Market-prices

Since all of these things can be gotten over the Internet these days, the main benefit of this book is that it is in book form and you can pick it up for stock ideas in the tech area (except for IBM and HPQ).

The only thing that I found interesting was the author's Top 25 Picks for 2002-2003. This list includes all the big cap tech stocks except QCOM and has some comments about each choice. There's also an interesting discussion about the QQQ's and the Rydex funds and how it might be better for most investors to simply buy these instead of riding the ups and downs of these highly-volatile individual issues.

I would like to have seen a more lively format, but I guess this book wasn't meant for my entertainment. If you want to buy individual stocks within the NASDAQ 100, you will need more current information in addition to what is presented here.

The Bottom Line: It's a handy reference.

Peggy is a widow with a four-year-old daughter. Her husband was a cop who died in the line of duty. Peggy has sworn that she will never again get involved with a cop. Peggy finds herself extremely attracted to the scientist that is staying in her guest house. Peggy is not the only one drawn to Rory, but her daughter is taken with the man as well. Rory knows what Peggy's feelings are about dating cops. He knows that he should avoid both her and her daughter. Day by day the attraction and sexual tension between the two heats up. Rory knows that for her own protection he cannot tell her that he is an FBI agent. Peggy knows that she is falling in love with Rory, but what happens when she finds out that he is a cop.

This book sets up yet another mystery in the Colton series. They do not mention many characters from the previous series except Joe and Colton. The story of Peggy and Rory stands on its own, but sets up a mystery that leaves the reader anticipating the next story.

This book is divided into two parts. Part I explains the theory of "Smart Momentum." Part II shows step-by-step how to implement it in Microsoft Excel. The nice thing about this book is that Part II parallels Part I on a chapter-by-chapter basis.

The book focuses on (a) indicator creation, (b) indicator selection, and (c) indicator combination. The logical development of a trading system proceeds as follows:

An equity curve shows cumulative dollars extracted from the market versus time. The "Smart Momentum Ratio" (SMR) summarizes an equity curve in a single number. (The author claims the Sharpe ratio, in and of itself, is not good enough.)

One can compare equity curves by comparing their respective SMRs. The better the equity curve, the larger the SMR.

Since an equity curve is the cumulative daily result of a trading indicator: The better the trading indicator, the larger the SMR.

A collection of one or more trading indicators comprises a trading system. Since a single indicator may fail under certain market conditions, it is desirable to build a trading system out of several uncorrelated indicators.

If one varies the parameters of a trading indicator, and its SMR stays relatively constant, then that indicator is said to be "robust." Indicators that contain SMR spikes (referred to as "Matterhorns") are not robust. Curve fitting is avoided by using several data windowing methods, which are briefly mentioned.

By the way, this book does not teach you how to use Microsoft Excel. It only gives you the Excel spreadsheet formulas to enter into spreadsheet cells (I did not test them to see if they were accurate). The techniques shown in this book are fine for tinkering in Excel, but to seriously create and analyze indicators the way the author suggests would take man-years in front of Excel. This may lead a person serious about developing trading systems into computer programming and optimization algorithms. For the latter approach, I recommend "The Encyclopedia of Trading Strategies" by Katz and McCormick.

Because of the above reason, and the reasons that follow, I only gave the book 4 stars (with respect to its intended target audience):
Chapter 9 - Spreadsheet preliminaries) The author uses USDJPY data sampled at 6:00, 12:00, and 18:00 GMT, but does not tell where to acquire such data.
Chapter 11 - Indicator selection) The author tells how to find robust indicators, but does not give the Excel steps needed to generate the 3D charts used in companion chapter 4.
Chapter 12 - Indicator combination) Indicator correlation matrices are presented. The author says they are generated with the Excel "correl" function, but does not reveal what cell references to use.
Chapter 13 - Maintenance) Failing indicators are replaced with new ones on a frequent basis. In my opinion, this is not the signature of a robust trading strategy.

I liked the book because it tries to explain market structure using OBSERVABLE variables, because it tests the theory both via case study and via econometric methods and because it is full of innovative ideas. I want to mention in particular the way in which Sutton tackles the problem of multiplicity of equilibria, what he calls "the bound approach"

A few months ago Sutton published a companion book called Technology and Market Structure in which he carries over the same line of research to endogenous barriers to entry.

Talbott has throughly researched this subject, and it is nice to hear from someone who is not affiliated with the real estate market comment on the state of housing in America. He points out that a number of factors could cause not only a correction, but an outright crash:
1. Overleverage (especially in the case of ARMs)
2. Interest rate increases
3. Potential deflation
4. The precarious state of Fannie Mae and Freddie Mac, companies that are basically unregulated and leveraged to the hilt.

It is my own belief that a 2% increase in interest rates from 6% to 8% will start in motion one of the worst economic fiascos this country has ever witnessed.

Housing has typically been a hedge against inflation. This time it will be inflation that kills the housing market. President Bush recently spent 800 Billion in 2 days. Federal spending is up over 30%. The Medicare bill will cost the US between 2 and 3 TRILLION dollars in the next 20 years. Only through devaluing the dollar (which has already begun) and massive tax increases, can the government hope to pay its bills. This means inflation, and lots of it. The people that are investing in real estate have a chronic myopia when it comes to economic history.

I share the authors concerns about Fannie Mae and Freddie Mac. Hopefully, with the Treasury now overseeing these two institutions we might see some progress in getting these two goliaths under control.

I would have found it helpful if the author spent some more time drawing contrast to some of the previous real estate bubbles that we have seen around the globe. Japan and Hong Kong are two recent examples of what can go wrong when the bubble bursts. As well, it would have been nice to see data prior to 1968. Thirty-five years is still a relatively short period of time.

Many on here have already pointed out the main themes I came away with, so I'll not be redundant. Given that, it is important to note that real estate markets are local and not national. Yeah, yeah we've all heard that before, and other factors, such as changes in interest rates, are national, not local, trends.

But like everything in life, it's neither black or white but shades of gray that matter. I almost chuckle at those who are worried about prices having risen 50% in 3 or 4 years. Friend, that's nothing to worry about. An excellent return, perhaps a bit out of the ordinary, but nothing to lose sleep over.

Here's what I lose sleep over. Paid $340 in March 1998 in Orange County. Same house now on market down the street for $950!! That's closing in on a a 3-bagger, in the parlance of Peter Lynch, in 6 years. Moreover, I read yesterday that while the mix of fixed to variable rate loans nationally is roughly 70-30 (assumption being that fixed rate loans provide some protection against a downturn), here in California it's the reverse! - 70% of all loans are variable or worse yet "interest only".

What will happen here when the chickens come home to roost? We're getting back to where we were in '89......

Despite Price's effort to show the "truth-seeking" aspect of reporter, Jesse Haus, she comes off selfish and unsympathetic. The amount of energy wasted on her character seemed pointless. Lorenzo Council is more interesting, as a cop balancing between a need to do his job and to protect Dempsy, the place he grew up. The Friends of Kent group and their obsession was fascinating. Yet some of the people we want to know better, like Brenda, her family, and the father of her child are all revealed in brief glimpses that interest the reader, but fade away all too quickly.