Quote for the Week

It is very hard to think against the crowd, especially when the crowd is practically universal and unanimous in thought and emotion. When a man lifts his voice in chorus with a thousand other voices, singing nobly on a hillside, he will feel confident and exalted, at least until the song is ended, whether or not his actual circumstances warrant the feeling. Or try another shaky metaphor: when Galileo announced that the sun stood still and that the earth moved around it, virtually everyone with any interest in the subject agreed wholeheartedly that he was either crazy, wicked or both. This opinion was shared by both educated and uneducated. We should hesitate to label any of them as stupid, because if we had lived in those times that would almost certainly have been our scornful opinion too. — Fred Schwed Jr. (source)

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Quote for the Week

Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earning power through economic changes or deterioration of management. In the five editions of The Intelligent Investor I have used the example of A&P shares in 1936-1939 to illustrate the basic difference between fluctuations in price and changes in value. By contrast, in the last decade the price decline of A&P shares from 43 to 8 paralleled pretty well a corresponding loss of trade position, profitability, and intrinsic value. The idea of measuring investment risk by price fluctuations is repugnant to me, for the very reason that it confuses what the stock market says with what actually happens to the owners’ stake in the business. — Benjamin Graham (source)

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Quote for the Week

I’ve been an advisor to a couple of endowment funds. I was on a finance committee on one of them for quite a while. We had an outside advisor who set up benchmarks and suggested managers and hedge funds that would supposedly outperform, and so forth. The committee would work on this very seriously. These were smart, successful people, about a dozen, with a range of expertise. They would debate long and hard about how to allocate the assets — how much to emerging markets, how much to bonds, and so forth. And they’d fine-tune it from time to time, but mostly it didn’t make much difference. I found it difficult to persuade them that all this cerebration was a waste of our time. — Ed Thorp (source)

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Here’s what I’ve been reading for the past three months:

• Value Investing Makes Sense – Jean Marie Eveillard is a French-born value investor who had a successful career that began running a mutual fund at SocGen, which became First Eagle. He describes his journey from the discovery of value investing, why he transitioned from Graham-style to a Buffett-style strategy, and the experiences that led to his long-term success. The book is only available in print, as far as I know, and is not the easiest to find.  (notes)
• American Business History – Walter Friedman explains why the U.S. is so unique compared to the rest of the world when it comes to businesses. He covers the factors that drove business dynamism since before the early colonies. If you like history and business, this is a good book for you. (notes)
• Men and Rubber: The Story of Harvey Firestone – Harvey Firestone’s autobiography recalls the story of how he turned a small tire company into an industry leader. The book includes a detailed perspective of the early automobile industry and insights into the problems new businesses continue to run into today. (notes)
• Immoderate Greatness: Why Civilizations Fail – Major civilizations throughout history, much like markets, cycle from rise to peak, to collapse. The book focuses on the primary drivers of the decline and fall of civilizations. It’s not the most optimistic book, nor unbiased, and for a short book, the author over-relies on analogies that could have been cut out. Notes to come.
• The Buffett Essays Symposium – The book is an annotated transcript of an event held in 1996 to discuss topics covered in Warren Buffett’s essays. You get a mix of different views from Buffett, Munger, and others on corporate governance, investing, M&A, accounting, and more. If you’ve read The Essays of Warren Buffett, you might find this interesting. Notes will be published once I’ve finished it.

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