Buy the Book: Howard Marks’s The Most Important Thing lays the groundwork for being a successful investor. He details the investment principles needed to tackle the complexity of markets and investing.
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Wise Words from Philip Fisher
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Philip Fisher’s investment philosophy epitomizes patience. Not only patience with his investment portfolio but in the search for the next opportunity.
Fisher sought out companies that could grow at a high rate over a very long time. He wanted a good price too. Then he would hold them, in some cases, for decades. His portfolio was highly concentrated because those types of growth companies are rare.
That rarity meant Fisher needed more information than just the numbers:
From him I learned the value of the “scuttlebutt” approach: Go out and talk to competitors, suppliers, customers to find out how an industry or a company really operated. — Warren Buffett
His scuttlebutt method required asking the right people, the right questions to figure out how a company really worked. It’s far more qualitative than quantitative. Often, the final decision came down to the quality of a company’s management.
Fisher’s style is the perfect strategy for anyone who likes to do a lot of researching, waiting, and practically no trading. It’s also perfect for anyone who’s comfortable with the inevitable big swings in stock prices that are bound to come with it. Simply put, it’s not for everyone.
But the rest of us can still borrow a thing or two, like patience, from Fisher’s wisdom anyway. Continue Reading…
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1929 Crash: An Industry Breakdown
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The late 1920s market bubble was one of the biggest bubbles U.S. markets ever saw. Yet, not all industries participated in it. A breakdown of how each industry performed over that period tells the tale.
The Cowles Commission started collecting market data in 1932. The data is available online (linked below), stretches from 1871 to 1937, and is broken down by industry.
A chart of the 1929 bubble and burst looks like this:
The data is price returns only — no dividends included.
The chart is a hot mess (done so on purpose). It’s also incomplete. For instance, the financial industry, along with investment trusts are missing from the picture. That said, it does show just how few industries were inflated at the time. Continue Reading…
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Mastering the Market Cycle by Howard Marks
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Howard Marks explains the pattern of cycles found in markets, the economy, and business. An investor who understands the different cycles — the history, the driving factors, their interconnectedness, and the role of psychology — can avoid common errors and best position their portfolio for success.
The Notes
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Reminiscences of a Stock Operator by Edwin Lefèvre
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Edwin Lefèvre’s fictionalized account of Jesse Livermore is a classic. It shares the timeless principles around trading in markets while warning of the biggest obstacle that plague speculators and investors alike — human nature.
The Notes
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The Rise and Downfall of Richard Whitney
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A syndicate of bankers gathered on October 24th to plan out how to end the panic. As acting president of the New York Stock Exchange, Richard Whitney was the face of the operation. The rest ran the six largest banks in the country.
It was like history repeating itself. J.P. Morgan famously did something similar in 1907 when he summoned the leading bankers to save the financial system from collapse. Only this time things didn’t work out as before.
The day after Black Thursday (October 24, 1929), Whitney strolled up to Post No. 2 on the exchange floor and ordered 10,000 shares of U.S. Steel. “205 for Steel” was the bid. It was over $5 above the current asking price. He did the same for several other blue-chip stocks. In a matter of minutes, he placed $20 million in bids. The market reversed course and rallied into the close. It was enough to turn the tide through the weekend.
The selling resumed on Monday. And on October 29th, forever known as Black Tuesday, the market was in a full-on panic. Continue Reading…
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