of what traders can learn from fishing.Reflections on a Lake—John Lamberg, engineer/inventor; and Mark M McNabb, finance professor,Virginia Tech1. Be on the lake when the fish are feeding. Know what sectors the marketlikes.2. Don’t go fishing when the lake is packed with tourists. You probablywon’t be able to get near your favorite fishing hole, and even if you do, allthose churning propellers will scare the fish away. If everyone is playingthe same stock idea, the easy money has been made.
How to Land Them (Artist: Hy Hintermeister, © 1937).
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354 Practical Speculation3. Come prepared with well-maintained fishing equipment, an adequatesupply of bait, lures and sharp hooks, and an extra supply of patience.Give your best ideas time to work, but don’t use margin to see them out.4. Don’t make noise; you will scare the fish away. Fidelity never speaks;why should you?5. Don’t fish where there are no fish. Know the structure of the lake and thehabits of the fish you are trying to catch. Electronic fish finders can helpyou locate fish, but it won’t make them bite. If no one else is buying, whyshould you? Catching falling daggers can kill a dip-buyer.6. Despite your best preparations, sometimes the fish just won’t bite. Don’tbe discouraged; go back to shore and enjoy the day, then come back another time. Even the best traders are only 60 percent right. Just make thewinners big ones.7. Sometimes you find yourself in the middle of a school of feeding fish.Keep your hook baited and in the water. Correct equipment problemsquickly, and get the bait back in the water. When your stocks are runningup, stay with the trend.8. When a big one takes your bait or hits the lure, set the hook firmly, keeptension on the line at all times and play the fish until it tires. Keep thelanding net out of sight. Don’t sell winners too soon.9. When a really big one breaks your line, take it in stride. He may still bein the area, so always have a backup fishing outfit aboard. If a market decline washes out a group, get ready when the group takes off again.10. Know when to come back to shore, particularly when whitecaps start toappear or there are storm clouds in the distance. If the market gets crazy,go to cash while you figure things out.Market Lessons I Have Learned while on a River with a Rod in Hand—Duncan Coker, investorCasting upstream into a fast current, mending the line, taking in slack and waiting for that dramatic strike of the trout (preparation and expectations).Finding the right fly, knowing the knots, leaders, when and how to cast andthe all-important presentation. (It is not easy to fool a fish or the markets.)Peaceful serenity of bringing in a fish to the bank in the red dim of sunset,only to let him go to fight another day (the reward for a long-term perspective).Saltwater Flyfishing for Bonefish—Duncan Coker, investorBonefish are incredibly “spooky.” When spooked they move at speeds up to 30mphin a highly volatile way, making sharp turns to avoid prey or anglers (panics). Thetrigger can be internal, aquatic predators or external, anglers (market shocks).
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But invariably they return to the same cycle of following the tides and canthus be caught every now and again (market cycle).The catching part takes practice, research and a methodical and disciplinedexecution. Of course it is a lot of fun and challenging (performance).The Message Found in a Bottle—Devon Malori, 10 years old (Dr. Brett’s daughter)Last night I heard my grandpa and my dad talking about the stock market. Theysaid something about reading about a bottle that had messages about the market.So I went down to the beach and looked for bottles.I didn’t find very much. But there was one interesting one. It had a piece ofpaper in it. I copied the message down. It said:“We fishermen follow the schools of fish, to maximize ourcatch. A few fish (usually the weak and dying) always swim awayfrom the school. But every so often, the strongest leader fish breakaway from the school. Wise fishermen follow the strongest lead fishbecause they know that the school will soon follow.”I don’t know what that means, but I thought I should tell you. There are letters at the bottom of the page underneath the words “5-day break away from theschool.” The letters read CSCO, QCOM, LU, ORCL, T.I hope that helps you. I’ll tell my dad about it too. Bye, bye.(May 9, 2000)The Hoodoo Man—Peter Daniels, retired aerospace engineerI’ve just finished Victor’s book, The Education of a Speculator, which I enjoyed verymuch and particularly the part about the “hoodoo man.” Here is the story aboutthe greatest hoodoo man I ever met.Between the ages of 8 and 10 (circa ’42 to ’44), I spent almost every sunny daywith one of the greatest men that I ever met. He was over 6 feet tall, straight as astick and by all accounts was over 100 years old. His name was Uncle Stone andevery sunny day during the summer he walked from somewhere in PittsylvaniaCounty, Virginia, across the Staunton River bridge to Campbell County in orderto fish. He dressed the same way every day in a black suit, frock-tailed coat and fedora hat. He carried a cane and two bamboo fishing poles.When I first met him, I was completely mesmerized because he could catchmore catfish than one would think was humanly possible. Some days thesestrings of fish were only 3 feet long but on other days he could catch a string offish at least 14 feet long. I saw him hold a string of fish (in the middle of thestring) with arms extended over his head and both ends of the string touched the
356 Practical Speculationground. He used the same equipment that everyone else used but his results werephenomenal.When I asked him how he was able to catch so many fish he replied that hehad “hoodooed” the fish.After that I became obsessed with fishing because I wanted to catch a stringof catfish that would reach from my arm, extended over my head to the groundand I wanted to learn the “secret of the hoodoo.” I started going fishing everysunny day with Uncle Stone and it took me three summers to catch that longstring of fish.In the meantime, I listened as Uncle Stone told me many stories about hislong, wonderful life, including the time when he had been a slave (I know thispart is hard to believe, but it’s true). But he would never tell me the secret of thehoodoo, no matter how hard I tried to get the answer out of him.After I caught my long string of fish, I became uninterested in fishing andon our last day on the river bank Uncle Stone told me that he had just turned 105years old and that he was thinking about getting married again, to a “yella gal thistime” (and he did!). He also showed me a large tumor on his right side that hekept covered with his frocktailed coat, and he told me that it would never hurt himbecause he had “hoodooed” it.A few years later, the most interesting and upbeat person that I have evermet died. But I know that Uncle Stone died happy because he had beatenthe stock market of life, and even George Soros hasn’t done that! A few yearslater, I was walking past a black cabaret one night and stopped to listen, becauseI loved their music. I’ll never forget the song that was playing that night. As I listened I heard the refrain over and over again. It was “Somebody DoneHoodooed the Hoodoo Man,” and I said to myself, “Nobody can hoodoo a realhoodoo man!”
Bluefish—Peter DanielsThere is a strong similarity between the mind-set of surf fisherman and stocktraders. Here is a story about surf fishermen. The stock trader analogies are inparenthesis.Before Jimmy Carter was president, big schools of bluefish roamed theOuter Banks.These schools could be immense. Miles long and God knows how widethey were.I once saw a single school that stretched from Rodanthe to Nags Head, whichis roughly 20 miles.I hated them because I just couldn’t get away from them, to catch anythingelse, when I was fishing. A three- to five-pound fish almost every cast! No one
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couldn’t catch them! You didn’t dare use bait because then you’d catch two at atime as fast as you could reel them in.When they started to run, the word got out and surf fisherman from everywhere came here to participate in their feeding frenzy (investors moving into the bullmarket). Two “Island Boys” could make thousands of dollars with a gill net and arowing dory just fishing from shore (old-time traders reading the tape and scoring big).You didn’t even need a pole when the blues were “blitzing.” Tourists would just ridedown the beach and pick up beautiful gray trout, still alive and flapping, that hadbeached themselves in their frenzy to escape being eaten (stock tips making money).One day I caught a blue that was so large that for a long time, I actually thought thatI had caught a large shark which were also common near the shore at that time (gapup big-time on good news when you are long). God how I hated those bluefish!Well one night, I looked out of my door and thought that someone had builta city behind my house. It was the lights of large trawl boats, fishing right in myback yard as far as I could see in both directions. The next morning, when I gotup, I heard on the radio that Jimmy Carter (Greenspan solving the irrational exuberance problem) had invited foreign commercial fisherman to fish, not within the 10mile limit or the 3-mile limit, but almost in the surf in my back yard. They were soclose that I could have recognized individuals for a police lineup. For days thesmall boats would come out and encircle the fish with purse nets and haul themon board. Day after day, this occurred. Jimmy Carter just gave the place away(Greenspan raising rates).Well, the word was out to the commercial interests both foreign and domestic.The foreigners came and commercial fisherman came from other states and theycleaned up the place, except for the minnows. They took the blues and the gray andspeckled trout. They decimated the red drum (it became commercially endangered)and the flounder (tech, communication and Internet stocks all decimated).They left the whiting and the croakers (Dow 30). When it was all over and thetrawlers left, the people complained to the U.S. Fish and Wildlife Service. Butthese sweethearts said, “That ‘s because of normal ecological conditions, fish werejust in a down cycle right now. . . . We are working on it and the solution is conservation by limiting the catch and raising the legal size limits until the fish return(Fed lowering the funds rate).”For a few years, fishing on the Banks was like fishing in the Sahara desert(stock pickers bottom fishing). Eventually, fishing improved a little but if you wanteda fish to eat, you had to break the law because the size limits were at the extremities of the bell curve (insider trading increasing). Well, I don’t fish anymore becauseI don’t want to harass fish that are mostly under the legal limit. I’m just hangingback waiting for the big fish to return (trader waiting for a higher low and a higherhigh). And I’ve been waiting for over 20 years (traders after the crash of ’29).But what does the average surf fisherman do: Buy a bigger surf vehicle (oneor more faster computers). Install a CB radio (subscribe to a live data and news wiresources, buy books on fundamental and technical analysis). Put a rod rack on the top
358 Practical Speculationand sides of his truck so he can carry and fish with 15 different rods at the sametime (swing and day trading with multiple entries) and all paid for with plastic (margin account).I passed on buying the latest fishing paraphernalia, but boy did I bite on thetrading trash. I haven’t made any money to speak of since I bought it all. In theold days I could make 15 percent to 20 percent just watching CNBC. Now I haveso much data to digest that it takes me all day and night. I’ve been waiting over 20years for that chop on the water and great flocks of gulls, circling and diving andpicking up tidbits, to tell me that the blues have returned. When that happens, Iwill know that the other big, delicious fish are back and the blues are moving infor their part of the feast.Frankly, I’m not sure what I’m waiting for as far as this market is concernedbut one thing is certain. Surf fisherman and traders are so much alike primarilybecause of their positive expectations.Fishing and Risk—Patrick Boyle, traderI don’t claim to be much of a fisherman, but most weekends in the summer I go inhunt of stripers, bluefish, or anything stupid enough to bite my bait off the shoreof Cape Cod. The one thing I learned quickly as a novice fisherman was how important it is to set the drag on your reel right. It is probably more important thanchoosing the right bait, or spot to fish, as the location of fish, or what they wish toeat on a particular day can be pointless to forecast.The drag on a reel is what sets the strength with which the fishing line isheld. If set too tight, the line will snap when a fish pulls hard; if too loose, you willnot pull anything in.There are many par