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Book Reviews

"This is a great book for novice and experienced traders. Soaking up its wisdom distilled from experience and introspection will help you become more successful. And that's true even if it doesn't make you a penny." --Aaron Brown, AQR

Jon Stewart is in the same business as Jim Cramer…they create TV ratings. Neither is on a higher moral ground than the other. Stewart’s genre is comedy, and Cramer’s is, at best, infotainment.

Stewart is misguided to think that Cramer is responsible for any of his viewers’ investment demise. Each investor is responsible for his or her own investments. What and when to buy or sell short is up to them, as well as when to offset a position. Putting it on Cramer is endowing him with too much importance. Ratings do not signify importance…they signify popularity. Putting it on Cramer gives away one’s power to be in control of their risk management.

Even if Cramer is winless in his stock picks, he is coming from a good place. IMHO, he is an educator deep down and he may be better suited in an Endowed Chair at a college or university. He’d be a good fundraiser no doubt.

The fact is, there just isn’t that much worth reporting when it comes to stocks – it’s trivial. Furthermore, if one is to follow CNBC’s ethos of “Buy and Hold” no one would need to watch the station day after day unless they were bored and wanted to be entertained. News that is deemed “Breaking News” today, scrolled at the bottom of the screen, loses its magnitude by the next day, nevermind years from now.

If one puts such importance on Cramer, his advice, and CNBC as a whole, it signifies the desparate level of financial literacy we’re at as a nation of investors.

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“History is a chronicle of people clinging to erroneous ideas authenticated as religious or scientific truths. Max Planck (1858–1947), one of the greatest physicists of all time, observed: “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.””

I remember hearing everyone from my parents, to the neighbors, to the morons on TV saying, with a smirky shrug of the shoulders, “yeah, but you can’t time the market. Buy and hold the index and you’ll be fine.” (There’s really no “timing” of the market per se anyway, it’s “pricing the market” as far as I can see. The “time” part is incidental, but I digress…)

Not having a bona fide manner to exit positions is one way to deal with the uncertainty that goes with trading. It’s called “ignoring it” until a later date. “Buy and Hold” has become “Buy and Hope.” My guess is that if one was retiring right about now, they’d wished they’d timed the market a little…

I always prefer to look a little stupid trade after trade and be in cash, than to be really stupid and still be long names that might never come back. For example, CSCO – a great company – has never recovered from the highs of 2000. How long will it take Citi to come back?

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Time magazine is doing its blame-game pandering part by listing mug shots of the 25 People to Blame for the financial crisis. Many of these folks did make bad decisions and some broke the law, but investors who did not have a risk management or sell discipline in place to mitigate the risk in their portfolios have to take the blame for losing a lot of their own money. “Buy and Hold” is not “Buy and Forget.”

Blaming others feels good though. It puts the “fault” on someone else. But that, to me, is giving your power away. Taking responsibility is a better approach to taking control of your finances. It would be better to be out of Citi at $40 per share and be in cash, than to be long Citi at $1 and write scathing blog entries about Angelo Mozilo.

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Tech Two?

Nearly a decade after the turn-of-the-­millennium technology-stock meltdown, that familiar exuberance is in the air.

by Mike Martin

10 Vital Plays
Swollen Stock
QCOM $650 GOOG $680
Plaything Perils
eToys crashes like Santa on a balsa sleigh, filing for bank­ruptcy after Street analysts reveal dismal 2000 holiday-season orders Mattel shares sink nearly 25 percent after authorities reveal children are likely ­better off eating paint chips for breakfast than ­playing with Chinese-made gewgaws
Seer Status
Oracle (of Redwood City) at $50; Oracle (of Omaha) at $50,000 Oracle (of Redwood City) at $20; Oracle (of Omaha) at $140,000
Marvelous Gadgets of Wonder
iPod birthed; Steve Jobs’s vision of putting “1,000 songs in your pocket” blows minds Even your granny’s toaster oven holds 20,000 songs, plays DVDs and uploads to YouTube videos of her swearing after burning dinner
Nightmare Scenarios
Purported Y2K debacle far less perilous than anyone envisioned All-too-real CDO debacle far more perilous than anyone envisioned
Online brokerages
E-Trade advertises it has clients “with money coming out the wazoo” E-Trade shareholders, whatever their stake in the brokerage, get spanked on the wazoo thanks to a series of ill-advised loans
Boorish Loudmouths’s Mark Cuban ­elegantly pirouettes around the market ­collapse by selling to Yahoo for stock; swiftly eliminates downside risk via elaborate hedge Cuban clumsily (and sleevelessly) mambos with Kym Johnson on Dan­cing With the Stars; swiftly elimi­nated from competition

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