Bond-market

This is a well-informed and very readable book on the informational value of the financial markets. However, this is not a how-to book on stock picking. What Mr Insana is concerned with in this book is not so much what price movements can tell us about an individual stock, but the macro information that the financial markets can tell us about the economy, geopolitics, major news events etc. There's almost no advice on individual stock picking based on price movements (too noisy), but there are advices on how to choose a job, time the purchase of a new home, move cash in and out of the market etc. based on the message of the markets.

In retrospect, some of the messages from the markets identified in the book are quite prescient. A good example is the rapid deterioration in the A/D line at the height of the Internet bubble. Of course that phenonmenon did not go unnoticed by the market pros. I clearly remember numerous analysts assuring viewers on CNBC that the stock market was not over-valued (and therefore in no danger of collapsing) because so many stocks were in the doldrums!

The book was filled with anecdotes about how major economic and geopolitical events (from Fed rate cuts to border wars between Egypt and Libya) are foreshadowed by unexplained market movements. Had Mr. Insana focused on the rationale behind these movements his argument would've been a lot more convincing. Instead, the book had a tendency to ascribe a sort of magical, oracular power to the market and the "smart money" that makes the market. Of course the real reason is a lot more mundane. Sometimes it's rampant insider trading (as in the oil futures mkt). At other times anyone who has bothered to read a newspaper would have seen it coming from a mile away. A good example is the collapse of the Thai baht. Any regular reader of the Far Eastern Economic Review would not have needed the markets to send a msg - for months the magazine was filled with dire warnings of imminent collapse in its op-ed pages.

Another issue that Mr. Insana did not address is the very important question of how to separate the signal from the noise emanating from the market 24 hours a day. As someone who had (foolishly) dabbled in the futures market, I know first hand that wild swings in the market can be triggered but nothing more dramatic than a 1/2-hr T-storm in downtown Chicago. (I always susepct that if I wait at a 2nd fl. window at the CBOT and sprinkle water on the head of a particular trader as he leaves the building, I can make a killing in soybeans.) In the days of old when the market was almost the exclusive domain of the Smart Money in the know, the msg. of the mkts was probably a lot more reliable than today, when the unwashed masses can steamroll the smart money based on the most ludicrous rumor posted on Pump-n-dump.com. How to separate the grains from the chaff is something we'll have to leave to another CNBC author.

BTW, there really is a web site called pumpanddump.com.

Those other reviewers (as well as CNBC, Amazon and financial experts) are right. SIMPLE MONEY SOLUTIONS by Nancy Lloyd (a Federal Reserve Board economist who I see frequently on CNBC and read in the New York Times Sunday Business) and this book by Ron Insana are all I needed to finally make sense of my personal finances and begin making good investment decisions for my personal portfolio as well as my 401(k) plan.

By using the outstanding, original and easy-to-follow advice in these two books my net worth has actually risen into the high six (6) figures!!! Not bad while the market is stagnating or dropping.

My friends, whose portfolios have been plunging in value, are in awe of my newfound financial savvy and skyrocketing bottom line.

And I owe it all to the information I picked up in these two incredible books. Ron and Nancy should patent this advice. It beats anything I've read elsewhere.

CNBC anchor Ron Insana's second book on the stock market, "The Message of the Markets," follows "Traders' Tales" in 1996, and does an excellent job of selling you on the idea that the market does send signals for anyone who's interested in looking for them. Using Insana's words, "Many times the prices of stocks, bonds, and commodities accurately anticipate or forecast future events. "But what is a "market?" If a market is where buyers and sellers come together and agree to exchange assets - stocks, bonds, futures, options, wheat, oil, gold, cloth, Beanie Babies, guns, drugs, etc., then the "message" of the market has to be the PRICE resulting from that exchange. That price level conveys enough information that if you know what you are looking for, you will be able to anticipate future events solely on the basis of price and its trend. Why? Because there is what Insana calls "smart money" and "dumb money."Smart money belongs to insiders, those closest to the action who see and know what is happening. They act on their knowledge, leaving their tell-tale footprints of transaction prices for all to see. Then there are the outsiders; the ones who wake up one morning and read about something that just happened, realize that it is significant, and decide to catch the obvious trend already in progress, invariably buying from those same insiders who got in months ago anticipating exactly that outcome. What Insana doesn't say is that without smart money to indicate the way, all markets would be chaotic, panic-driven price spikes in either direction as everybody tried to react to the same thing at the same time. He is particularly correct when he warns to watch out for the price move "with no apparent reason." It can signal momentous events on the horizon.The real message of the book thus becomes that if you learn to track where the "smart money" is going, then in addition to profiting along with the insiders on the various price moves, you can also make more intelligent business, investment, and career decisions. Insana uses the interest rate yield curve as well as popular averages to predict the onset of recessions; market internals (Advance/Decline Line, diverging Dow Jones Averages, etc.) to predict the stock market; and commodity price movements to predict geopolitical events.
He gives industry/sector group relative strength rotation credit for frequently predicting the economy's strengths and weaknesses and cites ways in which this can be used in selecting career paths as well as suggesting business trends. He uses commodity price moves as signals that foretell future events such as Chernobyl, the Gulf War, the Egypt-Libya potential war, and other geopolitical upheavals.  However, I believe he makes too much of the market selling off just prior to the announcement that JFK had been shot. There is a story about a certain well-known network newscaster in Dallas making the call back to his NY newsroom, then ripping the pay phone out of the wall to keep other reporters from using it to get to their newsrooms. So there may have been real reasons for the news delay. Anyway, the market was shut down with the Dow suffering only a 3% decline. After remaining closed one additional day, the market continued its upward climb for the next 3 years. While a member of the Pacific Stock Exchange, I witnessed the same momentary "front-running" when Reagan was shot on March 30, 1981. On that day something "felt" amiss when we suddenly got hit will an avalanche of sell orders. Minutes later, the news tape announced that the president had been shot. But like in the Kennedy situation, the market dipped momentarily, then continued its rally. In these two cases, the message was inconsequential, financially speaking. After giving numerous examples of what market signals are and how they've fared over the years, Insana asks his most thought-provoking question: "So why was it that most investors, all the world's politicians...failed to notice trouble signs on the horizon? Once again, it was the failure of many observers to pay attention to the market's ominous message."  The implication being that the rain clouds were forming but nobody took notice. The answer is simple yet unsatisfying: As long as we listen to what "they" say instead of watching what "they" do, we will always fall victim to "their" market. What Insana is making a case for is a market discipline termed Technical Analysis. It looks at market action, valuing above all else the constant interplay between the supply and demand for a any tradable entity, and considers Fundamental Analysis (Wall Street research) as so much hot air. It is not a particularly popular stance, but it is much closer to allying yourself with reality than anything else.

I'm an interest rate professional with more than 10 years of successful pricing and trading experience, and I enjoyed and appreciated Riccardo Rebonato's clear presentation of the pricing of these derivatives. I keep this on my desk as one of my key references.

Another great read is "Credit Derivatives" (2nd Edition) by Tavakoli. The products and their uses are clearly explained, and ties in relative value to the interest rate market. I concede that the models for this product may be trickier because of documentation risk and data issues, but Tavakoli brings clarity to this topic so any interest rate professional can grasp the products and why investors - even hedge funds - are so keen to use them.

It's hard to believe a reviewer with such a myopic view of Derivatives pricing could go through the whole book, understood it and found time to rate it. Mindblowing waste of time !
Few hundreds years ago, he would have recommended burning the Madmen claiming the earth was round.

Anyway, while Derivatives Pricing achieves little for the welfare of mankind, the recent need for assets based on ever complex market scenarios calls for a more refined pricing methodology. There no supply and demand here, only customers who want hedge/trade/tradge assets /liabilities and traders who need to make sure their firms don't go burst when market move.

The author answers that demand by formatting and publishing his papers.

My avid reading kept jostling out superb hot ideas from this book. Rebonato carries out a comprehensive survey of the LIBOR market model. He tackles historical background, calibration, and effective implementation. The later chapters also cover extensions to the LIBOR market model to take account of smile and skew. In particular, there is extensive discussion of the cutting-edge Joshi-Rebonato stochastic-vol, displaced-diffusion LIBOR market model.

If you are working on the pricing of exotic interest rate derivatives, this book is a must buy.

Valerie Thompson has done an outstanding job of tackling this portion of the global bond market. The book is thorough enough to provide a refresher to a market pro yet accesible to moderately skilled retail investors. Mastering the Euromarkets is particularly recommended for the legions of retirement plan equity investors who will eventually need to worry about generating income from their portfolios.

It is not a matter of like or dislike here.
I did really enjoyed of the same author - "Irrational exuberance", finding its conclusions very well argumented and the exposition clear and easy.
Here we have only a kind of "laboratory" with a collection of articles about hypotesys testing: very specific, many formulas,use of advanced math but NO DEFINITIVE CONCLUSION.Not even the thesys about market efficiency has been clearly attacked.
If the thesys lacks, you cannot either form a judgement and agree or refuse conclusions.

I love reading and discussing: if you happen to have ideas different from mine - or whatever - feel free to write me.

It is a nice book.But for me,I love Shleifer's "Inefficient market" more.This book focus on the Divident-to-price ratio and use it for the analysis of the market volatility.The writer does give us some insight about the market.But I doubt if it could stand for a long... since the market is changing all the time.

Shiller does to the Effecient Market Theory what Columbus did to the flat earth theory. This is one of the finest books on markets I have read, and I have read hundreds.

This book discusses the types of control (aka restraint) the author found in three settings of traders ('market makers'): the futures market, the bond market, and the stock exchange. The studies were conducted at different times, and under different conditions in each market, which makes comparing across the settings somewhat difficult. However, Abolafia does a good job of addressing those issues, and does a commendable job of drawing together three otherwise very different studies into a single rubric. His conclusion--that the social context of each market plays a big role in the opportunities and constraints actors in each market face--will come as no surprise to followers of the new economic sociology (since Granovetter's 1985 embeddedness article). But even other readers will find Abolafia's evidence quite convincing on this point. He uses his ethnographic data, collected over a decade, to demonstrate how market actors are embedded in social context.

When I used this in an undergraduate Sociology of Work class, most students did not catch the distinctions Abolafia made between the various settings. I tried using this with Simpson's work on types of social control in the workplace (direct, hierarchical, bureaucratic, occupational, etc), and while students saw some connections, they did not get the fine distinctions Abolafia made which I had hoped they would, since his comparison across market settings forms a core element of his argument.

Would work well in graduate level courses, or courses specifically on economic sociology. For scholars of the market (economists or sociologists) this is a book not to be missed!