Our Batty Market, Part 2

A reader has suggested that I read the 2003 book "Practical Speculation" to find out how to trade the U.S. stock market. When I didn't publish the comment, he then accused me of censorship.

Certainly there is no censorship of "Practical Speculation"; it is still available on Amazon and at bookstores. The market world has enough facile suggestions, so I don't think the comment merits publication. Nevertheless, I'll give my current view of "Practical Speculation."

The book was written during the tech crash years of 2000-2002, a decline shocking in duration and magnitude to even the most sophisticated traders. My collaborator and I struggled to nail down a theme. Our optimism about the future of the Internet and the benefits of the a market free of central planning made us natural bulls, but the unfolding market plunge forced a more Machiavellian outlook. Our writing began to be reshaped by a realmarket outlook, if you like, along the lines of realpolitik. When the book finally came to market, it was heavy on enumerations of the varied deceptions employed by market players and observers. The deceptions we wrote about seem quaint now, given today's dark pools, high-frequency trading and banks that trade hoards of free taxpayer money against the very investors who supplied the funds. Today's market is much more more sophisticated and dangerous than it was seven years ago, particularly for small traders with short-term horizons.

Moreover, the globalization of money has accelerated at a pace unimaginable at the turn of the century. Our narrow focus on the U.S. market would be impossible today.

"Practical Speculation" rewarded readers with a timely prediction at the very bottom of the 2003 crash for a market recovery. Unfortunately, the publication was upstaged by the invasion of Iraq. "Practical Speculation never made the best-seller lists; in fact, the top business book of the time was a doomsday tome by Robert Prechter (is he back on a boat waiting for the next crash?) Our bullish prediction went unnoticed (perhaps deservedly so, since readers would have had to outlast some admittedly overblown literary foufou to find it in the book's last pages).

We had some good insights about real estate's interrelation with the stock market. We had no idea that the market's resuscitation in 2002 would come at the cost of a mammoth real estate bubble rotten at its core.

In short, despite the book's benefits, it has become quite outdated. I reserve the right to be flummoxed by the market despite having once attempted to write lucidly about a market of another day.

My current prediction is that the evil effects of the massive stimulus/bailout bubble in progress now will dwarf the previous crashes. The guns and butter, the Afghan adventure and the health-care reforms will not lead to a good end. I am as bearish now as I was bullish when writing "Practical Speculation." The market's cycles are always changing; unfortunately, that was at once the truest and most facile of our insights.