Money-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 wanted to like this book, and held out high hopes through the first several chapters. It's real flaw is in its lack of substance. Perhaps the editors or Ms. Davis feared losing readers in overly technical explanations of complex trades, but I believe there is a middle ground which was not even approached. I was also dismayed with the chapter on women in the business--not a single profile of a woman attempting to balance a high powered career with family. As a group, the individuals (men and women) come across as smug, self-satisfied and self-centered (the section where she writes about their charitable work is as fawning as it is laughable). But what this book really needed was more meat--more about programmed trading, the chartists, the value traders, derivatives, day traders, etc.

Ms. Davis might not stretch to say traders are saviors but she almost deifies them with her genuinely affectionate portrayals here. She's intent on redeeming the profession (as if it needs redeeming--it doesn't), which she imagines the Average Joe scorns and vilifies. I bet the Average Joe pays little attention to hyperactive market makers, compared to the time spent fretting over his or her own investments. Still, Ms. Davis assures us that for every rogue trader like Nick Leeson (who brought down the British Bank, Barings) or Mike Milken (wait, Mike is NOT a crook, she corrects, notwithstanding the criminal charges), there are scads of other, brilliant, hardworking people--possessed of traits you and I could only wish to have--who lubricate the capital markets and provide the fuel for growth. In other words, she's a proselytizing apologist: by compensating she overstates. If you're not in the financial business, you might find this breezy book an acceptable companion at martini time, if you're someone who will gaze in amazement at the hue of a cocktail olive. She's oddly cozy and deferential with her subjects, like a mistress. More like it, the traders are friends whom she has no desire to offend, or perhaps she plans to approach them for future employment. The trouble is, the topic cries out for a critical eye. For those who take investments seriously the text is a great failure, totally lacking in specifics, or even anecdotes that might illuminate. Imagine a cook book that attempts to describe the taste of the recipes without listing any ingredients and you'll understand the problem with "A Million A Minute." Ms. Davis, your readers can take more. A truly entertaining book (and with more meat) is Michael Lewis' "Liar's Poker" and "Pit Bull" by Martin Schwartz. Mr. Schwartz, especially, is a man who has traded for years, who can share his secrets (successes and failures) and who can live to tell about it!

My biggest complaint with most books like this is that they are boring to read because they go on and on with long explanations that lose the point somewhere along the way.I loved this book and was pleasantly surprised. There was no time to get bored. The author moved easily from topic to topic. Her observations were not run of the mill, but were sharp and fascinating.The characters came to life.The book's approach is more like an economic look at the world of trading and its implications rather than a recipe book for how to trade. But as the author said, you can't learn to trade from a 'how to trade book' anyway.If you could, people wouldn't get paid so much to do it.I'd recommend this book very highly.