Michael J. Panzner takes us on safari through what most definitely is a jungle in his book ‘The New Laws of the Stock Market Jungle : An Insider’s Guide to Successful Investing in a Changing World‘. The book focuses on the changes that have occurred in the marketplace over the last 10 years or so. These include improvements in technology and communications (the Internet, email, instant messaging), electronic trading, the technology bubble and its aftermath, the impact of hedge funds, the slashing of commission rates, etc.
Ten chapters, one for each ‘new law’, serve as the heart of the book. They are:
- Intraday Volatility – Intraday Share Price Volatility Is on the Rise.
- Trading Like Commodities – Stocks Are Increasingly Being Bought and Sold Like Commodities.
- Approaches and Attitudes – Investing and Reason Frequently Give Way to Speculation and Emotion.
- Information and Communications – More Information and Faster Communications Often Have Unexpected Consequences.
- Derivatives – Derivatives Are Exerting a Growing Influence on Share Prices.
- Seasonality and Cycles – Many Seasonal and Cyclical Patterns Are Becoming Less Predictable.
- Imbalances and Upheavals – Aggressive Approaches and Tactics Are Leading to More Unstable Short-Term Imbalances.
- Form and Fantasy – Substance and Reality Increasingly Give Way to Form and Fantasy.
- Market Indicators – Many Traditional Market Indicators Are Becoming Less Reliable.
- Global Factors – Global Factors and Foreign Investors Are Exerting a Growing Influence On Share Prices.
Panzner does an excellent job of fleshing out each of those topics. But this book isn’t just an academic study of the market, each chapter includes strategies for investors to adapt their methodologies to the new laws. Even though I’ve been a very active market watcher and participant for the last several years I didn’t fully grasp the impact of some of these recent changes, especially those related to indexing, derivatives, globalization and the vast increase in the number of hedge funds. It also gave me a better understanding of why stocks often have seemingly nonsensical reactions to news.
While reading this book I was struck at how it’s so topical. It seemed like every day I’d see something in the news related to what I had just read in the book. Be it stories about the herding of hedge funds, the policies of some foreign country wreaking havoc on the markets, predictions about the divestiture of foreign funds from the U.S. markets, etc. Investors would do well to read this book and incorporate some of Panzner’s strategies into their investing plans.
(Originally posted on TraderMike.net)Powered by Sidelines