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46 of 48 people found the following review helpful:
5.0 out of 5 stars
Excellent trading foundation!, November 13, 2005
This review is from: Timing the Market: How To Profit in the Stock Market Using the Yield Curve, Technical Analysis, and Cultural Indicators (Hardcover)
This work provides an excellent, professional grounding for one's approach to the markets. The theoretical basis for this foundation is ongoing analysis and interpretation of the U. S. treasury yield curve, bond quality spreads, and movements of the federal funds rate. The author's exposition of the yield curve is the best I've seen. She divides her analysis of the yield curve into short-term money market segments, the traditional spread between ten year bonds and three month bills, and longer-term bonds. Each of these segments affords the analyst important information as to the the present and anticipated state of the economy -- which determines the earnings expectations that drive markets.
The second section of this book affords a somewhat different take on technical analysis than is usually encountered. The author explains how to use the volatility index (VIX) and the put/call ratio as indications of short-to-intermediate term market turning points. She also indicates how margin debt and short interest levels can be used to reveal long-term market highs and lows.
The third section of the book describes cultural and demographic methods for gauging the market climate. These methods are qualitative only; subject to interpretational error; and questionable in the separation of "fact" from one's psychological projection. However, used strictly as adjuncts to yield curve analysis and technical indicator confirmation, they can be quite useful as further confirming tools.
The fourth section describes how to use market timing in a profitable, top-down approach to riding the business cycle through rotation from fixed-income investments into equities, then hard assets, foreign currencies, and back into fixed-income instruments. The author details how intelligent asset rotation leads to more favorable portfolio results than does buy-and-hold over the long run.
The market timing model which the author evolves over the course of the book substantially beats a buy-and-hold portfolio and does so while experiencing less volatility. The timing model's rationality, operations, and results are clearly explained and documented to facilitate a comprehensive understanding of her approach.
This book is well-written. Its thesis is logical; well-developed; and supported with numerous examples, data, and around sixty pages of appendices. I feel that its methodology will help investors understand and identify forces which move markets as well as avoid those traps of crowd psychology which lead to participation in mass buying at market tops and mass selling at bottoms. This work is an interesting, original contribution to the literature of markets!
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41 of 44 people found the following review helpful:
2.0 out of 5 stars
An overall disappointing effort, December 29, 2006
This review is from: Timing the Market: How To Profit in the Stock Market Using the Yield Curve, Technical Analysis, and Cultural Indicators (Hardcover)
I approached this book with an inclination to like it. I'm a firm believer in market timing, and I jumped at the chance to learn some new ideas about using the fixed-income markets to time the stock market. I have to say, though, that I came away from Timing the Market frustrated and disappointed. Here's why.
Throughout the book, there is a chart detailing various buys and sells that one supposedly could have made using the author's timing system. However, rather than deriving these buy and sell points systematically, the author seems to choose buy and sell points that would have worked best in retrospect without regard for whether or not they fit into a coherent, replicable system.
For example, in chapter 7 the author adds buy points to her chart right after the waterfall declines in October 1987, September 1998 and September 2001. What is the rule that guides these choices? Apparently, it is that the Fed lowered the fed funds rate at least one-half of one percent after a crash of some kind. This rule is apparently a sufficient but not a necessary condition of buying because numerous other buy points on her chart don't involve this rule at all. So IF you hadn't already committed funds because of other rules, you MIGHT have been able to buy then.
Later in the book, on the basis of a breadth-based rule about the Dow 30, the author erases the September 2001 buy signal and records a buy signal for her system on July 19, 2002, near the ultimate bottom of the bear market. This is based on the fact that all 30 Dow Jones Industrial Average stocks declined on the same day. I see IN RETROSPECT why she did this, but how would you have known in September 2001 to wait for the later buy signal? The author does not address these kinds of questions at all, as far as I can tell. As I said, frustrating and disappointing.
There may be value in Ms. Weir's concepts, but she has far to go if her aim is to develop a rigorous market timing system, in my opinion.
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25 of 29 people found the following review helpful:
5.0 out of 5 stars
Timing the Market . . it's just better, April 18, 2006
This review is from: Timing the Market: How To Profit in the Stock Market Using the Yield Curve, Technical Analysis, and Cultural Indicators (Hardcover)
I'm a technology guy, so when asked if "something works", my response is often: "I don't know, let's try it." That's precisely what I did with this book. It actually inspired me to go out to the Fed's site, collect the data, crunch through some numbers, and make the trades myself going back to 1960. I only "traded" based on the information in the first two chapters (the heart of the book really) I used the 3 month / 10 year curve and the money market curve for buying back in.
I really was surprised to find that I ended up with twice the money as the buy and hold portfolio even though my trade dates were slightly different than the author's (not by much, but I think the data differs a bit depending on your source)
Bottom line for me: It seems that there is something to this yield curve stuff . . Sitting down and working through the math did teach me an important lesson though. The 1982 - 2000 Bull Market in stocks was an incredible thing - an unusual affair. After trudging through the volatility of the 1960s and 1970s that fact really leaps out at you. If you had simply bought stocks toward the end of 1981 and held on until about the middle of 2000 you would've reaped something like a 1200% gain by my estimates. In other words, the 1982-2000 Bull made things very easy for stock market investors and bailed out a lot of unsophisticated people.
Will the future be so easy? I highly doubt it. And I wouldn't expect a bull market like the one we just saw anytime soon. This may render the simplistic "buy and hold" advice of old practically worthless. All the more reason to pay attention to what markets and the economy are doing. Bear markets can last a looooong time. It's worth making an effort to stay away from them if possible.
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