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Cnbc 24/7 Trading: Around the Clock Around the World (Cnbc Profit from It) Unbound – Import, February, 2002
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Nothing has so altered the investment landscape in the past five years as the Internet and the CNBC network. The availability of real-time financial news, data and analysis, and instant order entry and execution have empowered investors and democratized financial markets. Barbara Rockefeller's CNBC 24/7 Trading is a primer for what's fast approaching--a trading day that never ends, where at least 500 international stocks can be bought or sold electronically anytime, anywhere.
The book's main theme is the importance of including foreign stocks in a portfolio to lower risk and increase returns. Current portfolio-management theory, or "modern portfolio theory," holds that foreign stocks have historically outperformed American stocks and tend to move up and down at different times, as well. Thus, a portfolio that includes both is not only less risky but also likely to perform better over time. The point of optimum diversification, the "efficient frontier," is where the greatest returns are achieved with the least risk. They make the case that to not diversify is to actually take a bigger risk. In fact, today more money is invested and managed according to the tenets of modern portfolio theory than by any other method. Yet, missing in this book is any discussion about the impact of an increasingly wired world on stock volatility everywhere, and especially on the "noncorrelation" between U.S. and foreign stocks, on which modern portfolio theory is predicated. Recall how quickly the Asian financial crisis spread to Brazil and then to Russia just a couple of years ago. In the near future, events may well impact all stocks globally in the same way at the same time.
The book explains well the many risks in buying foreign securities. There's currency risk; country-specific economic and political risks; foreign-market, liquidity, broker, and back-office risk; foreign-company operational risk; and accounting standards that are anything but standard. What's more, it's harder, at least for now, to get timely and accurate news and financial data from overseas. The book does cover several theoretically safer methods of investing abroad, including American Depositary Receipts, iShares (foreign index shares), and open- and closed-end funds. And there are sections on the basics of foreign exchange and even charting for beginners.
Investors interested in taking a financial worldview will find here all the reasons they should--and plenty of things to worry about if they do. --Scott Harrison
The first responsible book about a new area of economic activity ...provides balanced information about alternative sources of around-the-clock financial information." -- The Journal of Investment Consulting
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What is also annoying besides the constant redundancy of this book, is the matter in which the author sites references and website addresses for more information. The author must have included at least fifty if not a hundred sites that support each single example. What would have helped the overall presentation of this book, if the author included a list of helpful web sites to locate key information at the end of the book rather than interspersed within his blah blah blah commentary.
There is some useful information in this book and one who likes to explore new web sites might find more value here. However CNBC could have made this book reach a wider audience by organizing this book in a more easy to read manner. Therefore a 2 1/2 star rating fits the bill.
Note please some additional points on this topic. One is that the author advises that many portfolio diversification exercises use only classes of securities, rather than the securities themselves, which she describes as a sub-optimal practice because the same class of securities can contain a highly volatile security as well as a `placid' security.
The second point is that the author could have gone a lot farther in criticizing financial planners who create "optimal" portfolios for customers that are nothing of the sort. She perhaps should have warned much more strongly about paying an advisor to create an optimal portfolio. You will not always get what you think you paid for.
Finally, Rockefeller says clearly that no website today will give you the correlation of any two securities easily. You have to do it yourself, if you can get the data. Data on foreign stocks is hard to get, and, often, is not free; and, useful websites come and go, all of which the author acknowledges.
Why should US investors care are about non-US stocks? Because the new US administration is western states-oriented, investors should be prepared for future US dollar weakness that will presumably favor western states' exporters of commodities - grain, oil, beef and timber. With US dollar weakness, non-US stock will presumably appreciate in price versus US stocks. This means that savvy investors should be taking far closer looks at non-US stocks in the next four years than they have been taking in the last four. For serious investors, 24/7 Trading could not have come at a better time. Reading it is fair warning for the future.
Desmond MacRae New York City