Book Reviews
Review of ‘Being Right or Making Money’
One of the finest independent research houses shares its timing model
 
Ned Davis started his independent investment research firm, Ned Davis Research (NDR), from a residential apartment in Florida, far away from Wall Street, in 1980. Over the years, the firm has developed a reputation as an independent, institutional research company, by offering unbiased, in-depth analysis. Nearly every major institutional investor subscribes to its research backed by sophisticated analytic tools that detect patterns from of a huge, decades-long, database of statistical information on the markets and the economy. 
 
Davis and his colleagues have published a few books, including an oversized chart-book, Markets in Motion, which showcases the depth of their research. Being Right or Making Money, published many years ago, has been out of print for years. The hardcover edition was being sold for $430-odd on Amazon. A new edition of the book was published in 2014.
 
NDR’s research stands out for its methodical approach to market-timing. For equity market-timing model, the firm used more than a 100 proprietary indicators picked from market data of price and volumes, sentiment (including valuation) and macroeconomic data, mainly monetary data. NDR has timing models for bonds, commodities and gold as well. All the indicators are robustly back-tested so that the firm has a clear idea of the odds. From this, it makes informed guesses about what the market will do now. Unfortunately, while individual investors will get a glimpse at how NDR builds its timing models, they will not be able to replicate it. For retail investors, it is impossible to get access to all the data and update the model regularly. 
 
The book would be useful mainly for portfolio managers, mutual funds and equity research divisions of broking houses. But Davis does have a set of dos and don’ts for individual investors, based on his 40 years of experience: 
  1. Don’t Fight the Tape: This is an old Wall Street maxim. It means you need to stay with the broader trend. Davis uses dozens of indicators, such as new high/lows, up/down volumes, crossover of 50-day moving average over 200-day moving average, etc, to decide whether the trend is up or down. According to NDR, moves with a lot of confirmation are the healthiest and huge moves are, usually, global in nature. 
  2. Don’t Fight the Fed: Money moves the markets. The United States’ Federal Reserve (the Fed) exercises enormous influence on money flows which, in turn, deeply influences stocks. When the Fed is easing money flows, stocks rise. When the Fed is tightening, stocks fall. Stay in sync with monetary trends set by the central bank. Money left over from economic demands ends up in the financial markets, at least in the US. 
  3. Beware of the Crowd at Extremes: All trends run to the extremes and then end abruptly. This surprises the majority who continue to extrapolate the recent trend. At that point, it pays to be a contrarian. How to spot such extremes? Extreme optimism equals low cash, while extreme fears shows up in high cash levels.
  4. Rely on Objective Indicators: The surest way to lose money on stocks is to go by faith, gut-feel, intuition and so on. You need to rely on hard, cold data that has been tested to work in the past. 
  5. Be Disciplined: You need the discipline to ignore the noise created by the media. Stay away from rumours, guesses and hot tips. Stay away from everything other than what you have actually tested and found to be working in the past.
  6. Manage Risk: According to NDR, “We are in the business of making mistakes. Winners make small mistakes, losers make big mistakes.” NDR ensures that its mistakes are small, by using stop losses and a lot of trend-sensitive indicators.
  7. Remain Flexible: While it is important to remain disciplined, you should also be flexible because markets change and causal relationships change, though over the long term. 
  8. Money Management Rules: “We are more interested in making money than being right,” writes Davis. “Be humble and flexible.” Retail investors are usually unaware of it and end up investing either too much in a stock or too little. 
  9. Study History: Those who don’t study history are condemned to repeat it. The core of the market—an interplay of liquidity, sentiment and valuation—has remain unchanged over the years. Davis advises model-builders to go as far back as possible in history, to collect and analyse data.

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CBI raids Bengal ponzi firm's premises
The CBI on Wednesday raided at least 18 different locations of Ramel Group of Industries across West Bengal in the chit fund scam, an official said.
 
"Searches are being conducted at 18 places in West Bengal in connection with investigation of case against Ramel Group. Searches are being conducted at the official and residential premises of the group and its managing directors and directors," a Central Bureau of Investigation official said.
 
The Ramel group was one of the several non Saradha Group companies against which the CBI registered cases for illegally raising public money.
 
Having found guilty of operating Collective Investment Schemes (CIS) without obtaining its approval, market regulator Securities and Exchange Board of India (SEBI) in July 2014 asked Ramel Industries to immediately wind down its scheme that raised over Rs 97 crore from investors.
 
Ordering refund of the collected money, the SEBI also barred Ramel Industries as well as its promoters and directors from dealing in capital markets till the refund was complete.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Keep your woollens in top form with these easy tips
Bhavya Chawla, chief stylist, Voonik, an online stylist-handpicked apparel store, has suggested some tips to keep woollens as new as ever!
 
Winter is here and your woollens are your best companions during this season. It require extra care as the fibres are more delicate and are prone to being damaged very easily. Avoid washing machines to clean your sweaters and avoid hanging your sweaters for drying, says an expert.
 
Bhavya Chawla, chief stylist, Voonik, an online stylist-handpicked apparel store, has suggested some tips to keep woollens as new as ever!
 
* Use the right brush: Avoid washing machines to clean your sweaters as they may lose their sheen. Instead, use an electrostatic garment brush after every wear as woollens tend to accumulate a lot of dust and are vulnerable to moths. Airing them and spot-cleaning is another effective way to keep them new. 
 
* Gently clean tough stains: If you accidentally stain your sweater or scarf, take it to the dry cleaner. In case the stain is not that tough and you feel you can manage to clean it at home, use a high quality detergent meant for woollens. Mix it in lukewarm water and soak your woollens in the mixture. Gently wash the piece of clothing with your hands. But remember to do this only for items that don’t come with a “Dry clean only” tag!
 
* Avoid hanging: Woollens should never be hung up on a clothes line like other articles as this causes the fabric to stretch and it may lose its shape eventually. Lay the sweater or cardigan on a flat surface and allow it to dry at room temperature. Steer clear of sunlight and intense heat as these can sap all colour and life from your precious woollens. 
 
As they are really prone to stretching out of shape, you must also avoid hanging woollens on hangers in the closets. Instead, fold them neatly and place them.
 
* Don’t iron when dry: Woollens shouldn’t be ironed when they are completely dry as this won’t ease out the deep creases. They can also scorch easily under direct dry heat. Instead, use a steam press. If that’s not an option, wet a plain white cotton cloth very slightly and use this as a buffer between the iron and the woollen. It’s also advisable to keep the sweater turned inside out when not in use.
 
* Prevent moth attacks and germs: Wool is very vulnerable to moth attacks and germ build-ups. That is why it’s imperative to never stack even remotely damp woolLen clothes in your wardrobe as you will end up creating a breeding ground for germs. Remember to stash some moth balls in the section of your cupboard where you are placing your woollens.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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