Book Reviews – Page 21 – The Aleph Blog

Book Review: TradeStream Your Way to Profits

Posted on 23 March 201012 February 2011 by David Merkel

I like to review books, and I will do it whether I get compensation or not.?? Unlike most reviewers, I read the books that I review, unless I indicate otherwise.? I have read this book.

This is a book designed to show readers where they can find useful resources on the Web for investing.? The author has a long affiliation with Seeking Alpha, an organization that I have supported, and benefited from during my time of blogging.

The book gives readers a panoply of sources to gain investment ideas from: blogs, aggregators, the sites of mainstream publications, data vendors, etc.? He focuses on the social web for investing, showing places where investors can help one another in the search for profits.

Areas that are focused on include:

Following blogs
Following professionals through their 13F filings
Message boards, and their successors
How to do investment screening
Following insiders
Rumors
Doing fundamental industry research

There is a lot here, and the author handles it well.? I was never bored with this book.? He has a very good selection of sites on the internet for delivering investment information.

Quibbles

Look, any book on the internet and investing is likely to be of limited value 2-3 years out.? Things change that fast.? If you buy that book, pay attention to it and use it rapidly.? The advantages that the book describes will largely be gone by 3 years.

Who would benefit from this book?

Investors that use the internet would benefit from this book.? It will help them find better sources for data, and aid them in navigating the noise of the internet.

If you want to buy this book: TradeStream Your Way to Profits

Full disclosure:

I received this book from the author for free.? If anyone enters Amazon through my website and buys anything, I get a small commission.? I don’t want to do a “tip jar.”? If you get value from what I do, and you need something where Amazon offers you the best price, buy it there, after entering through my site.? Amazon pays me, and you pay nothing extra.? What? a great deal.

Book Review: Diary of a Hedge Fund Manager

Posted on 19 February 2010 by David Merkel

This is a book that gives a feeling for being in hedge fund management, rather than a dry description of what needs to be done if you are in the rare position of being asked to manage a hedge fund.

The author was an ambitious guy.? Growing up in Canada, he wanted to play professional hockey.? He played ably in youth leagues, the minors, and college.? Making the pros was not to be.

So, what does a competitive guy do when he can’t pursue his dream?? He pursues another dream, managing money. He works hard, and gets one break after another, and eventually manages his own firm, which he sells out to a larger one.? He gets a plum job at a firm that proves less than patient with his current performance, and he gets let go.? Even that is a triumph for the author.? He starts his own firm, which is what he is still doing today.

Think of an analogy to sports — every player makes mistakes, but the best players recover from mistakes well and learn from them.? The author definitely got his share of breaks, both good and bad, but he responded to the bad breaks well, and came out the better for it.

Though this book is about hedge funds and other areas of investing, really, this book is about the author.? It tells his story, and as the story gets told, you pick up incidental points along the way:

What is it like to be an intern at a trading firm?
How do you learn as you go?
What was it like inside CSFB during the dot-com bubble?
How to interview management teams to get an edge.
How to sense if someone is lying.
In general, the Fund of hedge funds operators are not desirable clients.
Get a sense of the strength of consumers
Get a sense of the three time horizons — days/weeks, months, and years.? (He uses other terms than this, but I appreciated his logic here, because it seemed a lot like what I did as a corporate bond manager.? Have a sense of short-term momentum, medium-term trend and long-term mean-reversion.)
Very good to good means sell
Very bad to bad means buy
The value of keeping a trading journal, and reviewing performance.
Be careful who you do business with, because eventually they may show you the door for less than good reasons.
Surviving the credit bubble’s bust.? Buying back in when people are panicking.

The book runs 204 pages, but roughly 30 don’t have much on them.?? The book is breezy, and though I mentioned a lot of things that I got out of the book, readers less familiar with the subject matter might miss some of the points.? He does not spend a lot of time on the details. On the other hand, a reader less familiar will get a feel for what it is like to be a part of a fast-paced area in investments.

Who would benefit from the book:? Those that would like to read the tale of an interesting guy who had a tiger-by-the-tail initial career in investments.

If you want to but the book, you can get it here: Diary of a Hedge Fund Manager: From the Top, to the Bottom, and Back Again.

Full disclosure: The publisher sent me this book. They send me a lot of books, and I review as many as I can. I don’t like every book that I receive, but typically I review the ones that seem the best, and let the rest pile up. Anyone entering Amazon through my site, and buying anything, I get a small commission, but your price does not go up. Such a deal.

PS — the blog for the author’s firm is here.

Book Review: Quality of Earnings

Posted on 2 February 201010 December 2010 by David Merkel

I think earnings quality is one of the great neglected concepts of investing.? Why do many growth investors blow up on seemingly promising companies?? The answer is often that the investors did not review earnings quality.? Why do value investors fall into value traps?? The answer is often that the investors did not review earnings quality.

I have reviewed a number of books, and written many articles about earnings quality? Because so much of the investment world is blind here, the idea still has punch.

Thornton O’Glove hits at the subject in a traditional way — accrual accounting entries are always more suspect than cash entries.? He focuses on:

Being skeptical — don’t trust management, analysts, auditors.
Look for inconsistencies in disclosure.? Who tells a happy story broadly, bet is serious in regulatory filings?
Who plays games with one-time events?? What companies push the limits in determining what is a one-time event?
How do companies play with their accruals in order to report income?
Is taxable income significantly out of whack with GAAP income?

The book was written in the Mid-1980s, before it was easy to review SEC filings.? That has changed, but few really review filings today, even though it is easy to do so.

This is a good book, and you can learn a lot from it, but many of the references are dated, as in the classic version of “The Intelligent Investor.”? I mean, I recognize most of the examples, but many readers will say, “Huh, I’ve never heard of that company!”

Do you want to improve your investing?? Look to earnings quality.

Who could benefit from the book?? Any investor could benefit from the book, particularly those that analyze fundamentals.

If you want to buy the book, you can buy it here: Quality of Earnings

Full disclosure:? I bought this book.? I review books old and new.? This old book still has value, and I recommend it.? It will require more effort than most investors are willing to put forth, but I believe it will yield value to those who work with it.? This is simple stuff, but it is work, and there is always a barrier to entry around work.

Also, anyone entering Amazon through my site and buying anything — I get a small commission, but you don’t pay anything more.? I love it when both my readers and I win.

Book Review: Reminiscences of a Stock Operator (Annotated Edition)

Posted on 22 January 2010 by David Merkel

I read Reminiscences of a Stock Operator around ten years ago.? I was trying to understand trading dynamics in the market, and the book was mentioned frequently.

It is a classic.? But can a classic be made better?? In this case yes.? Jon Markman, an able financial writer,?has written notes around the narrative, with pictures and graphs that illustrate many things that would be obscure to the reader of the book.? Markman brings forgotten people to life, and motivates the events that transpired.

It was an exciting era, one where the common law of contracts played a greater role, and statutory law played a lesser role.? It wasn’t no-holds-barred, but it was close.

We are experiencing our own era of leverage that is too high, and what happens when it breaks.? The protagonist of the book, Jesse Livermore, aims for best advantage, and learns as he goes along, going broke several times in the process, and dying broke as well.? Leverage cuts two ways.? Live by leverage; die by leverage.

Paul Tudor Jones II writes an appendix to the volume, as well as a foreword.? Being a trading billionaire who started from scratch and went broke a few times, he is an excellent man to get into the mind of Livermore on a modern basis.

Who would benefit from this book: Historians would benefit, as would those interested in trading.? Economists wanting to get a look at market microstructure would also benefit.? Livermore, more than most, gives a full view of technical analysis, because he lays bare the motivations of players, and how other players attempt to devine those motivations.

If you want to buy this book you can buy it here: Reminiscences of a Stock Operator Annotated Edition.

Full disclosure: Publishers send me books.? I review some of them.? I try to review the best of them, but I promise the publishers nothing.? If you click on a link that leads you to Amazon through my website, and you buy something, I get a small commission.? My view is that you should buy what you want.? Don?t reward me for something that you don?t like.? Rather, enter Amazon through my website and buy what you want; it will cost you nothing more.

Book Review: Wealth, War & Wisdom

Posted on 20 January 2010 by David Merkel

The first thing I do when a PR flack sends me a book is throw away their summary.? Unlike other reviewers, I read the books.? The publisher sent me this book, but I did not ask for it.

All that said, I thought Wealth, War & Wisdom was a great book, and I spent more time on it than I normally do for books of equivalent length.? Why?? It covered areas of history that I was not as aware of.

This book is really two books in one.? It is a book that covers the history of WWII in an eclectic and cursory way.? After that, it asks the harder question of how one can assure the preservation of wealth in a volatile world.? In a lesser way, I have talked about that recently.

Regarding the history of WWII, I came away with a greater appreciation of:

The troubles Britain faced.
The cruelty that the people in the nations overrun by Hitler and the Soviets faced.
The compromises many nations made to have an easier time in the War.
The courage that it took to oppose aggression in the face of initially bad odds.

One commonality between Germany and Japan was a lack of resources, and rather than produce and trade to get them, they chose conquest.

But the greater problem is how one preserves wealth over all contingencies.? The problem is almost insuperable.? Even as some wealthy people today are buying farmland, that was one strategy to preserve wealth in WWII.? Homely farms that were reasonably productive, but not ostentatious, were ideal to preserve wealth and lives.? Away from that, investing abroad was wise for the rich.? Also, commodities and TIPS, which did not exist then might preserve some wealth.? Gold and other precious items, if small could also preserve wealth, or at least life.

For those who live in the US today, we live in a special time and place.? We are free from the losses that come from aggression on our home soil.? We largely agree with one another, much as politicians may disagree on that point.? Americans are exceptional in so many ways, though not all of them are good.

Preserving wealth means owning productive land locally, and having flight capital abroad.? Away from that, Biggs counsels owning stocks because good times happen more often than they should.

I liked this book, more than many, and if you want to buy it, you can find it here: Wealth, War and Wisdom.

Full disclosure:? Publishers send me books.? I review some of them.? I try to review the best of them, but I promise the publishers nothing.? If you click on a link that leads you to Amazon through my website, and you buy something, I get a small commission.? My view is that you should buy what you want.? Don’t reward me for something that you don’t like.? Rather, enter Amazon through my website and buy what you want; it will cost you nothing more.

Book Review: The Only Three Questions That Count

Posted on 15 January 201015 January 2010 by David Merkel

I resisted getting this book when it first came out.? Much as I enjoy Ken Fisher as a writer, and appreciate the interaction that I have had with him over the years, the title turned me away.? “Three questions? Only three?? Investing is far more complex than that.”? I would say that to myself.

After reviewing his most recent book, I said to myself, “Well, you’ve reviewed all of his books but one; you may as well do it.”? So, I borrowed the book from a friend.

I wish I had read it sooner.? The three questions are simple ones, and they have been mentioned elsewhere on the internet, so here they are:

What do you believe that is actually false?
What can you fathom that others find unfathomable?
What the heck is my brain doing to blindside me now?

The idea is to get us to think more deeply.? Test the received wisdom to see if it is really true.? Look for unusual areas of competitive advantage that you have that are possessed by few.? Your emotions will often lead you astray: look for opportunity amid fear; look for shelter amid wild abandon.

Competitive advantage in investing is an elusive thing.? The clever idea that you might discover is just one journal article away from an academic toiling in obscurity, but will go to a? hedge fund two years from now.

Patterns that work in one market should work in most markets.? If your discovery seems to work in most places, it might work well, until it is discovered and used heavily.

I found a number of insights useful.? Like me, he uses E/P relative to bond yields to try to estimate whether markets are rich or cheap.? I also found his insights about how the yield curve affects style investing to be useful.? I do something like that through my industry rotation.

Now, in the intermediate-run, most things that people are scared about don’t affect the market much.? Government deficits seem to be a positive for stocks in the short run.? Trade deficit?? Little effect on stocks.? Weak dollar?? Little effect.? This book debunks a number of common worries, though I would say that if the problem got significantly bigger, perhaps the result would be different.

Ken Fisher offers what I would deem to be good advice on Asset Allocation, and how to make sell decisions, amid many other issues.? I enjoyed the book a lot, and would recommend it to my readers.

Quibbles

Occasionally, the book seems disjointed.? Ken Fisher is covering a lot of ground, and he takes a decent number of “side trips” to explain concepts.? The flip side of that is that the book covers many areas of the equity markets, and helps to explain what drives them.

Now, sometimes I wonder if multivariate approaches might reveal different conclusions than what Ken Fisher comes to.

Who would benefit from the book: Investors with moderate experience in investing who are finding the going harder than they expected.? This book will help them take a step back, and think twice about investment decisions.

If you want to buy the book, you can buy it here: The Only Three Questions That Count: Investing by Knowing What Others Don’t (Fisher Investments Press)

Full Disclosure: Book reviews are my main profit center at my blog.? They allow me? to create a win-win situation for me and my readers.? I don’t want my readers to waste their money to reward me.? I would rather they buy things that they want to buy at competitive prices through Amazon.? If they enter Amazon through my site, I get a small commission, and their price does not change at all.? Such a deal.

Book Review: Why are we so Clueless about the Stock Market?

Posted on 9 January 2010 by David Merkel

This is a basic book.? If you are trying to introduce someone to investing, this would have value.? It uses concepts familiar to every man to explain that there is nothing amazing about good investing — it is just common sense sharply applied.? In terms of deep insight, I don’t see a lot of it, but that is not what the book is aimed at.? The book is for new investors looking to understand the markets.

There is much that is good here, but nothing deep.? If you want to buy the book, you can buy it here: Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market.

Full disclosure: Anyone who enters Amazon through my site and buys something sends me a commision.

One Dozen or so Books on Economics

Posted on 30 December 200930 December 2009 by David Merkel

One reader asked me:? David do you have a Top 10 book list on Economic Theory for beginners? Just finished “The Myth of the Rational Market” and loved it. But I don’t know what to read next. Or let me ask the question another way, should I start with reading books on Austrian economics? Hayek? Misses? Fisher?

I do want to give a list of economics books that I have read that I have found useful.? I am an odd duck here, because I have been schooled in the neoclassical theories, and I have largely rejected them.? Men, and the institutions of men are more complex than that.

Here’s my dirty secret.? Yes, read the Austrian economists, but I have not read any of them.? I have come to their conclusions on my own, but my views have also been influenced by Minsky and the Santa Fe Institute.? I view economics as ecology.

All that said, here is a list of economics books that I think are valuable, that I have read:

1) Manias, Panics and Crashes, by Kindleberger. Kindleberger explains how crises come into existence in a systematic way.

2) Devil Take the Hindmost, by Chancellor.? Chancellor describes the history of crises, and gives significant background data regarding economic crises.

3) The Alchemy of Finance, by Soros.? Explains why men are not rational as the neoclassical economists think.? Explains nonlinear dynamics — reflexivity, as he calls it.

4) A History of Interest Rates, by Homer. ? Detailed studies of how interest has played a role in our world again and again, even as idealists attempt to limit or eliminate it.

5) The Volatility Machine, by Pettis.? Explains how smaller nations get whipped around by the economics of larger nations.? The author is an important read in my opinion at his blog.

6) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, by de Soto.? Puts forth the idea that laws protecting property rights help create wealth.

7) Against the Dead Hand: The Uncertain Struggle for Global Capitalism, by Lindsey. Promotes global trade as a means of increasing wealth.? On the same topic, How Nations Grow Rich: The Case for Free Trade, by Krauss.

8 ) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor — Puts forth why culture matters.? Some cultures by nature will be poor and others rich.

9) The House of Rothschild: Volume 1: Money’s Prophets: 1798-1848 and The House of Rothschild: Volume 2: The World’s Banker: 1849-1999, by Ferguson.? Records tumultous years, and how some of the most clever capitalists ever known survived it.? Also notes that they never expanded to America when it would have counted.

10) The Birth of Plenty : How the Prosperity of the Modern World was Created, by Bernstein. Explains how the Western world grew into the present lack of scarcity that it now has.

11) The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics, by Easterly. Development economics is at its best when there are few subsidies — economics in the developing world is the same as it is here, only more so.

12) The Nature of Economies, by Jacobs.? In story form, she explains the nonlinearities of economics.

My view is that governments should provide a few basic simple rules regarding the economy, and let the courts fill in the details.? Economies grow best when they are free, and where the culture concludes that growth is valuable.? That is not true everywhere.

Full disclosure: all of the books that I mention here I own, and I bought with my own money.? If you enter Amazon through my site and buy anything, I get a small commission, but your prices are he same regardless.

Update: These are books on macroeconomics.? I may have a similar post on microeconomics coming.? Also, I forgot one book that I recently reviewed: This Time is Different, by Reinhart and Rogoff.? They cover why crises happen, but unlike Manias, Panics, and Crashes or Devil Take the Hindmost, they quantify it.

Where Can I Learn the Investment Math? The Bond Math?

Posted on 25 December 2009 by David Merkel

I was recently asked where to look for how to understand quantitative investing, fixed income, etc.? Let me try to explain.

I have reviewed in the past Investing by the Numbers (Frank J. Fabozzi Series).? This is a good book that covers a wide number of areas in quantitative investing without getting too technical.? I learned a lot from it, and I don’t think the lessons there are out of date.

As for Fixed Income, the main book is Handbook of Fixed Income Securities 7th Edition, edited by Frank Fabozzi.? Fabozzi gets practical experts to write for him and he edits the book so that it reads well.? The result is a readable book that gives all of the qualitative information about the market, but does not deliver the math.? That’s a good thing.? Most people don’t want the math.

But… what if you are a misfit like me who does want the math.? Where do you go? Buy the Theory of Interest.? And, don’t buy it new.? Buy it used, or get it through interlibrary loan.? Same for Fabozzi’s book.? Don’t overpay.? And, if you can understand it well, maybe you would like to become an actuary.? The actuarial profession has done many good things for me; maybe it will do so for you also.

I have learned a lot from all three of these books.? You can too.

Book Review: 100 Minds That Made The Market

Posted on 18 December 2009 by David Merkel

Some people are hard to buy gifts for.? With books, there is often a trade-off between books that say a lot, and those that people are willing to read.? One book that I think hits the sweet spot is 100 Minds That Made The Market, by Ken Fisher.

Why do I think this?? This book is 100 little books in one volume.? You can pick this book up for five minutes, and read a well-written 3-4 page biography of person who has had a significant impact on how our markets work today.? Then you can put it down, get back to work, and think that you have learned something significant.

When I read this book back in the late ’90s, I recognized about half of the people who were profiled in the book.? I felt that I learned a lot in a short amount of time.

Consider the categories of people that the book deals with:

The greats of the distant past (late 18th Century to mid 19th Century)
Investment Writers and Data Publishers
Famous investment bankers
Bankers
Central Bankers
New Deal Regulators
Swindlers, Scamps, Rogues, and Thieves
Statisticians, Economists, and Nuts
Successful? Entrepreneurs and Speculators
Unsuccessful Entrepreneurs and Speculators
Notable Oddballs
And more

The biographies are well-written and concise.? They illustrate eras in Western, and in particular, American Capitalism.? Many of the names are obscure in the present day, but after you read the biography, you have no doubt that they were important to their era.

I enjoyed the book greatly, and hope that you will too.? If you want to buy it, you can get it here: 100 Minds That Made the Market (Fisher Investments Press).

Full Disclosure

I review books because I love reading books, and want to introduce others to the good books that I read, and steer them away from bad or marginal books.? Those that want to support me can enter Amazon through my site and buy stuff there.? Don?t buy what you don?t need for my sake.? I am doing fine.? But if you have a need, and Amazon meets that need, your costs are not increased if you enter Amazon through my site, and I get a commission.? Win-win.