TrimTabs Investing: Using Liquidity Theory to Beat the Stock Market [Hardcover]

Charles Biderman (Author), David Santschi (Author)

Book Description

Series: Wiley Finance | Publication Date: May 2, 2005

Whether you are an investment professional managing billions of dollars or an individual investor with a small nest egg, TrimTabs Investing shows you how to beat the major stock market averages with less risk.  This groundbreaking book begins by comparing the stock market to a casino in which the house (public companies and the insiders who run them) buys and sells shares with the players (institutional and individual investors).  TrimTabs Investing argues that stock prices are primarily a function of liquidity—the amount of shares available for purchase and the amount of money available to buy them—rather than fundamental value.  Finally, it outlines the building blocks of liquidity theory and explains how you can use them to predict the direction of the stock market.

“Charles Biderman, a savvy and battle-scarred veteran of the investment wars, has fashioned an intriguing approach to making money in the stock market that adroitly avoids both heavy-breathing speculation and the standard Wall Street practices that enable investors, big and small, to lose money in good markets as well as bad. Aimed at the sophisticated investor (which may or may not be an oxymoron), the book is written in blessedly straightforward prose and is a worthwhile read for anyone with an urge to have a fling at investing.--Alan Abelson
Barron’s

“Since the days of Joseph and Pharaoh, it has been axiomatic that the size of the grain harvest affects the level of grain prices; but today’s investors have been slow to appreciate the fact that the supply of stock shares significantly determines the level of stock prices. Biderman’s long overdue book outlines the theory and evidence behind ‘Trading Float,’ the actual—and exploitable—power behind major moves in the stock market. --Paul Montgomery
CEO and CIO of Montgomery Capital Management

“‘Trade as corporate execs do, not as they say.’ Charles Biderman has built an impressive list of hedge fund clients from this essential insight, and this book does a great job explaining exactly how retail investors can incorporate it into their investing.”--Eric Zitzewitz
Assistant Professor of Economics, Stanford Graduate School of Business

“Charles Biderman is a smart thinker, clear writer—and he offers here some very interesting ideas. This book is for the little guy who enjoys reading about money and economics, even if he doesn’t adopt the strategies offered here; and for the professional or sophisticated investor, who, to a greater or lesser degree, just might.--Andrew Tobias
author of The Only Investment Guide You'll Ever Need

Editorial Reviews

From the Inside Flap

TrimTabs Investing introduces a well-researched, market-proven technique to improve your investment returns by following the smart money in the stock market. But first, you must forget nearly everything you've ever been taught by stockbrokers, financial advisors, and investment pundits. You must learn to ignore P/E ratios, changes in expected future earnings, and other widely

followed fundamental measures. Why? Because their impact on stock price movements is negligible. What really makes stock prices rise or fall is liquidity—the relationship between the amount of shares available for purchase and the amount of cash available to buy them.

In TrimTabs Investing, veteran investment consultant Charles Biderman details his completely original TrimTabs methodology. You will learn to:

• Recognize that the design purpose of the stock market is essentially the same as the design purpose of a casino: to separate the players from their money, yet leave them with a smile so they come back for more
• Use liquidity analysis to determine whether the smart money (public companies and the insiders who run them) and the dumb money (individual investors) are net buyers or net sellers in the stock market
• Boost returns while reducing risk by selling when liquidity is bearish and buying when liquidity is bullish

From December 2000 through December 2004, when millions of individual investors saw their portfolios slashed by half or more and the S&P 500 declined 8 percent, the TrimTabs model portfolio rose 100 percent.

Charles Biderman uses liquidity theory every day to generate market-beating returns for his clients, which include leading hedge fund

and portfolio managers. Whether you are an investment professional managing billions of dollars or an individual investor with a small nest egg, TrimTabs Investing will show you how to achieve similar results in your portfolio. Filled with in-depth insight and practical advice, this book will give you the tools you need to beat the market averages with less risk by showing you how to invest like the smart money in bull markets and bear markets alike.

From the Back Cover

Praise for TrimTabs Investing

"Charles Biderman, a savvy and battle-scarred veteran of the investment wars, has fashioned an intriguing approach to making money in the stock market that adroitly avoids both heavy-breathing speculation and the standard Wall Street practices that enable investors, big and small, to lose money in good markets as well as bad. Aimed at the sophisticated investor (which may or may not be an oxymoron), the book is written in blessedly straightforward prose and is a worthwhile read for anyone with an urge to have a fling at investing."
—Alan Abelson, Barron's

"Since the days of Joseph and Pharaoh, it has been axiomatic that the size of the grain harvest affects the level of grain prices; but today's investors have been slow to appreciate the fact that the supply of stock shares significantly determines the level of stock prices. Biderman's long overdue book outlines the theory and evidence behind 'Trading Float,' the actual—and exploitable—power behind major moves in the stock market."
—Paul Montgomery CEO and CIO of Montgomery Capital Management

" 'Trade as corporate execs do, not as they say.' Charles Biderman has built an impressive list of hedge fund clients from this essential insight, and this book does a great job explaining exactly how retail investors can incorporate it into their investing."
—Eric Zitzewitz Assistant Professor of Economics Stanford Graduate School of Business

"Charles Biderman is a smart thinker, clear writer—and he offers here some very interesting ideas. This book is for the little guy who enjoys reading about money and economics, even if he doesn't adopt the strategies offered here; and for the professional or sophisticated investor, who, to a greater or lesser degree, just might."
—Andrew Tobias author of The Only Investment Guide You'll Ever Need

See all Editorial Reviews

Product Details

• Hardcover: 195 pages
• Publisher: Wiley; 1 edition (May 2, 2005)
• Language: English
• ISBN-10: 0471697206
• ISBN-13: 978-0471697206
• Product Dimensions: 9.3 x 6.3 x 0.8 inches
• Shipping Weight: 12.8 ounces (View shipping rates and policies)
• Average Customer Review: 3.3 out of 5 stars  See all reviews (9 customer reviews)
• Amazon Best Sellers Rank: #803,726 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

46 of 51 people found the following review helpful:

1.0 out of 5 stars Save your money!, June 1, 2005

By 

C. MacCreery "Archon" (Michigan) - See all my reviews
(REAL NAME)   

Amazon Verified Purchase

This review is from: TrimTabs Investing: Using Liquidity Theory to Beat the Stock Market (Hardcover)

I spent almost 20 bucks for this e-book that was written to pump their website and service.
Biderman claims altruistic intent to help the investor win the "stock market casino" against the corporate "house".

He charges $6,000 a year for his Trimtabs.com newsletters for "mostly institutional" investors but this 6K a year is the 60% off sub rate for individual investors. Some altruistic intent huh?

He does collest information but I found a website that gives away for free most of the info he collects and wants to sell for 6K a year. http://www.capital-flow-analysis.com/

Most of the information he talks about in his book is freely available if you want to dig for it. On the the flip side he gives an interesting account of the rise and fall of the stock market in the 90's and early 00's in regards to "liquidity" theory.

In a nutshell, bet with the corporations and against the individual investor they are usually wrong. Like in 1929, 1987 and 2000, when the individual investor is hyped about the market, buy bonds. When everyone thinks the market sucks, buy stocks. There, you saved $20 to $30 bucks.

22 of 25 people found the following review helpful:

4.0 out of 5 stars New indicators for supply and demand of stocks, May 10, 2005

By 

John C. Dunbar (Sugar Land, TX United States) - See all my reviews
(REAL NAME)   

This review is from: TrimTabs Investing: Using Liquidity Theory to Beat the Stock Market (Hardcover)

This book presents a series of indicators that track the supply of stocks from corporations and the demand of stocks by the public and investment firms. The author has devised these indicators over a long time but only recently (compared to other indicators) has put them together in a working system. His company provides updates to all of these indicators but the author also tells you how to prepare a number of them yourself.

It appears that the getting the data is somewhat difficult and messy. It thus borders more on art than science, as some data series come out late (but they are lagging indicators) and some data is just irregular or estimated.

The author's testing show great results over the exuberant 2000 decline, but I believe the time period of live testing has been too short and the messiness of the indicators themselves augur for more testing.

Please note that it is doubtful that the average investor can accumulate the data to replicate what the authors have proposed. However, there are spin-off indicator ideas that could be applied by the interested market-timer.

Also note that there are many researchers who say that market timing is impossible, and that any research pointing to success just used a small period of time where it worked. They also say that market timers who say their systems have worked over the last 70 years have either fit their data going backward, or are just a statistical anomaly.

However, most market timers say that market timing can increase your odds of success in the market many times (like double or triple your returns if you can avoid the worst 10% or 20% of the market). To apply the research of these authors, you have to believe that market timing actually works, or that you can shave the odds to your favor.

I like this book because it clearly lays out a new indicator methodology along with a rationale. It's up to the reader then to prove that the system works or that he can derive new, easier or better indicators on his own.

John Dunbar
Sugar Land, TX

8 of 9 people found the following review helpful:

5.0 out of 5 stars A Bargain Price for an Inside Look at Investing, June 2, 2005

By 

Chart Well Jan - See all my reviews

This review is from: TrimTabs Investing: Using Liquidity Theory to Beat the Stock Market (Hardcover)

This book is really different for the world of finance because it is frank and down-to-earth without making a lot of grandiose claims. As an individual investor, I am not interested in tracking company earnings but want to time my buy, move and rebalance decisions.

I could relate to the character in the first chapter. I was not as interested in the looking back section as much as the liquidity in action and the looking ahead sections. So, it's about reading the chapters that pertain to your investment goals.

There, I confess to skipping the more aggressive strategies but the point is that Biderman makes these strategies available. The view of supply and demand in the market is intriguing. This liquidity view seems to be an important piece of the puzzle. The author's voice is loud and clear. I like his candor. I think it's irrelevant what his company charges for research because this book gives me a rare inside look at how professional money managers might operate. Biderman sounds like someone I'd like to sit down with for a consultation.