The best way to profit in the stock market is to identify its absolute tops and bottoms and then have the courage to trade them. Timing the Market shows you how to come very close to accomplishing that goal.
Timing the Market is for investors who want to increase their returns and reduce their stress while making profits in the stock market. Investors of all experience levels can use public information and simple arithmetic to achieve this end.
Private investors with very little time to devote to their portfolios will find that this guide simplifies their lives. Active traders with more time to devote to their investments can apply leverage to the concepts in this book.
Professional investors can use the principles in the following pages to cut through their information overload and identify the most important issues.
Timing the Market addresses all investors’ needs by starting with the broadest, most critical issues and systematically working down to individual security selection.
If you do not have a large computer filled with scrubbed data and an experienced staff of Ph.D.’s, or if you do but would like to speak intelligently in their absence, you will depend on this book.
Many of the graphs in Timing the Market display two centuries of economic, social, and stock market data, some of which is reprinted in the appendixes together with web sites for the source material.
This compilation of Wall Street practices has never been written before. Professional money managers and street-smart investors around the world pass this intelligence along an underground network of friends, families, and clients.
Their insights are too valuable to be handed down like tribal war stories around a campfire; someone had to write them down in an organized manner with illustrations and anecdotes.
That someone had to be one of the few former schoolteachers with experience on Wall Street. Elementary school teachers are used to breaking a process down into simple steps and then explaining it with stories.
Teachers who believe a subject is important want to motivate the audience to a better understanding of its critical concepts.
We clarify with parables and pictures and then make sure that our listeners have the tools (in your case they will be newspapers, books, and web sites) to accomplish the task. Your task is to improve your investing, and you will succeed because you are more motivated than any classroom of children that I ever taught.
When my family moved from the Midwest to New York City, I went to a different classroom. But this time I sat in the back instead of at the teacher’s desk up front.
The siren call of Wall Street enticed me to New York University for a master’s degree in business administration, and this is the book that I wish I had in graduate school. I would have read it twice: once at the beginning of the program and again at the end of my study.
At the beginning of the MBA program Timing the Market would have given me the background I needed to understand the lectures.
It would have provided some terminology, stock market history, and concepts upon which to build financial theory. It would have provided the bridge I needed from my nonbusiness background.
At the end of my graduate work in finance I needed Timing the Market to translate Wall Street theory into practice. This book would have prepared me for some of the jargon on the trading floor and in the boardroom.
It would have given me simple arithmetic for making investment decisions and meeting with clients. It would have provided some of the benchmarks and signals that allow a professional to find the forest among all those trees. Timing the Market would have drawn a map through that forest and made me a much more productive employee.
Timing the Market grew out of a list of investing criteria that I have used over the years. Organizing these ideas for my own use turned into this book.
These market timing benchmarks are common Wall Street practices that never made it into a book until now. Here is the conventional wisdom that is exchanged around the watercooler in successful broker- age firms and money management offices around the world.
These investment insights come in three forms, and each one has its own section in Timing the Market. There is a summary after each part of the book for experienced investors with sufficient background to skip the explanations and go straight to the conclusions.
Part One is yield curve analysis and is the backbone of this book.
The Federal Reserve Bank of Cleveland uses the shape of the Treasury yield curve to help it forecast the economy. Millions of investors use the yield curve to forecast the stock market, and it is one of the most powerful and most widely used indicators in existence.
Part Two, technical analysis, measures the levels of investors’ fear and greed. This application of behavioral psychology builds on Freud’s observations of crowd mentality. It simplifies technical analysis down to a few benchmarks for assessing the crowd’s emotions. We can then profit from the effects of mob psychology.
Part Three, cultural indicators, analyzes the economy and the stock market for people who think with their right brain to avoid math at all costs.
The world is full of intuitive investors who know how to read their environment, and economists often include anecdotal evidence in their thinking.
Whether we realize it or not, we probably draw from all three forms of insight when we make major investment decisions.
The first three parts of the book develop the purchase and sale decisions on the graph in Figure I.1 in a manner that enables readers to continue on their own as independent investors.
Part Four applies the stock market timing decisions to specific investments. You can use index mutual funds or separate securities with leverage depending on how much homework you want to do and how aggressive you are.
Leverage, of course, adds risk to markets that are already volatile, and past performance is not necessarily an indication of the future. Every effort has been made to ensure accuracy in this book but there can be no guarantees.
Part Five illustrates capitalism at work. Mankind has tried to improve his financial and social position by trading the markets ever since history has written down stories.
Some of these tales tell how people have been seduced by outrageous investments, and some tell of spectacular achievements.
The final two chapters present some of the most audacious, as well as some of the most charming, stories of the opportunities available to us who live in a capitalistic economy.
Your financial security requires that you learn how to profit from timing the stock market. You are the only person who can protect your port folio and make it grow.
It is critical that you make the volatility in the market work for you. If you lost money when the bubble burst in 2000, you need to get that money back.
The only way to recoup your loss is to time the next big market moves correctly. If you have dreams for the future that require a large portfolio, you need to profit from buying and selling at the right time.
The next market moves may be extraordinary and could affect the global economy.
You need the ability to build your own fortune and create your own destiny.
