Customer Reviews

The New Reality of Wall Street : An Investor's Survival Guide to Triple Waterfalls and Other Stock Market Perils

5 star:		(3)
4 star:		(1)
3 star:		(1)
2 star:		(2)
1 star:		(0)

 

 

While the author from NV makes a point about the Harris Insight yearly underperformance, Mr. Coxe's performance has beaten the SP over the last three years by 680 basis points annualized.

This is a superior book, because of the style of thinking. Typical investors, like the individual from NV, or the herd, think in a conformed fashion and Mr. Coxe takes us out of the conformity and allows us independent thought.

He also does a great job explaining what external influences on the market are, the important roles they play( things like eurodollars, central banks, world economies, etc.), and what happens when markets go down or sideways for an extended period of time.

I would recommend this book if you are looking for a good macro overview of markets and the major players. It is not nor meant to be a technical indicator or timing book, and indeed while there will be major trading rallies of 50%, the chances are very strong that we continue to remain in a "generational" bear market. One that could last a decade or more if history is correct. And one that will ultimately decimate Mr NV and the herd again at the proper time and place. For as we all know the market exists to make the majority of the people wrong the majority of the time.

If you are looking to think like everyone else, then there are other books you should be reading.

This book is explains the Big Picture of global markets and how an individual investor can use a broader understanding of markets to manage a personal investment portfolio. The survival analogy really works for me. It is his ability to explain the patterns underlying the day to day activities of the stock markets which sets Mr. Coxe apart from other investment writers I have read. The first chapters are about crashes and Triple Waterfalls, and he provides the historical context for the Nasdaq's crash. It was eerie and sobering to see how precisely we mimicked the behavior of investors in other eras. However the chapters I found most interesting were dealing with the US Dollar, Gold and the Eurodollar. I can't wait for his next book!

Donald Coxe does a great job of explaining how we got to where we are today. But the best thing is that he offers intelligent, witty insight into what investors should do next. At a time when most investing guides are offering bubblegum advice in a pop psychology wrapper, ths book is a breath of fresh air.

Don Coxe says it took him over a quarter century to develop his triple waterfall theory. In his words, he started out trying to imagine what economic historians would be writing about a hundred years on. Realizing they would focus on the grand sweeping movements (to the exclusion of minor fluctuations), Coxe felt motivated to do the same.

Triple waterfall theory is a variation on a popular asset allocation theme, namely that the ultimate investment strategy only requires one or two major decisions per era. As research house Gavekal puts it, imagine being fully vested in gold and oil through the 1970s, going on vacation, coming back to buy Japan and zero coupon bonds for the 1980s, hitting the beach for ten years more, then scooping up tech stocks and JGBs for the 1990's. (For this decade the smart play has been Asia and commodities, though of course we are only half through.)

It is unsurprising to Coxe, and to students of market history in general, that Wall Street is still fighting the last war. As of this writing, crude is rapidly reapproaching $60 a barrel, copper is pushing multi-decade highs, and gold has aggressively decoupled from the dollar as fiat currency worries deepen. Yet the investment houses continue their conceptual love affair with bedraggled and besotted tech stocks, dismissing inflation as benign and the natural resource resurgence as a flash in the pan.

Coxe's triple waterfall theory is meant to help you avoid making this type of classic mistake. He tours historical events and makes a powerful argument for a disconcerting conclusion: When an asset class goes through a triple waterfall, it doesn't just fall out of favor temporarily. (And if you think the term 'waterfall' is overly dramatic, just pull up a monthly chart of the Philly semiconductor index.) The exile can last for decades, as gold bugs who spent twenty years out in the cold well know.

In addition to warning investors against the danger of hapless old flames, Coxe offers up a "taxonomy of bears," dissecting the rhyme and reason of past bear markets. While his terms are overly cute--teddy bear, baby bear, papa bear etc--the reasoning is sharp and well thought out. He also brushes the dust off a reliable but obscure indicator, the TED spread, and explains why it still has great value during times of international crisis.

One [Amazon] review is pretty harsh on Coxe for his poor mutual fund performance, also nitpicking some demographic predictions and a lack of options coverage. This sounds a lot like sour grapes to me. The purpose of the book is to present ideas and insight based on market history, so what do I care about an offhand view on Latin assimilation... and why would anyone expect an options primer? To me, the book rests squarely on the value of the insights--the big takeaways--and by that measure it's a good read. (A fast one too... I finished it on a coast-to-coast plane trip.)

As I peruse more reviews, I'm realizing that my viewpoint is often at odds with other readers. I truly enjoy market history, original thought, and well written 'big picture' perspectives. Sometimes I get the feeling this is uncommon, and that many are looking for some kind of concrete instructional payoff along the lines of 'do exactly this and this.' If that's what you want, you're barking up the wrong tree (with Coxe's book). In contrast, if you like doing your own thinking and enjoy seasoned perspectives, you'll be pleased.

"New Reality of Wall Street" is an oddly assembled book with some flashes of insight. Although Mr. Coxe has a lively writing style, the substance and weight of his assertions often leans towards what is colloquially referred to as "bull". The novice will find much to be confused about. The keen skeptic will have much to be skeptical about. And the expert will find nothing new.

The book starts out in the style of a wilderness survival guide. This would suggest the book is meant for novice investors. And this is supported by his diversions to explain concepts such as risk premium and bond duration. But he also delves into detailed discussion regarding foreign currencies without explanation of currency mechanisms. For example, he explains that Japan, as an enormous creditor to the USA, must print large amounts of Yen to "absorb" the inflow of Dollars. A novice who does not understand central banking mechanisms is left without so much as a trail of popcorn to figure out why or how this is. So while Mr. Coxe spends too many pages on basic principles for this to be an expert investor's book, he entirely skips vital concepts for this to be a novice's book.

Even if one does understand everything that is said in these pages, there are other thematic problems. He makes numerous creative assertions regarding the causality of certain economic events, but does not offer any supporting logical arguments or empirical evidence. (Contrast this with writers such as Robert Shiller or Marc Faber who do not require you to take their statements at faith, but instead support their assertions with data.) Most often, his arguments are based on political opinions and platitudes. If you do not accept his political opinions, you may find it difficult to accept many of his explanations or conclusions. It's not that his political opinions are unusual as much as his opinions display a disconcerting tendency to confuse fact with opinion or logic with data. For example, in one instance he simply states without further elaboration that democracy is superior to communism as a matter of logical fact. While most readers would agree that historical evidence supports the superiority of democratic style governments, to state that this is a result of deductive reasoning is be ignorant or confused. Faith is required in reading this book. Ironically, he spends considerable effort explaining why you should never accept Wall Street recommendations on faith.

Finally, although some of his assertions may seem bold for those who do not regularly read beyond mainstream financial magazines, his investing recommendations betray any uniqueness. His recommendation is simply to diversify broadly among stocks, bonds, and cash.

Although I happen to agree with much that he writes about, I am left feeling that this is nothing more than a very long elaboration of a poolside conversation over beer. It may be enjoyable and you may be nodding your head in agreement often, but unlike what the title suggests, there is nothing substantial, concrete, or convincing. Marc Faber's "Tomorrow's Gold", although slightly dated, is a far superior treatment with similar conclusions and more daring recommendations.

I didn't find this book particularly helpful in terms of investing. I think most people know that India and China have become more capatilistic, in a purely relative sense, and that they will be needing to build roads, indoor plumbing, etc. Coxe seems to be a genius in his other writings and has a weekly conference available on line. This book just struck out for me.

While not a complete waste of money (like Mark Douglas' books), the author has little credibility writing a book when his one year performance in his Harris Insight Equity fund (4/1/02-3/31/03) was MINUS 29.6%. Notable flaws are the author's assumption that the exploding latin population will assimilate into the general population as the Italians and Irish did over a century ago and help the economy (Hey Donald Coxe, check out current crisis condition of California). Another flaw is his stubborn refusal to see the current bear market as largely UNfinished and more like the Great Depression than the milder 73-74 bear. And, since he only knows how to push mutual funds (he manages one), forget about any info on options. Options and the leverage they empower the average investor with is the ONLY realistic way to make up for past market losses. Try Sy Harding's book (for overall market knowledge), Charles Caes' "Tools of the Bear" (for options education), and John Murphy's "Charting Made Easy" (to learn technical analysis).