Andrew Allentuck

Saturday. July 26, 2003

The Right Stock at the Right Time: Prospering in the Coming Good Years
by Larry Williams
John Wiley & Sons, 2003
223 pages
ISBN 0-471-26608-6

Larry Williams, newsletter editor and occasional scribe for publications like Barron's and the Wall Street Journal, has put together his musings on the market. His approach is situational, his reasoning a kind of back of the envelope sureness that, with patience and some sense of history, things will work out.

He uses a four year cycle for market bottoms, assuring the reader that there will be other lows following the 2002 year of the bear. The bottoms will come in 2006, 2010, 2014, etc.

He also considers the oddities of market cycles, such as the October effect, which is the worst month for markets. Today, October tends to be a low month because the 31st is the end of the year for mutual funds and other institutional investors. He offers the explanation, instead, that October is a busy month for the Fed when it acts to stimulate the market with efforts to drop interest rates.

Mr. Williams' explanations of market moves are not the most sophisticated, but he provides valuable data and a few indications of how investors can play market cycles. Indeed, there is evidence that most public companies are victims of regression to the mean, showing above average earnings increases for four or five years and then reverting to sub average earnings growth for a similar period. That's the basis for being a cycle trader, a philosophy dear to his heart. The problem, of course, is to see the cycles turning through the mists of data that markets spin off.

Market timers should be able to find encouragement and value in The Right Stock at the Right Time. Buy and hold investors will tend to dismiss the book. The truth, of course, is that there are times that even buy-and-never-sell investors should trade out of bad situations or capture profits before they vanish. Thought-provoking even if not necessarily right, The Right Stock at the Right Time is a good read if not the unvarnished and final truth of cycle trading.