You Can Retire Sooner Than You Think

by Wes Moss

I've read a lot of financial, business and economics books over the years. As I've gotten closer and closer to retirement age, I've paid more and more attention to portfolio protecting strategies as well as books and advice related directly to the actual retirement process. Now in my early 50’s, I’m looking realistically at the prospect of early retirement, possibly in as few as two or three years, so naturally, I've been studying up on the brass tacks of preparing and executing a retirement strategy. For that reason, I didn't think I would find much useful information in Wes Moss’s book that I hadn't already taken into account in my own planning and actions.

I was right, but I was wrong.

Mr. Moss is a syndicated talk show host and certified financial planner of some standing and recognition. He took it upon himself to conduct a survey of retirees in an effort to quantify happiness and determine exactly what makes retirees happy. Of course, he suspected that the amount of retirement assets would play into it, but to his credit, he let the data dictate the answer. What he found was not only illuminating, it is incredibly instructive.

This book is his attempt to relay the findings of a survey he conducted in an effort to identify and quantify the elements of a “happy” retirement. He succeeded in filtering those elements down into five simple “secrets” to achieve a happy, fulfilling retirement. The good news is, some of the secrets are not so secret and in fact, I have already taken some of them into consideration and acted on them. Things like, developing multiple streams of income, driving a sensible and affordable car, staying healthy and active, and pursuing a motivational interest. For me, this is common sense, but I think it will be a revelation for a lot of folks in my age bracket. So I was right in that, some of this book was (for me) preaching to the choir. And you might think that makes it not terribly useful, but I found it vaguely uplifting to have my ideas vindicated by a disinterested third party (so to speak). I was wrong, though, because Mr. Moss has allowed his clients (the survey takers) to also provide better perspective and concrete facts in support of what makes a retiree happy (or unhappy).

What I was wrong about was, Mr. Moss’s clients (the survey takers) provide different perspectives and concrete experiences to back Mr. Moss’s ideas, and that’s where what makes this book different makes it better. There are no investment strategies, per se, in this book. Mr. Moss is more along the lines of offering advice like: pay the mortgage off fast, become active in your community, and pay for the big stuff (house repairs and remodels, once-in-a-lifetime vacations, etc.) before you retire and while you have an income, to avoid unforeseen circumstances derailing your entire retirement. How you go about doing that is up to you. It’s a defensive strategy, but one that has proven effective for a remarkable number of happy retirees. Again, I’m already on board (just purchased a grand piano for my second career as a jazz pianist, thank you very much), and I’m looking forward to having a happy retirement because of it.

This is not a mainstream book about retirement. For portfolio building and tax avoidance strategies, you’ll have to look elsewhere. But for a sensible approach to enjoying your life in retirement, I don’t think a better book has been written. It’s different and better, and that’s what makes this book worth every bit of five dollar marks.

Money

by Steve Forbes and Elizabeth Ames

Steve Forbes has a way of polarizing people, and although I’m sure he’s going to continue doing that with his latest book, Money, co-written with longtime collaborator Elizabeth Ames, I'm still a big fan of Mr. Forbes. This book did not disappoint me. Mr. Forbes discusses what money is, what money is used for, what it should be used for, and why it causes the many issues (I hesitate to say “problems”) that he thinks it does. Sure, there are more than a few political vents and rants in this slim, easy to read book, but for the most part he keeps to the book's main tenet: fiat money adversely impacts the economic health of any country who uses it. And the solution? The United States should return to the gold standard, along with the rest of the world, and then the issues related to fiat money go away. That’s the long and short of it. 

I must admit, though, that I'm not sure things were so much better when we were on the gold standard. It’s not like there wasn't inflation. Yes things are more expensive now than they were in, say, 1955, but in 1955, the average American only made $5000 a year or so. I could look up the current average salary, but we know it’s a lot higher than $5K. I think Mr. Forbes is on the right track in thinking that the gold standard would solve some of the money issues America faces right now. At the least, it would keep the Fed from printing money at leisure to advance whatever agenda it sees fit at any given moment. But my own feeling is the issues are more complex than just “The Fed shouldn't do this, Congress should do that, and money should be able to be exchange for gold”. Thankfully, Mr. Forbes recognizes that his “simple” suggestion of a return to the gold standard is but a remote possibility at best, so in the final chapter, he provides the reader with a “the best offense is a good defense” strategy to protect one’s own money from the steady devaluation caused by not being on the gold standard. The suggestions are tame (buy index funds, own some gold, stay in the market for the long term) but at least they are realistic. The inclusion of an investment strategy is a bit gratuitous, but I think it is more likely to help rather than hinder the majority of this book’s readers.

Money for the most part is sensible and sober, and Mr. Forbes has no shortage of clever  ideas and strong opinions. Some readers may balk at some of his bolder political statements and finger pointing, but given a high profile author like Mr. Forbes, it’s easy enough to let him have his say and turn the page. In any event, I don’t think he’s going to succeed in resolving anything with this book, and I’m sure most politicians will pointedly ignore it. For me, it didn't make me any bigger of a fan, but it didn't disappoint me either. This was an interesting, thought provoking book, and I'm glad I read it.

Understanding Options and How You Can Trade Like A Pro

by Michael Sincere

by Sarah Potter

I’m reviewing these two books together because they cover a lot of the same material. Obviously, Sarah Potter’s book, Trade Like A Pro is a lot broader and focuses mainly on trading strategies, analysis, methodologies, charts, graphs, and the nitty gritty details of making regular, and hopefully profitable, trades. Michael Sincere, on the other hand, in his book focuses only on options: what they are, how they work, and how to use them to broaden one’s investment strategy. Although options are certainly a speculator’s game, they also have a role in the average investor’s portfolio, whereas everything in Trade Like a Pro is geared to the person who is going to do just that: trade.

I found Mr. Sincere’s book much more up my alley, both from the aspect of the types of trades and the prices of the examples he uses, to the step by step walk through of a typical (and not so typical) options trade. Ms. Potter, on the other hand, assumes you know a lot and are ready for some advanced topics and analysis, and she also assumes you have a large war chest to start with. (For example, Mr. Sincere’s typical options sample trade uses Boeing at $88, while Ms. Potter uses Mastercard at $550. Does it matter in the end? Not really, but I know that $50K trades in options are nowhere in my near future, whereas $9K probably is.) I've been buying and selling equities for 28 years but had never ventured into options. After reading Understanding Options, I opened my options account and made my first trade. It really was as simple as reading the book, following the instructions, and executing the trade. As for Trade Like a Pro, I gained valuable insight into trend analysis and found remarkably similar approaches in simple moving average usage that is close to what I already do (and have been doing for years).

Really, I think reading these books together is a good approach, as they have similarities and differences in investment strategies that allow the reader to creatively think about their own investments (or in some cases, gambles). I rate Mr. Sincere’s book slightly higher because it is much easier to read and understand and for his laser focus on this one topic, but that is not to say it is better than Ms. Potter’s, whose book is full of useful ideas, suggestions and strategies. In the end, reading one or both of these books is sure to help most anyone who invests or speculates regularly in equities markets.

Stocks for the Long Run

by Jeremy Siegel

The fifth edition of Jeremy Siegel’s Stocks for the Long Run, features great updates written in light of recent economic events, i.e. important stuff that happened long after the publication of this book. That is why after 20 years, it remains required reading for stock investors of all ilks, and its value continues to grow through the years. With Mr. Siegel’s penchant for being a scholar and purveyor of insight and current knowledge, he expertly extends his previous work to cover the real estate implosion, the 2008 depression, the post-depression recovery, and the Fed’s tight money policy and quantitative easing. Everything that the press and TV financial gurus have worked so hard to obfuscate over the last six years suddenly becomes lucid and, if not sensible, at least explainable.

Of course, the majority of the book is the original classic, where Mr. Siegel displays considerable acumen and gobs of statistics and applies them to markets and investments. Although this is my first time reading this book, I’ve had some exposure over the years to Mr. Siegel’s writing in economic magazines and newspapers. He is always one of the most lucid financial pundits around, a skill that was obviously honed in the writing (and rewriting) of this book over the last two decades. He uses clear examples, easy to understand graphs and tables, and an overall “no nonsense” tone that keeps the book light but “sturdy”. And instead of telling potential investors what they should do, he tells you what to expect when it comes to markets, individual stocks, and particular sectors, how to recognize what they are doing, and what you might want to consider doing to take advantage of that. If none of that suits you, all you have to do is skip to the next chapter, where he will give you different insight into a different investment aspect. Mr. Siegel covers everything stocks, so someone looking for detailed information can read individual sections to their taste, while someone looking for a thorough overview can just go through the book, cover to cover.

This is one of the best books ever written on investing in stocks, a book that other pros, authors, and analysts keep on their shelf for a ready reference. If you’re serious about investing in stocks, you need to keep a copy of this five dollar-sign book on your shelf as well.

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.