TrimTabs Investing Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more For a list of available titles, visit our Web site at www.WileyFinance.com TrimTabs Investing Using Liquidity Theory to Beat the Stock Market CHARLES BIDERMAN with DAVID SANTSCHI John Wiley & Sons, Inc Copyright © 2005 by Charles Biderman All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008 Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness 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Library of Congress Cataloging-in-Publication Data: Biderman, Charles, 1946– TrimTabs investing : using liquidity theory to beat the stock market / Charles Biderman with David Santschi p cm — (Wiley finance series) ISBN 0-471-69720-6 (CLOTH) Stocks Stocks—United States Liquidity (Economics) Investment analysis Stock exchanges—United States I Santschi, David II Title III Series HG4661.B53 2005 332.63 '22—dc22 2004024582 Printed in the United States of America 10 Dedication To the possibility of global prosperity Contents ACKNOWLEDGMENTS ix INTRODUCTION PART ONE Introducing Liquidity Theory CHAPTER A Tale of Fortune Lost 11 CHAPTER The Genesis of Liquidity Theory 23 CHAPTER The Principles of Liquidity Theory 29 CHAPTER The Building Blocks of Liquidity Analysis 41 PART TWO Inside Liquidity Theory 51 CHAPTER Demolishing the Cult of Earnings 53 CHAPTER The House: Secret Corporate Power 69 CHAPTER The Players: Buying, Selling, and Borrowing 83 vii viii CONTENTS PART THREE Looking Back CHAPTER The Bull Market and the Bubble CHAPTER The Aftermath 95 97 109 PART FOUR Liquidity Theory in Action 123 CHAPTER 10 Swinging for Singles: Lower-Risk Strategies 125 CHAPTER 11 Swinging for the Fences: More Aggressive Strategies 139 PART FIVE Looking Ahead 149 CHAPTER 12 Managing Difficulties 151 CHAPTER 13 New Applications 161 CHAPTER 14 How Liquidity Could Save the Markets 171 Appendix: Historical Liquidity Data 181 About the Authors 185 Index 187 Appendix: Historical Liquidity Data F ollowing are brief descriptions of the 15 columns of Table A.1 How to Read the Table Period Month and/or year of data S&P 500 Value of S&P 500 at end of period Market Capitalization Market value of all NYSE, Nasdaq, and AMEX stocks, excluding American Depositary Receipts Market Capitalization = All Shares Outstanding × Current Share Prices L1 Net Float Net change in trading float of shares Best leading indicator of stock market direction L1 Net Float = New Offerings + Insider Selling – 2/3 New Cash Takeovers – 1/3 Completed Cash Takeovers – New Stock Buybacks New Cash Takeovers Cash portion of newly announced takeovers of public companies Completed Cash Takeovers Cash portion of completed acquisitions of public companies New Stock Buybacks Dollar value at previous day’s close of new stock buyback announcements New Offerings Dollar value of new equity offerings sold in the United States, excluding closed-end funds Insider Selling Estimated selling by all corporate insiders 10 Foreign Flow Net purchases or sales of U.S stocks by foreigners 11 All Equity Flow Flows into and out from U.S equity funds and global equity funds 12 L2 U.S Equity Funds Flow Flows into and out from U.S equity funds Lagging contrary indicator 13 U.S Equity Funds Total Assets Total assets of all U.S equity funds 14 U.S Equity Funds Cash Percentage Percentage of all U.S equity fund assets held in cash equivalents 15 L3 Margin Debt Net change in margin debt at New York Stock Exchange member firms Lagging contrary indicator 181 182 TABLE A.1 Historical Liquidity Data Period (1) 1995 1996 1997 1998 1999 2000 Jan–01 Feb–01 Mar–01 Apr–01 May–01 Jun–01 Jul–01 Aug–01 Sep–01 Oct–01 Nov–01 Dec–01 2001 Jan–02 Feb–02 Mar–02 Apr–02 May–02 Jun–02 Jul–02 S&P 500 (2) Market Cap (3) L1 Net Float (4) New Cash T/O (5) Comp Cash T/O (6) 616 741 970 1,229 1,469 1,329 1,366 1,240 1,160 1,249 1,256 1,224 1,211 1,134 1,041 1,060 1,139 1,148 1,148 1,130 1,107 1,147 1,077 1,067 990 912 7.310 8.954 11.560 13.860 17.619 16.396 16.890 15.290 14.070 13.656 14.247 13.216 12.144 11.564 10.337 11.134 11.781 11.147 14.435 14.192 13.797 14.392 13.656 14.247 13.216 12.144 –69,208 –107,479 –40,449 –101,807 –69,036 72,623 16,433 47,463 18,698 23,782 64,193 41,738 18,234 23,926 –45,511 23,024 11,501 17,091 260,572 19,955 8,826 30,714 15,667 27,391 6,982 –8,836 89,000 71,223 101,146 157,342 232,949 235,990 13,016 7,687 6,473 5,818 14,980 2,568 12,957 6,355 13,142 1,137 2,781 6,975 93,889 632 331 5,064 3,889 5,856 1,177 1,301 82,939 71,382 97,728 149,507 153,555 226,290 22,654 22,542 10,672 14,709 16,665 5,175 6,306 13,475 3,678 8,357 6,434 18,392 149,059 4,693 5,291 1,748 3,560 4,611 3,536 2,302 New New Buybacks Offerings (7) (8) 101,114 181,759 133,825 105,700 174,432 221,903 19,552 19,552 12,527 11,476 15,100 17,619 16,645 7,304 53,640 18,825 21,314 24,121 237,675 5,942 18,780 1,973 6,910 5,189 22,337 25,719 86,770 98,850 132,592 89,974 180,303 259,146 13,523 42,849 17,896 16,437 50,034 40,793 25,621 15,755 7,319 25,390 26,061 35,389 317,067 20,282 19,737 31,398 19,156 26,821 25,582 12,817 Insider Selling (9) Foreign Flow (10) All Equity Flow (11) L2 U.S Equity Flow (12) Assets (13) 32,118 46,706 60,792 68,652 131,604 268,140 38,688 36,800 21,200 27,600 44,800 22,000 20,000 24,200 10,800 20,000 10,752 16,600 293,440 7,600 9,852 5,248 7,200 11,200 5,700 5,700 11,240 12,511 65,870 53,978 107,807 174,002 23,778 9,435 7,428 6,627 17,321 10,438 11,475 7,703 –11,532 7,261 13,172 13,284 116,390 8,608 2,167 6,854 7,769 –314 4,045 9,653 124,392 216,937 227,107 157,032 187,666 309,365 24,937 –3,285 –20,694 19,141 18,383 10,851 –1,278 –4,953 –29,962 873 15,152 2,802 31,966 19,350 4,691 29,662 12,859 4,838 –18,247 –52,608 112,880 169,421 189,261 149,506 176,441 259,571 21,448 1,139 –15,760 17,254 20,839 9,736 2,434 –1,440 –27,263 5,140 13,381 6,822 53,570 16,011 7,554 26,714 12,200 2,726 –18,946 –49,011 1,053 1,441 2,022 2,587 3,457 3,419 3,536 3,180 2,935 3,214 3,252 3,198 3,128 2,940 2,626 2,710 2,925 2,989 2,989 2,949 2,889 3,050 2,924 2,894 2,662 2,386 L3 Margin Cash Debt (14) (15) Equity Funds 7.7 6.1 5.8 4.7 4.2 5.5 5.3 5.6 5.4 5.2 5.2 5.3 5.2 5.2 5.2 5.3 5.3 4.9 4.9 5.2 5.2 4.9 5.2 4.9 4.5 4.4 15,194 24,220 28,930 15,670 87,610 –29,697 –1,680 –10,240 –21,560 1,730 8,320 –4,180 –5,000 –4,120 –16,260 –50 4,640 1,800 –46,600 1,500 –3,360 2,340 1,570 –80 –4,590 –10,110 Aug–02 Sep–02 Oct–02 Nov–02 Dec–02 2002 Jan–03 Feb–03 Mar–03 Apr–03 May–03 Jun–03 Jul–03 Aug–03 Sep–03 Oct–03 Nov–03 Dec–03 2003 Jan–04 Feb–04 Mar–04 Apr–04 May–04 Jun–04 Jul–04 Aug–04 Sep–04 2004 916 815 886 936 880 880 856 841 848 917 964 975 990 1,008 996 1,051 1,058 1,112 1,112 1,131 1,145 1,126 1,107 1,121 1,141 1,102 1,104 1,115 1,115 11.564 10.377 11.134 11.781 11.147 11.147 10.886 10.634 10.665 11.571 12.830 13.020 13.290 13.597 13.533 14.360 14.620 15.280 15.280 15.540 15.760 15.530 15.121 15.301 15.730 15.183 15.354 15.671 15.671 –8,985 3,209 –3,769 –33 –174 87,087 –8,892 –4,447 –3,951 2,344 21,764 21,756 6,382 12,571 11,720 2,878 22,451 –2,946 93,930 –2,659 –6,514 31,696 1,343 –7,067 4,682 –31,023 –17,093 –2,684 –29,318 1,584 2,775 2,476 3,110 7,644 35,839 2,425 3,445 2,088 6,319 2,148 9,780 8,813 2,580 4,086 7,961 667 8,340 58,652 2,375 37,663 9,408 6,311 20,403 8,704 7,618 21,617 12,494 126,593 1,470 954 2,610 3,789 1,125 35,689 6,863 3,184 1,395 2,857 1,885 1,356 1,473 1,398 1,580 1,312 1,194 2,339 26,836 2,590 4,225 910 2,823 2,867 4,617 3,693 15,427 1,783 38,935 13,964 7,018 15,649 19,419 6,554 149,454 22,518 12,654 16,017 7,731 6,650 6,599 17,187 5,680 13,193 11,775 7,631 26,219 153,854 24,877 22,013 6,980 18,963 22,907 14,921 46,045 15,328 16,850 188,884 875 7,546 10,701 14,622 8,003 197,540 14,179 7,765 7,723 13,141 24,874 25,830 24,538 9,937 19,765 15,400 18,924 17,815 199,891 16,265 28,027 32,254 15,855 20,204 18,546 12,533 11,392 16,793 171,869 5,650 4,850 3,700 8,100 3,850 78,650 3,350 3,800 6,200 6,000 14,000 9,500 5,400 10,500 8,400 5,000 12,000 11,800 95,950 8,400 14,000 13,000 9,600 10,200 8,400 8,800 6,400 6,300 85,100 4,614 –6,466 3,616 6,480 2,416 47,058 –2,796 –2,078 2,840 4,357 6,593 10,308 –7,863 11,585 –6,225 –1,244 8,779 13,330 45,416 12,787 2,408 –13,461 –1,891 –7,623 1,904 9,778 –2,084 –3,830 –2,012 –3,110 –16,051 –7,576 6,907 –8,381 –27,665 –262 –10,886 42 16,115 11,919 18,643 21,473 23,605 17,501 25,022 14,928 14,178 152,278 42,948 26,150 15,520 22,990 427 10,397 9,462 1,089 10,113 140,322 –610 –14,455 –7,335 6,251 –5,944 –24,847 –1,319 –10,384 1,414 12,561 12,456 18,070 19,042 18,815 17,154 19,188 12,532 9,343 127,257 31,447 18,136 9,752 15,993 –919 7,612 6,500 –1,214 6,001 94,782 2,399 2,163 2,300 2,441 2,305 2,305 2,245 2,196 2,217 2,402 2,566 2,628 2,709 2,803 2,785 2,967 3,031 3,167 3,167 3,261 3,331 3,314 3,251 3,294 3,377 3,240 3,240 3,332 3,332 4.9 –3,360 4.9 –2,590 320 4.8 2,490 4.8 1,320 4.4 4.4 –15,870 530 4.4 –880 4.2 1,900 4.6 30 4.8 5,930 4.6 2,170 4.6 –100 4.4 1,210 4.3 6,210 4.3 6,850 4.4 9,400 4.4 1,080 4.0 4.0 34,330 5,600 4.2 1,540 4.2 –650 4.0 1,570 4.1 3.9 –2,810 1,620 4.0 4.0 –3,060 70 4.1 3,000 4.1 6,880 4.1 Source: (2) Yahoo! Finance; (3) to (8) TrimTabs Investment Research; (9) Thomson Financial; (10) U.S Department of the Treasury; (11) to (14) Investment Company Institute; (15) New York Stock Exchange 183 About the Authors harles Biderman is the founder and president of TrimTabs Investment Research Born in New York City, he earned a BA from Brooklyn College and an MBA from Harvard Business School He began his career as Alan Abelson’s assistant at Barron’s from 1971 to 1973 After correctly predicting the collapse of real estate investment trusts, he became a successful real estate entrepreneur, putting together various deals in Tennessee and New Jersey He founded TrimTabs in 1990 to provide portfolio managers and market strategists with unique investment insights He is frequently quoted in the financial media, including the Wall Street Journal, Barron’s, CNBC, and Bloomberg David Santschi is an editorial consultant and copy editor with TrimTabs Investment Research Born in Cincinnati, he earned an AB in history magna cum laude with high honors from Davidson College and an MA in history from the University of Wisconsin–Madison Currently he is a doctoral candidate in early modern European history at the University of Wisconsin–Madison C 185 Index A Abelson, Alan, 23–24, 26 Accounting fraud, 65–67 Acquisitions, 54, 64 Adelphia, 178 Amazon.com, American Association of Individual Investors Investor Sentiment Survey, 154 American depositary receipts (ADRs), 76 Ameritrade, 47, 100 AMG Data Services, 85 Analyst recommendations, 13, 16, 66–67 Arbitrageurs, 45, 72 Arnold, Daniel A., 116 Asian currency crisis, 56 AT&T Wireless, 43, 71–72, 119–120 B Baby boomer generation, 116 Balance sheets, 54, 65 Bank of Japan, 176 Bankruptcies, 18–19, 26, 175, 177–179 Barclays Global Investors: functions of, generally, 128 iShares ETFs, 133, 141–142 Barron’s, 23–24, 85 Bear market: characterized, 12, 14, 16–18, 20, 30, 38, 46–48, 60, 93 development of, 113–116 Beardstown Ladies, 12 Berman, Meyer, 24 Biderman, Charles, 19, 23, 117, 156, 185 Blodget, Henry, 13, 62 Bloomberg News, 80 Bombay Sensex, 5–6 Brokerage firm(s): commissions, 1, 36, 62, 142 functions of, 17, 29, 36–37, 46, 62, 105 online brokers, 100 Buffett, Warren, 21 Bull! A History of the Boom (Mahar), 101 187 188 Bull market: characterized, 2, 20, 47–49, 57–59 development of, historical perspective, 100–105 end of, 106–108 of late 1990s, 97–100 market recovery, 116–119 Buy-and-hold strategy, 2–3 C Capitalism, 4–5 Cash takeovers: characterized, 43–45 historical perspective, 98–99, 101, 103–104, 107, 109–110, 113 implications of, 70–72, 79–81 problems with, 151–152 CBS MarketWatch, 80–81, 85 Chanos, Jim, 66 Charles Schwab, 128 ChevronTexaco, 158 Chicago Mercantile Exchange (CME), 143–145 Cingular Wireless, 43, 71–72, 119–120 Cisco Systems, 3, 15, 29, 55–56, 72 Citifederal Savings and Loan, 25 Clear Channel Communications, 158 Clinton, President Bill, 98 Closed-end funds, 76 CMGI, 12 CNBC, 15 CNNmoney, 81 Cohen, Abby Joseph, 100 Conflicts of interest, 62, 67 INDEX Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (Prechter), 116 Consumer capitalism, Consumer protection, Convertible bond offerings, 43, 75 Convertible preferred stock offerings, 43, 75–76 Core earnings, 64 Corporate America, see Insider selling behavior implications, 16, 26–27, 30 as buyer, 112, 115–116, 121, 127 as seller, 107–108, 113, 115, 117, 119–121 Corporate income, 161, 164–165, 169 Corporate insiders, 16, 30–31, 37–38, 41 See Insider selling Credit Suisse First Boston, 29, 67 D Day traders/trading, 15, 105 Dealogic, 79–81 Debt, level of, 54, 65 See also Margin debt (L3) Defined-benefit retirement plans, 17 Digital Equipment Corporation, 23 Dirks, Ray, 25 Dollar-cost averaging: characterized, 1–3, 17–18 implications of, 36, 128–130 189 Index Donaldson, Lufkin & Jenrette, 29 Dow 40,000: Strategies for Profiting from the Greatest Bull Market in History (Elias), 103 Dow 100,000: Fact or Fiction (Kadlec), 103 Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market (Glassman/Hassett), 103 Dutch auction, 72–73 Dynegy, 66 E Earnings, generally: forecasts, 59–60 growth, 20 manipulation, 63–67 myth, 53–55 trends, 49 Earnings before interest, taxes, depreciation, and amortization (EBITDA), 64–65 Eavis, Peter, 67 eBay, Ebbers, Bernard, 13 Elias, David, 103 Employee stock option grants, 64 Employment growth, 161, 165–167 Enron, 13–14, 65–67, 178 E*Trade, 100 Exchange-traded funds (ETFs), 17, 46, 84, 126, 128, 152 F Fascism, 5–6 Federal Reserve, 26, 89, 98, 109 Fernandez, Frank, 6–7 Fidelity, 128, 153 Financial Accounting Standards Board, 65 Financial newspapers, as information resource, 20, 25 See also specific newspapers Financial statements, 63 Foreign purchases and sales, U.S securities: data interpretation, 89–91 historical perspective, 102, 105 implications of, generally, 89 information resources, 89 Form (Statement of Changes in Beneficial Ownership of Securities) filings, 78, 152, 172 Form 144 (Report of Proposed Sale of Securities) filings, 77–78, 81, 152, 172 Forward earnings, 57–61 Free cash flow: defined, 42 per share, 65 Fundamental analysis, 37, 54 190 G General Electric, 5, 43 Glassman, James, 103 Global Crossing, 13, 178 Goldman Sachs, 26 Goodwill, 64 Great Bust Ahead: The Greatest Depression in American and UK History Is Just Several Short Years Away, The (Arnold), 116 Great Depression, 18–19, 36, 175–176 Green shoe, 152 Greenspan, Alan, 6, 98, 100 Gross domestic product (GDP), 176–177 Grubman, Jack, 12–13, 62 H Hassett, Kevin, 103 Hedge funds, 13, 126, 139, 144–148, 157 High-net-worth individuals, 139, 143, 148 Honeywell, I Illinois Tool Works, 56–57 Income: corporate, 161, 164–165, 169 personal, 161–164, 169 Individual investors, 16–17, 20, 27, 29–30, 36, 86–87, 119–120, 128 INDEX Initial public offerings (IPOs), 15, 43, 75–76, 104, 152 Insider selling: historical perspectives, 104, 106–107, 117, 120 implications of, 43–44, 76–78, 81, 110, 112, 152–153 improved data, 174–175 low-cost reforms and, 172–173 Institutional investors, 16, 20, 139, 143 Intel, Interest rates, influential factors, 89, 109 Internet: impact of, 4–5 as information resource, 20 online job postings, 161, 167–169 Internet stocks, 2–3, 12, 101 Investment bankers, 62, 100 Investment clubs, 12, 16, 23 Investment Company Institute (ICI), 17, 84–85, 153 Investor psychology, 154 See also Individual investors; Institutional investors Investors Intelligence Survey, 154 Iraq war, impact of, 119, 156 iShares Lehman 1–3 Year Treasury Bond Fund (SHY), 133–134, 136–137, 141–143 iShares Russell 2000 Index (IWM), 141–142 iShares S&P 500 Index (IVV), 133–134, 136–137, 141–143 191 Index iShares S&P SmallCap 600 Index (IJR), 133 Iwaisako, Tokuo, 177 J Janus Funds, 153 Japanese economy, 176–178 Jarecki, Henry, 28 JDS Uniphase, 15, 29 Job postings, online, 161, 167–169 Johnson & Johnson, Juniper Networks, 105 K Kadlec, Charles W., 103 Kerschner, Ed, 100 Kimberly-Clark, 73 Kynikos Associates, 66 L Lay, Kenneth, 13, 66 Leverage: characterized, 139–140 impact of, 47, 128 Leveraged buyouts, 64–65 Liquidity analysis, 70–71 Liquidity data: historical, 181–183 improved, impact of, 174–179 Liquidity theory: components of, generally, 6, 16–19 defined, development of, 23–28 principles of, 29–39 Liquidity TrimTabs, 27 Long-term bonds, 126–127 Long-Term Capital Management, 56–57 M Magellan Fund (Fidelity), 102 Mahar, Maggie, 101 Margin debt (L3): data interpretation, 92–94 defined, 15 formula, 46–48 historical perspectives, 100, 105, 107–108, 117–118 implications of, 26, 36, 46–47, 91, 103 information problems and, 154 information resources, 91–92 investor psychology and, 154 as low-cost reform, 174 Market bubbles, 18, 29, 36, 38, 46–48, 62, 165 See also Technology bubble Market capitalization, 41–42, 152 Market TrimTabs, 26, 66 Media, impact of: print, 22–25, 85 television, 15, 80 Mergers, 63–64 Meyer, Priscilla, 25 Microsoft, 5, 42–43 Midlantic National Bank, 26 192 Mocatta Metals, 28 Monetary policy, 19 Monti, Mario, Morgan Stanley REIT Index, 88–89 Moscow Times, 5–6 Munger, Charlie, 65 Municipal bonds, conservative, 142 Mutual funds: characterized, 13–14, 16–17, 26–27, 29–31, 39, 76 data interpretation, 85–89 flows of, 83–84 information resources, 84–85 technology, 102 N Nasdaq, 12, 14–15, 29, 46, 83, 92, 97–98, 101–110, 113–116, 119–120, 174 Nasdaq-100, 145–147 Nasdaq Stock Market, 42 National Commerce Financial, 70 Net change in trading float of shares (L1): components of, 41–45, 157–159 formula, 41–45, 47–48, 70, 80 historical perspectives, 103–105, 113–115, 117–118 implications of, generally, 70, 84, 98, 109–110, 151, 164–165 information management, 156–157 INDEX information problems, 151–152 investor psychology and, 154 as low-cost reform, 171–173 New applications: corporate income, 161, 164–165, 169 employment growth, 161, 165–167 online job postings, 161, 167–169 personal income, 161–164, 169 New offerings: characterized, 36, 38, 43–44, 75–77, 79 historical perspectives, 104, 106, 112, 115, 117, 119–120 New York Stock Exchange (NYSE), 15, 42, 91–92, 100, 174 Nikkei, 176–177 Nokia, O Olson, John, 66 Online Investor, The, 80 Open-end funds, 76 Operating earnings, 63 Options conversions, 172 Organized labor, Outsourcing, P Pension funds, 118, 139 Personal income, 161–164, 169 193 Index Personal Income and Outlays, 162 Pfizer, Prechter, Robert, 116 Preferred stock, 75–76 Price-earnings (P/E) ratios, 54, 97 Pro forma earnings, 63–64 Procter & Gamble, 43–44 Public companies: investment behavior, impact of, 16, 30–32, 37–38, 41, 44 secret power of, 69–70 Putnam Investments, 153 Put options, 23 R RCA, 36 Reagan, President Ronald, 24 Real estate funds, 87–88 Real estate investment trusts (REITs), 24 Real Media, 13 Reported earnings, 63 Rich Dad’s Prophecy: Why the Biggest Stock Market Crash in History Is Still Coming and How You Can Prepare Yourself and Profit from It! (Kiyosaki/Lechter), 116 Risk management, 48 Risk tolerance, 126 Roosevelt, President Franklin Delano, 19 Roth IRA, 132–134 Russell 2000, 120, 145–147 Rydex Ursa Fund (RYURX), 136–137 S Salomon Brothers, 26 S&P 500, 1, 5–6, 11, 14, 16–17, 29, 46, 56–61, 83, 85, 92–93, 97–98, 101–107, 110, 113–117, 119, 121, 133, 136, 139–140, 143–147, 164 S&P 200, Santschi, David, 185 Sauter, George U “Gus,” 127 Schnapp, Madeline, 169 Secondary offerings, 15, 75–76, 152 Securities Industry Association (SIA), 6–7, 17, 30 Self-tender, 72–73 SEP-IRA, 135–136 Short sales, 26–27 Short sellers, 66 Short-term bonds, 126–127 SIMPLE-IRA, 132–134 Skilling, Jeffrey, 13, 66 Small-capitalization stocks, 119–120 Spitzer, Eliot, 13 Starbucks, 31 State Street Global Advisors, 128 Stock buybacks: defined, 15 historical perspective, 98–99, 101, 110–111, 113–114, 116–117, 155–156, 158–159 implications of, 38, 42–44, 72–75, 79, 81, 86 low-cost reforms, 172–173 problems with, 151–152 194 Stock market, generally: bubbles, see Market bubbles; Technology bubble casino, 1–3, 16, 20–21, 30–32, 42, 69, 105–106, 179 crash(es), 18–19, 36, 174 See also Great Depression paradigms, 37–38 Stock options: characterized, 12, 15, 38, 43, 66, 77, 107 grants, 54 Strong, Richard, 14 Strong Financial Corporation, 14 Sullivan, Scott, 13 Sun Microsystems, 15, 29 SunTrust Banks, 70 Supply and demand, 3, 20, 32–37 T Tax changes, impact of, 54 Tax shelters, 24–25 Technical analysis, 37 Technology boom, 100–102 Technology bubble: characterized, 14–15, 19, 47, 55–56, 60, 99–100, 105, 109 deflation of, 119–121 10-K filings, 73–74, 171 10-Q filings, 73–74, 171 Terrorist attack (9/11), economic impact of, 7, 13–14, 111–112, 155, 174 TheStreet.com, 85 Thomson Financial, 80–81 TIAA-CREF, 128 Treasury bills, 145–147 INDEX TreasuryDirect, 135 Treasury Inflation Protected Securities (TIPS), 135 TrimTabs: functions of, 6–7, 85 Daily Mutual Funds Flow, 85 Exchange-Traded Funds, 153–154 historical perspective, 26–27 Investment Research, 13, 27 Model Portfolio Fund, 27 Monthly Liquidity, 27, 81, 169 Online Job Postings Index, 167–169 Personal Income, 169 U.S Employment Update, 169 Weekly Liquidity, 27, 80–81 Troubleshooting guidelines: art and science perspectives, 157–158 exogenous stocks, 155–156 information, incomplete and delayed, 151–154 information management, 156–157 investor psychology, 154 T Rowe Price Associates, 128 T Rowe Price Science & Technology Fund, 102 Tyco International, 178 U U.S Bureau of Economic Analysis (BEA), 162–164 U.S Bureau of Labor Statistics (BLS), 165–167, 169 U.S Department of the Treasury, 89 195 Index U.S equity funds, see U.S equity mutual fund flows (L2) characterized, 104 flows, 80 historical perspectives, 111, 113–115 U.S equity mutual fund flows (L2): components of, 45–46, 157–159 formula, 45–48 historical perspectives, 103, 113–115 implications of, generally, 84 information management, 156–157 information problems, 153–154 investor psychology and, 154 as low-cost reform, 173–174 U.S Securities and Exchange Commission (SEC), 44, 63, 65, 73, 77–78, 152, 171 Vanguard index funds: characterized, 17–18 mutual funds, 127–128 Vanguard Limited-Term TaxExempt Fund (VMLTX), 132, 135 Vanguard Short-Term Bond Index Fund (VBISX), 129, 131 Vanguard Small-Cap Index Fund (NAESX), 131 Vanguard Tax-Managed Growth and Income Fund (VTGIX), 132 Vanguard Total Stock Market Index Fund (VTSMX), 129, 135 V Y Value: defined, 26 price vs., 55–61 Value investing/investors, 37, 54 Vanguard 500 Index Fund (VFINX), 31, 131–132 Vanguard Group, The, 153 Yahoo!, 3, 15, 105 Yahoo! Finance, 80–81 W Wal-Mart, 3, 5, 151 Wall Street Final, 25 Wall Street Journal, 81 Winnick, Gary, 13 WorldCom, 13–14, 178 Z Zacks Investment Research, 62 Zitzewitz, Eric, 174 ... lot of fun —David Santschi TrimTabs Investing Introduction t your local bookstore, you can probably find dozens of books about the stock market In fact, scores of investing titles roll off the... president of TrimTabs Investment Research For the past 10 years, TrimTabs has been developing liquidity theory, a unique paradigm for understanding the stock market Nearly all of TrimTabs’ clients... www.wiley.com Library of Congress Cataloging-in-Publication Data: Biderman, Charles, 1946– TrimTabs investing : using liquidity theory to beat the stock market / Charles Biderman with David Santschi