Live Truly

You Can Be A Stock Market Genius Even If You’re Not Too Smart

You Can Be a Stock Market Genius Even if You’re Not Too Smart: Uncover the Secret Hiding Places of Stock Market Profits is another common sense meets sophisticated investing book by Greenblatt. I love this guy. This book looks at certain situations where an individual investor has an advantage (if he does his research… or her research). He goes over the basics and then gives some case studies. This book is from the mid-90’s, but I think, as far as investing goes it’s really the most educational one I’ve read. Graham’s Security Analysis might have more details, but its very dense reading, very worthwhile but slow to sink in–at least for me. This book on the other hand reads faster than a motivational tape! It’s written in the same funny, no-nonesense, down-to-earth style as his little one. A major concept in this book is the win-to-loss ratio, ie. how much can you win vs. how much can you lose on an investment. He also goes through acquisitions, mergers, and all sorts of other situations that may at first be intimidating, but become fascinating after his hold-your-hand, pat-your-back walkthrough. I wish I could take some of his classes… maybe in a few years. By the way, the portfolio I started based on his website is in the double digits, even after the latest crash. Too bad it’s only a play one.

Tags: greenblatt, Investing, joel greenblatt, stock market

Freakonomics

Freakonomics is one crazy eye-opening book. I recently got it as a present from my old roommate. I really can’t think of anyone who wouldn’t benefit from reading this book. It’s a potent mix of history, policy, economics, and some statistics and how they all interact in very surprising ways. Told in an approachable, fresh, fun to read (or listen to) voice.

The part on glamor professions really hits a point. Thousands of people in lower positions competing for a very few spots. Those that make it, do very well, those are the ones seen, but most people don’t make it. If instead people went for a different goal, they could significantly increase their chances for success, or at the very least increase their standard of living while they try to achieve it. I also like how many events could be equally well or better “explained” by influences completely different than those that come to mind. Crime rate drops in a city with new police policies. Everyone cheers the mayor. Crime drops across the nation, regardless of policies. Was it because of the new policies? Was it due to some other event? Interesting question is how can we test these explanations.

Tags: Economics, freakonomics

Google Finance

Anyone noticed Google Finance’s new look? The market summaries, sector summaries, news, and movers are all so conveniently located. I love it. Go Google!

Tags: Finance, Google Finance, Tools

Man’s Search For Meaning

Frankl’s Man’s Search for Meaning is about finding your reason to live. Sometimes its not what you want from life, but what life demands from you. Frankl is a psychoanalyst who survived four concentration camps. Although it describes life in the camps in a very direct way, the book is more about finding the reason to keep going. It’s really direct and to the point and some passages of it flow like poetry. The book will have a different impact on every person. The edition I read had a long preface and a second part about logotherapy (logos = meaning). I found the original book and the last few pages the most powerful, although the whole thing is worth reading. This is the type of book that you could over and over and get more from it each time.

Tags: frankl, Growth, logotherapy, meaning

Who Moved My Cheese?

Just read Who Moved My Cheese? by Dr. Spencer Johnson. It really illustrates the need to adapt, change, and not get lazy and start feeling entitled. Basically it’s about two mice and two mini-people that find a giant warehouse of cheese. The cheese is everything they want and they’re super happy (security, healthy relationships, money, power, etc). One day the cheese disappears. The mice hunt for another place but the people that got used to the place just get sad. One of the people eventually gets tired of waiting for the cheese to come back and goes hunting again… and finds greater treasures. A real metaphor for ife. The only catch I see is sometimes it does take a little persistence for something to develop, but I can see this as part of the hunt too. You got to get out and get violent (and persistent) to find the cheese. Who Moved My Cheese? is a really simple story with huge lessons. Definitely worth a read.

The book has a website too: whomovedmycheese.com

Tags: change, spencer johnson, who moved my cheese

Greenblatt’s The Little Book that Beats the Market

Joel Greenblatt’s The Little Book That Beats the Market is an impressively straightforward and action-oriented investing book. It’s also a pleasure to read. It’s based on Benjamin Graham’s principles but it gets the point across in less than two hundred pages and uses simple examples that a middle school kid could understand. The author also has a track record to prove his theories (he’s founder and managing partner of Gotham Capital, a fund with quite a record).

The things I love most about the book are:
1. It has a common sense formula
2. It explains why it’s common sense
3. It has easy action steps

My only issue with the formula is that you have to switch stocks in one year cycles, however, perhaps if a stock maintains its ratios it could be kept again. The stats on returns are amazing, but even better is that the formula isn’t just random, it actually makes sense.

Basically the secret of the book is this: buy companies that have a high ratio of earnings to capital invested (ie. if two businesses both cost 500k to start and one makes 250k and the other makes 100k a year… which is a better investment?) and to buy companies that have a higher earnings yield (ie. if two companies both sell shares at 10 dollars, but one company earns 1 dollar for that share and the other company earns 2.50 for its share… which is a better investment?).

The coolest thing is that there’s a website that helps you find such companies: MagicFormulaInvesting.com.

Even if this book took a week to get through (it only takes an hour or so) The Little Book That Beats the Market is definitely worth your time.

Here’s a more detailed review.

Tags: greenblatt, Investing, stock market