Buy the Book: Thomas Gibson’s 1906 classic is the result of studying thousands of speculative accounts over a ten-year period. It sits as a timeless warning on the numerous mistakes investors make in the stock market.
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Quarterly Reading – Winter ’22
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Here’s what I’ve been reading the past three months:
- Baruch: My Own Story — This is the first of two volumes of Bernard Burach’s autobiography. Baruch built his fortune on Wall Street as a speculator and dealmaker, before entering public life managing the mobilization effort of WWI and advising presidents. I found it easy to read and fascinating not only for the stories of his investing hits and misses but the history of major financial events as seen through the eyes of someone who was there. (notes)
- The Pitfalls of Speculation — Thomas Gibson wrote the book in 1906 to highlight the many ways people lose money speculating in the market. Of course, those ways are still the same today. It filled my old book quota for the quarter.
- Ice Age: The Theory That Came in From the Cold — Ice Age explains the history behind the discovery of the cycle of ice ages, why it happens, and how it impacts the planet. (notes)
- The Davis Dynasty — The book tells the story of three generations of the Davis family but primarily focuses on Shelby Collum Davis and his 47-year investing career. The author, John Rothchild, does a great job weaving market history and investing lessons into the Davis family’s story. I had read the book about seven years ago so a second read-through gave me a chance to compare and update my notes.
- 100-to-1 in the Stock Market — The book promotes the idea of “buying right and holding on” to individual stocks by highlighting stocks that investors could have made 100x their money on. Unfortunately, each chapter devolves into a “had you bought” list of stocks, with a starting price and ending price as if it proves the author’s point. He makes it sound easy. It’s not! There’s no mention of why anyone would buy any of the stocks mentioned beyond happenstance (or hindsight bias) and, so far, the most difficult part of actually holding on is glossed over. I’m seven chapters in and have a waning desire to finish.
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Baruch: My Own Story
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Buy the Book: PrintMy Own Story is the first volume of the autobiography of Bernard Baruch. Known as the Lone Wolf, Baruch amassed a fortune on Wall Street as a speculator and dealmaker, and later, as a lone investor before entering the public life managing the economic mobilization of WWI and advisor to presidents.
The Notes
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Common Sense Principles from Two Legends
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Louis Rukeyser was a sounding board for reason in irrational markets. For three decades, he hosted Wall Street Week. He pushed against the ever-shrinking attention span of Wall Street by promoting a longer-term mindset.
Anytime markets got wild, Rukeyser filled his panel with a few legends to help cut through the noise. Few guests did it better than John Templeton and Peter Lynch.
Both were guests on the 20th Anniversary show in 1990 and shared some timeless principles. Their conversation is a good reminder of how distracting the market can be.
Whether it’s market predictions, the latest economic indicator, someone else making fast money, or a spike in volatility, it diverts your attention from what matters. That’s when investors get into trouble.
The solution is patience. Focus on the long term. Understand what you own. Bigger market swings should be expected. Always keep price and value front of mind.
A transcript of their conversation is below. Continue Reading…
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2021: A Year in Returns
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There are particular periods in the market where investing appears to be too easy. Things can get crazy when that belief spreads. 2021 was one of those years.
The danger of easy money is that investors become complacent. They become blind to the risks they take. They don’t realize that money made easily, can be just as easily lost.
Of course, anytime too many people believe returns are easy to come by, it’s a good time to return to the basics. Brushing up on sound investing principles, past cycles, and how similar periods ended is always a good idea when investors become risk-seeking en masse.
Warren Buffett once said, “People are habitually guided by the rear-view mirror and, for the most part, by the vistas immediately behind them.” He used it to explain why so many investors were hurt in past market bubbles.
Too often investors rely on recent experience to reinforce decisions. The error lies in setting expectations as if future conditions will exactly mirror the past. Except, markets don’t work that way. Change is constant. Looking backward ignores the craziness ahead. Continue Reading…