What are you reading re Business & Money?

Someone mentioned Phil Town in one of the investing threads, so I checked him out. Former river rafting guide, he claims to have turned $1,000 into millions within a few years, or something like that. He also points out what a crappy investment mutual funds are, claims one can easily learn to make an average annual gain of 15% in the stock market with very little risk or work. His book, Rule #1, was a NYTimes bestseller. Check it out HERE at amazon.com.

Anyway, I bought the book, received it last week and am well into it. I really like it. His writing style is very easy, comfortable and conversational – like an ordinary guy, not an incomprehensible genius securities expert (not saying he is one, just saying some experts come across that way) – and I believe it’s good, sound, workable advise.

Rule #1, incidentally, Warren Buffett said, is never lose money. Rule #2 is never forget Rule #1. May be obvious, but that’s damn good advice. I’ve had a few good picks over the years, but definitely my fair share of losers that sucked away tens of thousands of dollars. It does seem that if one had a good system for logically analyzing and picking winners, and avoiding losers, one could be vastly more wealthy.

As I said, his system does seem plausible and workable. I’ve still got a lot of reading to do in the book, but so far he has talked about how one should never invest in a company one doesn’t understand. Only look into businesses that are meaningful to you, that you are somewhat familiar with, comfortable with. Then, look at the following to determine whether they have a competitive edge over their competitors that gives them a predictable long term advantage.

Each of the following must be at least 10%/year for the past 10 years, but one should also look at the past 5 years and 1 year to be comfortable they’re moving in the right direction:

  1. Return on Investment Capital
  2. Sales (or revenue) growth rate
  3. Earnings per share (EPS) growth rate
  4. Equity (or Book Value) growth rate
  5. Free cash flow growth rate

He explains each of these concepts very clearly and simply, what they mean, why they are important, and how one calculates them, etc. He also has website that sounds very helpful and includes a calculator for determining the above (which I haven’t checked out yet).

And he pounds Buffett’s (and his) mantras into your head: the #1 rule to making money is never losing money. The goal is to find wonderful companies and invest in them at a terrific price (the above is for judging whether a company is wonderful; later in the book he’ll explain how to determine if it’s a terrific price).

Anyway, as you can tell, I’m extremely happy with the book. I’ve “gambled” on plenty of stock choices before, basically throwing my money away without properly understanding the stock; now I’m confident I’ll make much wiser choices in the future and will never again throw my money into the market without applying Phil Town’s tests. I’ll let you know when I’ve done the homework and selected companies that appear to meet all of his criteria.

:slight_smile:

MT -
Good post. Good fortune in your choices.

Thanks, I’ll be happy to buy you a beer some day when it pays off. :beer:

Incidentally, he also makes millions on the speaking circuit and his motivational, inspirational spirit clearly comes across in his writing. And, there’s a blurb on the book cover from CNBC’s Jim Cramer: “The clearest and best book out there to get you on the path to riches. This one’s special!” We’ll see.

Here’s his website, btw: philtown.com/

Great post, MT!
How much was the shipping on Amazon?
How fast did it get here?

OK, I’ll be the cold water. Very few people beat the market in the long term by doing the kind of technical indicator analysis that this guy Town describes. Sure, lots of people can do it in a bull market, but rarely can such people do it through numerous bull-bear cycles. There will always be a few who do manage to beat the market for ten years or so (Peter Lynch and his Magellan Fund, which, incidentally, started to perform poorly after his retirement), but most of them are just getting it right by chance. I doubt any of them spend just 15 minutes a week doing their homework. Think about it MT: If you had worked out a method for making millions out of equity trading in just a year or two, would you divert a great deal of your time away from the technical analysis that’s making you rich toward book writing and a speaking tour, or would you just keep focusing on what was already working? Me thinks Mr. Town makes a hell of a lot more money out of his flavor-of-the-month investment books than he has ever made out of “investing” itself.

I own no individual stocks, and I would never buy any. I do nothing but index funds. I don’t plan to touch any of this money until I retire. Perhaps if I were desperate for a quick buck, I’d punt in the short-term on individual stocks. As it happens, I don’t need to take that kind of risk, and I’d rather spend the time developing my career or with my wife and son.

Getting rich quick on individual stocks sounds sexy, and stories about it sure do sell books. However, if you’re interested in methods that are a bit more proven and that will let you sleep well at night, I’d recommend reading any books written by William Bernstein, Michael LeBoeuf, Richard Ferri or Larry Swedroe. You might also like to have a look at this site:
www.diehards.org

[quote=“Josefus”]Great post, MT!
How much was the shipping on Amazon?
How fast did it get here?[/quote]

Purchase price: just over $10
Shipping price: $28 for 4 books and a CD
Shipping time: April 8 to 17
Peace of mind re retirement: Priceless

Au contraire. If the market’s in the doldrums for a prolonged period and you choose an index fund broadly diversified across the market, you’re guaranteed to float along in the doldrums, and that’s before deducting your management costs and other fees. Are you content to do that?

Yea, I agree that’s an exaggeration. Should take a couple hours a week anyway.

I’m sure he makes very good money (I guessed millions annually) from his speaking, not to mention his books, website, etc., and we’ve all heard that argument a thousand times – why doesn’t he devote that time to the market instead if he’s so good? Well, maybe he likes to get out of the office and talk to people, he enjoys socializing, getting up on stage and entertaining. If one could get in perfect shape by spending hours a day inside ones private gym in ones basement, wouldn’t one still want to go exercise outside from time to time? And, if he’s made millions and is totally confident he’s set for life, maybe he doesn’t feel a compelling need to keep his nose to the grindstone. Besides, he said it takes very little time, so presumably he’s doing both, trying to lead a richer, more balanced life.

[quote]I own no individual stocks, and I would never buy any. I do nothing but index funds. I don’t plan to touch any of this money until I retire. Perhaps if I were desperate for a quick buck, I’d punt in the short-term on individual stocks. As it happens, I don’t need to take that kind of risk, and I’d rather spend the time developing my career or with my wife and son.

Getting rich quick on individual stocks sounds sexy, and stories about it sure do sell books. However, if you’re interested in methods that are a bit more proven and that will let you sleep well at night, I’d recommend reading any books written by William Bernstein, Michael LeBoeuf, Richard Ferri or Larry Swedroe. You might also like to have a look at this site:
www.diehards.org[/quote]

re diehards.org (ie., the Vanguard family of funds), Ha ha ha. I used to feel that way. I know they have an outstanding reputation, but a while back I finally sold my VIGRX fund. Over the past 10 years the Nasdaq has gained 78%, S&P500 is up 12.5%, DJIA is up 11.75%, and my VIGRX? Down 17.3%! A monkey could do better than that.

So I no longer buy the idea that individual stocks are more risky than funds. That fund, managed by one of the most reputable firms, is a total dud. On the other hand, check out my favorite stock, that I’ve owned for years: KOF Up 40% over 1 yr., 176% over 5 yrs., 190% over 10 yrs., and 651% over 15 yrs.

Fuckin’ A. I wish I’d dumped everything in that stock from the beginning. And, I’m confident by careful technical analysis one can find other companies equally likely to way outperform the market and the wimpy mutual funds, which abundant studies have proven are likely to lag behind the market (but continue to collect fees from investors).

[quote=“Jive Turkey”]

I own no individual stocks, and I would never buy any. I do nothing but index funds. I don’t plan to touch any of this money until I retire. Perhaps if I were desperate for a quick buck, I’d punt in the short-term on individual stocks. As it happens, I don’t need to take that kind of risk, and I’d rather spend the time developing my career or with my wife and son. [/quote]

:bravo: :bravo: Well said, Jive Turkey. This is one of the best things I’ve seen written here in a long time. I like your investing philosophy. :bravo: :bravo:

[quote=“Mother Theresa”]

Au contraire. If the market’s in the doldrums for a prolonged period and you choose an index fund broadly diversified across the market, you’re guaranteed to float along in the doldrums, and that’s before deducting your management costs and other fees. Are you content to do that?[/quote]
One, my “management costs and other fees” amount to about .25 percent. I’ve not paid any US taxes and probably won’t need to for another ten years or so. I pay no brokerage fees. The amount to deduct is really negligible, MT. Of course being the cheap bastard that I am, I’m constantly looking for the cheapest way to move money from HK to Vanguard, and I’ll be happy when I’m eligible for Admiral Shares at Vanguard. And yes, I’m quite happy “floating along in the doldrums.” It’s a buying opportunity. Conversely, I don’t know anybody in the individual stocks game who consistently makes the right call on when to get out. Instead, most lock in their losses by selling as the market falls. Most folks in that game do very nicely when the market is roaring away. They do equally badly when it drops.

Yea, I agree that’s an exaggeration. Should take a couple hours a week anyway.[/quote]
I doubt it.

I’m sure he makes very good money (I guessed millions annually) from his speaking, not to mention his books, website, etc., and we’ve all heard that argument a thousand times – why doesn’t he devote that time to the market instead if he’s so good? Well, maybe he likes to get out of the office and talk to people, he enjoys socializing, getting up on stage and entertaining. If one could get in perfect shape by spending hours a day inside ones private gym in ones basement, wouldn’t one still want to go exercise outside from time to time? And, if he’s made millions and is totally confident he’s set for life, maybe he doesn’t feel a compelling need to keep his nose to the grindstone. Besides, he said it takes very little time, so presumably he’s doing both, trying to lead a richer, more balanced life. [/quote]
My god, man, if you could only step back and read what you’ve written. The word “rationalizing” was the first word to come to my mind.

Finally? The thing has only been open since 1992, so you couldn’t possibly have held it for more than 16 years. You really are looking to get rich quick! :wink:

I personally am not into growth or value funds. I’m not saying they aren’t worth it, but you definitely picked a bit of a dog. Just because you made a poor choice does not indicate that indexing is a poor strategy. You make it sound much worse than that fund really is. You managed to lock in a loss of 17.3, but the fund has posted an average annual return of over 8% for the preceeding 10 years. Granted, that’s lower than the returns that would’ve been gotten out of funds that would be considered as core portfolio holdings by most indexers, but you’d have had to have made a serious slip from most indexing strategies to have made a loss like what you made. Did you go into it quickly with one or a few purchases, or did you make slow, steady contributions to gain the benefits of dollar cost averaging? Did you come out of it all in one go, or did you ease out over a period with a series of transactions? From what you wrote, it sounds more like you entered and pulled out quickly.

Why? Because you managed to take a big loss from it? Again, I’d never buy it, but just because you managed to lock in a fairly big loss during a period when the average annual returns of a fund were well into the black does not show that indexing doesn’t work. It just shows that you didn’t know what you were doing.

[quote]On the other hand, check out my favorite stock, that I’ve owned for years: KOF Up 40% over 1 yr., 176% over 5 yrs., 190% over 10 yrs., and 651% over 15 yrs.

Fuckin’ A. I wish I’d dumped everything in that stock from the beginning. .[/quote]
You’ve basically made the most effective argument against the strategy you’re pursuing with what you wrote above. Note that the indexer’s argument is not that individual companies’ stocks don’t beat the market; hundreds, if not thousands obviously do. The indexer’s argument is that nobody, save a few who manage it by statistical chance alone, is able to consistently choose stocks that will be long-term winners, and then put all into them. People who try it generally lose in the long term. Show me anybody who was smart enough to have thrown a large portion, if not all of their portfolio at your stock 15 years ago and left it there for the duration. Identifying individual stocks that have performed strongly over the past 15 years and saying that you wish you had thrown all in does not prove that technical analysis of individual stocks works. It shows that you failed at the game in the past, and strongly indicates that you will fail at it again in the future.

Show me any study that has “proven” that a statistically significant number of individual investors, especially investors of average means like you and me, has beaten a diversified porfolio of broad market equity and fixed-income indexes for at least ten years with a portfolio of individual stocks. You won’t find any because no such studies exist.

If I were in your shoes, I’d probably prefer to spend that weekly technical analysis time doing more lawyering, shagging my wife or playing with my kid. That’s exactly what I do right now, save the lawyering.

Yes, because market timing does not work. You can try it and you may get lucky at times, but what counts is not just the good trades you made, instead it counts what stands at the bottom of your balance sheet (gains minus losses).

You said yourself you burned thousands of dollars before - so what’s the yield of your entire portfolio? If you calculate that you get an idea if your strategie works or not.

The performance you achieved does not prove anything in general - the reputation of index funds is based on objective facts, not subjective experiences.

That’s not a very reasonable conclusion (see above).

Yeah, afterwards you always now where you should have put your money, that’s easy. Now tell us in which individual stock you will invest that achieves a similar performance as the KOF in future. Can you do it? Can Mr. Town?

Only a fool puts all his/her money into one individul stock (no offense intended, just generally speaking).

Studies also show that there is no way to predict the stock market long term, so that includes technical analysis. It might be useful for daytraders / speculative investing, but not for long term investments to e.g. save up for retirement.

I wish you luck with your investment choices, but ask yourself why you hardly read anything about losses made in books giving investment advise. It’s not because it didn’t happen …

MT wrote: “Someone mentioned Phil Town in one of the investing threads, so I checked him out. Former river rafting guide,”

I see you actually pay attention to the threads, yea I mentioned Town because right about the time you talked about KOF, I used the valuation method Town suggests, and came up with an MOS of 48 for KOF, which is the price you were waiting for, before buying more KOF.

So at the time I thought maybe MT has read the old river boat guide? And you said I “think too much” (probably also correct). BTW the swift boat(kerry) reference was pretty funny.

glad to see you are giving it a read, it is a decent book, refreshing to say the least.

BTW: you mentioned Cramer’s quote, on another note he suggested KOF in early April

MT,

You and others on the forum seem to like the Motley Fool service, (Dave, Tom Gardner and others).

I subscribe and or have subscribed to a couple of its newsletters/services, and find the general theme of their advice consistent with Phil Town’s. Of course the Gardner brothers along with the Motley Fool service are big fans/students of Buffet, so this is no surprise.

From the Fool’s monthly “picks/suggestions” it is a fun exercise to apply Town’s suggestions, I check for the “the four m’s” and run the “big five numbers.”

We can never reduce the risk, but I take a small amount of comfort if a company is suggested by the fool’s premium service, and passes Town’s screening/selection methods.

It is also cool when this works in the reverse order, in other words, when you come up with a wonderful company by using the passion, money, talent (Jim Collins) exercise, that meets the “four m’s” has good “big five numbers” and then you find it on the list of Dave and Tom Gardner.

My current financial literacy picks (they haven’t changed for a while.)

Your Money or Your Life:
yourmoneyoryourlife.org/

This book helps you get more conscious about what role money plays in your life.

The Intelligent Investor (Although, admittingly, I haven’t finished reading it yet :blush: ):
amazon.com/Intelligent-Inves … 0060555661

This book is about value investing.

The 4-Hour Workweek:
fourhourworkweek.com/

This book is about reducing the amount of time you need to spend to generate enough money to live (well) on.

I’m really looking forward to the day I will be able to speak about these books and the effects they’ve had on my life with AUTHORITY. That day is quickly approaching… :smiley:

miltownkidwrote: "The Intelligent Investor (Although, admittingly, I haven’t finished reading it yet "

It can be a hard one to read through, as u know he was Buffet’s teacher at Columbia, so you may find some that are a bit more interesting to read.


I will check out your other suggestions…

thanks

I think it’s more of a timing issue (for me) than level of difficulty. I will get a better… ROI (in terms of time) learning other things and working on other projects at the moment. When I get to the point in life when I have stacks of money to deal with, that’s one of the books I’m turning to.

Currently what little money I have to invest goes into a Roth IRA Index Fund. (Through vanguard.com/ ) Recently it’s been so little as to not even exist (that is extra money to put in there.) :laughing:

I’m still trying to get settled from my move back to the US. :stuck_out_tongue:

miltownkid,

I bought two books you recommended (money or your life, four hour work week) and I want to say thank you for listing them here. I am reading the four hour work week and it was the kick I really needed to stop my little business taking over my life. Thanks again!

BTW: you mentioned Cramer’s quote, on another note he suggested KOF in early April[/QUOTE]There was a very interesting article in Barron’s entitled “shorting Cramer” The essence was that if you shorted his picks you would make money. It’s probably the only serious study of Cramer’s track record, which is not very good.

I’m not familiar with Phil Town, but I would prefer to read people who have a track record. Jim Rogers, Mark Mobius,
Marc Faber. There a lots of very smart people who’ve written about investing.

I like Roger’s “Bull in China,” a bit too optimistic on China perhaps. But I think he may be right in buying Taiwan. Let’s hope this little island can continue to do well despite global market volatility! :rainbow:

I read a few chapters of this one recently; encompasses a lot of Grahams ideas in very, very easy to understand concrete examples: amazon.com/Little-Book-That- … 529&sr=1-2

Michael Lewis recently wrote a great article on the End of Wallstreet.

portfolio.com/news-markets/n … reets-Boom

It’s long and parts of it hard to understand, but it’s well worth a read. Anyone who never read the mega-bestseller that launched his career in 1989 – Liar’s Poker – about how he made hundreds of thousands of dollars as a 24 yr old working on wall street and couldn’t believe how crazy that world was, including that they were dumb enough to hire a novice like him and pay him that kind of dough, to manage that kind of dough, should definitely pick it up. It’s a terrific book. And, as he says in the above article, when he wrote that he figured Wall Street was about to collapse due to all the craziness he saw, and he’s been amazed it took another 20 years.

Anyway, I found the above article (mostly about the craziness of the insane growth in the subprime mortgage market and corresponding bond market and how it was inevitable it would finally collapse, but people stupidly failed to foresee it, except for a few who couldn’t believe the stupidity they were witnessing) quite entertaining.

And, if you like Michael Lewis, you might also be interested in this great looking collection of essays that he edited: Panic: The Story of Modern Financial Insanity. It just came out last month.

[quote=“Mother Theresa”]Michael Lewis recently wrote a great article on the End of Wallstreet.

portfolio.com/news-markets/n … reets-Boom

It’s long and parts of it hard to understand, but it’s well worth a read. Anyone who never read the mega-bestseller that launched his career in 1989 – Liar’s Poker – about how he made hundreds of thousands of dollars as a 24 yr old working on wall street and couldn’t believe how crazy that world was, including that they were dumb enough to hire a novice like him and pay him that kind of dough, to manage that kind of dough, should definitely pick it up. It’s a terrific book. And, as he says in the above article, when he wrote that he figured Wall Street was about to collapse due to all the craziness he saw, and he’s been amazed it took another 20 years.

Anyway, I found the above article (mostly about the craziness of the insane growth in the subprime mortgage market and corresponding bond market and how it was inevitable it would finally collapse, but people stupidly failed to foresee it, except for a few who couldn’t believe the stupidity they were witnessing) quite entertaining.

And, if you like Michael Lewis, you might also be interested in this great looking collection of essays that he edited: Panic: The Story of Modern Financial Insanity. It just came out last month.[/quote]

Interesting reading. Thank you for the tip. Yet more evidence how typical it is to know a lot and understand nothing.

I still say the essential cause of all this insanity is the desperation of Americans to sustain their standard of living long after their ability to earn it has gone with the wind.

Let me know when you get to Taipei. You have a drink (and a cigar) waiting for you.