[cardguy]

I read alot of books and read alot about finance and economics.

But I have never really read any investment guides. Partly because I sese if they were truly valuable they would never be written.

But - they seem to be big sellers on the whole. So many people here may have read some. And as such - I was wondering which investment guides you guys found to be interesting and worth reading?

[SeanBateman]

The Education of a Speculator by Victor Niederhoffer

[cardguy]

I read that book.

Strange book. Seems to talk about everything but investments.

Also - the guy seems to keep blowing up and losing all his money.

http://seekingalpha.com/article/49251-th...ederhoffer

[Peregrine]

What I Learned Losing A Million Dollars by Jim Paul/Brendan Moynihan. The only "investment guide" book I'm willing to recommend to date (and I heartily recommend it). Additionally, reading and internalizing Taleb's philosophy has been more helpful to me as an "investor" than any book specifically about investing.

Edit: Niederhoffer's style is best described as "picking up nickels in front of a steamroller". As cardguy mentions above, he's gotten intimate with the steamroller on more than one occasion.

[SeanBateman]

re: Niederhoffer

Yeah right after that book came out he blew up his fund in the Asian financial crisis. But the big lesson is about quantifying and testing ideas. If you backtest trades based on most of the traditional indicators it becomes clear fairly quickly that they don't work. That book has many good examples of unique approaches to the market that while maybe not still profitable today can serve to spark some creativity.

[cardguy]

(01-03-2014 06:31 PM)Peregrine Wrote:  

What I Learned Losing A Million Dollars by Jim Paul/Brendan Moynihan. The only "investment guide" book I'm willing to recommend to date (and I heartily recommend it).

Yeah - I read that book. A good book. But I felt it was a little 'light'. In the sense that it felt like reading a long blog post. As opposed to a proper indepth book.

[cardguy]

To widen out the discussion. Do you guys think there is any point amateurs playing the stock market? Or do you think the advantage the professionals have makes it too difficult to compete?

[Peregrine]

(01-03-2014 06:33 PM)cardguy Wrote:  

(01-03-2014 06:31 PM)Peregrine Wrote:  

What I Learned Losing A Million Dollars by Jim Paul/Brendan Moynihan. The only "investment guide" book I'm willing to recommend to date (and I heartily recommend it).

Yeah - I read that book. A good book. But I felt it was a little 'light'. In the sense that it felt like reading a long blog post. As opposed to a proper indepth book.

Agreed. Could you clarify what you mean by "in depth" though?

[cardguy]

On the above subject - Mark Cuban (who is a billionaire) had some interesting blog posts on this subject.

http://blogmaverick.com/2010/08/20/the-s...-the-bank/

http://blogmaverick.com/2008/09/08/talki...and-money/

My approach is to put together some 'fun' money (20k-100k). And just punt it on one-off ideas. No diversification, and betting on risky ideas as well.

[babelfish669]

The most helpful books for me were investor biographies. You understand what type of initial success, or leverage, is required to build up a critical mass of assets to invest and become wealthy.

[Peregrine]

cardguy Wrote:

To widen out the discussion. Do you guys think there is any point amateurs playing the stock market? Or do you think the advantage the professionals have makes it too difficult to compete?

Define "amateur". If by that you mean the average person, absolutely. The average person is, to put it crassly, too stupid and the stock market is far too rigged. As the poker saying goes, if you don't know who the sucker is after 30 minutes, it's you. The average person is the sucker. The average person is the unknowing lamb walking to slaughter. The smartest thing to do is to recognize that you're a lamb and to avoid the slaughterhouse altogether, regardless of how lavish the promises of fresh grass are. That's the advice I give to friends when they ask me for investment tips or strategies. Some of them think I'm holding out on them, but that's the sincere truth.

However, just like small fish can get fat eating the scraps that are created from the feeding frenzies of large fish, individuals can make money in the shadows of the big players. But that takes a certain understanding and insight that 99% of non-pros don't have and even actively deny, in the same way that the average man will deny the principles of game. Even a bunch of pros (defined as people who trade in the stock market for a living, not necessarily people who are good at it) don't get it, and get slaughtered.

Edit: One more thought - the small fish has to be careful when picking off scraps (not that scraps are anything to laugh at when the big fish are eating meals in the billions and trillions of dollars), lest he becomes part of the meal. That's why you never risk more than you can afford to lose.

[cardguy]

My approach would be to pick one good idea every couple of years - and go all in. No fucking around.

[samsamsam]

(01-03-2014 06:35 PM)cardguy Wrote:  

To widen out the discussion. Do you guys think there is any point amateurs playing the stock market? Or do you think the advantage the professionals have makes it too difficult to compete?

I think there is opportunity for anyone who takes the time to find the right investments. I am not sure what strategies or approaches you will be using.

Large funds often need to put a lot to work and so investing in smaller companies may not work for them. I think some funds even have a 5 dollar share rule - that the stock has to be trading at $5 or higher. When Citi was under $5 a lot of analysts were discussing that funds couldn't get in.

I would just do a lot of testing and studying before putting any capital at risk.

The question is do you feel like it will be worth your time to learn enough to invest wisely?

Plenty of fund managers cannot beat indexes and they do this all day long.

But I also know a guy (fairly well) who quit his day job and started only about a year ago with like 10k. He focuses on following penny stocks that have been pumped and he shorts them.

So you just need to ask yourself if you are willing to put in the time. But I think you're a smart dude cardguy, you could do it.

[cardguy]

(01-03-2014 06:35 PM)Peregrine Wrote:  

(01-03-2014 06:33 PM)cardguy Wrote:  

(01-03-2014 06:31 PM)Peregrine Wrote:  

What I Learned Losing A Million Dollars by Jim Paul/Brendan Moynihan. The only "investment guide" book I'm willing to recommend to date (and I heartily recommend it).

Yeah - I read that book. A good book. But I felt it was a little 'light'. In the sense that it felt like reading a long blog post. As opposed to a proper indepth book.

Agreed. Could you clarify what you mean by "in depth" though?

I got the book after seeing it was pretty much the only book on investing that Nassim Taleb recommended.

I am not a huge fan of Taleb. But I think he is an interesting writer.

Anyway - I read the book (it was hard to find - so I paid quite alot for a copy). And thought it was good.

But as I remember - it was quite a short book. And it seemed to mostly describe how he felt indestructable when he was making money - and how helpless he felt when he was losing money.

Plus a chapter about how all the traditional investment advice is contradictory - and in each case is just randomness/survivorship effect of those few investors who it happened to work for.

And that was it.

Nice book - but not as indepth as I was hoping. For some reason I thought it would be more comprehensive in some way.

[SeanBateman]

I think there are guys who could technically be considered amateurs but who have a level of technological sophistication and understanding of market microstructure that is high enough to be competitive on a certain scale. There are some guys at very small or even one man operations who are basically hacking order books and do other wacky things like that. And there are some guys doing some mathematically advanced predictive modeling to trade their own accounts, basically data mining type stuff. But some dude just reading Bloomberg news and looking at Fibonacci levels on his eTrade screen doesn't have any competitive edge.

[cardguy]

Yeah - I have always taken an interest in the stock market. But I no little about it.

My parents never played it. And none of my friends do. It is a different culture here in the UK.

Plus - alot of my early reading in this area was to do with the Efficient Market Hypothesis. So - my inclination has always been one of scepticism.

But I am working through that now - as I think EMH is largely bullshit (as do alot of other people).

So - I find the whole area really interesting from an intellectual point of view. I don;t really need any money - but at the same time, I like the approach to investing of somebody like Scott Adams - who described his thinking here:

http://www.dilbert.com/blog/entry/bad_in...nt_advice/

Also - most professionals are not in a position to just invest in one stock at a time. So - I think this approach opens up opportunities for the smaller guys.

[cardguy]

Anyone else have thoughts about EMH?

For the first few years I read up on finance - that theory ruined the fun for me in a big way. The idea that only randomness could beat the market.

[cardguy]

A book I can recommend is 'The Zurich Axioms'.

http://www.amazon.com/The-Zurich-Axioms-...1897597495



What I like about it is the honest discussion it has about the nature of risk, and how you have to be prepared to embrace it if you want to do well in your investments. The advice it contains is different to most of the standard advice.

[SeanBateman]

EMH is just kind of a naive notion, right? That's one cool thing about that Niederhoffer book, he talks about that a bit. He was at University of Chicago where they were heavy into EMH but then his average return was I think $20 on per contract on 2 million ES contracts traded which was something like 700 standard deviations away from randomness. It doesn't get much less random than that. The stock market would have to be around of like a million trillion years for that to happen randomly, and he certainly isn't the only guy to perform that well. In things like option pricing yeah a normal probability distribution is used to reflect short term variance and it can be surprisingly accurate but EMH takes it too far by saying there are no inefficiencies or repeating anomalies in the market.

[Veloce]

(01-03-2014 06:35 PM)cardguy Wrote:  

To widen out the discussion. Do you guys think there is any point amateurs playing the stock market? Or do you think the advantage the professionals have makes it too difficult to compete?

According to Peter Lynch the average investor has a leg up on professional brokers because they're not under the same performance pressure.

But based on your posts, I'd probably stick to an S+P 500 fund.

[Steve9]

(01-03-2014 06:35 PM)cardguy Wrote:  

To widen out the discussion. Do you guys think there is any point amateurs playing the stock market? Or do you think the advantage the professionals have makes it too difficult to compete?

Yes, plenty of amateurs do beat the professionals, but they are not "playing the stock market", they have a well thought out strategy that can take years of experience to perfect. But it is really not worth doing this until you have 200K+ to invest, or you are really interested in the stock market.

If you don't want to spend hundreds of hours researching stocks and you want something safe and simple I reckon you could just buy shares of BRK.B (Warren Buffets company - Berkshire Hathaway) and it will outperform the S&P index and most managed funds over the long term, while paying no fees.

[Dusty]

Jeremy Siegel

[Peregrine]

Quote:

Anyone else have thoughts about EMH?

For the first few years I read up on finance - that theory ruined the fun for me in a big way. The idea that only randomness could beat the market.

EMH (efficient market hypothesis) is so divorced from reality as to be laughable. It completely ignores the fact that market participants are humans, not machines or computers. Behavioral economics has gone a long way in dispelling this notion.

[LeBeau]

This is the first book on investing/markets I ever read, and I think it actually gave me a really good foundation for understanding how to identify opportunities, the realities of Wall Street and what causes mispricing, even if a few aspects may seem dated (came out in 1997).

If you read widely enough, you'll see a lot of fund managers recommend this as well, despite the brutal title, there's a lot of respect for Joel Greenblatt's performance and contributions.

http://www.amazon.com/You-Can-Stock-Mark...0684840073

[coolstorybro]

If you want to learn how to invest in stocks, there should be plenty of college level books about reading financial statements of companies with regards to all kinds of standard key numbers or books on technical analysis.

Personally, I don't want to think of investing as throwing money after stocks, but rather seeing 'game changing' technology and then going in.

I know everyone has stories like this, but I remember telling everyone how cool the idea behind Bitcoin was years ago for example.

I'd like to think the true investor is good at spotting the beginning of trends or the importance of new technology while it still struggles. If I have learned anything it is that the mainstream is very slow to catch on.

Basically learning to spot what Nassim Taleb calls 'Black swan' events:

Quote:

The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.

The theory was developed by Nassim Nicholas Taleb to explain:

The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology

The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)

The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

For example, as soon as the internet came out in the 1990s, the wheels started spinning about possibilites with the smartest people, the mainstream was still apprehensive.

Out of such situations arises opportunity for massive growth and also overnigth destruction.

An example is how Netflix destroyed video/dvd rental, but Netflix took a while to catch on, even so, wouldn't the smart person realize that this was a game changing moment?