Book : The Master Trader: Birinyi’s Secrets to Understanding the Marketstock
Q&A with Laszlo Birinyi, author of The Master Trader
John Maynard Keynes once referred to the stock market as a game. If that is the case, this game, like all others, has winners and losers. The purpose of The Master Trader is to help individuals avoid being losers.
This is not a get rich; retire early book but one which details some of the disadvantages and pitfalls for investors today. Mr. Buffett once suggested that the secret to investing was to make a big snowball and find a steep hill. Alas today that hill is not only steeper but it is slanted up, now down.
We asked Mr. Birinyi who was inducted into the Wall Street Week Hall of Fame in 1999 for more details and information on his effort:
What should readers learn from your book?
Making money on Wall Street is no easier than any other profession. While money managers may seem to lead glamorous lives, the truly successful ones work every bit as hard as your average doctor or engineer. For example, we are told that Peter Lynch supposedly came to the office most Saturdays.
What should individuals then do?
First there are a lot of don’ts. One being to recognize that the term “expert” is a title, not a description and the majority of commentators are not experts, they are available and their job is too often one of public relations, not detailed research and analysis.
Secondly be an informed consumer. It is disappointing to see how little research individuals put into their decisions. To us, they too often treat ideas like a salad bar; a little of this, some of these and one of those. Rather than ascertain an individual’s credentials or background, they assume that since you are quoted or on camera, you really know something.
Anything specific which you discuss?
One is to pay close attention to the market. One recent example was Boeing’s introduction of the 767 which did not go well. There were issues with the batteries, planes were grounded and there was real pressure on management. But the stock did not go down and after losing money on the short side, I realized that the market was looking ahead and bought the stock.
One practical suggestion, which we term anecdotal research, is to keep an extensive file of clippings, magazines, and other articles as history is a great inefficiency in this business. Our files go back to 1962 and it is fascinating to find parallels and antecedents. We have even gone so far as to go to dealers and buy every available copy of the famous 1979 BusinessWeek issue, “The Death of Equities.”
One controversial section is likely to be my conclusion that technical analysis is not helpful. From the perspective of many years on the Salomon Brothers trading desk, we found it to be of almost no value.
From the Inside Flap
“Trading is a game,” asserts veteran market analyst and industry legend Laszlo Birinyi in The Master Trader: Birinyi’s Secrets to Understanding the Market. And “like all games, there are winners and losers. Hopefully, you will emerge a winner by understanding the reality of today’s markets and being aware of the land mines and pitfalls.”
For more than forty years, Laszlo Birinyi has been one of the financial world’s leading voices—a brilliant trader, prognosticator, and unique personality unafraid to speak hard truths that rattle the cages of Wall Street. Now, in The Master Trader, this Wall $treet Week Hall of Famer gives us a frank, entertaining, and highly applicable road map to navigate a stock market riddled with potholes of misinformation.
In The Master Trader, Birinyi debunks widely accepted, but often faulty, financial advice through hard, realistic scrutiny of financial analysts, experts, academics, and even Nobel Prize winners. He emphasizes the marketing incentives that too often override truthfulness in the stock market, befuddling investors and leading to overwhelming economic strain.
With a thorough but no-nonsense tone, Birinyi exposes technical analysis and its potential for failure, demystifies the business protocol of Wall Street, and deciphers trading indicators, anecdotal data, and price gaps. Brimming with insider strategies and personal trading vignettes, The Master Trader addresses:
- Market changes that will likely occur as Spyders adjust in pre-trading
- Techniques for predicting the future success of a stock that reports better than expected earnings
- Methods for determining when to buy or sell stock
- The real function of money flows as a fundamental input instead of a technical indicator
- How to use magazines and newspapers, which are actually databases in disguise, to your advantage
- The futility of stock market research as an indicator of the future instead of an assessment of the past
Combining case studies and real data with Birinyi’s fearless insights and trademark wit, The Master Trader is a rare window into the mind of a master. Read this book less as a cheat sheet for making money than a guide to not losing it. In today’s struggling economy, that may be enough to come out on top.
Alongside Laszlo Birinyi’s stories from his more than forty years of trading experience, the book provides guidance on critical trading and investment issues, including:
What the market will likely do if Spyders are up one percent in pre-tradingWhether to buy or sell when a stock reports better that expected earnings and trade up to $5 to $50The details behind group rotation and market cyclesThe seasonal factors in investingIndicators, explained: which are indicative and which are descriptiveThe importance of sentiment and how to track it
The book will include chapters and details on technical analysis, the failure of technical analysis efforts, the business of wall street, trading indicators, anecdotal data, and price gaps. The Website associated with the book will also feature data sourcing and video.
Chapter 1 Technical Analysis: Fuhgeddaboudit (pages 1–9):
Chapter 2 The Failure of Technical Efforts (pages 11–30):
Chapter 3 Technicals: The Last Word (pages 31–36):
Chapter 4 Wall Street: Games People Play (pages 37–47):
Chapter 5 Money Flows: The Ultimate Indicator (pages 49–73):
Chapter 6 Anecdotal Data (pages 75–87):
Chapter 7 Always Cut the Cards (pages 89–113):
Chapter 8 DOW: 19,792? (pages 115–127):
Chapter 9 That’s Easy for You to Say! (pages 129–136):
Chapter 10 Playing the Game (pages 137–154):
Chapter 11 Have It Your Way (pages 155–161):
Chapter 12 The Market: Yesterday, Today, and Tomorrow? (pages 163–189):
Chapter 13 Get Ready, Get Set … (pages 191–196):
Chapter 14 Market Cycles and Rotation (pages 197–216):
Chapter 15 The Economy and the Federal Reserve Board (pages 217–228):
Chapter 16 Picking Stocks (pages 229–245):
Chapter 17 The Trading Day (pages 247–263):
Chapter 18 “Mind the Gap” (pages 265–275):
Chapter 19 You Must Remember This (pages 277–284):
Chapter 20 Wall Street Week and Other Adventures (pages 285–289):