Investing Book Reviews, Scr

By pjain      Published June 6, 2020, 8:06 p.m. in blog Invest   

Investing Needs - Thinking Different, Higher Level, Contrarian

Stock market discounts everything - is like a GOD!

The basic problem is the stock market is a discounter of all widely known information

Most Funds can't beat the market with YOUR costs - at best take MORE RISKS!

Only with deeper insights and SPECIAL knowledge can you win sometimes

The only way to make, on average, winning market bets is knowing something most others don’t.

But it is EVEN WORSE - often our beliefs get in the way - GREED, FOMO, Getting in with the herd at market tops - FEAR - Selling near bottoms

  • So you need to honestly itemize and test your beliefs

  • You need to uncover information not widely known or understood.

Beliefs and Behaviors - need a Scientific Method of Knowledge

Investing should be treated as a science, not a craft, and details a methodology for testing beliefs and uncovering information not widely known or understood.

Forbes Magazine which said "Fisher's key insight is that investment is not a craft that can be mastered by merely accumulating information." So people who copy Warren Buffet by reading for hours may not really get much head.

Higher level Thinking by Howard Marks

Challenging yourself is key to Successful Investing

Three Questions that Count By Ken Fisher

The book’s scientific method consists of asking three questions - while it appears philosophical, covers why investing is so hard! Other issues covered include high P/E ratios; debt; the federal budget, trade, and current account deficits; the U.S. dollar; high oil prices; emerging markets; gold; and the U.S. economy.

1. What do I believe is true that’s wrong? - ADDRESS YOUR OWN MYTHS

This addresses common investing errors and herd following instincts.

What do you believe is true that's actually wrong? If you are captivated by some market myth, other investors probably are, too. Figure out what that popular but wrongheaded belief is and you can disassociate yourself from it. You can bet against it.

Example: Most investors believe that years when the market is trading at a high multiple of its collective earnings are bad years in which to invest and low-P/E market years are good times. This popular belief is contradicted by the evidence, as I have outlined in earlier columns. Yes, there are some high-P/E years that turned out to be disasters (2000 and 2001, for example). But there are just as many occasions when buying into a high-P/E market was the right thing to do, for example in 1932, 1998 and 2003. So when you see folks freaked out by high-P/E markets, you can bet against them. You know something they don't know. You can invest knowing that the market P/E is irrelevant. (And it should be.) -- Ken Fisher in Forbes article

2. What can I fathom that others can’t? COMPETENCE CIRCLES, FAT PITCH, INVEST WITH CONFIDENCE

The experts are wrong more often than not - but people get depressed how they can beat the experts. This shows how to try to find bettable patterns which others may misinterpret,

If you have the right instinct for turning market statistics into buy-and-sell signals, you seek correlations first, then causal relationships that would explain them.

YIELD CURVE Example: The main force driving cycles when growth stocks do well versus value is time-lagged shifts in the yield curve. The yield curve plots the yield on Treasury notes and bonds against their maturity dates. The historical pattern has been this: About 9 to 12 months after the yield curve gets flat, growth stocks start beating value stocks, and they continue to beat value until the curve gets very steep again. The causal relationship is very simple. A flat yield curve reflects a reluctance of banks to lend to commercial borrowers. And value stocks are very borrowing-dependent, while growth stocks aren't. At the moment the yield curve has gone close to flat--the yield on ten-year Treasurys, 4.1%, is not much more than the yield on two-year Treasurys, 3.9%. So mid-2006 is the time to prefer growth to value. -- Ken Fisher's forbes article.

3. What is my brain doing to mislead me? BLIND SPOTS!

The real bottleneck is not information (PEs, Analyst ratings, etc are all public info) but "your own psyche. Overcome your psychological failings and you can be a better investor." - Key Fisher

This deals with behavioral finance, pointing out cognitive errors such as overconfidence and confirmation bias.

I've been writing here for years about self-blinding psychological traits like confirmation bias and reframing (Aug. 15), fear of heights, myopia and Stone Age hardwired thinking. It takes time and effort, but you can learn. For example, if you are myopic and suffer confirmation bias, you are a trend-follower and will miss upcoming changes like the capital expenditure and agricultural booms starting in 2006. - Ken Fisher

I am a Guru - Mystery of Good investing is too hard for you!

Of course it is self-promotional too - promoting him has a mysterious guru. Wall Street types like Fisher make a lot more money when they make investing seem complicated.

  • "I have a system" - Ken Fisher

He is seen by many as very opaque and mysterious. His success can be explained by Fat, rich and lazy investors want to believe they are with the "smart money."

Critical Review

A native of San Francisco, he never worked at a traditional Wall Street firm and began his career in the private investment firm owned by his father, Philip A. Fisher, a well-known investor and author. By 1979, Mr. Fisher struck out on his own, forming his own investment firm. He penned his first book, “Super Stocks,” in 1984 and has written 10 more since. By 2018 he owned a $112 billion dollar AUM investing firm.

  1. DIRECT SALES TO INDIVIDUALS KEY. The true key to Mr. Fisher’s success has been advertising and employing an army of salespeople to cold call investors, often relying on leads generated from internet responses. Fisher said he had developed a marketing system that was “unique among asset management firms.” and in 2004 it spent $14,000 to attract each of it customers. For decades, it has insisted on a minimum balance of $500,000 per client. Even in 2018 his firm spent just over $68 million on advertising, and the firm ranks as the 12th-biggest ad spender in the financial services industry. Over decades, all that spending has attracted a robust client base for Mr. Fisher’s firm.

  2. ASSET GATHERING MACHINE. Of the $110 b AUM, (??breakdown needed/validation?) it manages about $60 billion for more than 65,000 individual investors — the bulk of its client asset base. On the other hand public pensions and state and municipal governments accounted for roughly 10% or $11 billion of the firm’s assets. The firm’s other clients include sovereign wealth funds, corporate profit-sharing plans, other investment advisers and charitable organizations.

  3. INVESTMENTS - HIGHER RISK/EDGY for Higher Returns. Fisher invests client money in a variety of stock strategies that include investments in small-cap, emerging-market and so-called frontier market stocks.

  4. OPAQUE PERFORMANCE NUMBERS - "Confidential". Since these are private wealth investments, there is no easy way to get actual performance. Also it does not focus on traditional mutual funds. But some past Fisher funds with publicly available numbers have underperformed the market substantially. The Purisima Total Return Fund, a mutual fund that Mr. Fisher managed, had a return of almost 25 percent in the 10 years before its liquidation in 2016, according to Bloomberg data. Yet over the same period, investments in the S&P 500 would have risen roughly 100 percent.

  5. HOW IT MAKES MONEY ON Assets. His firm makes most of their money from fees charged to clients, which can range from 0.5 percent to 1.5 percent.

    Fisher Investments charges ridiculous and unnecessary fees and for that you get a middling-to-lousy track record of returns. ..

  6. BACKLASH ON RACISM, SEXIST Comments.

    Ken Fisher got a ton of flak on calling "Lincoln the worst president" - saying slaves would have been better off if had

  7. The Only Three Questions That Count - Wikipedia

  8. Three Questions That Count - Forbes.com

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