Financial-markets

I had the chance recently to read "A Fool and His Money" by the same author, and enjoyed it: he described a comic series of mishaps as he sought to replace employment by investing. (A similar book about a pilot investor losing all in a few years appeared around 1960).

I tend to be a bear by now, so I thought I would agree with this book. The surprise for me was the anecdote-filled journey through markets of the last century - the ups-and-downs come alive in this book. He has a wry chapter where he points out that "Profit from the coming collapse" books appear every year or two, rain or shine, for the last 15 years; in that sense 1998 is more of the same. The author is a Harpers/Atlantic type journalist who aims to be erudite and entertaining at the same time.

No, he doesn't have secret advice on how to make a killing by shorting stocks now (he covers the most recent bear funds like 'Prudent Bear' of David Tice). He explains why hedge funds may not work, may soak huge commissions, and why bears & shorters are tax-disadvantaged.

Another witty chapter is "Where are the Bears' Yachts?" - even the brightest consistently pick the sorriest guaranteed future losers and win millions by shorting them.

Bonds
1. Bonds are profitable as interest rates are dropping, if a capital gain can be realized. A capital gain occurs when the seller has bought a bond with a high yield rate and the sells when the market yield has dropped. The difference in yield creates value because the seller's bond is preceived to be more value because of the difference in the yield cash flow. The perceived value translated into a higher selling price, for the seller. Price is a function of the cash flow difference in the yield. The positive difference in buy and sell bond price is the capital gain.

2. When interest rates are climbing, investor money moves back into security, treasures, funds which take advantage of the higher interest rates.

Stocks
1. 15 percent growth is a 20th century phenomenia
2. Stock before 1950 averaged 6 percent. The author is not impressed with Stocks nor their long term performance.
3. Stocks can fluctuate 50 percent in price in a given year. This can lead to mixed signal of buy high and sell low rather than buy low and sell high.
4. Market timing to buy and sell a stock creates massive numbers of losers
5. Buying and Selling Stocks always makes the Brokerage House the winner. The experts have 100 to 1 the advantage.

Gold
1. Gold doesn't earn interest. Gold costs to store. Gold is a safety against the dropping value of cash.
2. Increases during inflation. Inflation increase as the government prints more money

Cash
1. Cash is the most desired medium. Cash is liquid and readily exchangable for goods and service. The decision to buy company stock or build a new company is based on the replacement value of the company.
2. The Federal Reserve controls the inflow and outflow of the money supply
3. The money supply effects the interest rates. As money becomes more difficult to lend the interest rates go up. As money becomes cheap the interest rates go down.

New Bull High
1. All the bear advisors must capitulate
2. 80 percent of the market must be bullish
3. The market must be in a recession
4. Money must be moving out of mutal fund

Bull Assumptions
1. Bulls are very optimistic
2. During a Bull market very little attention is given to Bear advise
3. Global events, earthquakes, wars, oil shortages, etc have immediate impacts on Bull momentum.

New Bear
1. Prices are deflating
2. The price to earning ratio are moving higher or have reached new price levels
3. The yield curve is inversed. Deflation cause bond activity and bond sell off in a bear helps investor take a profit.
4. Deflation, P/E, and Inverse yield hit the market only once in the 1930s
5. Deflation has not be a factor since the great depression
6. The best bear predictor in the market has been an astrologer. The author this Russell was pretty lucky. Averages, statistic, genetic algorithms, and simulators have not been able to find an market equation.

Bear Assumptions
1. There is no known scientific way too predict a bear trend. At best Artifical Intelligence system can mimck the behavior patterns of one expert in a simulation.
2. Bear markets cycle about every six and half years, however, there is no way to predict the cycle is reliable. Some of the worst bailouts came because of leverage billions of dollars hedged against a downturn in the market, a downturn that didn't happen on time.
3. Bear warnings such as six months of downward price pressure is inconclusive proof the market will move into a bear market.
4. Company can be performing excellent and demonstrate increasing earnings; however increasing earning does not guarentee higher prices. So, a doubling in earnings one year does not mean a doubling of price, also, only the market's players desire too move the price higher will cause higher prices. Some have tried to model market player emotions/expectation with little success.
5. Contratrism will not always work and in many cases increases the pain and carnage. Going against the pattern of the crowd goals is too find bargins during cycles of fear and greed.

1.Greek leaders had a huge federal payroll too meet and many bureaucratic mouths to feed, on top of expensive wars and costly road building and drainage.
2.Three escapes: a. raise taxes b. fire bureaucrats and cut government spending c. spend at the usual carefree pace, but put less precious metal in the coins.
3.The continental colonist could not pay for their revolution with taxes. They financed the war with a huge print run of "Continentials" sent to troops and suppliers as payment for their services. Nothing of substance was backing the new currency. When merchants began to refuse the new currency the revolutionist made it a crime to refuse the new currency.
4.The Continential congress issued new paper worth twenty of the originals. The new money quick lost its buying power. By issuing sham currency, the Revolutionary government had imposed what amounted to a 97.5 percent tax on the recipients.
5.By the late 1700s paper money was discredited and the United States along with other countries put themselves on the Gold standard. Banks could issue notes redeemable in gold. The Gold standard created the first reliable cash in human memory. It created problems because banks could only distribute notes proportion to the gold they had in their vaults. Congress did not renew the Bank of the United States charter; the second bank of the United States came under political attack and its demise caused the panic of 1819 and a third bank was not created until 1913. After the panic of 1819 the gold standard was relaxed and state banks appeared to take advantage printing more notes than they had tangible assets to cover.
6.In the mid 1800s, the federal government force banks out of the money business by imposing a huge tax on their cash. Every since the U.S Treasury has had the monopoly on money.
7.The U.S Treasury created a huge supply of greenbacks to finance the Civil War and terrible inflation made the greenback as worthless as the continental. Two World Wars and the Vietnam War were financed in similar fashion.
8.To fight inflation the central bank raised interest rates. The remedy was too create a recession.
9.Sep 1944, politicians and bankers from the Allied nations met at Bretton Woods to devise a new system of fixed exchange rates.
10.Each currency was assigned a price range within it could trade, in relation to the US dollar. So for example if the Swiss franc was too expense, the Swiss Central bank would enter the market and sell francs and buy dollars. This action would push the Swiss franc down and the dollar up. If a country refused too devalues, other countries would amass the non-conforming countries currency, approach the country's central bank and demand a swap for gold. The choice remained devalue or deplete. The pressure to devalue was considered the lesser of the two evils.

Just a compilation of known - like what zodiac signs, planets and aspects are.

I was really disappointed with this book, particularly given that it was written by seasoned bankruptcy experts. The book is very skinny on content - it spends about 30 pages on bankruptcy law and its procedures, a few on case studies that are superficial/poorly written and several on bond analysis, and standard research tools that are well-known to a person with basic financial knowledge, ie the sort of people who would be interested in something relatively exotic as Bankruptcy Investing. The few useful pages that there are are marred by poor writing, and a complete absence of analytical frameworks that stay with the reader.

Bankruptcy is a complex topic and there is a need for a book of the sort Branch and Ray have attempted. However, this is most certainly not that book.

Great introduction and overview of the world of distressed and bankruptcy investing. The authors managed to synthesize a very complicated subject into an easy-to-read and understandible book. Of course no one book can cover the entire subject in detail, but this one comes amazingly close. Highly recommended.

This book has everything I needed to make money in this market. They do need to update their data and bring it forward, but the analysis is first rate and the methodology was very new to me although quite understandable in plain english for someone without a law degree or an mba. I now understand what is going on here and I can see how the vulture investors get the large returns. I reread the first part after several months of buying and it all still held together. Interesting and moneymaking as well.