Readers reviews of If its raining in Brazil, Buy Starbucks
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Stay with this book through the first
section. Its slow reading, but it is also a good coverage of the relationships between
economics, the market and broad market behaviour. At its core, this is a book about sector
rotation and the way the investors traditionally and intuitively think about the
relationship between major economic events and their impact on the market. If this is an explanation of common wisdom, then it is
important reading for traders for it gives
clues the ways to outwit the crowd to be sellers when they want to be buyers.
It is a good explanation of the impact
of major economic events. His discussion of the way in which major US economic reports are
related to market behaviour is very good. He then shows how this can be related to sector
rotation. The insight he offers is that early identification of sector rotation allows you
to get on board stock before the rest of the
market discovers that it is moving. Sound familiar? It approaches the standard holy grail
of fundamental investing from a slightly different angle.
The book has a deadly flaw. It is based
on two assumptions. The first is that better analysis will enable you to PREDICT the
market. This assumption is joined by another. Because your analysis is so good, and your
prediction is so sound, when you buy a stock
and its starts to go down, then you should continue to hold onto it because you KNOW that
the stock is going to go up. This is the direct road to trading failure, to investment
collapse and then bankruptcy.
For Navarro risk is all confined to
analysis risk. Learn how to make a better analysis using macro economic processes, and the
risk in the market is reduced. There is no discussion of position management techniques.
He does briefly talk about stop loses. These are set in mid air, without reference to any
market behaviour. These are ineffective stops because they are most likely to be triggered
by normal market events. If your stop is above support, then it will be triggered as
prices fall to support.
Navarro does not get to grips with the
complexity of these macro economic issues, and this is a failing. If its raining in
Brazil, breaking the drought, then coffee will be cheap. Simply buying Starbucks is a
simplistic solution because it ignores currency impacts, retail conditions in the Starbuck
economy, and the management of the target company. It is important to understand the big
picture, but the devil is in the detail.
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