As I mentioned with The Way of the Turtle, on Fridays I get 20 minutes of kid free time to speed read a book in Borders. This week I choose If It’s Raining in Brazil, Buy Starbucks By Peter Navarro.

This book is a foil to those financial gurus who eschew top down investing. As it says on the cover this is “The Investor’s Guide to Profiting from Market-Moving Events”. Peter Navarro embraces the big picture macrowaves and he has some heavy hitters in support. The book leads off with the following quote from the legendary Jim Rogers and I’d be surprised if George Soros is not mentioned.

“Money supply, government deficits, trade deficits, inflation figures, the financial markets, and government policy. I look all those things for the U.S. and key foreign countries as well. It is one big, three dimensional puzzle…” Jim Rogers

That is in essence what this book is about. The inputs required and steps to develop a macro investing thesis. If you prefer sticking to bottom up investing and don’t care to know how other market participants are playing the game then don’t bother reading this book. I think everyone else will find something of interest.

Part 1 contained some interesting background material on economics and I’m sure much more. Part 2 covered the nuts and bolts of microwave investing. Part 3 put microwave investing in to practice.

One of the cornerstones of my investment philosophy is
capital is scarce while opportunities are bountiful.

Therefore, it should come as no surprise that Chapter 8 Ten Rules to Protect Your Capital caught my attention.

The following rules are controversial and a quick search will uncover numerous retorts to each rule. Whether you agree with or find these rules applicable to you will depend on your investment style. However, every investor would be wise to consider these rules and write down their thoughts on each.

The Macrowave Investor’s Money Management Rules

Efficient Trading

1. Cut your losses
2. Set intelligent stop losses
3. Let your profits run
4. Never, ever, let a big winner become a loser
5. Never average down on a loser
6. Conquer the urge to overtrade - don’t churn your own portfolio

Efficient Ordering

1. Never use a market order before the opening bell or with a new IPO
2. Use market orders to capture the price movement in a trending market
3. Use limit orders to capture the spread in a trading range market
4. Never chase a stock

Minimize Trading Costs

1. Think round-trip on your commissions - not one way
2. Choose the right broker - read the fine print

Raining in Brazil has plenty to offer, even to investors like me who find the details in economic reports more than a bit boring. The following graph of the business and stock cycles is one of what looked like many “keeping it simple” ideas to apply.



Looking at this graph, what stage of the business and stock cycles do you think we’re in? Will thinking about this graph change your current investment focus?

Check out Peter Navarro discussing his book.

If you’ve read this far then you must be interested in economic indicators. For you perseverance here is a an ebook published by 21st Century Investors, “Understanding the “Official” 17 Key Economic Indicators”

Cheers
Dean