The Message of the Markets

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9780066620466: The Message of the Markets

Can the financial markets really foretell the future?

According to CNBC's veteran market watcher, Ron Insana, they can and do. Every day the world's markets are speaking -- shouting, really -- boldly predicting the future. In fact, they are reflecting information not yet revealed to the general public: events as dramatic as the outcome of a war, as tragic as a nuclear accident in some distant part of the globe, or as mundane but vitally important as the future direction of interest rates.

In order to understand what the markets are saying, you have to know how to listen to and interpret the messages they are sending. This is the first book to show readers how to understand the signals put out by the markets, and how to use that information to advantage in their lives.

Since ancient times, writes Insana, investors and merchants have met to buy and sell goods -- and to exchange information and gossip. This information is reflected in the prices charged for those goods, whether it is news of war in a far-flung region that will cut off the gold supply or a crop failure that will make wheat scarce.

Now skip to the present day, where the proxies for goods and services -- tradable securities -- act in exactly the same fashion. From the price of oil to foreign-currency fluctuations, from the price of a stock to the interest rate offered on a bond, the financial markets provide clues to events great and small. For example, Insana documents how

  • the stock market sent a shudder down Wall Street several moments before President John F. Kennedy was killed in Dallas
  • the crude oil market warned the world that a war was coming between Iraq, Kuwait, and the United States -- and then predicted a quick victory
  • the wheat market told the West about the seriousness of the Chernobyl nuclear accident days before official word of the meltdown
  • a tiny currency known as the Thai baht warned the global markets that the Asian economic crisis was imminent and potentially devastating.

In the world of finance, Insana reveals how

  • the yield curve gives a one-year advance warning of an impending recession
  • a little-known futures contract predicts with great precision what the Federal Reserve will do to interest rates weeks before the Fed makes its decision

At a more personal level, Insana shows how individuals who heed the warnings of the markets will make better personal decisions regarding

  • investments
  • mortgages and loans
  • real estate purchases
  • career choices
  • and much more

Whether you are an investor, a market buff, or are simply interested in making better financial decisions, the markets are speaking to you in a very relevant and personal way. Let Ron Insana be your guide and interpreter to understanding the message of the markets.

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Review:

CNBC's Ron Insana is one of the founding fathers of TV biz-news punditry, and his analytical strength and fondness for puns do not desert him in The Message of the Markets, the followup to his book Traders' Tales: A Chronicle of Wall Street Myths, Legends, and Outright Lies. But despite his trademark perky tone (the section on the Gulf War is titled, "Oil's Well That Ends Well"), Insana writes to fulfill an extremely serious ambition: he wants you to learn to use the fluctuations of the financial markets to actually predict the future.

He's not kidding. Insana insists that the market leaves coded messages, "breadcrumbs on the road to the gingerbread house." With a few charts and a bit of technical explanation, he shows how you could have profited in the Great Salad Oil Swindle of 1963, the crash of 1987, the Asian crisis of 1997, and other riveting fiscal dramas. Insana makes his points convincingly. There's his anecdote about President Kennedy's assassination, when the market began to tank before the news got out. One broker sparked the selloff, saying it "had something to do with the president." The possibly apocryphal explanation: Disappointed dealers at a Dallas brokerage house go back to their office when JFK's parade is halted without explanation. Though nobody suspects the truth, their manager can think of no bullish reasons such a parade would be cancelled, only bearish ones, so he sells early and saves big.

While this story remains unverified, Insana has plenty of verified market-message examples: the 1990 oil spike that heralded Saddam Hussein's Kuwait invasion two months early, the Thai baht crisis that presaged the turning of Asia's tigers into whipped kittens, and the 1993 Dow Jones Utility Average warning preceding the 1994 bond crash. A notable anecdote: one trader deduced a 1980s spat on the border of Egypt and Libya based strictly on upticks in U.S. based oil companies and defense stocks and dips in two international oil stocks and a designer-jeans company dependent on Egyptian cotton.

Can you really predict Greenspan by reading Insana's book? Or is it all just Monday morning quarterbacking? Hard to say. But Insana's book is as fun as the investment game itself. --Tim Appelo END

About the Author:

Ron Insana is familiar to millions of viewers as the popular business journalist and anchor in CNBC. His show, Street Signs, is seen in 70 million American households and in 71 countries. Insana makes frequent guest appearances on NBC Nightly News, the Today Show, and Imus in the Morning.

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