Karl Marx in many respects provided the intellectual framework for many communist and socialist planned economies. Capital Volume 1 sets out a substantial part of Marx's economic theories as well as some observations on working conditions during the early stages of the industrial era.
The economic theories have been widely criticised on academic grounds. The flaws are fundamental and render his theory untenable on even a very basic analysis. I was in particular struck by the conclusion (not articulated by Marx) that people would work to the same level of efficiency without personal materialistic incentives and that the correct rate of return on all inputs to the economic process other than labour is zero. In the light of modern understanding of economic processes and human nature, Marx looks completely out of touch with reality. As a side note, I was particularly amused at his descriptions of unproductive workers in the Appendix - including authors with Milton being used as an example of an unproductive worker.
Of greater interest, as the description of working (and living) conditions in industrialised countries. Leaving aside the distorted and rose tinted view of life in pre-industrial times and the fact that Marx either sneeringly dismisses or ignores the benefits that accrued to society as a whole from industrialisation, these sections of the book were powerfully written and conveyed what I believe to be an accurate depiction of the horrific conditions experienced by workers (and many non-workers) during that era.
If he had stuck with social commentary and left economic theory to others, Marx might have been remembered for something other than the man whose fatally flawed economic theories contributed to some of the greatest humanitarian tragedies of the twentieth century when various communist/socialist states attempted to apply them in the real world.
Showing posts with label Book Reviews. Show all posts
Showing posts with label Book Reviews. Show all posts
Friday, February 22, 2013
Sunday, November 25, 2012
Book Review: You Say Tomayto ...
"You Say Tomayto ..." (Contrarian Investing in Bitesize Pieces) is written is a similar style to Anthony Bolton's "Against the Tide", a series of short summaries on various matters which a fund manager considers relevant to the business of making stock selections for an actively managed fund. In this case the author is Alistair Mundy who heads Investec Asset Management's Contrarian Equity Team who has reproduced a series of his monthly commentaries from the last four years.
While there were only a relatively small number of points which I had not previously encountered or concluded on my own, on the whole there was enough material to make reading a worthwhile exercise. Especially now when equity markets have been relatively kind, it is worth remembering that good times are generally followed by bad and departing from the principles of being a value investor can be damaging to your wealth.
I particularly liked the sections dealing with breaking down market commentary (mostly useless), sales pitches (ditto) and the momentum investing (a bad idea).
While there were only a relatively small number of points which I had not previously encountered or concluded on my own, on the whole there was enough material to make reading a worthwhile exercise. Especially now when equity markets have been relatively kind, it is worth remembering that good times are generally followed by bad and departing from the principles of being a value investor can be damaging to your wealth.
I particularly liked the sections dealing with breaking down market commentary (mostly useless), sales pitches (ditto) and the momentum investing (a bad idea).
Thursday, November 22, 2012
Book review: Investing Against the Tide
Anthony Bolton earned a stellar reputation as the manager of Fidelity's Special Situations Fund. Against the Tide is Bolton's recount of his investment approach and some of the techniques used in managing investments.
The material covers basic principles in assessing the merits of a company's shares and the techniques for selecting individual investments (both to buy and to sell). As a general statement, the principles were well stated but did not offer anything new. Everything contained in the book (apart from Bolton's personal observations and experiences) has been well flagged by others. As an example, the benefits of investing in companies which have strong franchises, the risks of owning companies with high gearing and the preference for buying shares at "valuation anomalies" to obtain a margin of safety. These are all mantras that have been repeated by others.
What I did find interesting was the addition of technical analysis to fundamental analysis and the behavioral aspects of "Twelve qualities that make a good portfolio manager".
One thing that struck me as odd was the heavy emphasis on direct meetings with company management. Obviously, these are not available to retail investors like myself and it is somewhat irksome to have the utility of such meetings to professionals regarded as being of high importance. While there is nothing illegal in such meetings (no insider information should be passed), it would make for a more level playing field if such meetings were either banned or done my conference call where all interested persons could join.
Succinctly written but no new insights.
The material covers basic principles in assessing the merits of a company's shares and the techniques for selecting individual investments (both to buy and to sell). As a general statement, the principles were well stated but did not offer anything new. Everything contained in the book (apart from Bolton's personal observations and experiences) has been well flagged by others. As an example, the benefits of investing in companies which have strong franchises, the risks of owning companies with high gearing and the preference for buying shares at "valuation anomalies" to obtain a margin of safety. These are all mantras that have been repeated by others.
What I did find interesting was the addition of technical analysis to fundamental analysis and the behavioral aspects of "Twelve qualities that make a good portfolio manager".
One thing that struck me as odd was the heavy emphasis on direct meetings with company management. Obviously, these are not available to retail investors like myself and it is somewhat irksome to have the utility of such meetings to professionals regarded as being of high importance. While there is nothing illegal in such meetings (no insider information should be passed), it would make for a more level playing field if such meetings were either banned or done my conference call where all interested persons could join.
Succinctly written but no new insights.
Tuesday, September 11, 2012
Off topic: some recent reading
Some recent reading:
1. The Portable MFA: published by the New York Writers' Workshop, this covers novels, short stories, non-fiction and poetry. Both interesting and useful for someone who hopes to eventually find the time to write a book;
2. Flawless: the story of the world's largest diamond robbery. A real life crime story. Fascinating;
3. The Rise and Fall of Ancient Egypt: Toby Wilkinson's history of Egypt under the Pharaohs was a fascinating read - plenty of detail and a writing style that conveyed a feeling for this period of history. Subsequent visits to the ancient Egypt sections of the British Museum and the Metropolitan Museum of Art were more interesting as a result of reading this book. This one sparked a yearning to visit Egypt again;
4. The Age of Wonder: Richard Holmes' look at some of the scientific discoveries during the second half of the eighteenth century. In some respects, the book reads like a series of interlinked mid-length biographies starting with Joseph Banks and including other leading scientific figures such as William and Caroline Hershel and Humphrey Davy as well as some of the noteworthy scientific discoveries of the time. The emphasis is very much on the cultural or social impact rather than the science. A wonderful read;
5. Ulysses: James Joyce's novel is regarded my many as the greatest English language novel of the twentieth century. Having read (and enjoyed) Portrait of the Artist as a Young Man, I was expecting to enjoy Ulysses as well. I didn't. I found the writing to be dense, impenetrable and, at times, incomprehensible. Above all, it was boring. I can't see myself reading anything else by Joyce after this.
1. The Portable MFA: published by the New York Writers' Workshop, this covers novels, short stories, non-fiction and poetry. Both interesting and useful for someone who hopes to eventually find the time to write a book;
2. Flawless: the story of the world's largest diamond robbery. A real life crime story. Fascinating;
3. The Rise and Fall of Ancient Egypt: Toby Wilkinson's history of Egypt under the Pharaohs was a fascinating read - plenty of detail and a writing style that conveyed a feeling for this period of history. Subsequent visits to the ancient Egypt sections of the British Museum and the Metropolitan Museum of Art were more interesting as a result of reading this book. This one sparked a yearning to visit Egypt again;
4. The Age of Wonder: Richard Holmes' look at some of the scientific discoveries during the second half of the eighteenth century. In some respects, the book reads like a series of interlinked mid-length biographies starting with Joseph Banks and including other leading scientific figures such as William and Caroline Hershel and Humphrey Davy as well as some of the noteworthy scientific discoveries of the time. The emphasis is very much on the cultural or social impact rather than the science. A wonderful read;
5. Ulysses: James Joyce's novel is regarded my many as the greatest English language novel of the twentieth century. Having read (and enjoyed) Portrait of the Artist as a Young Man, I was expecting to enjoy Ulysses as well. I didn't. I found the writing to be dense, impenetrable and, at times, incomprehensible. Above all, it was boring. I can't see myself reading anything else by Joyce after this.
Saturday, April 28, 2012
Book Review: The Power of Habit
It has often been said that we are all creatures of habit. Charles Duhigg's book "The Power of Habit: Why we do what we do in life and business" explores the nature of our habits, the benefits and problems with habits and how to either change or develop them.
He begins by exploring how habits work in individuals and why they can be good things in that habits enable us to get things done with minimal effort. He then looks at how people can go about creating new habits or changing old ones. It was this part of the book which I found to be both most interesting and practical. The explanation of how the "cue - habit - reward" loop works on the brain and case studies on techniques to break it was clear, easy to follow and practical. I ended up taking a look at some of my own habits (bad ones according to mrs traineeinvestor), picked one and am attempting to use what I picked up in this book to change it. The possibilities of helping my children to form better habits has also occurred to me.
The second part of the book looks at the habits of organisations including case studies from Alcoa and Starbucks. These were interesting but of less practical use given the proximity off my retirement.
Part three looks at changes in society, drawing on examples from the civil rights movement and an American church group. It also considers the question of free will and personal responsibility for our habits.
The apendix entitled "a reader's guide to using these ideas" was useful but didn't really add anything to what had been covered in part one.
Overall, I found The Power of Habit to be one of the best self help books I have read. Highly recommended.
He begins by exploring how habits work in individuals and why they can be good things in that habits enable us to get things done with minimal effort. He then looks at how people can go about creating new habits or changing old ones. It was this part of the book which I found to be both most interesting and practical. The explanation of how the "cue - habit - reward" loop works on the brain and case studies on techniques to break it was clear, easy to follow and practical. I ended up taking a look at some of my own habits (bad ones according to mrs traineeinvestor), picked one and am attempting to use what I picked up in this book to change it. The possibilities of helping my children to form better habits has also occurred to me.
The second part of the book looks at the habits of organisations including case studies from Alcoa and Starbucks. These were interesting but of less practical use given the proximity off my retirement.
Part three looks at changes in society, drawing on examples from the civil rights movement and an American church group. It also considers the question of free will and personal responsibility for our habits.
The apendix entitled "a reader's guide to using these ideas" was useful but didn't really add anything to what had been covered in part one.
Overall, I found The Power of Habit to be one of the best self help books I have read. Highly recommended.
Saturday, February 18, 2012
Book Review: Hetty
Hetty Green was America's first female tycoon. My previous knowledge of her life was largely limited to the rather shallow exaggerations of her extreme frugality and the fact that the estimated size of her fortune at the time of her death to America's GDP at the time is similar to that of people like Bill Gates and Warren Buffett.
As is often the case, the truth is more complex. Author Charles Slack paints the portrait of a woman who possessed many traits, including the extreme frugality for which she is best known, an obsession with money and an extremely good track record as an investor - holding a very diversified portfolio of assets, avoiding debt and being disciplined enough to avoid market euphoria and profit from market panics. During the crisis of 1907 when JP Morgan (and others) were intervening to stem the panic, she was the only woman involved. Much of her financial education came from her father, Edward Robinson, who built a fortune initially based on whaling which Hetty would eventually inherit most of.
Hetty makes for interesting reading. Although the book lacks some of the depth of other biographies I have read, I suspect that this is in a large part due to Hetty herself - she was an only child, had only two children and no grandchildren, she largely avoided becoming involved in contentious transactions (a few law suits notwithstanding), didn't control any companies and avoided high society for most of her life. '
It was somewhat ironic that after her daughter Sylvia died, the fortune that Hetty had so vigorously enlarged and defended was bequeathed to a large number of charities.
All in all, an enjoyable read.
As is often the case, the truth is more complex. Author Charles Slack paints the portrait of a woman who possessed many traits, including the extreme frugality for which she is best known, an obsession with money and an extremely good track record as an investor - holding a very diversified portfolio of assets, avoiding debt and being disciplined enough to avoid market euphoria and profit from market panics. During the crisis of 1907 when JP Morgan (and others) were intervening to stem the panic, she was the only woman involved. Much of her financial education came from her father, Edward Robinson, who built a fortune initially based on whaling which Hetty would eventually inherit most of.
Hetty makes for interesting reading. Although the book lacks some of the depth of other biographies I have read, I suspect that this is in a large part due to Hetty herself - she was an only child, had only two children and no grandchildren, she largely avoided becoming involved in contentious transactions (a few law suits notwithstanding), didn't control any companies and avoided high society for most of her life. '
It was somewhat ironic that after her daughter Sylvia died, the fortune that Hetty had so vigorously enlarged and defended was bequeathed to a large number of charities.
All in all, an enjoyable read.
Tuesday, January 31, 2012
Book Review: Bad Science
In Bad Science, Ben Goldacre explains how and why we are led to believe fallacies about issues as diverse as vitamin supplememts, homeopathy, the MMR debate, AIDs vaccines in Africa and cosmetics.
Goldacre explains the fallacies behind many of the spurious claims made in support of many health or beauty related prducts or against various vaccines in sufficient detail to enable a lay person (like myself) to understand the ways in which members of the public are mislead (either deliberately or accidentally) using poor or simply bogus assertions of scientific validity.
While many of the issues raised were not exactly news (I have yet to meet a single person who believes that homeopathy is anything other than unmitigated rubbish), the most damning indictment is given to the journalists who would appear to me more devoted to generating scary headlines than reporting the truth.
Excellent. Thisbook is one to keep and revisit from time to time.
Goldacre explains the fallacies behind many of the spurious claims made in support of many health or beauty related prducts or against various vaccines in sufficient detail to enable a lay person (like myself) to understand the ways in which members of the public are mislead (either deliberately or accidentally) using poor or simply bogus assertions of scientific validity.
While many of the issues raised were not exactly news (I have yet to meet a single person who believes that homeopathy is anything other than unmitigated rubbish), the most damning indictment is given to the journalists who would appear to me more devoted to generating scary headlines than reporting the truth.
Excellent. Thisbook is one to keep and revisit from time to time.
Saturday, January 21, 2012
Book Review: The Birth of Plenty
The Birth of Plenty is William Bernstein's examination of the factors which resulted in some countries producing rising GDP and rising living standards for their citizens and others growing more slowly, stagnating or declining.
Bernstein identifies four factors which are necessary conditions for economic prosperity:
1. Property rights and the rule of law: these essentially ensure that risk taking will be rewarded - without which few people will be willing to work hard or take economic risk. The absence of punitive taxation and the absence of confiscation by the state
2. Power, transport and communication: essential to the development of trade (competitive advantage), lower costs and efficiency of markets
3. Capital markets: essential for providing capital needed for development and for limiting destructive behaviour by governments (particularly in the form of military adventurism)
4. Scientific rationalism: allowing for the possibilities of creative thinking unshackled by religious or other intellectual straight jackets permitted technological progress
Bernstein illustrates his thesis by using a number of countries as case studies, in particular England, France, Holland and Spain. For my part I found his arguments compelling. Of relevance to contemporary issues, Bernstein discusses issues such as economic inequality, excessive taxation and the link between economic prosperity and democracy.
Overall, a fascinating read.
Bernstein identifies four factors which are necessary conditions for economic prosperity:
1. Property rights and the rule of law: these essentially ensure that risk taking will be rewarded - without which few people will be willing to work hard or take economic risk. The absence of punitive taxation and the absence of confiscation by the state
2. Power, transport and communication: essential to the development of trade (competitive advantage), lower costs and efficiency of markets
3. Capital markets: essential for providing capital needed for development and for limiting destructive behaviour by governments (particularly in the form of military adventurism)
4. Scientific rationalism: allowing for the possibilities of creative thinking unshackled by religious or other intellectual straight jackets permitted technological progress
Bernstein illustrates his thesis by using a number of countries as case studies, in particular England, France, Holland and Spain. For my part I found his arguments compelling. Of relevance to contemporary issues, Bernstein discusses issues such as economic inequality, excessive taxation and the link between economic prosperity and democracy.
Overall, a fascinating read.
Sunday, October 09, 2011
Book Review: The Upside of Irrationality
I purchased this book as in flight reading material for a recent business trip on the strength of a single question on the back cover:
"Why can paying high bonuses lead to lower productivity?"
I was also generally interested in the first part of Dan Ariely's book which deals with the unexpected ways in which we defy logic at work.
I found The Upside of Irrationality to be an engaging book that explained a number apparently irrational responses to various situations. The (simplified) answer to the issue of why large bonuses don't always produce better performance, and sometimes produce worse performance, is that the higher the stakes the more likely that the recipient of the bonus will succumb to pressure. Also, when as the stakes get higher, people (understandably) start spending more time thinking about their bonus than focusing on the task at hand. As an aside, I wouldn't have minded more space being devoted to what incentive schemes do tend to produce higher performance. The author does address the point but not in as much detail as he devotes to unsuccessful incentive structures.
While he book reads as a discrete list of issues where irrational human behavior is examined and explained rather than a single cohesive look at the subject, it remained an engaging and thought provoking read.
Recommended (although possibly not for people who's compensation includes a large bonus element).
"Why can paying high bonuses lead to lower productivity?"
I was also generally interested in the first part of Dan Ariely's book which deals with the unexpected ways in which we defy logic at work.
I found The Upside of Irrationality to be an engaging book that explained a number apparently irrational responses to various situations. The (simplified) answer to the issue of why large bonuses don't always produce better performance, and sometimes produce worse performance, is that the higher the stakes the more likely that the recipient of the bonus will succumb to pressure. Also, when as the stakes get higher, people (understandably) start spending more time thinking about their bonus than focusing on the task at hand. As an aside, I wouldn't have minded more space being devoted to what incentive schemes do tend to produce higher performance. The author does address the point but not in as much detail as he devotes to unsuccessful incentive structures.
While he book reads as a discrete list of issues where irrational human behavior is examined and explained rather than a single cohesive look at the subject, it remained an engaging and thought provoking read.
Recommended (although possibly not for people who's compensation includes a large bonus element).
Saturday, June 04, 2011
Book Review: What Investors Really Want
What Investors Really Want is Meir Statman's look at the world of personal investment from a behavioural finance perspective. The book is well written and waffle free making it easy to digest. Topics covered include:
- the desire for a free lunch of investments with profits higher than risks
- some of the more common cognitive errors
- the often adverse impact of emotions on investment decisions
- mental accounting
- how we react to profits and losses
- the desire for high status and respect
- the desire for fairness
- the role of financial advisers
While most of the subjects covered were ones that I was already familiar with, the book was still a worthwhile read. Had I been less familiar with behavioural finance, it would have made for a great introduction to the subject.
Recommended.
- the desire for a free lunch of investments with profits higher than risks
- some of the more common cognitive errors
- the often adverse impact of emotions on investment decisions
- mental accounting
- how we react to profits and losses
- the desire for high status and respect
- the desire for fairness
- the role of financial advisers
While most of the subjects covered were ones that I was already familiar with, the book was still a worthwhile read. Had I been less familiar with behavioural finance, it would have made for a great introduction to the subject.
Recommended.
Sunday, May 29, 2011
Book review: 100 Ways to Motivate Yourself
It's been a while since I read a self help motivational book. Steve Chandler's book was picked more or less at random and for the principle reason that I wanted some ideas to keep myself motivated once I transit into retirement and no longer have anyone imposing deadlines on me, no one paying me to get off my butt and get things done and no longer have the sense of professional responsibility to fall back on when all else fails. I've a long list of things I want to do once I leave the work force for good and don't want to wake up four or five years into retirement and find that my only achievement has been to gain weight and leave a permanent indentation in the sofa.
Chandler's book might have been designed just for me - 100 different techniques (actually 101) for motivating yourself to get things done, to find inspiration, to lift you mood, deal with pessimism and other similar problems.
I particularly liked the sheer diversity of the techniques offered. Approaches ranging from "welcoming the unexpected" to "get on your deathbed" all struck a chord with me. I can see this book staying on my book shelf (Kindle) for some time as a pick me up for times when I'm struggling to get going.
This one joins Richard Wiseman's 59 Seconds as one of the few self help books that I can see myself revisiting in the future.
Chandler's book might have been designed just for me - 100 different techniques (actually 101) for motivating yourself to get things done, to find inspiration, to lift you mood, deal with pessimism and other similar problems.
I particularly liked the sheer diversity of the techniques offered. Approaches ranging from "welcoming the unexpected" to "get on your deathbed" all struck a chord with me. I can see this book staying on my book shelf (Kindle) for some time as a pick me up for times when I'm struggling to get going.
This one joins Richard Wiseman's 59 Seconds as one of the few self help books that I can see myself revisiting in the future.
Tuesday, April 26, 2011
Book review: How to Get Lucky
Max Gunther's How to Get Lucky was published in 1986 and represents and attempt to identify character traits and habits that differentiate the "lucky" from the "unlucky". Gunther identifies 13 such techniques:
1. knowing the difference between planning and luck - understanding that all the planning in the world does not make an investment a sure thing, especially where random chance has a role to play
2. finding the fast flow - the importance of widespread contacts and weak social links in generating opportunities
3. risk spooning - only taking risks which are appropriate and avoiding risks which offer only limited upside to the the amount risked or ventures which have potentially disastrous consequences
4. run cutting - not expecting lucky streaks to run forever, or even for a very long time
5. luck selection - cutting losses and walking away from situations which offer limited upside
6. the zig zag path - goal orientation is not always a good thing. Changing course, sometimes often, can be a good thing
7. constructive supernaturalisim - religion, superstition and the occult do not determine outcomes, but if they can help moving from a state of indecision they can be helpful
8. worst case analysis - knowing the downside and how to deal with it if it eventuates
9. the closed mouth - bad mouthing people or committing to a position unnecessarily can be damaging to future prospects
10. recognising a nonlesson - understanding that just because something worked once, does not mean it will do so again. In other words, correlation does not equal causation
11. accepting and unfair universe - life is not fair. Accept it and move on
12. the juggling act - having multiple ventures will keep you busy but increases your potential opportunities
13. destiny pairing - finding the right partner, mentor etc is sometimes critical
While Gunther does rely more on anecdotes than statistical data than I would prefer, he does in places support his thesis by reference to experts in various fields. While it falls short of being definitively persuasive, How to Get Lucky certainly makes for interesting and entertaining reading.
1. knowing the difference between planning and luck - understanding that all the planning in the world does not make an investment a sure thing, especially where random chance has a role to play
2. finding the fast flow - the importance of widespread contacts and weak social links in generating opportunities
3. risk spooning - only taking risks which are appropriate and avoiding risks which offer only limited upside to the the amount risked or ventures which have potentially disastrous consequences
4. run cutting - not expecting lucky streaks to run forever, or even for a very long time
5. luck selection - cutting losses and walking away from situations which offer limited upside
6. the zig zag path - goal orientation is not always a good thing. Changing course, sometimes often, can be a good thing
7. constructive supernaturalisim - religion, superstition and the occult do not determine outcomes, but if they can help moving from a state of indecision they can be helpful
8. worst case analysis - knowing the downside and how to deal with it if it eventuates
9. the closed mouth - bad mouthing people or committing to a position unnecessarily can be damaging to future prospects
10. recognising a nonlesson - understanding that just because something worked once, does not mean it will do so again. In other words, correlation does not equal causation
11. accepting and unfair universe - life is not fair. Accept it and move on
12. the juggling act - having multiple ventures will keep you busy but increases your potential opportunities
13. destiny pairing - finding the right partner, mentor etc is sometimes critical
While Gunther does rely more on anecdotes than statistical data than I would prefer, he does in places support his thesis by reference to experts in various fields. While it falls short of being definitively persuasive, How to Get Lucky certainly makes for interesting and entertaining reading.
Wednesday, April 06, 2011
Book review - The Great Super Cycle
The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation is a book in two parts. In the first part, author David Skarica makes the case for the current financial problems of many developed countries, in particular the United States, to play out with an inflationary end game. The inflationary case is supported by historical precedent and reference to regularly recurring economic cycles. While the former argument is persuasive, I was left with reservations about the cycle based argument. My doubts were not so much because I don't believe in economic cycles (I do), but because I struggle with the idea that such cycles are as regular and predictable as the author claims.
That said, I tend to agree with the conclusion that we should expect higher inflation going forward than we experienced in the last 10-20 years as cash strapped governments continue to print money to pay for expenses that they cannot afford.
The second part of the book consists of a review of various investments which the author expects to perform well during the expected period of inflation. The usual suspects of precious metals, emerging markets etc are covered. I took nothing new from this part of the book and material of that nature has, as one would expect, dated very quickly.
While the first half of the book was well worth reading, there were a few typos which detracted from my overall favourable impression.
For a contrasting view (that the deleveraging of public and private sectors will lead to deflation) Endgame: The End of the Debt SuperCycle and How it Changes Everything byJohn Mauldin and Jonathan Tepper is well worth a read.
That said, I tend to agree with the conclusion that we should expect higher inflation going forward than we experienced in the last 10-20 years as cash strapped governments continue to print money to pay for expenses that they cannot afford.
The second part of the book consists of a review of various investments which the author expects to perform well during the expected period of inflation. The usual suspects of precious metals, emerging markets etc are covered. I took nothing new from this part of the book and material of that nature has, as one would expect, dated very quickly.
While the first half of the book was well worth reading, there were a few typos which detracted from my overall favourable impression.
For a contrasting view (that the deleveraging of public and private sectors will lead to deflation) Endgame: The End of the Debt SuperCycle and How it Changes Everything byJohn Mauldin and Jonathan Tepper is well worth a read.
Friday, January 14, 2011
Book Review: The Frugal Millionaires
The Frugal Millionaires is a short book which based on interviews by author Jeff Lehman with 70 "frugal" millionaires conducted with the objective of identifying characteristics and habits which millionaires have in common. The material is neatly organised under headings such as investing, savings, health and other topics. The content is presented in the form of a short introduction to each topic followed by a series of short quotes from the anonymous interviewees supplemented by definitions of key terms and some additional remarks by the author.
While I did not get anything new out of the material presented, it would be a useful read for people who think of the typical millionaire as a flashy, high spending super consumer (the reality is that they usually are not). That said, The Millionaire Next Door provides a more detailed and comprehensive coverage of much the same material with considerable additional analysis and (IMHO) is much the better book.
While I did not get anything new out of the material presented, it would be a useful read for people who think of the typical millionaire as a flashy, high spending super consumer (the reality is that they usually are not). That said, The Millionaire Next Door provides a more detailed and comprehensive coverage of much the same material with considerable additional analysis and (IMHO) is much the better book.
Monday, January 10, 2011
Book review: The Pledge
From time to time I read books on productivity, self help and similar topics. Last weekend I read Michael Masterson's "The Pledge: your plan for an abundant life". While there were some useful takeaways from, on the whole I was disappointed.
The book is short, an attribute which I generally rate as positive for this genre. Masterson covers a number of topics such as productivity, personal choices, relationships and the mental attitudes needed for success. Most of these topics get covered in more depth in single books by other authors. While people who have no read anything on these topics may find the relatively high level summary type coverage a useful introduction, having read a number of books on all of the topics covered, I found nothing new. At times I felt I was skim reading the Cliff Notes version of a more detailed book. Part of Masterson's commentary on prioritising work was openly lifted straight out of "The Seven Habits of Highly Effective People".
There were some things which I regarded as very wrong and/or unworkable. To give two examples:
1. the suggestion that you should only look at your e-mails once a day and at the end of the day. If I did that I would lose most of my clients. I am paid to be responsive (as are most professionals). Also, a lot of the e-mails I receive require either same day action or delegation. Waiting until the day is over before actioning them is inefficient and sends a very wrong message to clients and colleagues alike. While I am sure that there are some people for whom this approach works and agree that constantly looking at e-mail damages productivity, this is not a solution that is viable for most people;
2. the use of monthly and daily folders for tasks. Not viable in my opinion. I would end up spending more time dealing with the folders than I would save by using them. I'll stick with my three task lists (clients, office and personal) divided into short term and longer term completion targets.
I did laugh when his schedule showed a fixed time slot for speaking with his wife.
Some things I did like:
3. Masterson partially calls bull on Tim Ferris's "The Four Hour Work Week" (which I rate as a nice fantasy with some good ideas but generally non-viable for most people);
4. Masterson calls bull on the "Think and Grow Rich" school of thought which holds that all that is necessary to achieve success is to visualise it - scientific studies show that dreaming about success without doing more is actually counterproductive.
In summary, an average read for people new to productivity and self help books with several good ideas (and a few bad ones), but offers nothing new for those who have read other books on these topics.
The book is short, an attribute which I generally rate as positive for this genre. Masterson covers a number of topics such as productivity, personal choices, relationships and the mental attitudes needed for success. Most of these topics get covered in more depth in single books by other authors. While people who have no read anything on these topics may find the relatively high level summary type coverage a useful introduction, having read a number of books on all of the topics covered, I found nothing new. At times I felt I was skim reading the Cliff Notes version of a more detailed book. Part of Masterson's commentary on prioritising work was openly lifted straight out of "The Seven Habits of Highly Effective People".
There were some things which I regarded as very wrong and/or unworkable. To give two examples:
1. the suggestion that you should only look at your e-mails once a day and at the end of the day. If I did that I would lose most of my clients. I am paid to be responsive (as are most professionals). Also, a lot of the e-mails I receive require either same day action or delegation. Waiting until the day is over before actioning them is inefficient and sends a very wrong message to clients and colleagues alike. While I am sure that there are some people for whom this approach works and agree that constantly looking at e-mail damages productivity, this is not a solution that is viable for most people;
2. the use of monthly and daily folders for tasks. Not viable in my opinion. I would end up spending more time dealing with the folders than I would save by using them. I'll stick with my three task lists (clients, office and personal) divided into short term and longer term completion targets.
I did laugh when his schedule showed a fixed time slot for speaking with his wife.
Some things I did like:
3. Masterson partially calls bull on Tim Ferris's "The Four Hour Work Week" (which I rate as a nice fantasy with some good ideas but generally non-viable for most people);
4. Masterson calls bull on the "Think and Grow Rich" school of thought which holds that all that is necessary to achieve success is to visualise it - scientific studies show that dreaming about success without doing more is actually counterproductive.
In summary, an average read for people new to productivity and self help books with several good ideas (and a few bad ones), but offers nothing new for those who have read other books on these topics.
Saturday, January 01, 2011
Book Review: Debunkery
Having read and enjoyed Ken Fisher's "The only three questions that count", I picked up his latest offering "Debunkery" as something of an impulse buy to read on a long haul business trip I took in mid-December.
Fisher examines 50 of "Wall Street's Money Killing Myths" and rejects most or all of them either in whole or in part. A short chapter is devoted to each of the myths, explaining what each myth is, why people may believe it and why it is not correct (or, in a few cases, only partially correct). Devoting a short chapter (typically only about three pages) to each myth, combined with Fisher's (and co-author Lara Hoffmans') easy writing style made for easy reading and ready understanding.
That said, I didn't really get that much out of the book because:
1. I seriously doubt whether there are many people who actually believe some of the myths presented. As an example, is there anyone who expects to to achieve average returns (or anything close) in any given year? I hope not;
2. many of the myths have been well and truly debunked by a number of people or simply don't stand up to even the most basic scrutiny. Sell in May and go away? I can recall that one being rejected by brokers' reports in the 1980s. Low PEs mean low risk? Really? Again, the persistence and lack of resolution of the value v growth debate should be enough to contradict that myth. And so on.
Actually, there were only a few myths that I had not seen previously rejected. There were also a few that I hadn't heard of before.
In conclusion, while I personally didn't get that much out of the book, I still enjoyed reading it as a well written a succinct reminder that one should not accept anything passed off as common wisdom without careful examination. For relatively inexperienced investors, it would be a more valuable read.
Fisher examines 50 of "Wall Street's Money Killing Myths" and rejects most or all of them either in whole or in part. A short chapter is devoted to each of the myths, explaining what each myth is, why people may believe it and why it is not correct (or, in a few cases, only partially correct). Devoting a short chapter (typically only about three pages) to each myth, combined with Fisher's (and co-author Lara Hoffmans') easy writing style made for easy reading and ready understanding.
That said, I didn't really get that much out of the book because:
1. I seriously doubt whether there are many people who actually believe some of the myths presented. As an example, is there anyone who expects to to achieve average returns (or anything close) in any given year? I hope not;
2. many of the myths have been well and truly debunked by a number of people or simply don't stand up to even the most basic scrutiny. Sell in May and go away? I can recall that one being rejected by brokers' reports in the 1980s. Low PEs mean low risk? Really? Again, the persistence and lack of resolution of the value v growth debate should be enough to contradict that myth. And so on.
Actually, there were only a few myths that I had not seen previously rejected. There were also a few that I hadn't heard of before.
In conclusion, while I personally didn't get that much out of the book, I still enjoyed reading it as a well written a succinct reminder that one should not accept anything passed off as common wisdom without careful examination. For relatively inexperienced investors, it would be a more valuable read.
Saturday, November 20, 2010
Book Review: The Flaw of Averages
Statistical uncertainties. A topic which the non-mathematician in me found rather daunting. As someone who prefers to do my own retirement planning and investment management, the reality is that I have to deal with a wide range of uncertainties on a daily basis. Getting away from that fact is not possible so I need to have at least some understanding of the basics.
Sam Savage's "The Flaw of Averages" was exactly what I needed to get my mind around some of the key issues. Written in terms that even a layperson can easily understand (and with plenty of humour), this book made for an educational and entertaining read.
Some key takeaways:
1. replacing uncertain future outcomes with a single average and then relying on that single average to plan for the future is a systemic error which explains why forecasts are always wrong (this is known as the "flaw of averages";
2. there is an important distinction between "risk" and "uncertainty" (uncertainty being an objective feature of the universe while risk is a more personal construct;
3. techniques for reducing uncertainty;
4. average inputs do not always deal produce average results;
5. the Seven Deadly Sins of Averaging (actually 12 of them);
6. some practical examples from the world of personal finance. Of these the most important is that a retirement portfolio which is adequate if a single average rate of return is achieved over the life of the portfolio is as likely to fail as to succeed.
Highly recommended for anyone with an interest in personal finance or investment management.
Sam Savage's "The Flaw of Averages" was exactly what I needed to get my mind around some of the key issues. Written in terms that even a layperson can easily understand (and with plenty of humour), this book made for an educational and entertaining read.
Some key takeaways:
1. replacing uncertain future outcomes with a single average and then relying on that single average to plan for the future is a systemic error which explains why forecasts are always wrong (this is known as the "flaw of averages";
2. there is an important distinction between "risk" and "uncertainty" (uncertainty being an objective feature of the universe while risk is a more personal construct;
3. techniques for reducing uncertainty;
4. average inputs do not always deal produce average results;
5. the Seven Deadly Sins of Averaging (actually 12 of them);
6. some practical examples from the world of personal finance. Of these the most important is that a retirement portfolio which is adequate if a single average rate of return is achieved over the life of the portfolio is as likely to fail as to succeed.
Highly recommended for anyone with an interest in personal finance or investment management.
Thursday, August 26, 2010
Book Review - The Ascent of Money
The Ascent of Money is a brief history of some of the key moments in the development of the business of finance as we currently know it. The author is academic Niall Ferguson.
Ferguson's central theme running through the book is that finance was a key driver of at least a number of key developments and events in human history. In his own words:
"poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence"
I very much agree with this proposition (but, for all practical purposes, he was preaching to the already converted when I picked up the book).
Ferguson's writing style is pleasant to read and sufficiently lively to make his account of the selected samples of history engaging. It took me about three days to read the book while I was on holiday.
As a whole I enjoyed the read and thought it was an excellent and well presented work on the subject.
However, I do have a few minor quibbles. The first is that, as someone who was already familiar with the subject matter, I would have enjoyed more detail and....well just more. It was very readable. Fortunately, there is a comprehensive list of source material in the book.
The second issue is that while the book is understandably focused on the causes and effects of financial crisis, I felt that insufficient attention was given to the role of politicians, regulators and governments generally in creating or facilitating the conditions in which financial disasters occurred.
The last point is that his attribution to the economic downturn which Hong Kong experienced beginning in 1997 to the resumption of PRC sovereignty over Hong Kong is simply wrong. The Asian crisis and an administrative decision to hugely inflate the supply of land for housing were two of the main factors which caused and exacerbated the downturn. Having lived through the experience, I saw nothing to suggest that changing the flags over government house had any bearing on the economic events at the time in the manner suggested.
Overall a great read and an important point which is well worth remembering when we consider how our financial lives should be regulated.
Ferguson's central theme running through the book is that finance was a key driver of at least a number of key developments and events in human history. In his own words:
"poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence"
I very much agree with this proposition (but, for all practical purposes, he was preaching to the already converted when I picked up the book).
Ferguson's writing style is pleasant to read and sufficiently lively to make his account of the selected samples of history engaging. It took me about three days to read the book while I was on holiday.
As a whole I enjoyed the read and thought it was an excellent and well presented work on the subject.
However, I do have a few minor quibbles. The first is that, as someone who was already familiar with the subject matter, I would have enjoyed more detail and....well just more. It was very readable. Fortunately, there is a comprehensive list of source material in the book.
The second issue is that while the book is understandably focused on the causes and effects of financial crisis, I felt that insufficient attention was given to the role of politicians, regulators and governments generally in creating or facilitating the conditions in which financial disasters occurred.
The last point is that his attribution to the economic downturn which Hong Kong experienced beginning in 1997 to the resumption of PRC sovereignty over Hong Kong is simply wrong. The Asian crisis and an administrative decision to hugely inflate the supply of land for housing were two of the main factors which caused and exacerbated the downturn. Having lived through the experience, I saw nothing to suggest that changing the flags over government house had any bearing on the economic events at the time in the manner suggested.
Overall a great read and an important point which is well worth remembering when we consider how our financial lives should be regulated.
Saturday, August 07, 2010
Book Review: How To Be Rich
"How to be rich" was written by J. Paul Getty and published in 1961. At the time Getty was regarded as one of, if not the, richest men in the world. He was also regarded as something of an eccentric, a miser (somewhat unfairly) and a serious art collector.
How to be rich reads like a collection of articles covering topics such as:
How to be rich reads like a collection of articles covering topics such as:
- what Getty looked for in successful company executives
- his approach to selecting investments
- art as a form of investment
- the growth of big government
- the increase in the administrative functions within large corporations
- dealing with your mistakes
On investments, he clearly advocates value based investing, investing in what you know (many of his investments were in the oil industry), long term investing (he slams get rich quick schemes), not buying when the market is expensive and being willing to jump in when everyone else is selling. In may respects, he sounds a lot like Warren Buffet.
One of the more interesting aspects of the book is the way it reflects the times it was written in - pre-oil crisis inflation, communist fears, a drift towards more left wing governments and relatively limited participation of women in the work force.
With or without the social context in which the book was written, it is well written and contains a lot of simple common sense (particularly on the subject of investing) and was well worth reading.
Saturday, February 20, 2010
Book Review: The Sellout
The Sellout Charles Gasparino's account of the credit crisis.
Gasparino begins with the origins of the crisis and neatly chronicles the unfolding of events through to the collapse of Bear Sterns, Lehman Brothers, Fannie Mae, Freddie Mac and AIG and the near collapse of Merrill Lynch and others. Along the way he identifies the causes of the problem:
1. political policies designed to encourage home ownership with no real thought given as to the consequences of those policies
2. inept regulators who either didn't know what they were doing or who made some seriously bad judgement calls (or both)
3. bankers driven by short term profits, with no regard for either the risks being taken or even how to sensibly measure those risks
4. credit rating agencies who were essentially paid to certify that sub-prime mortgages where as good as Treasureies
5. mortgage originators who neither knew nor cared whether people could actually afford the debt they were taking on
6. borrowers who took on more debt than they could realistically afford
Very few of the main characters appearing in the story emerge with much credit. Of the institutional CEOs, Jamie Dimon and Leon Fink are possibly the only exceptions.
Perhaps the most damming indictment of the whole process was all the CEOs who thought that leveraging their equity 30 times using mostly short term financing to invest in long term illiquid instruments concentrated in one sector of the economy was anything other than moronic. Even without the recent example of LTCM (and other examples before that), it does not take a rocket scientist to figure out that it is only a matter of time before they get into serious trouble.
Very well written and well worth a read.
Gasparino begins with the origins of the crisis and neatly chronicles the unfolding of events through to the collapse of Bear Sterns, Lehman Brothers, Fannie Mae, Freddie Mac and AIG and the near collapse of Merrill Lynch and others. Along the way he identifies the causes of the problem:
1. political policies designed to encourage home ownership with no real thought given as to the consequences of those policies
2. inept regulators who either didn't know what they were doing or who made some seriously bad judgement calls (or both)
3. bankers driven by short term profits, with no regard for either the risks being taken or even how to sensibly measure those risks
4. credit rating agencies who were essentially paid to certify that sub-prime mortgages where as good as Treasureies
5. mortgage originators who neither knew nor cared whether people could actually afford the debt they were taking on
6. borrowers who took on more debt than they could realistically afford
Very few of the main characters appearing in the story emerge with much credit. Of the institutional CEOs, Jamie Dimon and Leon Fink are possibly the only exceptions.
Perhaps the most damming indictment of the whole process was all the CEOs who thought that leveraging their equity 30 times using mostly short term financing to invest in long term illiquid instruments concentrated in one sector of the economy was anything other than moronic. Even without the recent example of LTCM (and other examples before that), it does not take a rocket scientist to figure out that it is only a matter of time before they get into serious trouble.
Very well written and well worth a read.
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