This is a superb book. The sub-title is "Investing by Knowing What Others Don't" and it is the best book I've read on investing and asset managment in years.
The author is Kenneth Fisher, an investment manager based in California, who also writes a monthly column in Forbes magazine. He's a pretty successful guy, ranked 297 on the latest Forbes 400 Richest American's list. Yup. That's successful allright.
His father is Philip Fisher, also a pretty famous investment manager, who was known for recognizing good companies, and then buying and holding their stock - sometimes for decades. Lastly, Fisher has an interesting philanthropy - redwood trees. He has endowed the only university chair dedicated to a single species of tree.
On to the book. Here's the only negative: Fisher has a slightly cute sense of humor, which I found a little annoying at times.
But the pluses are huge.
The three questions are: (1) What do you believe that is actually false? (2) How can I fathom what others find unfathomable? And, (3) What the heck is my brain doing to blindside me now?
Each of the first three chapters is dedicated to explaining one of the three questions. The first chapter debunks many "facts" about markets that are actually wholly or partially incorrect myths. Here are two examples: High P/E markets are riskier than low P/E markets (P/E stands for price-earnings ratio and is one of the most fundamental valuation metrics for stocks) and a weak U.S. dollar is bad for stocks.
In the second chapter Fisher makes the point that the only way to beat the financial market is to know something the market doesn't know, or at least ignores. This is pretty basic. The market (prices of stocks, commodities, currencies, bonds, etc) has already discounted in the underlying pricing known knowledge; to outperform the averages, you have to know something not widely known.
The third chapter is how our mental processes frequently work against us in trying to sort through meaningful data and relationships. Fisher refers to the market as "The Great Humiliator" (TGH) where we are constantly at risk of allowing our emotions, like pride and regret, get in the way of rational decisions. For example "confirmation bias" where we seek evidence confirming our preset notions and reject contradictory evidence. And of course very applicable to other aspects of our life, besides our finances.
The remainder of the book - six chapters and an interesting short conclusion - expands on the three questions. The chapters have titles like "Capital Markets Technology", "Shocking but True", and the last chapter "Putting it all Together."
Much of the analysis is quite brilliant. For example I loved his examination of U.S. budget deficits, and why they are not negative for the financial markets - or for the country. COULD they be a negative - YES - but only if we do certain stupid things in managing our fiscal and monetary policies. He step by step builds a powerful case that, if anything, the United States is underleveraged - we could easily manage more debt. He gives several examples of debt-free developed countries with stagnant economies and lower standards of living.
I could go on and on. Get the book if you want a mind expanding read about managing your money (And your life! Much of what he says has applicability to all facets of life). Their are 42 pages of appendixes, including showing his audited records as a prognosticator in his Forbes column and the performance of his money management Firm.
His record shows that Fisher doesn't just talk the talk; he has walked the walk.
Check out Ken Fisher’s latest book: Debunkery: Learn It, Do It, and Profit From It. I work for Fisher Investments, and our firm believes in challenging conventional wisdom when it comes to investing. More information on Ken Fisher’s Debunkery at the official site: http://www.ken-fisher-debunkery.com
Posted by: AW Frey | Monday, October 18, 2010 at 06:30 PM