How to improve your knowledge of markets?

Hi all,

I am an undergraduate at a target school and interested in possibly working in equity research. The problem is that I am not an expert in any way on financial markets. Do any of y'all have recommendations of any resources (videos, books, publications) that should help me get started? I won't be doing recruiting for ER for another year, so I am ready to absorb and learn as much as possible regarding markets for these next 12 months?

 

Seeking Alpha is a great resource and you should start using it if u haven't - you should write and read on there. If you absolutely know nothing about financial/stock markets, Investopedia is a underrated site that really gives you the basics of understanding stocks such as looking at why stocks fluctuate, stuff like EPS and P/E, basics of corporate valuation, how IPO's work, etc.

 

Investopedia. I've learned more from the website than I have most of my investments classes. Just start doing google searches on what you want to learn about and look to see if Investopedia has any good articles or definitions on the topic of interest. As far as books go, I don't know any that talk about the markets in general. Can you narrow your question?

If you want to know about equities start reading online about equities markets. If you want to know about the bond market, do the same. There's also options, futures, swaps, and currency markets as well. The principles all remain the same between each, just different underlying assets. Buy low, sell high. Not sure if that's what you were looking for but that's all I know. If you want investing strategies there are better books on that rather than the general markets.

As far as interest rates go, from what I know there isn't a clear-cut answer as to what happens to stocks when interest rates change. In the bond market though, when interest rates are high, you might see more bond traders buying long-term bonds and holding them till interest rates are low. Then they can sell them and make a profit on the premium. Then they might jump into equities because bond yield are low driving up the demand for equities which may or may not drive up equity prices due to a million other factors that can affect equity prices. Hope that helps.

 

Hello eagels, i hope you had a great day if you think about investing money then stock market is an better option, and in the year 2017 the market expert says that market rates going higher soon.In the stock market all is depend on shares if share market increases then you get better profit and if market is in loss then don't disturb your money at the time when market rates increases you get better profit.

 

I like to listen to podcasts on my way to work, My line up of podcasts are: - Slate Money (hit or miss but its usually easy to tell if an episode is worth a listen or not) - M&A Views (short episodes so low investment) - Grants Interest Rate Podcast (I like this one a lot but it can be dry at times) - WSJ Moneybeat (earnings and general market news, one of the hosts annoys me but I still listen) - Exchanges at Goldman Sachs (really enjoy this one) - Motley Fool Money (General market commentary) - Deal of the week (M&A related) - EconTalk (very hit or miss for me but some very interesting episodes) - Odd Lots (I just subscribed to this one, not sure if I like it or not yet) - Pardon my Take (not finance related but I'm a big fan)

To each their own but these are the ones I enjoy and I think its a good way to keep up to speed and learn about the markets

I would also focus on the well known finance publications (intelligent investor, any aswath damodaran material including his youtube channel which I am working through now) and also if you have time some books that tell a good story. I read 'When Genius Failed' in college and found it so interesting.

 

Keep up to date with macroeconomic trends. Maybe add other sites in conjunction with WSJ like the financial times. Know where the DJIA, S&P 500 and NASAQ roughly opened and closed at and why they ended up there. For example, you should know what fed chair Yellen stated yesterday and why/how stocks responded to her statements. It probably also helps to keep up to date with deals going on as well of course.

 
Best Response

thanks for clarifying. plenty of websites to get a sense of what is going on, and people may try to say "why" things are going on, but they're probably trying to sell an idea/strategy. here's what I pay attention to in order to make sense of the world:

  1. credit spreads - how is risk being priced? are people thinking it's doom & gloom, or are people thinking there's no risk to be had in the market? look at not just HY, but all spreads.

  2. look at FX, is your currency generally appreciating or depreciating versus major trading partners. you may be perplexed to see your stocks not doing well, but if you have a strong currency and own multinationals, FX may explain the story

  3. valuation in various sectors, market caps, and regions. is DM ex US more highly valued than US, what about EM? what about small v. large? valuation is an awful short term indicator but it will give you a sense of how people are viewing things at the moment.

  4. look at vol across asset classes. are we in a high vol, low vol, or medium vol environment?

  5. watch earnings. are companies growing earnings, growing sales, raising dividends, etc? and not just earnings beats, growth year over year? are these beats lead by one sector (energy largely responsible for sales growth so far this quarter), or is it widespread?

  6. market leadership & breadth. is the current rally/decline widely enjoyed or is it being lead by a few names (like 2015 and the FANG stocks)?

  7. look at risk premia. the classic investor decision is whether they should own stocks or bonds. knowing risk premia (earnings yield - an interest rate like 10y UST or Baa corp) will help you understand how investors collectively view things. risk premia will not be a good guide to returns year to year, but it's important to identify large dislocations.

  8. look at monetary policy. are we in a easing or tightening cycle? know how this affects markets and companies (many private companies borrow debt indexed to certain rates, so increases in rates directly affects their bottom line)

I could go on, but that will get you started. the investment markets are massive. if you want to know whats going on in commodities, I can't help you, but that's another giant out there. my advice for you is try to figure out whatever part of the market you're specializing in and know everything that affects it. where this will come in handy is times like february 2016 when credit spreads blew out because of the energy sector. if you were paying attention, you'd realize defaults weren't picking up and recovery rates were still high, so logically those spreads had to come down if you believed we were going to stay in an expansion. HY was a home run in 2016. that's just a small example that will help you identify opportunities.

beyond that, I listen to smart people and try to mimic them. howard marks is probably my favorite commentator, he mostly focuses on credit, but I'm a big believer that the bond market drives everything.

hope this helps

also curious to hear what Martinghoul and macro bruin have to say

 

The book that ignited my interest in finance to begin with was "A Random Walk Down Wall Street." It is kind of a strange hodge-podge of financial history, financial economics theory, and personal investment advice, so it gets a lot in there in a format and writing style that is meant for everyone but not totally "dumbed down." If you're already past that level of sophistication, I think it pays to start your technical financial knowledge with knowledge of fixed income. The concepts you learn are fundamental to almost all assets (like present value, interest rate dynamics, quantitative risk analysis, etc.). Read Frank Fabozzi for that. Then start reading the WSJ regularly. Their news is good, and most of the time they put in helpful explanatory bits in their articles when they are reporting on financial news (like mentioning that yields move inversely to prices in the case of fixed income securities). Investopedia is good to fill in gaps when you come across a term you haven't heard before. Wikipedia is also generally good for looking up financial concepts, since it often goes pretty in-depth and shows alternate methods of calculating certain numbers.

 

i 'follow' markets myself. I don't work in any area of financial markets (I'm still an undergrad student), but here is what I do to 'follow' the market

1) I read market commentaries. I usually read market commentaries by Dennis Gartman, Dave Rosenberg, and Art Cashin. You could also check out TJ Marta or Jim Grant. Some of these you will have to pay for (or know someone that can send it to you).

2) I follow the market during the day any way I can. This means watching CNBC (I don't get Bloomberg TV at school or I'd be watching that) or listening to Bloomberg Radio (market updates every 10 minutes).

3) I read Seeking Alpha throughout the day. You can obviously flip through WSJ, USA Today, NY Times, Financial Times, IBD, whatever tickles your fancy.

4) Sign up for emails. I'm signed up for all sorts of random emails. I usually get news updates from WSJ. I also signed up for WSJ Market emails. These are sent daily and will usually cover a particular area (ie I get money rates and fx). I also get emails from US gov and stat agencies. I've signed up for emails from the Labor Department, Energy Department, etc. If you are following the market, you'll probably want Unemployment, CPI, & GDP at the minimum sent directly to you. You'll also want anything the Fed does (so sign up for Beige book, and speeches with Fed govs, etc). I also am interested in energy, so I get This Week in Petroleum sent to me. I also get Crop Progress reports from the Dept of Agriculture.

5) Look at charts. I use Stockcharts.com. This is the best site if you don't have access to Bloomberg (which I do at my college but I work all day so I could never use it). I usually go on this once in a while if I want to look at some charts.

To be honest, I don't follow any individual stocks. I like to follow the economy and the markets that are most closely tied to it (equity indices, rates, commodities, fx). It all depends on what you like. Also, keep in mind I don't work in the business, I do this as a hobby (although I do intend on breaking in to WS eventually).

looking for that pick-me-up to power through an all-nighter?
 

LIBOR nailed it. Follow what interests you. Read the WSJ, FT, Economist. Stay up to date in current events and have an idea of what level markets are trading. Maybe start following a handful of stocks that interest you. This may help you to keep up with things. Read the stories that move these stocks.

 

Read, read, and read.

Check out the firms that publish their research for free. You're getting an inside look at content which is written by the smartest people in this industry, so it's well worth your time. Citron, gotham, friendly bear, etc.

Gotham's short on EIGI was amazing IMO. Look at when it was posted and when the stock collapsed. They were very early and right for the right reasons. Great work.

https://gothamcityresearch.com/2015/04/28/endurance-international-group…

 

Echoing what others have said but just reading anything helps.

In re to ER, I've found that understanding business models is a very under appreciated skill. Every industry and company is different. But understanding the business model is one of the most crucial aspect to ER. It sounds obvious, but learning industries is much much more important vs learning financials.

With that being said, learn about what industry you want to go into. This is one thing I wish schools had more courses on.

Anyone can do the finance aspect of Ib, er or pe....but understanding the industry takes years and holds more value. This is where I think ER holds an edge on banking BC you actually have to be an expert in the industry. Get a head start and learn industries. Read trade journals or industry primers.

 

Outdated for sure but this will help you understand economics of various industries.

https://www.amazon.com/Paine-Webber-Handbook-Stock-Analysis/dp/00705957…

I've also noticed that when my firm launches coverage on a new name they'll also do an industry overview. Those reports act like primers, usually 30 pages+ instead of the issue 6-10

 

Well for starters, what industries interest you?

Market knowledge is good....but no one expects you to be able to call the next financial crisis...you will be expected to know (at some point in the job) the technical aspect. I.e. If you are a semi conductor analyst, you probably know all the components that go into an iPhone, what they do, unit cost, etc.

 

Aside from the recommendation of other people here, you can also participate any investor groups to get ideas and strategies from experience people. You can try Investing Slack Group at hashtaginvesting dot com

Proud Member of Investing Slack Group - an exclusive investing chat community.
 

For ER, invest your own money. Figure out what you think a stock is worth and compare that to what the market thinks, then try to figure out what's behind the difference. That's the value-add of being an ER analyst, apart from all the marketing and corporate access and what not.

 

FinTwit. Follow unverified HF managers (contrarian8888, hkuppy, pinecone macro, cycle_bottom.) Branch off from there based who they follow and respond to.

Following verified guys like Dalio, Chamath, Fink, etc. they are basically just pushing what CNBC is saying which is already 8 months behind smart money. Yes it is important to know what big WS guys say and general sentiment, but following smaller more nimble funds and people share differentiated views and you can stand out in interviews. 

I made a burner and only followed people like that for a year and it is incredible how much you realize you don't know. PM me for more info I have a cheat sheet with links to threads and summaries that help summarize industries, frameworks for analyzing companies/markets/etc., how HFT and quant funds work. 

 

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