The Message of the Markets

Rating:
Summary: The market is the message
Review: CNBC anchor Ron Insana's second book on the stock market, "The Message of the Markets," follows "Traders' Tales" in 1996, and does an excellent job of selling you on the idea that the market does send signals for anyone who's interested in looking for them. Using Insana's words, "Many times the prices of stocks, bonds, and commodities accurately anticipate or forecast future events. "But what is a "market?" If a market is where buyers and sellers come together and agree to exchange assets - stocks, bonds, futures, options, wheat, oil, gold, cloth, Beanie Babies, guns, drugs, etc., then the "message" of the market has to be the PRICE resulting from that exchange. That price level conveys enough information that if you know what you are looking for, you will be able to anticipate future events solely on the basis of price and its trend. Why? Because there is what Insana calls "smart money" and "dumb money."Smart money belongs to insiders, those closest to the action who see and know what is happening. They act on their knowledge, leaving their tell-tale footprints of transaction prices for all to see. Then there are the outsiders; the ones who wake up one morning and read about something that just happened, realize that it is significant, and decide to catch the obvious trend already in progress, invariably buying from those same insiders who got in months ago anticipating exactly that outcome. What Insana doesn't say is that without smart money to indicate the way, all markets would be chaotic, panic-driven price spikes in either direction as everybody tried to react to the same thing at the same time. He is particularly correct when he warns to watch out for the price move "with no apparent reason." It can signal momentous events on the horizon.The real message of the book thus becomes that if you learn to track where the "smart money" is going, then in addition to profiting along with the insiders on the various price moves, you can also make more intelligent business, investment, and career decisions. Insana uses the interest rate yield curve as well as popular averages to predict the onset of recessions; market internals (Advance/Decline Line, diverging Dow Jones Averages, etc.) to predict the stock market; and commodity price movements to predict geopolitical events.
He gives industry/sector group relative strength rotation credit for frequently predicting the economy's strengths and weaknesses and cites ways in which this can be used in selecting career paths as well as suggesting business trends. He uses commodity price moves as signals that foretell future events such as Chernobyl, the Gulf War, the Egypt-Libya potential war, and other geopolitical upheavals.  However, I believe he makes too much of the market selling off just prior to the announcement that JFK had been shot. There is a story about a certain well-known network newscaster in Dallas making the call back to his NY newsroom, then ripping the pay phone out of the wall to keep other reporters from using it to get to their newsrooms. So there may have been real reasons for the news delay. Anyway, the market was shut down with the Dow suffering only a 3% decline. After remaining closed one additional day, the market continued its upward climb for the next 3 years. While a member of the Pacific Stock Exchange, I witnessed the same momentary "front-running" when Reagan was shot on March 30, 1981. On that day something "felt" amiss when we suddenly got hit will an avalanche of sell orders. Minutes later, the news tape announced that the president had been shot. But like in the Kennedy situation, the market dipped momentarily, then continued its rally. In these two cases, the message was inconsequential, financially speaking. After giving numerous examples of what market signals are and how they've fared over the years, Insana asks his most thought-provoking question: "So why was it that most investors, all the world's politicians...failed to notice trouble signs on the horizon? Once again, it was the failure of many observers to pay attention to the market's ominous message."  The implication being that the rain clouds were forming but nobody took notice. The answer is simple yet unsatisfying: As long as we listen to what "they" say instead of watching what "they" do, we will always fall victim to "their" market. What Insana is making a case for is a market discipline termed Technical Analysis. It looks at market action, valuing above all else the constant interplay between the supply and demand for a any tradable entity, and considers Fundamental Analysis (Wall Street research) as so much hot air. It is not a particularly popular stance, but it is much closer to allying yourself with reality than anything else.

Rating:
Summary: A Disappointment
Review: I have long liked Ron Insana on CNBC. Based on my respect for his thinking and well reasoned commentaries on the air, I bought his book on blind faith.

With much anticipation I settled in to gain a better understanding of the markets. Unfortunately, the book didn't live up to its title. I forced myself to finish the book thinking that eventually I would get "the message."

At times I became lost in the text. Long paragraphs led to one sentence paragraphs which did not seem to be part of any natural progression. Charts sometimes did not seem to match the points that they were to help illustrate. While I am anything but an editor, I had the feeling that more editing might have helped.

Bottom line: this book is not a "keeper" for my future reference.

Rating:
Summary: Fun and Informative Book
Review: I'm a big fan of Ron Insana and his show Business Center. After reading this insightful and inspirational book about what's really going on in the markets, my admiration for him has grown even more. I may not be a market insider but after reading this book I have certainly increased my knowledge about the markets and improved my chances of leading a wealthier life.

Rating:
Summary: A piece of the puzzle unveiled
Review: Many underestimate the value the news can have on their investment strategies. Insana's research demonstrates the usefulness of correctly interpreting and acting upon the news. This reinforces the somewhat shorter-term "buy the rumor; sell the news" experiences my partner and I have had and discuss in our book "How to Start Day Trading Futures, Options, and Indices." Nothing occurs in a vacuum--not the behavior of the market nor that of other investment vehicles. Insana's book points this out in a easy to read, informative manner.

Rating:
Summary: A book on history, not investing
Review: Ron Insana's The Message of the Markets is an interesting read of financial market history. His thesis is that movements in the financial markets can foretell future events, but he ignores all those times the markets reacted irrationally. This book cannot make you a better investor, but it is one person's interesting perspective of history.

Rating:
Summary: A book on history, not investing
Review: Ron Insana's The Message of the Markets is an interesting read of financial market history. His thesis is that movements in the financial markets can foretell future events, but he ignores all those times the markets reacted irrationally. This book cannot make you a better investor, but it is one person's interesting perspective of history.

Rating:
Summary: What message? That the market's run by crooks?
Review: The world's biggest bear has nothing new to say. You'd be better off with books from someone who practices what they preach. If you pay for cable or a dish to get CNBC, you're already losing money. Don't waste any more.

Rating:
Summary: 2 Books My Investment Club Profited From
Review: This book and Nancy Lloyd's book, "Simple Money Solutions," have turned out to be investing bibles for my investment club. Both CNBC's Ron Insana and Nancy Lloyd have a deep understanding of financial issues and the integrity to present it in an objective way (unlike so many other "experts" who are trying to turn their infomation into a quick buck by appearing on television). Fortunately, my investment club started reading both of these books a few weeks ago and took the time to rebalance our portfolio before it was too late. If we had not read these books we would have taken a huge and avoidable financial loss. Bravo to Ron and Nancy for giving loads of thoughtful information and without a lot of fanfare. We profited from it and I'm sure others can too.

Rating:
Summary: Good point - wrong emphasis in presentation
Review: This is a well-informed and very readable book on the informational value of the financial markets. However, this is not a how-to book on stock picking. What Mr Insana is concerned with in this book is not so much what price movements can tell us about an individual stock, but the macro information that the financial markets can tell us about the economy, geopolitics, major news events etc. There's almost no advice on individual stock picking based on price movements (too noisy), but there are advices on how to choose a job, time the purchase of a new home, move cash in and out of the market etc. based on the message of the markets.

In retrospect, some of the messages from the markets identified in the book are quite prescient. A good example is the rapid deterioration in the A/D line at the height of the Internet bubble. Of course that phenonmenon did not go unnoticed by the market pros. I clearly remember numerous analysts assuring viewers on CNBC that the stock market was not over-valued (and therefore in no danger of collapsing) because so many stocks were in the doldrums!

The book was filled with anecdotes about how major economic and geopolitical events (from Fed rate cuts to border wars between Egypt and Libya) are foreshadowed by unexplained market movements. Had Mr. Insana focused on the rationale behind these movements his argument would've been a lot more convincing. Instead, the book had a tendency to ascribe a sort of magical, oracular power to the market and the "smart money" that makes the market. Of course the real reason is a lot more mundane. Sometimes it's rampant insider trading (as in the oil futures mkt). At other times anyone who has bothered to read a newspaper would have seen it coming from a mile away. A good example is the collapse of the Thai baht. Any regular reader of the Far Eastern Economic Review would not have needed the markets to send a msg - for months the magazine was filled with dire warnings of imminent collapse in its op-ed pages.

Another issue that Mr. Insana did not address is the very important question of how to separate the signal from the noise emanating from the market 24 hours a day. As someone who had (foolishly) dabbled in the futures market, I know first hand that wild swings in the market can be triggered but nothing more dramatic than a 1/2-hr T-storm in downtown Chicago. (I always susepct that if I wait at a 2nd fl. window at the CBOT and sprinkle water on the head of a particular trader as he leaves the building, I can make a killing in soybeans.) In the days of old when the market was almost the exclusive domain of the Smart Money in the know, the msg. of the mkts was probably a lot more reliable than today, when the unwashed masses can steamroll the smart money based on the most ludicrous rumor posted on Pump-n-dump.com. How to separate the grains from the chaff is something we'll have to leave to another CNBC author.

BTW, there really is a web site called pumpanddump.com.

Rating:
Summary: Good point - wrong emphasis in presentation
Review: This is a well-informed and very readable book on the informational value of the financial markets. However, this is not a how-to book on stock picking. What Mr Insana is concerned with in this book is not so much what price movements can tell us about an individual stock, but the macro information that the financial markets can tell us about the economy, geopolitics, major news events etc. There's almost no advice on individual stock picking based on price movements (too noisy), but there are advices on how to choose a job, time the purchase of a new home, move cash in and out of the market etc. based on the message of the markets.

In retrospect, some of the messages from the markets identified in the book are quite prescient. A good example is the rapid deterioration in the A/D line at the height of the Internet bubble. Of course that phenonmenon did not go unnoticed by the market pros. I clearly remember numerous analysts assuring viewers on CNBC that the stock market was not over-valued (and therefore in no danger of collapsing) because so many stocks were in the doldrums!

The book was filled with anecdotes about how major economic and geopolitical events (from Fed rate cuts to border wars between Egypt and Libya) are foreshadowed by unexplained market movements. Had Mr. Insana focused on the rationale behind these movements his argument would've been a lot more convincing. Instead, the book had a tendency to ascribe a sort of magical, oracular power to the market and the "smart money" that makes the market. Of course the real reason is a lot more mundane. Sometimes it's rampant insider trading (as in the oil futures mkt). At other times anyone who has bothered to read a newspaper would have seen it coming from a mile away. A good example is the collapse of the Thai baht. Any regular reader of the Far Eastern Economic Review would not have needed the markets to send a msg - for months the magazine was filled with dire warnings of imminent collapse in its op-ed pages.

Another issue that Mr. Insana did not address is the very important question of how to separate the signal from the noise emanating from the market 24 hours a day. As someone who had (foolishly) dabbled in the futures market, I know first hand that wild swings in the market can be triggered but nothing more dramatic than a 1/2-hr T-storm in downtown Chicago. (I always susepct that if I wait at a 2nd fl. window at the CBOT and sprinkle water on the head of a particular trader as he leaves the building, I can make a killing in soybeans.) In the days of old when the market was almost the exclusive domain of the Smart Money in the know, the msg. of the mkts was probably a lot more reliable than today, when the unwashed masses can steamroll the smart money based on the most ludicrous rumor posted on Pump-n-dump.com. How to separate the grains from the chaff is something we'll have to leave to another CNBC author.

BTW, there really is a web site called pumpanddump.com.