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WSJ Reviews: Insight for Trend Traders

Traders come to our site regularly seeking the latest recommended book. They always want something new. New, however, is not necessarily the answer as excerpts from a Wall Street Journal review by Roger Lowenstein so eloquently point out:

Self-Improvement Literature, on this side of the Atlantic, arguably began with Benjamin Franklin. More recent practitioners may lack for Franklin’s enduring pearls, but that hardly stops them from trying. Today one could spend an entire afternoon on books intended to illuminate the wonders of a single diet, a particular path to nirvana or a technique for getting along with one’s boss (or spouse). We now have three books from the genre on the art of investment. Franklin, with his advice on savings, may be considered their philosophical antecedent. None of the present selections — “Ahead of the Market,” “The New Reality of Wall Street” and “Yes, You Can Time the Market!” — aim for the timeless quality of Poor Richard’s. Rather, they offer a contrary promise — to assist their readers in the pursuit of time-sensitive and crowd-beating strategies. Investment manuals suffer another deficiency, which is that expert (and I use the term advisedly) opinion in the field tends to be cyclical, not cumulative. One would not expect to see a home-improvement volume with the title “The New Reality of Plumbing.” But the science of investing, at least as it is propagated by financial writers, undergoes a seeming revolution every couple of thousand points on the Dow.

TurtleTrader® comment: Most trading wisdom is definitely cyclical, not cumulative. Lowenstein’s plumbing example drives home the point.

It is no surprise that the three books under review, though chosen at random, share a bearish tone. It is a safe assumption that if the present rally on Wall Street continues, the next crop of titles will encourage investors to be daring; and if it continues still longer, downright aggressive…By far the weakest of the entries is Donald Coxe’s “The New Reality of Wall Street,” (McGraw-Hill, $27.95) with the screaming subtitle, “An Investor’s Survival Guide to Triple Waterfalls and Other Stock Market Perils.” Mr. Coxe’s conceit is that certain market movements recur and that readers should seek to divine which pattern is unfolding at any given moment and act accordingly. For instance, he classifies bear markets into four “breeds,” for which he employs a series of forest similes that rapidly grow tiresome. (“Hikers know which species of bears’ territory they are invading…. The Papa Bear is drawn from hibernation by the whiff of rising interest rates.”) The larger problem is that markets form new patterns every day. There is no set number — four? five? 23? — of bear-market species. The term bear market itself has no meaning except in retrospect; we can know that one has happened but never that one is happening.

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