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More of What's Inside
Table of Contents
Acknowledgements.
Preface.
I. EVOLUTION.
The Modern Jungle.
Developments That Have Influenced Today's Stock Market.
II. THE NEW LAWS.
1. Intraday Volatility.
Intraday Share Price Volatility Is on the Rise.
2. Trading Like Commodities.
Stocks Are Increasingly Being Bought and Sold Like Commodities.
3. Approaches and Attitudes.
Investing and Reason Frequently Give Way to Speculation and Emotion.
4. Information and Communications.
More Information and Faster Communications Often Have Unexpected Consequences.
5. Derivatives.
Derivatives Are Exerting a Growing Influence on Share Prices.
6. Seasonality and Cycles.
Many Seasonal and Cyclical Patterns Are Becoming Less Predictable.
7. Imbalances and Upheavals.
Aggressive Approaches and Tactics Are Leading to More Unstable Short-Term
Imbalances.
8. Form and Fantasy.
Substance and Reality Increasingly Give Way to Form and Fantasy.
9. Market Indicators.
Many Traditional Market Indicators Are Becoming Less Reliable.
10. Global Factors.
Global Factors and Foreign Investors Are Exerting a Growing Influence On
Share Prices.
III. SURVIVAL OF THE FITTEST.
The Jungle of the Future.
Developments That Will Likely Influence Tomorrow's Stock Market.
Notes.
References.
Index.
Excerpts
Preface [Link]
[PDF]
Additional References and Resources
Modern Conditions and Attitudes
Alan Abelson, “Up and Down Wall Street: Q and A: What’s The Problem,”
Barron’s, Jul. 14, 2003.
David Armstrong, “Short-Seller Rocker Partners Was Mauled by Bull Market,”
The Wall Street Journal, Jan. 23, 2004.
Andrew Bary, “Russian Roulette? Scorning History’s Lessons,
Investors Again Are Betting Heavily on Tech and Biotech,”
Barron’s, Sep. 15, 2003.
Ken Brown, “Stocks March to the Beat of War, Weak Economy,”
The Wall Street Journal, Mar. 31, 2003.
E.S. Browning, “Many Investors Throwing Caution Back to the Wind,”
The Wall Street Journal, Sep. 22, 2003.
E.S. Browning, “Tech-Stock Surge Brings Back a Hint of the Late-1990s
Frenzy: Share Rally Runs Well Ahead of Sales and Profit Growth,”
The Wall Street Journal, Aug. 22, 2003.
E.S. Browning, “What Lessons Learned? Markets Echo ’99: Skeptics
Say Stocks Have Formed An ‘Echo Bubble’ That Will Pop; But There Are
Differences Now,” The Wall Street Journal, Feb. 2, 2004.
Rebecca Byrne, “Toppy Markets Confound Technical Analysts,”
TheStreet.com, Jan. 8, 2004.
[Link]
Allison Bisbey Colter, “Hedging Trims Some Mutual-Fund Gains:
Short-Selling Strategies Take a Toll on Returns as the Market Improves,”
Mutual Funds Monthly Review: July 2003, The Wall Street Journal,
Aug. 4, 2003.
Chet Currier, “‘Bubble II’ in Stocks Is Risk to Be Reckoned With,”
Bloomberg, Jul. 8, 2003.
Bambi Francisco, “Compressing Learning Cycles: Commentary:
2000 Mentality Returns—at Net Speed,” CBS.MarketWatch.com, Jan. 27, 2004.
[Link]
Martin Hutchinson, “The Bear’s Lair: How News Moves the Markets,”
United Press International, Mar. 10, 2003.
Matt Krantz, “Day Traders Make a Comeback,” USA Today, Jul. 28, 2003.
Justin Lahart, “Trading Like Lemmings: The Pack-Like Behavior of Stock Traders
Has Reached Extremes Not Seen Since 1987,” CNN/Money, Apr. 3, 2003.
[Link]
Maggie Mahar, Bull! A History of the Boom, 1982-1999, HarperBusiness, 2003.
[Buy from Amazon]
Floyd Norris, “Bull Market 2003: The Worse the Company, the Better the Stock,”
The New York Times, Sep. 26, 2003.
Jeff D. Opdyke, “Déjà vu: Buying Stock on Margin is Back in Vogue: Regulators Worry as Investors Pour Borrowed Cash Into Market; Rolling the Dice on High Tech,” The Wall Street Journal, Sep. 18, 2003.
Jay Palmer, “And Now…Bubbles Within Bubbles,” Barron’s, Dec. 8, 2003.
Michael Santoli, “Hunting Bears: Short Sellers Were Big Losers in the Latest Stock Rally,”
Barron’s, Monday, Jul. 9, 2003.
Robert J. Shiller, Irrational Exuberance, Princeton University Press, 2000.
[Buy from Amazon]
Sandra Ward, “Sucker Punch Coming: Jeremy Grantham Says It’s Only a Bear-Market Rally,”
Barron’s, Nov. 3, 2003.
Gregory Zuckerman, “Speculation Makes a Comeback and OTC Trading Sees a Surge,”
The Wall Street Journal, Oct. 10, 2003.
Hedge Funds and Alternative Investments
Nicole M. Boyson, “Do Hedge Funds Exhibit Performance Persistence? A New
Approach,” Oct. 2003.
[Link]
Markus K. Brunnermeier and Stefan Nagel. “Hedge Funds and the Technology Bubble,” Journal of Finance, forthcoming. [Link]
Judith Chase, “The State of Hedge Funds,” SIA Research Reports, Mar. 10, 2003.
[Link]
Ann Davis, “SEC Takes Closer Look At Hedge Funds,” The Wall Street Journal, Feb. 2, 2004.
Ianthe Jeanne Dugan, “A Small Investor Lives Life on the Hedge: Sick of Stocks,
Retired Engineer Joins Rush to Investment Pools; ‘The Choices Are Bewildering,’”
The Wall Street Journal, Apr. 9, 2003.
Dion Friedland and Magnum Funds, “About Hedge Funds,” Hedge Fund Association,
2001. [Link]
Steve Galbraith and Mary Viviano, “Morgan Stanley US Strategy: Tail or
Dog—The Pond’s Getting Crowded,” Apr. 30, 2002.
“Introduction to Hedge Funds,” Financial Risk Management, Jun. 2003.
[Link]
Joe Kolman, “LTCM Speaks: In a Series of Secretive Roadshows, LTCM Partners Now Admit They Badly Misjudged
Market Dynamics and Volatility, Making Common Risk Management Mistakes on a Grand Scale,” DerivativesStrategy.com, Apr. 1999. [Link]
Gene Koretz, “Economic Trends: Hedge Funds’ Long Shadow,” BusinessWeek, Jul. 16, 2001.
Roger Lowenstein, When Genius Failed, Random House, 2001.
[Buy from Amazon]
Maha Khan Phillips, “Alternatives: Hedge Funds Still Failing At Risk Management,” Global Investor, Nov. 2002.
“Spotlight on Hedge Funds,” U.S. Securities and Exchange Commission.
[Link]
Daniel Strachman, “Managed Futures: Back in Vogue,” Futures Industry Magazine, May/June 2003.
Richard Teitelbaum, “Wall Street Refugees,” Bloomberg Markets, Nov. 2003.
David Wells, Robert Clow, and Elizabeth Rigby, “Hustling for the Hedge Funds’ Dollar,”
Financial Times, Jul. 10, 2003.
Global Influences
Andrew S. Adelson and Seth Masters, “Are U.S. and Foreign Equities Separate
Asset Classes?” Institute for Fiduciary Education, 2002.
[Link]
Michael Brennan and Henry Cao, “International Portfolio Investment Flows,” Journal of Finance 52, 1851–80.
Deborah Brewster, “Global Investing: US Investors Take Wider World View,” Financial Times, Oct. 6, 2003.
Warren E. Buffett, “America’s Growing Trade Deficit Is Selling the Nation Out From Under Us.
Here’s a Way to Fix the Problem—And We Need to Do It Now,” Fortune, Oct. 26, 2003.
“Dancing in Step,” The Economist, Mar. 22, 2001.
William H. Gross, “Investment Outlook, The Grand Scheme of Things,” PIMCO,
Jan. 2003.
Woochan Kim and Shang-Jin Wei, “Foreign Portfolio Investors Before and During a Crisis,”
CID Working Papers 6, Center for International Development at Harvard University, 1999.
Aaron Lucchetti, Greg Ip, and Phillip Day, “A Global Journal Report: U.S. Push for Weaker Dollar Rattles
Markets Around Globe,” The Wall Street Journal, Sep. 23, 2003.
Joel Millman, Phillip Day, Jason Singer, Michael R. Sesit, and Michael M. Phillips,
“Foreign Cash Flow Is Vital to U.S.—But Will It Last?” The Wall Street Journal, Jan. 15, 2004.
Peter Navarro, If It’s Raining in Brazil, Buy Starbucks: The Investor’s Guide to Profiting from
News and Other Market-Moving Events, McGraw-Hill Trade, 2001.
[Buy from Amazon]
Richard Nisbett, The Geography of Thought: How Asians and Westerners Think Differently...and
Why, Free Press, 2003.
[Buy from Amazon]
Floyd Norris, “Foreigners May Not Have Liked the War, but They Financed It,” The New York Times, Sep. 12, 2003.
Didier Sornette and Wei-Xing Zhou, “Evidence of Fueling of the 2000 New
Economy Bubble by Foreign Capital Inflow: Implications for the Future of
the US Economy and its Stock Market,” Jun. 19, 2003.
[Link]
“U.S. Investors Take a Wider World View,” The Financial Times, Oct. 6, 2003.
Information and Analysis
Alex Berenson, The Number, Random House, 2003.
[Buy from Amazon]
Ken Brown, “As Analysis Gets Cut, More Firms Are Going Unheard on the Street,” The Wall Street Journal, Oct. 27, 2003.
Ken Brown, “Wall Street Plays Numbers Game with Earnings, Despite Reforms,” The Wall Street Journal, Jul. 22, 2003.
Louis K.C. Chan, Jason Karceski, and Josef Lakonishok, “Analysts’ Conflict
of Interest and Biases in Earnings Forecasts,” Feb. 2003.
[Link]
Lynn Cowan, “Pressure on Analysts Remains Despite Rise in Sell Ratings,” Dow Jones News Service, Apr. 29, 2003.
Bill Fleckenstein, “Contrarian Chronicles: The Street Still Plays Games With Investors,”
MSN Money, Jul. 28, 2003.
[Link]
James K. Glassman, “Another P for Your Pod: Take P/S Ratios as Seriously as You Take P/Es,”
National Review Online, Oct. 2, 2003.
[Link]
Ron Lazer, “The Increased Importance of Earnings Announcements after Regulation
FD: Evidence from Revisions of Analysts’ Forecasts and Pre-Announcements,”
Preliminary Draft, Jan. 2004.
[Link]
Neal Lipschutz, “Point of View: Selective Disclosure Still Doing Damage,” Dow Jones News Service, Sep. 15, 2003.
“Market Commentary: Distorted Values,” Comstock Partners, Inc., Feb. 5,
2004. [Link]
“Market Commentary: Exclusion of ‘One-Time’ Charges Still a Problem,” Comstock
Partners, Inc., Feb. 3, 2004.
[Link]
Gretchen Morgenson, “New Math Aside, Earnings Still Reign,” The New York Times, Feb. 1, 2004.
John R. Nofsinger and Kenneth A. Kim, Infectious Greed: Restoring Confidence in America’s Companies,
Financial Times Prentice Hall, 2003.
[Buy from Amazon]
Andy Puckett and Marc L. Lipson, “Who Trades on Analysts’ Recommendations?”
Midwest Finance Association 53rd Annual Meeting, Mar. 18–20, 2004.
Susan Pulliam, “Street Sleuth: Return Of the Online Hype,” The Wall Street Journal, Jan. 12, 2004.
Lauren R. Rublin, “The Whole Truth: A Value Manager Profits By Looking Through The Numbers and Running
Against The Crowd,” Barron’s, Nov. 17, 2003.
Anna Scherbina, “Analyst Disagreement, Forecast Bias, and Stock Returns,”
Sep. 2003,
[Link]
Ellen E. Schultz and Theo Francis, “GM, Others Boost Their Earnings By Pouring Billions Into Pensions,”
The Wall Street Journal, Dec. 4, 2003.
Shawn Young, “Talking Up ‘Net Debt’ Allows Some Firms to Take a Load Off,”
The Wall Street Journal, Jul. 28, 2003.
Institutional Behavior and Investor Psychology
Timothy R. Burch and Bhaskaran Swaminathan, “Are Institutions Momentum
Traders?” Nov. 2001. [Link]
Edward Chancellor, Devil Take the Hindmost: A History of Financial Speculation, Farrar Straus & Giroux, 1999.
[Buy from Amazon]
Víctor M. Eguíluz and Martín G. Zimmermann, “Transmission of Information and Herd Behavior:
An Application to Financial Markets,” Phys. Rev. Lett. 85, 5659, Dec. 23, 2000.
Josh M. Griffin, Jeffrey H. Harris, and Selim Topaloglu, “The Dynamics of Institutional and Individual Trading,”
Journal of Finance, Dec. 2003.
Mark Grinblatt and Matti Keloharju, “The Investment Behavior and Performance of Various Investor Types:
A Study of Finland’s Unique Data Set,” Journal of Financial Economics 55, 43–67.
“Herding Psychology and Financial Markets,” The Socionomics Institute,
2003.
David Hirshleifer and Siew Hong Teoh, “Herd Behavior and Cascading in Capital
Markets: A Review and Synthesis,” Dec. 19, 2001.
“Investment Perspectives: Exploiting the Effects of Emotions on the Capital
Markets,” Bernstein Investment Management & Research, Oct. 8, 2003.
[Link]
Bruce I. Jacobs, “Momentum Trading: The New Alchemy,” Journal of Investing, Winter 2000.
“John J. Wheeler on Institutional Order Routing,” The Trader Bulletin, Jul. 3, 2003.
Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (Reprint Edition),
Three Rivers Press, 1995.
[Buy from Amazon]
John R. Nofsinger, Investment Madness: How Psychology Affects Your Investing…and What to Do About It,
Financial Times Prentice Hall, 2001.
[Buy from Amazon]
John R. Nofsinger and Richard W. Sias, “Herding and Feedback Trading by Institutional and Individual Investors,”
Journal of Finance 54, 2263–2295.
Robert R. Prechter, Jr., “Unconscious Herding Behavior as the Psychological Basis of Financial Market Trends and Patterns,” The Journal of Psychology and Financial Markets, 2001, Vol. 2, No. 3, 120–125.
Jeffrey Rothfeder, “Case Study: NASDAQ,” CIO Insight, Jun. 16, 2003.
[Link]
Richard W. Sias, “The Behavior of Institutional Investors: Tests for Herding,
Stealth Trading, and Momentum Trading,” Mar. 9, 2001.
Marcia Vickers, “The Most Powerful Trader on Wall Street You’ve Never Heard Of: Meet Steve Cohen.
Even His Enemies Admit He’s the Best Stock Trader Around, Routinely Trouncing the Market with His $4 Billion Hedge Fund.
Just How Does He Do it?” BusinessWeek, Jul. 21, 2003.
Bill Virgin, “Investors Will Happily Delude Themselves,” Seattle Post-Intelligencer, Jun. 26, 2003.
[Link]
Seasonal and Cyclical Factors
E.S. Browning, “Investors Take Cycles for a Spin,” The Wall Street Journal, Jan. 26, 2004.
E.S. Browning, “Investors Wonder Whether Stocks Will Be Naughty or Nice,” The Wall Street Journal, Nov. 17, 2003.
Yale Hirsch, Stock Trader’s Almanac 2006, Jeffrey A. Hirsch (Editor), John Wiley & Sons, 2005.
[Buy from Amazon]
David Hirshleifer and Tyler Shumway, “Good Day Sunshine: Stock Returns
and the Weather,” Aug. 17, 2001.
[Link]
“International Banking and Financial Market Developments,” BIS Quarterly Review, Jun. 2003.
[Link]
Mark Kamstra, Lisa Kramer, and Maurice Levi, “Winter Blues: A SAD Stock Market Cycle,”
American Economic Review, Mar. 2003.
Angeline M. Lavin, “An Empirical Investigation of the Persistence of Stock and Bond Return Seasonality,”
Journal of Applied Business Research, Vol. 16, No. 2, Spring 2000.
W. Marquering, “Seasonal Predictability of Stock Market Returns,” Tijdschrift voor Economie en Management, Vol. 47, 2002.
[Link]
Ian McDonald, “Mutual Funds Grateful for Automatic Pilots,” The Wall Street Journal, Jul. 8, 2003.
Glenn N. Pettengill and John R. Wingender, Jr., “Short-Sellers, Put Options
and the Monday Effect: Another Look (Extended Abstract),” Midwest Finance
Association Annual Meeting, Mar. 18–24, 2004.
Stephen Roach, “Global Economic Forum: The Latest Views of Morgan Stanley
Economists: Global: Macro Passion,” Nov. 17, 2003.
[Link]
Mike Robbins, “Strategies: How to Pick the Right Stock for the Season,” MSN Money, Dec. 16, 1998.
[Link]
Heydon Traub, “Bear Hibernation: A Method Behind Calendar Myth,” Boston Business Journal, Nov. 21, 2003.
[Link]
Tom Walker, “Statistics Tell Seasonal Story of Stock Market,” Laredo Morning Times Business Journal, Aug. 11, 2003. [Link]
Derivatives, Leverage and Volatility
Antony Currie, “Harvesting Value from Volatility,” Euromoney, Jun. 2003.
Robert H. Dugger, “Remarks to the Economic Outlook Roundtable 2004: Financial
Leverage and the U.S. Economic Outlook for 2004 and Beyond,” Federal Deposit
Insurance Corporation, Dec. 12, 2003.
[Link]
Kenneth L. Fisher, “Volatility, the Good Kind: The Bear Market Made It Fashionable
to Say Stocks Might be Flat for Ten Years or More. It Has Never Happened that Stocks Lie Flat for a Decade,”
Forbes, Jun. 23, 2003.
[Link]
Yuka Hayashi, “Investors Find More Use for a Tool: Exchange-Traded Funds,
With Varied Exposures, Are Gaining in Popularity,” The Wall Street Journal, Jul. 17, 2003.
Tom Kohn, “Derivatives Market Grows 20% to $170 Tln, BIS says” Bloomberg, Nov. 12, 2003.
Justin Lahart, “Watch the VIX: Wall Street’s Favorite Sentiment Reading May be Giving a False Signal,”
CNN/Money, Jan. 26, 2004.
[Link]
Ian McDonald, “Complainers Are Culprits When It Comes to Volatility,” The Wall Street Journal, Jul. 7, 2003.
Michael Santoli, “Back to the Futures: Pre-Trading Readings Foretell Stock Market’s Opening Tone,
But Beware the ‘10 a.m. Turnaround,’” Barron’s, Jan. 19, 2004.
Kopin Tan, “Cruising in Convertibles: For Many, They’re the Vehicle of Choice,” Barron’s, Jul. 7, 2003.
Aaron L. Task, “E-Minis Cause Some Major Worry,” TheStreet.com, Jul. 28, 2003.
[Link]
Markets and Trading
Elroy Dimson, Paul Marsh, and Mike Staunton, “Irrational Optimism,” Financial Analysts Journal,
Vol. 60, No. 1, pp. 15-25, Jan./Feb. 2004.
Thomas G. Donlan, “A Fool and His Money: Staking One’s Fortunes on Efficient Markets Isn’t Wise”
Barron’s, Feb. 16, 2004.
Robert D. Edwards and John Magee, Technical Analysis of Stock Trends,
W.H.C. Bassetti (Editor), Saint Lucie Press, 2001.
[Buy from Amazon]
Jeremy Grantham, “Special Topic: Ivory Towers,” Grantham, Mayo, Van Otterloo
& Co. LLC, Jan. 2003.
“In Search of Those Elusive Returns,” The Economist, Mar. 20, 2003.
Charles M. Jones, “A Century of Stock Market Liquidity and Trading Costs,”
May 2002. [Link]
Owen A. Lamont and Jeremy C. Stein, “Aggregate Short Interest and Market
Valuations,” Dec. 2000. [Link]
Edwin Lefèvre and Market Place Books, Reminiscences of a Stock Operator, John Wiley & Sons, 1994.
[Buy from Amazon]
Jon D. Markman, Swing Trading: Power Strategies to Cut Risk and Boost Profits, John Wiley & Sons, 2003.
[Buy from Amazon]
John J. Murphy, Technical Analysis of the Financial Markets, Prentice Hall Press, 1999.
[Buy from Amazon]
Peter Navarro, When the Markets Move, Will You be Ready? McGraw-Hill Trade, 2003.
[Buy from Amazon]
Philip Russel and Ben Branch, “Penny Stocks of Bankrupt Firms: Are They
Really a Bargain?” 2001. [Link]
Michael Santoli, “Silver Lining: Grasso’s Exit from the NYSE May Portend Lower Costs for Investors,”
Barron’s, Sep. 22, 2003.
David Schwartz, “Revealed: The Great Stock Market Swindle,” The Observer, Jul. 13, 2003.
[Link]
Deborah Solomon and Kate Kelly, “NYSE May Revise Best-Price Rule,” The Wall Street Journal, Feb. 3, 2004.
Deborah Solomon and Kate Kelly, “Wide SEC Review May Revamp Structure of U.S. Stock Markets:
As Upstart Trading Venues Proliferate, Donaldson sees 'Stresses and Strains,'”
The Wall Street Journal, Sep. 19, 2003.
Index
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"Stock market speculation
is both an art and a science and with this book, Michael Panzner explains just
why this is so in a way practical and thorough enough to actually help you
invest and trade more intelligently. What more could
anyone ask?"
Peter Navarro
Author of
If It's Raining in Brazil,
Buy Starbucks and
When the Market Moves,
Will You Be Ready?
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