My Side of the Street

 

by Jason DeSena Trennert

I’m always up for a good book with an insider’s look at the world of finance and hijinks on Wall Street. The tri-named author of this book, who I’ll call Jase because that’s what he goes by and because his name is so long, seems to have been an insider for something like thirty years, lately as the owner of his own research firm. He has plenty of interesting stories, unusual anecdotes, and some unheard tales from inside the world of finance. Unfortunately, many of his stories fall a little flat, and none of them deliver on the promise of this book’s enticing subtitle. I expected a “warts and all” look at how Jase and his moral bearing, ethical, everyday friends and colleagues bested the “wolves, quants, and flash boys” in battles in the trenches of high finance, but after the subtitle, there is nary a mention of any of those things, much less any high pitched, multi-million dollar investment battles. It’s just Jase going about his business being a good fiduciary representative.

All that’s well and good but I expected a lot more. At least Jase is a skilled writer. He’s clear, succinct, and highly readable, at times humorous, at times philosophical, at times poignant. His stories and anecdotes for the most part are worth telling and reading. I don’t know that his 9/11 story added much to the book (it certainly didn’t add to the diaspora of stories surrounding that infamous day), but it’s nice that he has a personal take on these things and it certainly makes us feel for him more as we get to know him better. Still, with no thread to tie the stories together, the whole book just muddles through. Some of the stories seem to be thrown in at the last minute because Jase remembered something and wanted to share it with the reader. Maybe this isn’t a bad reason to include something interesting, but I would have preferred a more well-constructed approach.

All that said, I really enjoyed this book. I would have preferred some more fireworks and war stories, but I still felt that I got something out of it for the effort of reading the whole thing. Maybe Jase can get together with another Wall Street insider like Joshua Brown, author of Backstage Wall Street. Beefier, more broad-ranging stories would make a best seller for sure, which this, unfortunately is not. Still I give it three and a half dollar marks.

The Innovator’s Hypothesis

by Michael Schrage

One of the things I liked about this book is, the author starts out by immediately explaining how the Innovator’s Hypothesis works and what is used for, as well as how it works. One of the things I didn't like about this book is, after that, he spend six chapters or so telling stories that are supposed to support the effect of the 5x5x5 (five people, five days, five experiments) strategy that tests, and hopefully proves, The Innovator’s Hypothesis. Is it fluff? Well, not exactly. Is it useful? Yeah, kind of. Then what’s the problem? Well, saying that cheap fast, easy experiments that test a workable hypothesis on improving a business is easy to say, but,

it isn't all that easy to do. Plus, if you are in the twilight of your career (hello, me), are you going to undertake a bunch of experiments to improve your business? Yeah, I didn't think so.

Obviously, there’s more to it than that, which is what this book is about. The author is a long time business consultant who draws on his experience to demonstrate his analysis of different types of successful (and not) businesses. Amazon, Google, P&G, Blockbuster, big pharma companies, credit card companies, and more, all have been part . There is lots of food for thought and plenty of practical advice. I thought that the 5x5x5 model the author propounds was clever and workable, especially towards the end of the book when he explains that you don’t necessarily have to stick to the 5x5x5 formula. I also thought that the examples he provides will be quite helpful to people who really read this book with a mind to doing experiments in their own company. (I, myself, have no intention of attempting this, because there is no benefit to my company that will directly impact me.)

Something that I thought was kind of glossed over in this book is coming up with the testable hypothesis is more difficult than I think most people appreciate, and, once the hypothesis is in place, coming up with the experiments to test the hypothesis also will be a considerable challenge. To be fair, the author provides guidelines for executing both of those tasks, I just think he makes it sound a lot easier than it really is. From an execution standpoint, everything is fairly cut-and-dried if you follow the author’s train of thought, but ultimate success and meaningful results will be, I think, much harder to come by.

This book is intelligently written and the methodologies and logic supporting the author’s arguments are well-documented throughout. As long as the reader has no misconceptions about how difficult it might be to implement and execute these strategies in their own business, I think most business operators and company managers will at least gain some valuable perspective from this book, even if they don’t start doing their own experiments. I too was able to imagine having been motivated by this book earlier in my career, but business experiments sound like a lot of hard work, so I leave them to somebody else to actually do. Still, the book is good, the writing is fluid and clear, and it gave me a lot to think about, so I value the whole package at three and a half dollar marks.

A Force for Good

Edited by John Taft

After reading this book, I actually wrote three reviews. Two of them I ended up discarding because after rereading some sections, my opinion either changed or I thought of something better to explain what I felt on reading that part of the book. That makes this the fourth review I’m writing.

The original review title was: “A step in the right direction that (unfortunately) won’t get you very far”. I went with that because I felt that the book had too many vagaries as far as actual execution of a financial plan. That is to say that I found the premise (promise?) of this book exciting: Get a bunch of qualified, serious-minded, economic thinkers and doers, and have them analyze the recent economic crisis and the current state of economic affairs so that they can then lend us an ethical and moral standard on which to base future economic activity so that everybody ends up better off and economic crises become things of the past. But in the end, they didn’t really come up with a way to make all their ideas become reality. Still the book has a lot of positives.

The list of essay writers reads like a veritable who’s who of economic thought, which raises the expectations higher. The editor, himself a leading economic thinker, explains how the book came into being and what it is trying to accomplish, and then, we plunge right in.

The chapters and essays come steadily and relentlessly with many being quite short and concise. Some essays provide history lessons, some just analysis, some a combination thereof. All of them present some ideas for avoiding financial crises in the future.  Most are very dry, but everything was quite readable. The common tenet throughout the book is, companies and individuals who are entrusted with other people’s money need to act responsibly, not be greedy, and use a moral and high ethical approach to business. It sounds good, and more than a few of the contributors make it sound achievable. A number of the essays, however, fall back on legislation and legislating bodies (politicians) as the way to go, but given the current pusillanimous state of Congress, those ideas (I thought) fell flat.

That is to say, there is absolutely nothing wrong with any of the ideas and proposals and supporting theoretical arguments that are presented en masse by the great thinkers assembled here, except, there is no plan of execution and nobody is going to undertake it upon himself or herself to be the one to start the great “ethical economics at any cost” movement. (For one, it’s hard to make much money doing that.) I like what the writers have to say for the most part, and I like the presentation and concept of this book. Ultimately though, high-minded does not always result in high-achieving. Of course, we want our financial advisors and consultants to behave themselves. Of course we all want to play win-win games that benefit everybody. Of course, we want to be part of something that is great and beneficial to all of mankind. Unfortunately, we are all human, and none of the writers has a clear concept of how we can motivate people to ignore their own profitability and success and sacrifice it for something else. (After all, as a member of society, if I make myself a little better off, isn’t society a little better off for my achievement, as long as I haven’t taken something from another member of my society?) In the end, I give this book three dollar marks for its readability and for being a highly informative book. I just don’t think it is all that good.

The Intelligent Option Investor

by Erik Kobayashi-Solomon

Having only started trading options in the last year, I've had good success so far, but I’m always willing to learn more. Mr. Kobayashi-Salomon, a former Morningstar strategist who now runs his own company providing institutional investors with analysis and strategies,  now brings us The Intelligent Option Investor, a book that is not only about options, but about finding the true value of stocks and then acting on those findings within the limits of one’s risk tolerance (and ultimately, budget). The information could just as easily be used for regular stock investing, but it is targeted for broader use in the options market.

Based mainly on the Black-Scholes-Merton valuation formula and the resulting BSM “cone”, the author builds a formidable structure of value analysis tools and methods, carefully illustrating and explaining their actual application not only in finding the value of stocks, but also in finding the projected value of those stocks based on the options market prices that lie either inside or outside the valuation cone. It is heavy going but is very useful information that I found very useful and intriguing. This first section of the book is also very important to understanding the rest of the book, which deals entirely with options. The author demonstrates the uses of the BSM cone in a number of different option strategies. Because it is all about making the reader “intelligent”, this book is not so much about finding the best strategy, per se. So it tells you what to look for, what to expect, and then leaves it to you to do the grunt work of figuring out where to put your money. (There are plenty of online tools for achieving this, mostly just by using a good brokerage’s website.)

Personally, I found the value cone quite intuitive, but because I don’t have much experience with options, it really gave me a lot to think about and consider in my own investing (not just options). A more experienced option investor might feel talked down to, but nothing is lost by going over this material as a review or refresher. Another thing I found valuable is that this book provides different types of option investing strategies based on the BSM cone. This is great for me, because I am becoming more risk averse, so I have no problem using the strategies that limit downside risk and avoiding the big risk, big upside potential strategies. It’s nice that the author gives the reader these kinds of options (sorry).

One caveat is, you should already know how to trade options before diving into this book. The author doesn't spend a lot of time telling you what options are, how they are traded, and what the fundamental differences are between the options types. It really just sticks close to its title and the premise that it will make you an intelligent options investor, because it assumes you are already an options investor. In the end, I found this book really did teach me a lot about options that I didn't

know and it does make me a more intelligent options investor. The careful explanation of the BSM cone and is application makes this a valuable book for any investor, but for an option investor, it’s the most useful tool I’ve ever run across, which is why I rank this book at five dollar marks.

Dual Momentum Investing

by Gary Antonacci

For whatever reason, I've seen more than a few books of late about trend investing. While this one comes up with a bit of a different title, the gist of the strategy that is proposed here is the same: Buy what’s hot and sell what’s not. The author, Gary Antonacci, won an award for a paper that became the heart of this book. He developed a simplified strategy for moving money between three investments based solely on their momentum: the S&P 500 index, All Country World Index, and the ACWI excluding US based stocks. He adds some meat to the bones of this strategy by using not just simple momentum, but what he calls absolute and relative momentum – the “Dual Momentum” of the title. The strategy itself ends up being called the Global Equity Momentum or GEM strategy.

Assuming the author’s supporting charts and data are accurate, there is a good case to be made for this being an effective investment strategy, but I do see some drawbacks. As simple as the strategy is, its execution will take a lot of research and constant monitoring to be sure to know when the hot investment is cooling down and cool investment is heating up. The author suggests a number of ways of doing this, including using a (free) website he has set up. And like most simple investment strategies, this one can be made more complex by taking other investment trends and factors into consideration, such as simple moving averages, P/E ratios, 52-week high proximity, and the like. Personally, think incorporating some of these indices would be a good idea, but I can also see how this would take up a lot of time. Personalization versus time/cost ratios will come down to the individual investor.

The biggest drawback of this book is that the author spends the first half of the book quoting a slew of research papers and economic articles in support of the strategy, including its timing, allocation percentages, and investment types. Only around page 95 of this 150-page book, does he actually introduce the strategy. The buildup to a one page flow chart for implementing and maintaining the strategy is, I thought, a bit extreme, but in all honesty, the strategy is about one of the simplest, and possibly effective, investment strategies I've ever seen.

While I can see giving the dual momentum investing or GEM strategy five dollar marks for simplicity and ingenuity, the book itself, being full of quotes from a 13-page bibliography, is just a little too sluggish to rate that high, so I give the whole package four dollar marks.

Retirement GPS

by Aaron Katsman

Boy, it's been a while. Even so, the holidays have got me tied up, so, I'll just post a short version of a review that I've also put up on Amazon. Enjoy!

I was happy to accept a gratis copy of this book from the author, as I had just finished reading and reviewing You Can Retire Earlier Than You Think and I was interested in finding more information about retirement investing with a mind toward retiring, either early or comfortably or both. I thought the GPS of the title would sort of provide some guidance for determining one’s financial position (right?) as it pertains to retiring. What Mr. Katsman has actually written, however, is more of a generic global investing guide that does not necessarily limit itself to retirement investing. There is no guidance for deciding anything about your ability to retire, but there is still a lot of valuable information in this book.

Mr. Katsman is an American who lives abroad and primarily (only?) invests overseas. The GPS of his book stands for “Global Portfolio System” and is mainly concerned with getting average investors to diversify internationally and consider a number of “normal” investments (mutual funds, bonds, etc.) in countries other than the United States. The author considers this to be a great retirement investing strategy, but I felt it wasn't a retirement strategy so much as an international investing strategy. retiring. The strategies and suggestions are interesting and sound and certainly worth considering from an investment standpoint, but they could be for retirement investing, income investing, growth investing, or just portfolio building outside of retirement funds. I would even argue, that for people who are still investing but have already retired, they might want to avoid some of Mr. Katsman’s strategies, as they involve different sorts of risks such as exchange rate risk, geopolitical instability, and factors that elderly investors are probably better off avoiding entirely. (I certainly can't picture someone like my 74 year old retired parents trying to buy Argentinean bonds or Chinese renminbi mutual funds or the like. 

To his credit, Mr. Katsman applies his vast overseas investing experience and shares a lot of the nuts and bolts of such investing in this book. The overall tone of the book is friendly and chatty, which is good for the most part, but some of his personal anecdotes need considerable stretching to tie into his discussion of investments. This book is still very readable and comprehensible. I learned a lot about a wide range of subjects, from the Chinese stock market, to the intricacies of European bonds, to exchange rates, and of course, the economic strengths and weaknesses of a large number of overseas economies. The world is a big place, however, so anyone who agrees with Mr. Katsman better be prepared to do a lot of their own research beyond this book, not only on the instruments they plan to purchase, but also the nature of the markets and country where those instruments are being sold. (I haven’t got the stomach for it, myself.)

All in all, this is a well-written, detailed, well-informed book on international investing. The global portfolio system is a neatly developed concept and strategy that is useful for retirement and long term investing, with possible applications to short term investing and out-and-out speculation. Mr. Katsman’s strategy alone rates four dollar signs, and with the lucid execution of this book to explain it, I think the overall package rates four dollar signs as well.

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.

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.