Market Sense and Nonsense: How the Markets Really Work (and How They Don't)

In "Market Sense and Nonsense" author Jack Schwager takes one piece of Wall Street wisdom to task after another. In all he analyzes and overturns 55 common misconceptions about the way markets work. The book is divided into three parts plus an epilogue and two appendices. All tie together pointing the way to better-informed investment strategies.- Part One lays the groundwork by overturning many common fallacies about the value of expert opinions, past performance metrics, mutual funds and leveraged ETFs. It includes a tour-de-force destruction of the efficient-market hypothesis (the "deficient" hypothesis in Schwager's words) that is by itself worth the price of the book.- Part Two explores hedge funds in detail starting with their historical development, explains the many different strategies employed, compares hedge funds to mutual funds and managed futures, and evaluates fund-of-fund investment strategies. I found this section surprisingly interesting and practical both as an active trader myself and as a prospective hedge fund investor.- Part Three looks at portfolios and defines eight principles of portfolio construction with a tilt towards hedge fund investing. Schwager points out that the risk-return profile of hedge funds is superior to mutual funds and, in the form of fund-of-funds, an investment in a hedge fund is actually available to and preferable even for investors of modest means.- The Epilogue contains 32 useful "investment observations" drawn from the book. Appendix One is an introduction to options as an investment tool. Appendix Two contains mathematical formulas for all of the risk-return metrics used in the book. Some of these are unique tools published here for the first time.Schwager takes time to explore his subject matter scientifically then draws conclusions based on a strong mix of qualitative and quantitative arguments. Where appropriate he devises tests to model risk-return relationships, then presents the results in the form of crisp charts and tables. Nearly every chapter ends with 1) a summary of the investment misconceptions discovered, 2) a review of the "market reality" versus conventional wisdom, and 3) the "investment insights" or takeaways that may be useful to the reader. For those with limited time, these chapter summaries provide a quick way to skim through the book and capture the highlights.The foreward is written by Hedge Fund Market Wizard Joel Greenblatt, author of  The Little Book That Still Beats the Market (Little Books. Big Profits) . Some of the myths that Schwager busts reveal the subtle reasons why Greenblatt's "Magic Formula" investment method reportedly works well over long periods of time.This book is not an easy read in the manner of Schwager's Market Wizards books. It is a higher-level, more strategic text that covers its financial subject matter in detail and from multiple angles. Yet it is not dry or boring either. Schwager's writing style is interesting and conversational, employs many analogies and examples to convey meaning, and frequently touches on real investor experiences to drive points home. "Market Sense and Nonsense" is aimed at those truly interested in how financial markets work and the reasons why so many commonly-held beliefs do not stand up under rigorous scrutiny. There is more than just investment mythbusting going on here. A thread of clear strategic thinking unifies the entire work.This book deserves a five star rating. Serious individual investors and speculators, fund managers and CTAs, and even financial markets regulatory personnel may benefit from the insights presented in this book.

Schwager is obviously a great writer and the many arguments he makes in this book to bunk broadly accepted assumptions are well researched and supported.The book is broken into three sections.1. Markets, Returns & Risk2. Hedge Funds as Investments3. Portfolio MattersParts 1 & 3 were strong and worked well together but the section on Hedge Funds feels wildly out of place. This book is more of a reality check for portfolio management than a trading book and is very different than any of his market wizard books (which are excellent).If you're strictly a trader that watches intraday charts, this book has little value for you. If you manage a portfolio of assets and have been schooled on the modern portfolio theory taught in academia and broadly accepted by many professional long only money managers, this book will open your eyes to the fact that much of what you believe is built on false market assumptions.

I am very happy that one of my favorite trading authors decided to write yet another book on trading the markets. While it is hard to ever beat his original Market Wizards best seller he did write another excellent book on trading the markets. This book seems to encompass all the knowledge he picked up from one on ones with the icons of trading along with his own personal experience trading his own accounts,being a portfolio manager, and advising professional hedge fund managers. It will be hard to find a more qualified author than Jack Schwager.What this book does is slice through the foolishness and misinformation that is in the markets and gets to what really works and what does not to actually make money through investing and trading.The reader will get their money's worth as the author takes you through 50 investment misconceptions. He exposes the talking heads on financial news as just entertainment at best or reverse indicators at worst. He explains why the value of leveraged ETFs deteriorate on both sides bull and bear over the long term and when they may have some value. He explains the difference between luck and skill with money managers and how to know the difference. He points out the error in choosing funds with the best near term records and why that is a mistake and the best times to get in and out of the market as an investor based on long term market price levels.Schwager demolishes the academic theories of efficient markets with specific facts about historical price action versus real fundamental valuations that can not be disputed with theories. He knows that the real market price drivers are fear and greed by the majority not rational decision making. Also Mr. Schwager puts holes in the Random Walk theory and explains how the markets can be beaten and have been for mulitple decades by many traders and investors by much wider margins than can be explained by probability and chance.This book is for all traders and investors that want to learn what works and what does not in the financial markets. This book is pure gold for knowledge and principles and I highly recommend it as a starter book for new traders and a great refresher course for market operators. I believe all traders and investors at all levels will walk away with a gold nugget of knowledge or some wisdom due to the vast amount of areas covered within this book.

Some helpful pointers but overall does not build a real case for active managers or hedge funds that would apply to most investors. Spends a lot of time attacking a straw man. We know the market isn't always right nor is it impossible to beat but does not imply that low cost passive isn't a better alternative for many or most investors when applied properly. Having enjoyed Schwager's previous work, this is something of a disappointment.

An eye opener. Loved the way the author explained each concept. Would definitely recommend this book to friends and family.

Livre reçu avec des taches de colles et du papier solidement collé dessus, expéditeur qui ne prend pas soin du tout de l'envoi, A ÉVITER

The author has discussed topics in good depth which I liked.However, a wide variety of topics were addressed which I felt were too advanced for a layman reader like me.

Información ya conocida. Nada nuevo si conocimientos moderados previos. Puede ser una buena introducción si no se ha leído nada previamente.

An excellent guide to understanding how the market really operates. This book is essential reading for separating 'theory from reality' in the financial markets. Key topics such as the efficient market hypothesis (EMH), diversification and risk are critically reviewed with several fallacies exposed. Important insights on trading, investing and hedge funds are revealed. It would take one many years of practice and learning to acquire this knowledge. In short, I would strongly recommend this book to beginners and professionals for the practical insights provided on the market. There is no doubt that your investment and time reading this book will benefit your portfolio many times over.