Once in a while, one comes across an original book on the markets. This is one such
There are thousands of ‘experts’ who express their opinions on the market. Just a handful of them have delved deeply into the mysteries of markets, developed a robust method and practise it with discipline over decades to report verifiable market-beating performance.
To this small tribe belongs Laszlo Biryini. He is well known as a Hall of Fame Market elf of Wall Street Week (WSW), the most popular weekly TV show than ran from 1970-2005 on the public broadcasting service in the US. He was the winner of the outstanding elf of the 1990-1999 in WSW. His recommendations averaged 1000% versus the average of 270% for the other panellists during 1992-1999, when the popularity of the programme was at its peak.
As Victor Neiderhoffer, a widely-read man and hardcore speculator who can detect bullshit from a mile away, says, “walking down the street with the very recognizable Laszlo after our tennis games, a grateful passer by stops him ‘You’re Laszlo Biryini, the guy from Wall Street Week, aren’t you. I owe you so much. You recommended Apple to me when it was 3 and Amazon at 50 and I bought them. And now, my whole family is sitting pretty because of you’.”
Among Biryini’s legendary market calls is catching the bottom of the bond market in 1994, calling the US market-bottom in 2008 with when S&P500 was 750 (it is 2,058 now) and maintaining an unwaveringly bullish stance between 2009 and 2014, despite troubles in Europe, scepticism about US monetary policy and high market valuation.
Biryini was an immigrant from Hungary who couldn’t speak English but rose to be the head market analyst at Salomon Brothers working next to Mike Bloomberg for 10 years.
He dismisses traditional technical analyses because they are “not predictive, not consistent, not analysis.” He is the inventor of the Money Flow Index, which counts the market value of upticks and downticks in a stock, to determine whether demand exceeds supply or not.
This book is a treasure trove of research insights. Among the various things that will stun you is the information about how faulty old market records are. On such faulty data are based conclusions regarding the long-term performance of stocks. He points out how Dow Jones was reset suddenly when the market reopened after Word War 1 without any explanation. In other cases, the data may be correct but the comparison over long periods would not make sense. For instance, S&P500 did not include financials in 1929 but included these in 2008, making any comparison of the declines of the two periods, a case of comparing apples with oranges.
Apart from being rich in original data (every page has a chart and a table and there are 224 figures and 97 tables in all), the book also elaborates how the investor’s interest is completely compromised by the Wall Street. Pump and dump operations, poor supervision and misrepresentation are rife in the US as they are in India. The big guys always win. According to him, the data used, the records kept, and the performance figures reported by portfolio managers, are misleading. Market forecasts are consistently wrong and harmful to investors.
Biryini is that rare breed of market practitioners, like Jeremy Grantham and Ken Fisher, who question everything, delve into raw data and never tire of testing the conventional wisdom. Biryini and his team showcase the enormous effort that goes in quest of core truths, digging original sources, evaluating every piece of information with a pair of clear eyes. It is this effort that makes Biryini’s work truly original and enjoyable.
What I am not sure is who this book is meant for. It’s technical and in-depth enough to keep out the novices. At $65, it is part of Wiley Trading Series which means it is meant for professionals. But brokers are part of the same professional system that Biryini takes apart while institutional investors probably have to do their own detailed research as Biryini does.
The book has many interesting investment ideas worth applying in the Indian context. There is one called ‘sprained wrist’ stocks. These are good companies that have dropped 5%-10% on an event but one that does not affect their business model. In such cases, be brave, step in and buy. Birinyi also uses a lot of anecdotal data to enrich his views. He pores over magazines and newspapers, because these are ‘databases in disguise’. He also keeps track of market commentators and economists, even though they are often wrong. A must for serious investors.
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