My Top 10 Friday AM Reads:

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  1. Numbers and Narrative: Modeling, Story Telling and Investing 
  2. Nobel-winning economist Robert Merton says 401(k)s face a crisis. Here’s why
  3. Index fund guru Bogle finds little traction on governance
  4. CNBC Viewership Drops To Lowest Since 1997 as Cramer Has Worst Month Ever
  5. Crumbling U.S. Grid Gets Jolt in Smart Houston Power System
  6. Two-thirds of U.S. states haven’t recovered the jobs they lost in the recession
  7. Good News on Health-Care Spending Is Making U.S. GDP Look Bad
  8. ISIL: Winning Hearts and Minds, the Jihadist Way
  9. World’s Biggest Debt Load Lures Distressed Funds to China
  10. Putin’s Economic Model Showing Strain as Russia Is Cut Off From Global Finance
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My Top 10 Thursday PM Reads:

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  1. Why Government Pension Funds Became Addicted to Risk
  2. When Commodity Collateral Shenanigans Go Wrong
  3. Is the Market Efficient? Cliff Asness Says Yes, and No
  4. How Barclays Got Caught Red-Handed With ‘Pernicious HFT Fraud’
  5. New York Sues Barclays Over “Dark Pool” Trading Practice
  6. Your Taxes Are Going Up. You Just Don’t Know It Yet
  7. Android TV: Google Aims for the Living Room … Again
  8. The Long and the Short of China’s Economy
  9. Inflation may be the biggest risk to the market: ex-White House adviser
  10. Single men should move to the Northeast

My Top 10 Thursday AM Reads:

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  1. Gold’s Flow East Seen for 20 Years as Incomes Increase Demand
  2. Ikea’s US Division Plans To Hike Minimum Wages By 17%
  3. My thoughts on the US economy
  4. How Millionaire Guangbiao Chen Became the Most Interesting Man in China
  5. U.S. Prepares Russia Sanctions as Ukraine Unrest Simmers
  6. Brent Drops Below $114 as Worries Ease Over Iraq Supply
  7. Malaysia jet most likely on autopilot when it crashed, Australia says
  8. Shares of three Chinese firms soar 44 percent on debut, first listings in over 4 months
  9. Jeff Carter: What’s Your Story?
  10. How Long Would it Take You to Become Warren Buffett? 

My Top 10 Wednesday Reads:

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  1. Was that the top?
  2. You would only be calling for a major reversal here if you thought the buyback fuel would be going away
  3. Rising volatility does not mean the market must go down. It can just as easily rise
  4. The four decade-long ban on exporting US oil is now over
  5. So you want to be a contrarian investor…
  6. Mexico is the new China
  7. Morgan Stanley got 90,000 applications for its summer intern program!
  8. Roger Nusbaum: Self-Sufficiency and Resourcefulness Over Complaining
  9. Yellen may be poised to rewrite Fed’s rule book on wages, inflation
  10. JC’s how to trade Twitter (earnings imminent)

My Top 10 Tuesday AM Reads:

  1. Arrow or Dart? Japan’s Abe unveils latest reform plan
  2. Norway’s $890 Billion Wealth Fund to Target Frontier Markets
  3. Realizing the American Apparel Chief Isn’t Wearing Any Clothes
  4. Cullen Roche: Let’s Worry About Inflation When Employment Starts to Inflate
  5. Joshua Brown: A Portfolio is Not a Plan
  6. How Close Is the Fed to “Mission Accomplished”?
  7. Bond Market Has $900 Billion Mom-and-Pop Problem When Rates Rise 
  8. Microsoft Makes Bet Quantum Computing Is Next Breakthrough 
  9. Nine Habits You Need to Stop Now
  10. A Financial Tour Around the World

My Top 10 Monday PM Reads:

  1. The stock-market herd: How to think about investing when prices are this high
  2. How to Lose $1 Billion: Yeshiva University Blows Its Future on Loser Hedge Funds
  3. What Janet Yellen Is Trying to Tell Us
  4. Can We Declare the Global Financial Crisis Ended?
  5. Google: The New Bank
  6. Draghi Says Unlimited Cash Through 2016 Is Rate Signal
  7. Rising oil prices can pull down markets: Fact or myth?
  8. In Yellen We Trust Is Bond Mantra as Inflation Dismissed
  9. RadioShack Is Now a Penny Stock
  10. Is the Fed behind the Curve?

10 Market Rules to Remember

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1. Markets tend to return to the mean over time

When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an opposite excess in the other direction

Think of the market baseline as attached to a rubber string. Any action to far in one direction not only brings you back to the baseline, but leads to an overshoot in the opposite direction.

3. There are no new eras — excesses are never permanent

Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots. Look at how far the emerging markets and BRIC nations ran over the past 6 years, only to get cut in half.

As the fever builds, a chorus of “this time it’s different” will be heard, even if those exact words are never used. And of course, it — Human Nature — never is different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction — eventually.  comes.

5. The public buys the most at the top and the least at the bottom

That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing.

Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors survey.

6. Fear and greed are stronger than long-term resolve

Investors can be their own worst enemy, particularly when emotions take hold. Gains “make us exuberant; they enhance well-being and promote optimism,” says Santa Clara University finance professor  Meir Statman. His studies of investor behavior show that “Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names

Hence, why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks (“Nifty 50” stocks).

8. Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend

I would suggest that as of August 2008, we are on our third reflexive rebound — the Januuary rate cuts, the Bear Stearns low in March, and now the Fannie/Freddie rescue lows of July.

Even with these sporadic rallies end, we have yet to see the  long drawn out fundamental portion of the Bear Market.

9. When all the experts and forecasts agree — something else is going to happen

As Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”
Going against the herd as Farrell repeatedly suggests can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets

Especially if you are long only or mandated to be full invested. Those with more flexible charters might squeek out a smile or two here and there.