George Lindsay and The Art of Technical Analysis

by Ed Carlson

No, this book is not about Goober from Mayberry RFD. (That’s “Lindsey” with an “e”.) The George Lindsay of this book was a technical analyst from the 1930’s and ‘40’s through the early 1980’s or so. He was a guest star on Louis Rukeyser’s stock program and was considered a bit of a savant, I guess. This book sets out to be a detailed study of his technical analysis methodology. But don’t let that fool you: There is precious little this book that pertains to, or could be used in, modern equities markets.

I knew I was in trouble at the first chapter of a book, which explores the biography  of Mr. Lindsay, including his sexuality. The author says that an understanding of the whole person is essential to understanding his technical analysis methods, but I have my doubts about that. Thankfully, that chapter is relatively short. The remainder of the book is all about the technical analysis methods of Mr. Lindsay. It is a straight-forward, no nonsense explanation. Most of the methods are graphically and numerically illustrated, and I think that once upon a time, these methods, mainly charting highs and lows and comparing intervals between them, probably had some validity. I think now they are painfully outdated and not of any practical use in current equities markets. For example, one of the methods involves subtracting a market high from a market low and subtracting from that by another number derived from some ratio or something (details are not important here). From there, you get some other number that dictates some interval of rising or falling prices. Fine, but back when the formula was derived, the DJIA was at 300 points or so. And in one of the cases, the example talks about a 30-point movement – 10% of the market. Well, a 30-point movement now is less than 0.25% of the market and probably happens fifty or a hundred times a day. Likewise, if we were trying to get to a 10% difference (let’s say), you’d be talking about a 1,200 point movement. Not out of the realm of possibility (especially in today’s markets), but are you really going to do that analysis and place bets on the markets, hoping for a 10% shift one way or another? Really? Good luck. What’s worse, the book’s only case study, presumably to prove the value of the methods, uses stock charts from the 1960’s. Maybe it’s just me, but it seems obvious that the equities markets of fifty years ago are a completely different breed of market compared to today’s. I don’t think you can successfully employ investing strategies from half a century ago in this day and age. (Again, if you think differently, good luck.)

Technical analysis has come a long way, even in just the last few years. Maybe a thorough analysis and extrapolation of Mr. Lindsay’s methodology could be put to practical use in today markets. Maybe. But I’d doubt it. As a history of equities analysis and an insightful exploration into one of the early pioneers of technical analysis, this book is probably of some value, but as a primer for investing in today’s markets, it’s not. I can give it three dollar marks for being well-written and informative, but that’s it.

Maverick Trading

by three guys from that company

When I first heard the title of this book, I thought what I was getting into was another “Here’s a scary and crazy way to make money in stocks that you've never heard of before” books. I mean, I hear “Maverick” and I’m thinking cowboys, whiskey, and poker games that end in gunfights. So I figured Maverick trading would be just that: some bold new take on investing in stocks where you keep the whiskey close by in case things don’t go well. (If that were the case, what you do with the gun is another story, too.) Turns out that Maverick is the name of the company (and the trading philosophy) of the three authors of this book, and Maverick Trading’s only thread to the other Maverick is, you try to make money.

The book starts with basic explanations of what moves markets: buyers and sellers. It also discusses why buyers buy and why sellers sell, and what happens when they don’t. They cover the basics of stock charts so that even a raw beginner can obtain and understand useful information on market movement. From there, the nuts and bolts of how markets move, along with the intricacies of analyzing stock positions and behind the scenes movements in prices, sectors, and industries are covered in some detail. I suppose more sophisticated traders than myself might find some of what Maverick is about to be too basic, but I have been investing in stocks for 26 years and never really considered looking at the market the way Maverick does. And of course, I also never thought it might be possible to see when large movements take place and what the real opportunity to buy or sell an equity might be based on what other people are doing. To some extent that makes this a trend book, but Maverick teaches you how to get information, how to analyze it, what to do with it, and when to act on it, regardless of trends. That makes it a complete package for successful trading. The “tools” they put in your “toolbox” are understandable, logical, rational, and eminently useable. And because they advocate infrequent trading only after the big picture is understood, I’m thinking that Maverick trading is a good risk limiting tool, too.

I like this book not only because of the information it contains, but because of its earthy, friendly, approachable tone. Some of the authors’ analogies can at times be ridiculous but the points they are trying to make get illustrated and illustrated well. It makes learning the Maverick way a breeze and reading the book is a pleasure. I didn’t have to buy this book, but it’s one that had I purchased it for myself, I still would have been very satisfied. I give it five dollar signs for that reason.

What Works on Wall Street

 by James P. O’Shaughnessy

I first read this book two editions ago. I always considered it a sober and sensible book, and I found out about it because I invested in a fund that used this book as the cornerstone of its investing strategy. WWOWS has always taken a more than practical approach to investing in stocks. Being analysis intense, it is also quite detailed and wide-ranging. That’s mainly because, although there is always some shifting, there are plenty of strategies and methods that actually work on Wall Street.

This new edition retains much of the content and structure from previous editions. Most of the chapter titles are the same, and although the order of their presentation is changed somewhat, they are still eminently readable as a linear progression or as “one offs” on specific topics. This book has a much cleaner look than some previous editions, having gotten rid of the somewhat pointless (get it?) line graphs that illustrated certain points. These are often replaced by bar charts or tables, which although they are much dryer, they are also much more useful. Physically, WWOWS’s fourth edition is double the size of the revised edition, and as far as I could tell, all pertinent figures illustrating a point are updated with more recent data samplings and examples. The starting and ending points of samples of data, however, tended to be somewhat arbitrary, possibly to demonstrate a topic or theory more clearly and dramatically. The data that is supplied is extensive and always clearly illustrates the topic at hand. It’s smooth and informative reading. In other words, this work just keeps getting better and better.

In the volatile, unpredictable world of equities investing, it goes without saying that what works today might not work tomorrow, what worked yesterday might not work today, and what worked when the second edition of this book came out might be running out of steam at this point. Still, for a general introduction to stock investing, stock analysis, investment and speculation strategies, and quant perspective, WWOWS remains the quintessential handbook. I can’t think of a reason, therefore, not to give it a full five dollar signs.