The Federal Reserve is the 800-pound gorilla when it comes to factors affecting the economy and the capital markets. That’s generally understood, if not routinely respected. Yet this goliath remains a mysterious entity for most Americans. A new film attempts to peel away some of the inscrutability with what is ultimately a fascinating story of the power, glory, and failures of the Fed. Money For Nothing: Inside the Federal Reserve is a self-proclaimed “independent, non-partisan documentary film that examines America’s central bank from the inside out–in a critical yet balanced way,” according to the movie’s website.
Daily Archives: November 10, 2012
Book Bits | 11.10.12
● Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)
By Jack Schwager
Excerpt via publisher, Wiley
Many investors seek guidance from the advice of financial experts available through both broadcast and print media. Is this advice beneficial? In this chapter, we have examined three cases of financial expert advice, ranging from the recommendation-based record of a popular financial program host to an index based on the directional calls of 10 market experts and finally to the financial newsletter industry. Although this limited sample does not rise to the level of a persuasive proof, the results are entirely consistent with the available academic research on the subject. The general conclusion appears to be that the advice of the financial experts may sometimes trigger an immediate price move as the public responds to their recommendations (a price move that is impossible to capture), but no longer-term net benefit. My advice to equity investors is either buy an index fund (but not after a period of extreme gains—see Chapter 3) or, if you have sufficient interest and motivation, devote the time and energy to develop your own investment or trading methodology. Neither of these approaches involves listening to the recommendations of the experts.
