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.

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.