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The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

ISBN: 978-1-118-11034-8
256 pages
April 2012
The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails (111811034X) cover image
A new approach to investing based on how Wall Street insiders approach the market

The Indomitable Investor deconstructs the stock market as the public has come to know it and reconstitutes it from the inside out from the perspective of the fortunate few who dominate Wall Street. By revealing how top investors and traders think and act Steven Sears shows the stock market to be an undulating ocean of money, with seasoned investors reading the waves others cannot.

Teaching readers to think about the market in radically different ways, The Indomitable Investor shows how to improve returns—and, just as importantly, avoid losses—with disciplines deployed by people who almost always do exactly the opposite of what Wall Street says to do.

Laying bare great fallacies, the book explains that non-professional investors wrongly think the stock market is a place to make money, which is what Wall Street wants them to try to do. The Indomitable Investor says otherwise and shows how Wall Street's best investors have a completely different focus.

  • Explains the critical ideas and insights of top traders and investors in language anyone can understand and implement
  • Packed with material rarely shared off Wall Street that is used every day by professional investors
  • Introduces the 17 most important words on Wall Street
  • Teaches critical skills, including: How to increase returns by focusing on risk, not potential profits; how to use the stock market's historical patterns to optimize investment decisions; understanding key relationships between stocks and the economy that predict what will happen to stocks and the broader market; how to increase mutual fund returns with an easy adjustment that redirects the bulk of profits to you—not mutual fund companies, and how to analyze information like seasoned investors to move beyond "statement of the obvious" news reports that turn ordinary investors into Dumb Money

Accessible to readers of all backgrounds, including those with a limited understanding of investing, The Indomitable Investor will change how investors view the stock market, Wall Street, and themselves.

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Chapter 1 Risk 1

A Nation of Stock Market Junkies 4

Calm Words for Wild Times 7

Chapter 2 Greed 13

The Hardest Decision 23

The Iron Man 24

Atlas Doesn’t Shrug 27

The Warrior Philosopher 28

Like Monkeys at the Zoo 30

A Context 32

The Danger of Warren Buffett 34

The Value of Errors 35

Chapter 3 Fear 37

The Theory of Contrary Opinion 42

Exile on Wall Street 44

The Media Is the Message 47

Media Misreads Google 49

Paulson’s Gamble 50

Buffett’s Goldman Trade 53

Fading the News 53

Chapter 4 The Anatomy of Information 55

The Doors of Perception 58

Anatomy of Information 60

The Future Is Now 63

Show Business 66

Words Are Weapons 68

Trust, but Verify 70

Chapter 5 Chaos 81

Money Never Sleeps 82

Perversities 82

The Black Swan’s Calling Card 85

Map of the Market 86

Don’t Get Skewed 89

Apathy and Fear Are Your Friend 90

Fear Not Black Swans 91

Is MPT MIA or KIA? 92

800 Years of Crisis 97

Fear Gray Swans 98

Chapter 6 Diogenes’ Lantern 103

Performance Is Relative 106

Death by a Thousand Fees 107

Stockbroker Pay 111

Hidden Fees 116

Beware of New Products 116

An Uncomfortable Conversation 117

A Funny Aside 118

Suitability Requirement 119

Fiduciary Standard 120

Shakespeare’s Rule 121

Appeals to Common Sense 121

Trust but Verify 122

Active versus Passive Fund Management 125

Chapter 7 Cycles 127

The Year in Stocks 128

Mysterious Repetitions 136

Flash Mobs 137

History’s Hiccups 138

The Economy in Slow Motion 139

The Guts of ISM 141

Numerical Nuances 142

Says Who? Says Goldman Sachs 142

Action 148

Chapter 8 Behavior 151

One Brain: Two Minds 152

Maps and Models 154

This Is Your Brain Visualizing Money 156

Compulsive Gambler 158

B. F. Skinner Goes to Wall Street 158

The Casino Culture 160

Your Own Private Stock Market 162

Often Wrong; Never in Doubt 163

Illusion of Memory 164

Safe Havens in the Age of Madoff 165

Illusions 167

Victor 169

An Antidote for Overconfidence 170

Go Slow to Go Fast 172

Think Week 173

Halos and Angels 173

Big Brother Is Studying You 175

Big Bank Is Watching You 177

Ancient Lessons 178

Chapter 9 Watchman, What of the Night? 181

The Next Crash 183

Misperceptions and Illusions 184

Revolving Doors 185

Investor Laureate 186

A Fox in the Henhouse 187

The Tremendous Task 188

Sane Money, Not Mad Money 189

Repetition and Velocity 191

More Education 192

Plain Speaking 192

The Cause of Failure 193

Virtue 194

Ladders 195

A Systematic Change 196

Flash Crash 198

Soft Spots 199

Washington 201

A Global Problem 202

Present at the Creation 204

The Illusion of Regulation 205

Power 208

The Balance of Power 208

Acknowledgments 211

Notes 215

About the Author 225

Index 227

I must create a system, or be enslaved by another man’s.
—William Blake

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Steven M. Sears is a Senior Editor and columnist with Barron's and Barrons.com. He previously reported for Dow Jones Newswires and the Wall Street Journal. Mr. Sears has covered, or participated in, most major- modern financial events as a journalist or an executive at several major exchanges. He is a member of the Economic Club of New York.
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March 22, 2012
The Indomitable Investor

The Indomitable Investor: Why a Few Succeed in the Stock Market when Everyone Else Fails (Wiley; April 2012; $29.95; 978-1-1181-1034-8; Hardcover, Ebook) is the book Wall Street hopes Main Street never reads.

Written by Steven M. Sears, a Barron’s and Barrons.com columnist, The Indomitable Investor shows dumb money -- and that’s precisely how Wall Street views individual investors -- how to become smart money. His book is filled with rarely discussed insights and disciplines from the most successful and sophisticated investors.

The Indomitable Investor takes a sharply different approach from most investment books. Sears has for the first time synthesized complicated, disparate ideas critical to successful investing into an easily understood book anyone can use to better navigate the stock market. Readers will not encounter get rich quick gimmicks, or bogus moneymaking secrets common in other books.

The Indomitable Investor shows how some investors consistently outperform the market using a dramatically different approach from all others that is predicated upon not losing money by understanding and containing investment risks. Most individual investors wrongly believe the stock market is, first and foremost, a place to make money. They never recover from that fatal misstep.

Sears’ new book reveals how successful investors listen to the market, and just as importantly, ignore the distracting noise surrounding trading that tricks many people into making bad decisions.

“Anyone who spends meaningful time in the market quickly learns the public’s understanding of what occurs, and why, rarely resembles what takes place,” Sears says. “Most individual investors remain trapped in an often destructive investment cycle because they have no idea such a dichotomy exists.”

The Indomitable Investor’s key points:

  • The most important words investors can know: “Bad Investors think of ways to make money. Good investors think of ways to not lose money.”
  • How to use historical trading patterns and economic cycles to optimize investment decisions and increase returns.
  • How to boost mutual fund returns with easy adjustments to redirect the bulk of profits to investors —not mutual fund companies.
  • Using financial news, rather than getting used by it, to escape the dumb-money rut.
  • How to spot “black swans.”
  • How to break the curse of buying high and selling low.
  • Recognizing the influence of key behavioral finance insights, including how images cue investors to make risky decisions.

Sears criticizes Washington and Wall Street for lamenting the nation’s financial literacy crisis - and doing nothing to fix the problem. He proposes Washington’s leaders appoint an Investor Laureate to initiate a national conversation about investing anyone can understand. Washington now speaks through complex securities laws that can only be understood by securities lawyers, and Wall Street’s experts who find ways to sidestep the spirit, if not intent, of the very laws intended to protect investors.

Sears says merging the Commodity Futures Trading Commission and Securities and Exchange Commission is a critical first step to insure the U.S. regulatory structure catches up with the modern market’s rapid evolutions. Everyone knows the futures market sets stock prices, but SEC does not regulate financial futures.

The essence of many people’s investment problems, Sears says, is traced to how quickly America morphed to a nation of investors, rather than savers. Many people mistakenly think what works on Main Street works on Wall Street. The disconnect bothers no one on Wall Street or Washington, which is why it is imperative to arm investors with the principles and disciplined approach detailed in The Indomitable Investor so they can begin taking more out of the stock market than the stock market takes out of them.

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