Beat the Crowd: A Monkey's Review
My favorite market news/market research site is Market Minder by Fisher Investments, and I honestly don't know what I would do without it.
I say that because much of our media today is not in the business of informing, but of dramatizing to get views. In the age of the Internet, every news item or event is either "the best thing ever" or "the worst thing ever"--because anything other than that supposedly won't get you attention. Veteran newspeople and reporters who have lived through history and served as a rock to those who want to know what's going on, are being replaced by "generation image" or "the social media generation"--young writers who don't have as long a frame of reference, and for whom major events are unprecedented. A lot of us are prone to only think of market history as it relates to the course of our young careers.
We forget just how much we can learn from financial history, how stocks have done under similar circumstances to the ones we're in now. And that helps us keep level-headed when making portfolio decisions for the future. You have to train your brain to do this.
Ken Fisher, the author of "Beat the Crowd," understands better than anyone else I've read that emotions are an investor's worst enemy. To him, making successful decisions (in investing, and really life in general) is about tuning out the noise and considering what can be learned from similar situations in the past.
Take, for example, P/E ratios (which Janet Yellen recently said she thought were too high). "Common knowledge" as parroted by most financial media would say that you would never, EVER want to invest in the market when overall P/E ratios are high and that low P/E ratios mean that stocks are "due" and should be purchased immediately.
Nope. P/E ratios are not predictive. There's no direct statistical correlation between S&P500 P/E ratios and the start of bull markets or bear markets. None. And to prove that to you, in Chapter 7 of "Beat the Crowd" he'll track the last dozen or so bull and bear markets, see where the ratios were, and show you the result. The power of doing your own homework.
Earlier in the book before turning to specifics like the one above, Fisher will lay out what his idea of contrarian investing and independent thinking is, including a few lessons from his dad. It's about finding the elephant in the room that no one else notices (or misidentifies).
In Chapter 4, he runs through several iterations of commonly-perceived "elephants" (like Social Security, eurozone woes, and Millennials never finding any success) that really lack power to move markets in the next 30 months. It's probably the best chapter in the book and is worth the purchase price just for that.
Another excellent chapter is the reading list towards the end. It contains many investment classics like Ben Graham's "The Intelligent Investor" but also some others I'd never heard of, like "Templeton's Way With Money" (future Monkey's Review posts). So after you're done with "Beat the Crowd," continue your education to stay sharp. The market ("The Great Humiliator" or "TGH" for short) is simply too good at what it does to let you stop here.
"Beat the Crowd" is a great mix of market history, philosophy, statistics, and sacred-cow skewering. You may disagree with everything Fisher says, but he has evidence of all kinds to back up everything he says. I wish he would do more interviews so that more people can witness him calmly rebut the panic-stricken media, not with more shouting, but with detached faith in his investing philosophy. I was inspired to revisit and reevaluate my personal portfolio after reading this, and perhaps you will as well. I hope we don't have to wait for his 12th book as long as we did for this one, his 11th and maybe his best.
Read up, monkeys!
Monkey’s Review 1: Barbarians At the Gate
Monkey’s Review 2: The Financier
Monkey’s Review 3: Decision Points
Monkey’s Review 4: Debunkery
Monkey’s Review
5: When Genius Failed
Monkey’s Review 6:
Monkey Business
Monkey’s
Review 7: Death Of The Banker
Monkey’s Review 8: A Journey
Monkey’s Review 9: Damn It Feels Good To Be A Banker
Monkey’s Review 10:
The Quants
Monkey’s
Review 11: All About Hedge Funds
Monkey’s
Review 12: The Unlikely Disciple
Monkey’s
Review 13: Adventure Capitalist
Monkey’s
Review 14: The Hedge Fund Book
Monkey’s Review 15: Investing In Hedge Fund of Funds
Monkey’s Review
16: Hilarity Ensues
Monkey’s Review 17: The
Prince
review>Monkey’s Review 18: Markets Never Forget (But People Do)
Monkey’s Review
19: The Money Culture
Monkey's
Review 20: An Empire of Wealth
Monkey's Review
21: The New Tycoons
review>Monkey's Review 22: A Bold, Fresh Piece of Humanity
review>Monkey's Review 23: Ahead of the Curve (2 Years At HBS)
Monkey's
Review 24: How To Be A Gentleman
review>Monkey's Review 25: Ten Roads to Riches
Monkey's
Review 26: The Best of Braverman
Monkey's Review 27:
Street Freak
Monkey's
Review 28: Kitchen Confidential
Monkey's Review 29:
The Buyside
Monkey's
Review 30: The House of Morgan
Monkey's
Review 31: The Wolf of Wall Street
interesting, ITF. I agree, PE ratios and the more popular CAPE are terrible for timing, but at the same time, does Fisher comment on the ability of a low PE/PB/PCF strategy to outperform (as in Dreman's research)?
I'm now curious to buy the book purely because he'd be one more contrarian author that has an interesting take.
Low PEs CAN outperform, just not always. In one part (I forget the exact chapter), he talks about finding the "Texas Instruments" of Wall Street and contrasting it with another tech company that were both Wall Street darlings with low PEs at the same time. Texas Instruments soared and made a huge profit due to the quality of its R&D, but the other company never went anywhere.
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