World Event Trading: How to Analyze and Profit from Today's Headlines (Wiley Trading)

257 Pages·2007·6.7 MB·English

by  Andrew Busch

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World Event
Trading
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Foundedin1807,JohnWiley&Sonsistheoldestindependentpublishing
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Foralistofavailabletitles,visitourWebsiteatwww.WileyFinance.com.
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World Event
Trading
How to Analyze and Profit from
Today’s Headlines
ANDREW BUSCH
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Copyright(cid:2)C 2007byAndrewBusch.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
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LibraryofCongressCataloging-in-PublicationData:
Busch,Andrew,1961-
Worldeventtrading:howtoanalyzeandprofitfromtoday’sheadlines/AndrewBusch.
p.cm.—(Wileytradingseries)
Includesbibliographicalreferencesandindex.
ISBN978-0-470-10677-8(cloth)
1. Stockexchangesandcurrentevents 2. Investments. 3. Stockexchanges. I. Title.
HG4551.B872007
332.64(cid:3)2—dc22
2007002384
PrintedintheUnitedStatesofAmerica.
10 9 8 7 6 5 4 3 2 1
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For Michelle, Samantha, Andy, Albert, Jake, and Jessie
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Contents
Foreword ix
About the Author x
Acknowledgments xi
Introduction 1
PART I Infectious Diseases
CHAPTER 1 The Black Plague: A Paradigm for Today 5
CHAPTER 2 1918 Spanish Flu 17
CHAPTER 3 Mad Cow Disease 25
CHAPTER 4 Severe Acute Respiratory Syndrome (SARS) 47
CHAPTER 5 Bird Flu 69
PART II Natural Disasters
CHAPTER 6 Hurricanes 83
CHAPTER 7 Earthquakes and Tsunamis 121
CHAPTER 8 Global Warming 135
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viii CONTENTS
PART III Politics
CHAPTER 9 Terrorism 151
CHAPTER 10 Government Change 171
CHAPTER 11 Government Scandals 189
CHAPTER 12 Modern, Short-Term War 205
Conclusion 229
Bibliography 231
Index 237
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Foreword
P
estilence, natural disaster, and acts of terrorism are each unpre-
dictable in timing, location, and scope. None, however, is unpre-
dictableinitseffectontheworld’sfinancialmarkets.
Animmensewindowofprofitopportunityoccurswhenthereisliquidity
andpricedislocation.Tradersandinvestorsinthethickofmarketupheaval
often are not able to seize the opportunity, simply because they do not
understand what is happening. Understanding the complex relationship
between a global event and the collective market psychology at the time
thattheeventoccursiscrucial.
Thisistheessenceofworldeventtrading(WET).
Justasmarketsconsistentlyshifttheircollectivefocusindetermining
thedriversofpriceaction,asuccessfulmacrotradermuststandreadyatall
timeswithavarietyofstrategiestoemploy.Asoneweaponinthatarsenal,
proficiencyinWETisindispensable.
In-depth knowledge of past events and how their impact was mani-
festedintheworld’sfinancialmarketsisnoteasytocomeby.Itisdifficult
tovisualizetheramificationsofanunusualsituationordevelopmentunless
youhaveexperiencedorstudiedmanyotherseeminglyone-offevents.As-
sociatedpricemovementsaredifficulttounderstandandgaugeforanyone
otherthantheveryexperiencedmarketprofessional.
Andychangesallofthisbyteachingyounotonlywhattolookat,but
how to look at it. By examining global events spanning the gamut from
naturaldisasterstocountry-specificpolicyerror,heleadsthewayineach
instancethroughacompleteanalysisofhowthemarketsreactedandwhy.
Drawing upon his 20 years as a currency trader, as an analyst, and as
anauthor,Andytakesyouthroughmanyoftheseminaleventsofthepast
fivecenturiesanddissectseacheventandthemarkets’reactiontoit.The
result is a virtual road map, with detailed explanations of how real-world
financialmarketsbehaveunderduress.
Whatfollowsisamustreadfortraders,academics,policymakers,and
studentsofmarketseverywhere.
BILLLIPSCHUTZ
PrincipalandDirectorofPortfolioManagement
HathersageCapitalManagementLLC
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