Review of Stock Market Stratagem: Loss Control and Portfolio Management Enhancement (Hardcover)

I agree with other reviewers that this book deserves 6 stars. Over the last 30 years, I've accumulated a lot of investment books but this is the first I've seen that has a chance of withstanding the test of the many varied business cycles over time. I note that this book has been selected as a text for several "practical" college investment courses.

Here are the specific reasons I like this book:

First, this is a book about lifetime investment principles for the DIY individual investor. Glett's idea is to devise easy-to-use techniques to take advantage of high growth stock market opportunities while minimizing possible losses with "risk control" strategies. Central to both concepts is the notion of diversification, where a portfolio of stocks are developed that maximizes the opportunity of finding a few big winners (doubles and triples), while limiting the number of losers to a tolerable few.

Extensive knowledge of economics or financial analysis is NOT required. Rather Glett advocates letting the market make the key buy/sell decisions. To provide insight, the techniques are explained using paper-and-pencil with public data from the web, but suggestions for simplifying the process using professional computer software are introduced as well.

An actively managed portfolio is advocated, where market conditions dictate what and when to buy and to sell. It is a "contrarian" strategy with a twist. It advocates the selection of low profile stocks in emerging market sectors rather than just the big names. It is also a "momentum based" strategy with a twist. Glett's "Reverse Scale" strategy advocates allowing winners to run, while losers are cut immediately. The twist in each case, however, is that its diversification and loss-control strategies are constructed to reinforce each other to minimize risk as defined by the investor. One of the key outputs of this strategy is the discipline to execute a stop-loss order within minutes after buying the stock to guard against subsequent "unreasonable exuberance."

Glett advocates the use of technical (charting) techniques to determine a stock's trend in order to quickly narrow a list of potentials to a select few. Charting is also useful in determining loss-limits. Financial and fundamental data are then used to gage the trend's sustainability.

And finally, techniques are developed for recognizing the onset of a bear market at which point the portfolio goes into limbo where winners continue to run, but losers are not replaced. A technique for knowing when to safely get back into the market is also presented.




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