Fire Ox Year – Extraordinary Moments in the History of Wall Street Stocks

Author: Friedson
Publisher:
Publish Date: 2005-03-01
Features: This series of books tells you the real stories in the long history of American financial development. It covers the transformation of Wall Street, the monopoly of the United States, the causes of turbulence in the financial sector, and analyzes how human greed and desire for money, as part of human nature, are intertwined with historical events. This is a highly readable book, serving as a repository for showcasing knowledge and high taste after meals. The book points out that accurately estimating the future of the stock market is a very unrealistic goal, but by examining history, some clues can be obtained, which helps in estimating the arrival of the next stock market opportunity. To find such clues, this book attempts to examine the top 10 years of the 20th century, proving that there are indeed some commonalities.
This book conducts research on a calendar-year basis, i.e., it statistically analyzes the price changes each year and selects the 10 years with the largest annual price increases as research targets. Although many annual strong-correlation factors exist in the influence of the securities market, such as the publication cycle of corporate financial statements, dividend distribution cycles, and the cycles of political events like elections, when conducting trading research, the calendar year is not a good research unit. Because the market is a complex interplay of multiple factors, many of which are not strongly correlated with the calendar year, the interaction will inevitably dilute the significance of this non-market unit. Especially with the development of related tools such as information acquisition and transmission technology, the probability of a spectacular rise in the stock market within a year has decreased, thus weakening the importance of researching this possibility. In other words, even if this research related to calendar years is valuable, it is mostly limited to statistical significance, such as performance comparison and evaluation of asset management institutions like fund management companies. From this perspective, studying special market events—i.e., what this book refers to as "market shocks"—and "price fluctuations from peak to trough" seems to be more practically meaningful.
Second, the research in this book shows that relevant theories of the securities market, such as the Efficient Market Theory and cyclical theories, as well as certain traditional analytical methods like the Price-to-Earnings Ratio method and fundamental analysis, cannot adequately explain the research sample (the years with positive news). Only monetary factors seem to be "playing a significant role." This inference, although supported by the event in this book, is not sufficient. Monetary factors (primarily referring to interest rate changes in this book) are indeed one of the most important factors affecting the securities market, and under modern credit conditions, the intensity of this factor seems to be increasing, and its mode of action is also becoming more complex. However, this factor can only take full effect through a series of transmissions, such as influencing the confidence of relevant entities. Many of the theories deemed to have failed in this book are precisely those that target important elements in this transmission sequence.
Third, the conclusions of this book suggest that a possible condition for a year with positive news (a major bull market) is "low prices and an unexpected easing of credit." This conclusion should only be considered for reference, as "low prices" and "unexpected" are subjective judgments. As post-event standards, they can be accepted, but they cannot be used as pre-event standards to make accurate judgments. From this perspective, the opportunity selection and grasp of securities trading emphasized in this book are more of an art than a science.