Keynes's Way to Wealth

by John F. Wasik

This is the first book about John Maynard Keynes that I’ve ever read. Of course I’ve heard lots about Keynes and his economic theories, so I was intrigued at the idea of utilizing his ideas to gain wealth, but that is where this book falls short. It attempts to show the man and his ideas in light of modern investment theory, but I felt that overall, it is caught in between a biography and a “how to” manual, and ultimately doesn’t tell us much about Keynes or how to become wealthy.

Biographically, this book provides only a bare sketch of the type of man Keynes was and his personal history. It tries to angle all this into an overview of how it led Mr. Keynes to develop his investment strategies (not his economic theories), but the conclusions drawn and supporting facts are tenuous at best. There are detailed sections of stocks that he bought, many (naturally) of companies that no longer exist or have long since been bought out or merged into other firms. Because (let’s face it) it would have been irrelevant information anyway, dates, prices and quantities of stocks purchased and sold, and individual profit and loss figures, are largely absent. This means that the reader is given a glimpse into Keynes’ investment strategies without regard to anything that might be made use of. Where the book excels is in providing a number of sidebars that supply definitions of investment terms and explanations of some of the situations that Keynes had to deal with, and these are interesting and sometimes, valuable. They won’t be particularly useful for advanced investors, but they will make this book much more approachable for beginners.

In the end, I think the reader must keep in mind that Mr. Keynes made money investing during historic depressions and devastating wars, so not only does that merit study, the ideas behind such investment strategies can probably still be applied today. Mr. Masik has made a good start looking into Keynes’s investment strategy, but in the end, I feel there is more meat on the bone than this book offers, which is why I rank it just above average at three and a half dollar signs.

Win by Not Losing

by Nicholas Atkeson and Andrew Houghton

I’ve noticed a theme running through a lot of investment books lately, and that theme is: reducing risk in an investment portfolio does not necessarily mean that you will thereby be reducing gains. Of course, greater risk can lead to greater gains. It can also lead to unmitigated disaster. That’s why I like the middle ground that is advocated by Atkeson and Houghton: try to maximize the upside, sure, but by all means, minimize the downside at all costs.

The authors’ argument is that there are ways to predict when the market is inflated and stocks are overpriced, or at least, not good value. That’s when a smart investor will want to start hedging or selling, or at least not be in buying mode. They relate a number of real world stories of real world investors who prove their points. They then present data to support their points further, and they even give you a concrete plan for executing intelligent investments based on their ideas. If that isn’t enough, they have a website that provides more information on executing their methodologies.

Some of the other books I have read (and reviewed in this blog) that encourage a similar approach including Winning the Lower’s Game, Asset Allocation, and Risk-Return Analysis. This book more than rounds those out to make a fine quartet of books for investors, both those starting out and not wanting to get fleeced, and those who are farther along (like myself), who still need a certain level of income but can’t afford another year like 2008.

Asset Allocation and Risk-Return Analysis

 

 by Roger C. Gibson

by Harry Markowitz

I decided to review these books together because the subject matter is quite similar, yet the approaches of the two authors couldn't be more different. Harry Markowitz is a Nobel Prize winner who more or less defined the concept of risk in investments and how to weigh it in the construction of a portfolio.  Roger Gibson, on the other hand, is a financial adviser with many years of experience and a unique view on balancing a portfolio to limit risk and maximize profit. Both advocate asset class and securities mixes that lead to portfolio diversification and limit risk. Markowitz does it with lengthy examples and complex formulas. Gibson does it with hypothetical portfolios and performance evaluation of investment classes.

Markowitz’s book, which is the first of four volumes on this ostensibly deep subject, is much like a college textbook. The financial jargon is at times a slog, and the formulas are nearly incomprehensible without an advanced mathematics degree. The parts that can be understood by the typical layman (like me), however, are interesting and useful. They make it very possible to analyze one’s own portfolio in the light of Markowitz’s experience and research, and that should lead to risk minimizing, return maximizing portfolio.

Gibson’s book does not suffer from the academic bent that afflicts Markowitz’s book, but it does have the drawback of being partially directed toward financial planners and investment advisers.  He shows historical trends and their effect on hypothetical portfolios, and then strengthens his argument with critical analysis of the performance of various asset classes during up, down, and sideways markets. The heart of his strategy ends up being diversification, rebalancing, and risk avoidance which individual investors and investment advisers can put to work in their personal and client portfolios. He then spends the last third of the book explaining how an investment adviser can analyze a client’s risk tolerance and use the principals contained in the book to build a suitable portfolio. Some people will find this interesting and useful, but as a long time investor who is not a CFA or investment adviser, I found it to be not that useful.

Risk-return analysis and risk avoidance are important cornerstones of any investment strategy, which is what makes these books so important. Without the benefit of the other three volumes of Markowitz’s work, and not needing the investment adviser sections of Gibson’s work, it’s hard to give them full marks for their books, but the material that is pertinent and understandable is so valuable, that a four-and-a-half dollar mark for each is more than justifiable.

Standard and Poor's 500 Guide 2013

Saving some time, here's the review I posted to Amazon a while back:

Back in the 80’s and 90’s when I was an economic development consultant in Japan, the Shikiho listing of company data was the go to source for information about companies in general. We used it to identify companies likely to perform strongly in the near future, and therefore likely to invest overseas, too. Obviously though, it also proved useful for identifying companies that might be good prospects in which to invest in general.

The Standard and Poor’s 500 Guide provides a lot of information that is very reminiscent of the Shikiho. I felt vaguely nostalgic flipping through the company explanations and financial summaries, reviewing the year to year performance of the stock price, P&L summary statements, earnings, dividend statements, and all the rest . The information contained in this book is very thorough and useful to a point. In this day and age, however, the Internet provides a number of resources to get more reliable and up to date information that would probably be of more value to most investors. Although it does provide buy, sell and hold recommendations, because this is Standard and Poor’s book of all 500 companies contained in their exchange, it does not offer much in the way of in depth analysis, but as a source of raw data for performing your own analysis, it is invaluable. You’ll just need to be prepared to provide your own investment strategy.

I’m very glad the publisher provided me a copy of this book gratis for this review, but I would say, the information contained is well worth the retail price. I rate this book as a “buy”.

Winning the Loser's Game

by Charles D. Ellis

The original title for my review of this book was: “Deep thinking, shallow strategy”. After I thought about it for a while, I realized that the deep thinking part was right, but that calling this book’s strategy “shallow” was probably not correct. “Boring”? Maybe. “Plain”? Definitely. But “shallow”? Probably not. See, the only strategy that this book propounds is buying index funds. That’s it. The plain white toast of the investment world is this book’s simple strategy for winning the loser’s game, and the author trots out lots of heavyweight facts and figures in chapter after chapter, with the bottom line of: you could have done this, and it might have made you rich, or it might not have, but if you had indexed, you’d be doing okay.

With such a simple concept driving the book, the author somewhat hedges his bet by spending time and pages convincing the readers that investing is a loser’s game and always will be. You may believe that, or you may not, but you’ll find the author’s view compelling if you read the entire book. More active investors lose money than make money. People get cheated. People make bad, poorly researched, and outright rash investment decisions. The only way to win that game is not to play it that way, and index funds are ideal for playing it the right way. Will your investments go up? Maybe, but you’ll never do much worse (or much better) than the rest of the market. Maybe you don’t want to be Joe Average, but I for one don’t want to be Joe Below-average.

I’m a longtime index investor and I’ve done okay. For me, this book was a lot of “preaching to the choir”, but I still enjoyed it. The book is well written, well organized, well thought out, and I’ll say it again, compelling. Some readers may balk at a whole book about an idea as simple as “buy index funds”, but maybe that’s what it takes to convince you. I recommend this book to anyone who invests in their future. It can’t hurt you as an investor, and it might help make you a better (if slightly stodgy) one.

Born to Blog

by Mark W. Schaeffer and Stanford A. Smith

I thought this book would be a little bit more about how to take a blog and turn it into something profitable, rather than being just a book about setting up a blog to profit from. Not that that isn't a good idea, it’s just not as easy as everyone thinks, with or without a book written by two successful (I presume) bloggers. This book is, however, very informative and useful. It’s a kind of “brass tacks” guide that will be most useful to people who are already blogging, but probably of less utility to someone looking to set up a blog for the first time. This book does cover the basics, however, and it does a good job of it. It seems to be always steering the reader toward monetization, so that if you are just blogging for the hell of it or to have fun, the constant reminders of what might be “profitable” can be a bit cumbersome. (At least, those suggestions and tidbits weren't of much practical use to me.) The book is laid out quite smartly, though, and has great sections on side bar content and which blog sites to consider and which to avoid. The authors have a lot of experience, not only in blogging, but also in the periphery of blogging, and they share a lot of their insights in interesting, real world anecdotes. I think as long as you keep in mind that blogging can be hard work when you are doing it for reasons other than sheer enjoyment and that only a small fraction of the world’s blogs ever make enough money to support their authors, this book will help you swim upstream faster and get your thoughts and interests published online with a minimum of frustration and anxiety. That’s more than reason enough to give it four dollar marks.

Monopoly, Money, and You

by Philip Orbanes

Americans of my age all grew up with Monopoly, and we tend to think we know the game quite well, especially if we usually won, like I did. (My secret: I cheated.) So for a dose of familiar cultural icons used to illustrate financial management, this book certainly has a good thing going. Monopoly, Money and You is something between a game manual and a financial guide, bringing together one of America’s best-loved family board games with the day to day task of financial management. It is a fascinating study of strategy, game theory, probability, and economic acumen that is enjoyable and highly readable, thanks to parallelisms drawn between the popular game and real life. By reading this book you will not, however, become a real estate mogul and baron of American business by way of forming monopolies. Rather, you will learn the strategy and secrets of winning at Monopoly, which may or may not be applicable to better managing your finances.

I found some of the parallels drawn in the book were quite tenuous. I don’t think the housing situation in the United states over the last five to ten years can be summed up by saying it’s like Monopoly in that there are a set number of houses and you can’t build what the bank can’t sell you. (After all, wasn’t the real estate collapse due to loans on properties that didn’t exist yet or weren’t priced accurately?) Still, money management is not an intuitive process and an understanding of simplistic financial situations like those that arise in Monopoly probably won’t hurt anyone’s money management skills. I would argue that in a worst case scenario, Monopoly money management skills are better than none. Likewise, people skills, as well as timing and strategy play a big part of success in life, so Monopoly is actually not a bad medium for gaining some insight into those areas. Whether or not they apply in real life depends on a lot on the people involved and what’s at stake. Sure, there isn’t much more at stake in Monopoly than bragging rights, so we can expect real life approaches to be quite different, but the Monopoly angle still has some value, I think.

Ultimately, this book is mostly a guide to winning Monopoly as opposed to a guide to gaining control of your finances. It covers every aspect of the game that must be understood to win consistently: probability, timing, opportunity cost, money management, negotiation, psychology, game theory in general, Monopoly theory in specific, and luck. There are several walk-throughs of actual championship games, which although difficult to follow at times, they are still somewhat exciting when you see the range of strategies and secret tips from this book applied in actual games. This book is not going to make you rich (unless you sweep a bunch of Monopoly tournaments), but it is nonetheless a fun, out of the ordinary read, for a book on finances, and well worth four and a half dollar marks.

The 'M' Word

by Lori Sackler

I find in the financial publishing world, I often start out reading a book expecting one thing and end up getting something else. As I made my way through the first couple chapters of this book, which started off pretty weak, to be honest, I began to think that the author’s efforts to defend the need for talking about money and rationalizing why the reader needed to make such effort was a bit redundant and not a very good basis for a book. But it wasn't long before the author shifted gears and began looking carefully at the root of the problem: psychology, human nature, misconceptions about money, and how disagreements about money arise. Because money is one of those things that people tend to get emotional about, sometimes due solely to differing individual viewpoints, it often leads lead to conflict, angst, frustration, and even anger. The ‘M’ Word seeks to avoid all that by providing plenty of strategies and practical information to begin discussing financial matters with family and like interests.

Once the author finishes her defense of the subject matter, it’s on to “the money talk”. The money talk is all about understanding your individual situation and the people you must deal with on the other side of the situation. This includes dealing with life changing events, such as the death of a family member, divorce, re-marriage, combining families, wealth transference, the whole lot. The author explores typical scenarios and financial situations, and in case study fashion, describes the experiences of actual clients who went through the money talk under circumstances that may be the same (or similar) to your own. The author then walks the reader through the fine points of the actual talk: hiring a financial consultant, scouting the meeting location, preparing the talk itself and any presentation materials that go with it, and finally, the execution of the talk itself. The author makes extensive use of checklists and sensible guidelines throughout, including a “Things to Think About” box at the end of each chapter, that serves both as a summary and another checklist for reviewing the previous chapter’s material.

If one of the author’s client’s cases matches your own circumstances closely enough, you will have little to do other than follow the book’s instructions and examples. For me, I still felt a little bit like my family and situation didn't exactly fit with The ‘M’ Word mantra, but I think that even if I can’t get my family to have a full blown money talk, I can still ready myself for what lies ahead. That is to say, this is a different sort of book with a lot of essential and valuable information. The ‘M’ Word might not help you solve all your family’s money related problems, but it might keep you from saying a few choice words as you travel down that road. That makes it well worth an easy four and a half dollar signs for me.

Survival of the Fittest for Investors

by Dick Stoken

I read two thirds of this book on a flight back from Mexico. I was disappointed to find that the bulk of the book comprised charts and past data which the author showed supported his theories and investment ideas. Of course, that’s easy when you get to pick the data. More than that, however, this book has some other problems.

Although , I won’t argue against anyone, including this book’s author, who says the stock market is a living system and can be analyzed scientifically using biological theories and methodologies, I will argue that diversification (of investments) is not the same as biological variation, and portfolio re-balancing is not the same as adaptation. Stretching the definitions may be a good investment angle, but it won’t necessarily make you money. Also, several elements seemed out of place, like starting off with a discussion of Newton so that he could show Darwin to be “more applicable” to investing, or his tendency to resort to describing bubbles and how they could be avoided as defense of his methodologies. I just kept wanting to say, yeah, the ten years from 1929 on were a bad time to be investing, we get it. So, now what?

If I had read this entire book, it is possible I may have found some useful nuggets at the end, but the first two thirds of the book were so drab, I just had to put it down. There is stuff to be learned in this book, and I really like the author’s original idea, but overall, it’s just not that useful and really only worth two dollar marks.

Income Investing

 by Jason Brady

Normally, when I review a book in this blog, I write a review that I usually adapt from one that I post on Amazon.com. This time, I happened to wake up in the middle of the night the day after reading this book in one sitting, and the words came to me naturally and flowingly, so I typed them into my phone at 2 in the morning. I liked what came to me in my sleep, unbidden yet inspired, so this time, I’m reproducing my Amazon review verbatim. Here it is:

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Brace yourself for reality

This is one of the soundest, solidest books on investing that I've ever read. It covers all the basics in an almost advanced overkill sort of fashion. The author draws on his many years of experience as a fund manager to explain the major classifications of investments and the subtle differences between the average guy’s understanding of the instruments and what they really entail. The object of these explanations is to make it easier for the investor to understand where profit comes from and how better to avoid losses that erode that profit. That’s all well and good and it is very useful and sound information.

The book does go a little bit astray, however, because even though the subtitle says " an intelligent approach to profiting...", there is no strategy outlined and there is certainly nothing resembling an "approach" to investing in this book. The latter chapters serve mainly to expound on the former, driving down a road that basically says, if you understood everything so far, you should also understand this. And if I understood the author correctly, “this” is his personal investing mantra, which in a nutshell is: buy dividend paying stocks with a growing dividend, buy bank stocks, and diversify into other categories of investments (bonds, options, etc.). Mr. Brady takes just a short 200 pages to explain why this makes sense and will be profitable. You’ll get no argument from me. I’ve owned dividend stocks forever and bank stocks of late and I’m not rich, but I’m doing okay, thank you very much. I think this is a sober, useful book, and even had I not received a gratis copy for purposes of writing this review, I'd have been genuinely glad to have read it in any event. I thought about giving it four stars, but even with the misleading subtitle, this is five star material.

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Or, on this blog, five dollar sign material.