Books 01 (May 08 - Oct 08)

Re: Books

Postby la papillion » Tue Sep 23, 2008 10:09 am

Book review - A Random Walk Down Wall Street

A Random Walk Down Wall Street, a book by Burton G.Malkiel, is one of those must-read books on investment/finance. I think there are 9 different editions of it and the first edition was out in 1973. I must say this book is really a good read as the author talks about a variety of topics. The author is bent towards indexing for the majority of people who do not like the hard work of picking stocks. It comes as a surprise for me too when I realized that this book is not really about the efficient market hypothesis (EMH). I feel that the stance is almost similar to Benjamin Graham in The Intelligent Investor, where he proposed about the passive and enterprising investor.

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The author’s main idea in this book is that everyone should have a core portfolio of index funds. If one likes the challenge of individual stock picking, then apportion a part of the investing capital to it, but still keeping the core of index funds.

The reason I like this book is that it gives such a wide variety of investment/finance linked topics. It ranges from the stock market crashes in the past, the different types of valuation in different eras, the pros and cons of TA, FA and EMH, brief understanding of modern portfolio theory (MPT) and the related Capital asset pricing model (CAPM). As if it’s not enough, there are chapters on behavioral finance, personal finance and how guide for ‘random walkers’ in the stock market.

I admit that I am biased towards EMH, CAPM and MPT (though I said that, I actually read through William Bernstein’s classic The Four Pillars of Investing, albeit partially). This book, however, gave me another view point – a somewhat more moderate stand. The author is not an ‘extremist’ in EMH, and he mentioned that himself in the book.

One of the best parts of the book, in my opinion, comes from a story. J.P.Morgan had a friend who was so worried about his stock holdings that he could not sleep at night. So the friend asked what he should do about his stock holdings. Morgan replied, “Sell down to the sleeping point.” Much wisdom is contained in that simple reply. Yours truly had dabbled in high risk warrants (HSI warrants, not STI, mind you) with huge position in the past, and so I can truly understand what is meant by holding on to sleeping point.

Personally, I have investments in a few types of assets:


1. Bank savings account – this is certainly the safest of the lot, and certainly the most boring. Guaranteed to a super deep comatose kind of sleep (For Singapore, insured up to 20k only, aggregate)

2. MMF – this is the next safest, after bank savings. The one that I had, Phillips Money market fund, had 55.78% of their asset allocation in money market securities, 42.36% in term deposits and the remaining in cash and other accruals. Their top 5 holdings in Aug 2008 include capitaland commercial, CDL bonds and SG bonds. This should be giving investors a long afternoon naps and a good night’s sound sleep. However, recently, I had a few dreams that rouse me at night, especially after learning that such funds in US had fallen from the financial woes there.

3. Stocks – this must be like sleeping beside 100 crying babies, on a bed full of spikes, with spotlights on your face and with neighbors blasting heavy metal music all night long. However, I’ve been sleeping rather well, having accustomed to the fluctuations of the market. There is such a thing as being numb to the market.


There are many others who have CPF. These are also super safe instruments, guaranteeing a good night sleep. In fact, it's so guaranteed to provide a good sleep that you have to hold until the withdrawal age, which is increasing all the time. Rip van winkle would have approved of it :)

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What's your sleeping point?
An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return - Benjamin Graham
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Re: Books

Postby iam802 » Tue Sep 23, 2008 10:16 am

Hi LaPap,

When you say you are biased towards EMH, can you further elaborate on it?

I am not familiar with EMH. I have heard people mention it a couple of times. The name suggest that the market is efficient and sounds like one of those clean-room theory in academic studies.

What I would like to understand is ... how is the market efficient ? And in this case, how can the average investor/trader... how can we apply this theory? Is there some underlying assumptions for EMH to work?

Thanks
1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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Re: Books

Postby iam802 » Tue Sep 23, 2008 10:54 am

Manage to find some answer to EMH

http://en.wikipedia.org/wiki/Efficient_ ... hypothesis

In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient", or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information. The efficient-market hypothesis states that it is impossible to consistently outperform the market by using any information that the market already knows, except through luck. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future.



I guess, LP... must be negatively biased against this theory.

The market can never be efficient because of emotions.

And when bad stocks get short till they file for bankruptcy, and regulators step in to protect. Is that a 'norm' ? I would think that it is not part of the market efficient theory.

In my opinion, this theory is like telling a would-be greatest investor of all time that he or she cannot beat the average.

Maybe it also goes back to the point of choosing what one reads and wants to believe.

If you believe you can beat the average performance, you will find a way to do so.
1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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Re: Books

Postby kennynah » Tue Sep 23, 2008 1:47 pm

the contents make for casual afternoon kopi/tea session lazy discussions while awaiting happy hour to start at 4pm..
Options Strategies & Discussions .(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas

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Re: Books

Postby la papillion » Tue Sep 23, 2008 10:22 pm

Hi iam802, you're right. My choice of words is misleading...I'm negatively biased towards EMH. It's my bias against it that blinds me to some elements of the theory which is true. My view is that markets are at least quite efficient (efficient defined as all information priced into the price of the stocks), prone to bouts of inefficiency that both traders/investors can arbitrage.

I basically form a strong view against it without really seeking to understand it. At least must give it a chance to convince me :)
An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return - Benjamin Graham
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Re: Books

Postby winston » Sun Sep 28, 2008 8:09 am

From Darst: Pay Attention, Protect Your Assets:

The Little Book That Saves Your Assets was written for one major purpose: to protect your assets in any kind of market environment, while helping the value of your portfolio grow over time.

Among the special features I've included in the book are:

A rundown of the key features of the 11 major asset classes, including the specific benefits and drawbacks of owning them (page 28).

An asset allocation clock, telling you what kind of assets to emphasize in periods of inflation, deflation, economic growth, and economic retrenchment (page 32).

Shortcuts for calculating the pretax portfolio return you will need -- factoring in the impact of inflation -- to live within your means after you retire (page 80).

Darst: Pay Attention, Protect Your Assets.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Books

Postby kennynah » Sun Sep 28, 2008 3:55 pm

i think some of you guys have read this book :

title : Way of the Turtle
author : Curtis Faith


easy read....one should be able to complete this book within an afternoon.

my opinion of this book.... it espouses the need for strategies in an investment. he spoke of the turtle way thought to the turtles by 2 commodities king of the 80s..the turtle way is a set of trading principals but the basic tenet is to trade an established trend.

so so book....read if you need to get some inspiration from this ex-turtle who made 31.5mil for his boss when he was just 19

there was some twist of fate to this curtis faith fella...so i leave that for the interested to discover from the book
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Re: Books

Postby winston » Sun Oct 12, 2008 4:10 pm

Am reading THE AMAZING POWER OF DELIBERATE INTENT. by Esther & Jerry Hicks

A NEW YORK TIMES BEST SELLER

This leading edge Abraham book is about having a deliberate intent for whatever you want in life, while at the same time using
the Art of Allowing and the Law of Attraction to balance your energy along the way.

As you come to understand and effectively practice the processes offered here, you will not only achieve your goals and desired outcomes more rapidly, but you’ll enjoy every single step along the path to manifestation. You’ll find that the living of your life is an ongoing journey of joy rather than a series of long dry spells between occasional moments of temporary satisfaction.

Words of Praise
Masterful Teachings from the great masters of the universe!
— Dr. Wayne W. Dyer, author of The Power of Intention

Abraham’s energy and words will soothe, guide, and empower you.
— Doreen Virtue, Ph.D., author of Goddesses & Angels

Absolutely fabulous! This book can transform every aspect of your life.
— Christiane Northrup, M.D., Women's Bodies, Women's Wisdom

You’ll learn to allow only good to come into your life.
— Louise L. Hay, author of You Can Heal Your Life

Customer Reviews

1 Billion Stars (5 is not enough by far!), 12.29.2006
Reviewer: Steve Nelson (Colchester, Essex)

Within the pages of this book you will find revealed the keys to the abundance of the universe. What is more is that you will find you already possess them, and in this book, Abraham shows you ‘where you put them’ and teaches you how to use them. If you have ever wanted to know the ‘truth’ your search is over. There are no words to express my gratitude to Abraham, Esther and Jerry for illuminating the world.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Books

Postby iam802 » Fri Oct 17, 2008 1:41 pm

I just finished reading "How I Made $2,000,000" in the Stock Market" by Nicolas Darvas

Darvas was a professional dancer. Through a series of mistakes and observation, he went on to establish his own trading system.

In essence, his system is similar to what CANSlim has. A combination of TA-and-FA. The system also includes when he will take a position (his entry point) and when he will cut-loss or exit.

For someone who do not rely on charting services, he was able to identify support and resistant points mentally. He also felt that listening to too much 'news' blurs his beliefs system.

The book is also very similar to the book on Jesse Livermore, except that Darvas is more 'ordinary'. It also focus on his learning experience, his mistakes and how he went on to rectify it. JL's book is more colourful with quite a fair amount of the details on his personal life as well.

Darvas achieved his $2m only through a few stocks. But, for each growth stock that was found, he would add on to the positions as it break new highs.
1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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The Ichimoku Thread | Option Strategies Thread | Japanese Candlesticks Thread
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Re: Books

Postby winston » Fri Oct 17, 2008 1:45 pm

iam802 wrote:I just finished reading "How I Made $2,000,000" in the Stock Market" by Nicolas Darvas


Yes, I read this book a long time ago.

I still use his system when I'm doing short term trading on Equities.

However, nowadays I'm trading more Warrants rather than Equities.
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