A random walk down wall street : first finance book I have ever read. It is only 10 years later that I realise to what extent it convinced me of the EMH from then on.
Reminiscences of a stock operator : currently reading this one and I know already that it is changing the way I look at the stock market. I have been progressively drifting away from the EMH regardless of this book, but I don’t think that I have ever read anything like it. The world has changed alot since Reminiscences and I am sceptical of some stuff in there, but it portrays a world in which the “weak vs semi-strong vs strong” debate is absolutely meaningless because the EMH would not even be relevant.
Obviously, the reality is somewhere in between these 2 extreme views.
I am just happy that I read these 2 books in this order, because otherwise I would most probably have lost money.
It intrigued me more than influenced me. It was a mixture of bio and fiction of Jesse Livermore’s life written in an era that I was fascinated by (the roaring 20s and the great Depression). Jesse himself was quite a character, someone who was anything but risk averse. He went from rag to riches back to rag many times over.
The one trading advice I remember from that book is to follow the path of least resistance.
And although I haven’t read any books by him, I read a lot of the writing of Jeremy Grantham. To me he is Warren Buffet but much more substantative. Warren Buffet is more of a macro guy, Grantham gets into the minutia when discussing things.
Speaking of books, I’m currently reading a book you suggested on this site ages ago: Secrets of mental math. I had no idea there was an underground of mathemagicians.
_To leave it to capitalism to get us out of this fix by maximizing its short-term profits is dangerously naïve and misses the point: capitalism and corporations have absolutely no mechanism for dealing with these problems, and seen through a corporate discount rate lens, our grandchildren really do have no value _
I can’t wait for his 2013Q4 Quarterly Letter. I hope it discusses the current run up in US Equity prices
I have read most of the famous books and I think they are generally overrated. Experience trumps everything. If I had to pick one book, it would be The Little Book That Beats the Market. That book explains about 30% of the puzzle, which is more than any other book I can think of. I also enjoyed all of the Peter Lynch books.
If you want to learn to invest, put the books down. Go find the 100 best performing stocks in each of the last 3 years. Look at all 300 relatively quickly, maybe 1 a day most days of the week (this would still take you a year of your free time but so would the books). Take notes. Look for patterns. Then apply it. You would learn more that way than reading every finance book ever written.
This is literally the best thing you could do to become a better investor. It’s better than the CFA, b-school, and all the books combined. Yet no one does this. It’s a mystery to me.
The other thing is, you have to realize that value investing is just the start. It’s a good start. But value investing alone is incomplete and potentially dangerous. It is also very difficult psychologically for most people to apply.
Experience is necessary, but presumably having a basic framework that includes some risk management at the very minimum is important for not striking out so disastrously in the first one or two rounds that you can’t recover.
And one issue to consider is that the last three years is probably not representative of the market conditions you’ll run into over your lifetime (and perhaps no three year period is). That doesn’t mean that bromion’s advice isn’t basically sound - it just means that one shouldn’t get over-wedded to lessons learned in the last few years (which might well be that “it doesn’t matter what stocks you buy, as long as they are equities.”)
But the books don’t have the basic framework, either, IMO. The Buffett value investing stuff is totally commoditized and is not practical in today’s market. Buy low P/E stocks? Are you sure? The stuff that screens low P/E has been vetted by literally thousands of people already and passed on. Many are value traps or businesses that shouldn’t be measure on P/E. You will never see KO trading at 4x P/E because the market is far too competitive for that to occur.
There are definitely different trades that work over any particular time period. Ideally you would look at some large number of stocks after each year and then you could learn those trades. High quality levered companies were amazing in 2009. Today it is harder to find longs, but I still found a few low risk doubles this year based on specific quantitative patterns. Today the fat pitch trade is shorting the pump and dumps (of which there are many, but you wouldn’t see those in 2009).
I disagree it doesn’t matter, there have been some spectacular flame outs in recent years. Look at UNXL as one of the biggest blow ups this year, falling from the 30s to ~9 and probably going lower. There are many lessons to learn from that stock. It was a darling of the Street at one time. There have also been some great, very low risk longs. Look at CCIX, that was a beast at $10 with several near-term earnings catalysts and buyout potential (the proxy had buyout written all over it). It took a few hours to unravel and it was the largest position in my PA this year.
It’s about recognizing the opportunity quickly and moving quickly, not spending weeks or months researching one company and then possibly still getting it wrong (which is what Wall Street does).
Edith Wharton in her short stories and some of her classic novels would touch upon the old street that done can’t change… her perspective was of course from the triteness of old money… but done nothing has changes see.
