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NEW BOOK!
TrimTabs Investing:
Using Liquidity Theory
to Beat the Stock Market
Charles
Biderman,
with David Santschi
• Buy
Now
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information
Hardcover,
2005
John Wiley & Sons, Inc.
|
A
Guide to Liquidity Theory
The capitalization of the market for an asset - whether stocks, bonds, real estate, or commodities - is primarily a function of the supply of an asset and the demand for an asset. The fundamental value of an asset has far less impact. Our basic premise is that price is a function of liquidity having nothing to do with value. At TrimTabs, we measure liquidity trends in the U.S. stock market and use them to predict the market's direction Liquidity is the relationship between the issuance and redemption of shares available for trading (float) and the amount of cash available for stock investment (flow). By tracking three liquidity trim tabs - one of which measures float and two of which measure flow - we can gauge where the stock market is likely to turn in the future: L1 - Net Change in the Trading Float of Shares The most important liquidity trim tab is the net change in the trading float of shares (L1), which measures whether corporate America is a net buyer or a net seller of stock. If L1 is positive, it means the trading float of shares is increasing and corporate America is a net seller of stock. If L1 is negative, it means the trading float of shares is shrinking and corporate America is a net buyer of stock. L2 - U.S. Equity Fund Flows The second liquidity trim tab is U.S. equity fund flows (L2), which measures the amount of cash investors are investing or withdrawing from ETF and mutual fund investing. |