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TrimTabs Investing:
Using Liquidity Theory
to Beat the Stock Market

Charles Biderman,
with David Santschi

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Hardcover, 2005
John Wiley & Sons, Inc.

BIO: Charles Biderman - Founder and Chief Executive Officer

"Price is a function of liquidity and has nothing to do with value."

Charles Biderman is Founder and CEO of TrimTabs Investment Research. Born in New York City, he earned a BA from Brooklyn College and an MBA from Harvard Business School. He began his career as Alan Abelson's assistant at Barron's from 1971 to 1973. There he predicted the collapse of real estate investment trusts (REITs). After Barron's, he worked in the Wall Street short selling community and recommended shorting REITs on their way to perdition.

After much of the REIT industry went bust, Biderman became a successful real estate entrepreneur, putting together various deals in Tennessee and New Jersey. His first deals in the mid-1970's were the purchase of 1,000 apartments, six shopping centers and two office buildings from REITs and banks. Although he predicted the real estate market would collapse in 1988, he did not anticipate that no liquidity would be available for development. This miscalculation forced him into personal bankruptcy and taught him the distinction between value and price: value is the intrinsic worth of an asset, while price is the amount of money that a buyer agrees to pay a seller for an asset. This simple distinction was the foundation not only for Biderman's next move but for a new investment paradigm: liquidity theory.

In 1990, Biderman founded Market TrimTabs in Santa Rosa, California. He named the firm after the image of a trim tab first used by R. Buckminster Fuller to describe how change occurs. A trim tab is the small rudder on the rudder of a capital ship. Although the trim tab's mass is a tiny fraction of the ship's mass, movement of the trim tab determines the ship's course.

Market TrimTabs originally specialized in short selling, but Biderman began tracking mutual funds flow twice each week in 1994. He realized that short selling was not working well because of the amount of cash flooding into the U.S. stock market, and he began tracking other factors that determine stock market liquidity in 1995. As the firm developed into the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity, including daily mutual funds flow and withheld income and employment tax collections, it became known as TrimTabs Investment Research. The premise of TrimTabs' approach is that stock prices are a function of liquidity rather than fundamental value.