Best Passages from Peter Lynch's Beating the Street: Part 2

I haven't had much time to go through Peter Lynch's Beating the Street since I last posted, but today I have some free time and would like to get these notes down for yours and my own reference.

• This is one of the keys to successful investing: focus on the companies, not on the stocks.
• My methods were not much different from an investigative reporter - reading the public documents for clues, talking with intermediaries such as analysts and investor relations people for more clues, and then going directly to the primary sources: the companies themselves.
• Every stockpicker could benefit from keeping a notebook of [stock] stories. Without one, it's easy to forget why you bought something in the first place.
• If you're prepared to invest in a company then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won't get bored.
• A computer company can lose half its value overnight when a rival unveils a better product, but a chain of donut franchises in New England is not going to lose business when somebody opens a superior donut franchise in Ohio.
• When you have to concern yourself with what the person behind you thinks about your work, it seems to me that you cease to be a professional. You are no longer responsible for what you do. This creates a doubt in your mind as to whether you are capable of succeeding at what you do--otherwise, why would they be monitoring your every move?
• Peter's Principle #8: When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds.
• Why investors attempt to prepare for total disaster by bailing out of their best investments is beyond me. If total disaster strikes, cash in the bank will be just as useless as a stock certificate. On the other hand, if total disaster does not strike (a more likely outcome, given the record) the "cautious" types become the reckless ones, selling their valuable assets for a pittance.
• No matter how well you think you understand a business, something can always happen that will surprise you.
• Bargains are the holy grail of the true stockpicker. The fact that 10-30 percent of our net worth is lost in a market sell-off is of little consequence. We see the latest correction not as a disaster but as an opportunity to acquire more shares at low prices. This is how great fortunes are made over time.
• [Sarcastically talking about a bad call on IBM] you aren't really a fund manager unless you have Big Blue in the portfolio.
• How much time you spend on researching stocks is directly proportional to how many stocks you own.
• In stocks as in romance, ease of divorce is not a sound basis for commitment. If you've chosen wisely to begin with, you won't want a divorce. And if you haven't you're in a mess no matter what. All the liquidity in the world isn't going to save you from pain, suffering, and probably a loss of money.
• Peter's principle #11: The best stock to buy may be the one you already own.
• Peter's principle #12: A sure cure for taking a stock for granted is a big drop in the price.
• When your best-case scenario turns out to look worse than everybody else's worst-case scenario, you have to worry that the stock is floating on a fantasy.
• Tbere's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or, worse, to buy more of it, when the fundamentals are deteriorating.
• Peter's principle #13: Never bet on a comeback while they're playing "Taps".
• Here's a tip from experience: before you invest in a low-priced stock in a shaky company, look at what's been happening to the price of the bonds.
• Cyclicals are like blackjack: stay in the game too long and it's bound to take back all your profit.
• Stockpicking is both an art and a science, but too much of either is a dangerour thing. A person infatuated with measurement, who has his head stuck in the sand of the balance sheets, is not likely to succeed. If you could tell the future from a balance sheet, then mathematicians and accountants would be the richest people in the world by now.
• A pile of software isn't worth a damn if you haven't done your basic homework on the companies.
• I've learned to think of investments not as disconnected events, but as continuing sagas, which need to be rechecked from time to time for new twists and turns in the plots. Unless a company goes bankrupt, the story is never over. A stock you might have owned 10 years ago, or 2 years ago, may be worth buying again.

Is it possible to be scared of a book?

Ordinarily I would say no. But as I grabbed The Intelligent Investor off the shelf this weekend for the first time since I bought it in 2008, I realized it is. This book has been called the greatest investment book of all time by Warren Buffett! It was written by the father of value investing, Ben Graham. For an analogy,

Sun Tzu : War :: Ben Graham : Investing.

Suffice it to say, I was intimidated. Enough to put off reading the book for over three years. If I read the book and then didn't live up to the legends who internalized this tome and went on to rack up the best records in the business, then I'd be a failure. If I could just delay reading it then I could delay the day I would have to look critically at my own performance. People love scapegoats, and not reading The Intelligent Investor became mine. But yesterday something changed. I realized I am not succeeding according to Coach Wooden's definition of success:

“Success is peace of mind which is a direct result of self-satisfaction in knowing you made the effort to become the best of which you are capable.”

I know that I will never realize my potential as an investor without this knowledge. So I grabbed it off the shelf and began. I'm ready now. I'm no longer afraid.

April Reading List

Beating the Street

by Peter Lynch, John Rothchild
Recommended

Comment: "This book is pretty good. It has great and practical advice for both the novice and the advanced stockpicker. The only downside is that the stock picks are dated now. For instance, he recommended Allied Capital which has since gone bankrupt and is the subject of David Einhorn's book which I finished last month. But just because the recommendations are not valid anymore doesn't mean you can't learn from Lynch's thought process and reasoning. I found these passages invaluable."

 

Inside the Economist's Mind: Conversations with Eminent Economists

by Paul A. Samuelson, William A. Barnett 

Comment: "I hardly ever do this and I hate to say it, but I quit this book before I finished it. It is a little more technical and less accessible than other books on economists that I've read, e.g. "Lives of the Laureates" and "The Worldly Philosophers". I also found it to be repetitive because a considerable amount of the interviews were with people I've already heard describe their background in depth. "

 

Prelude to Foundation (Foundation, Book 1)

by Isaac Asimov
Recommended

Comment: "This book was fantastic. I couldn't put it down.
The Foundation trilogy, of which this is not a part but it is in the line of books, won a special Hugo award for best science fiction series ever. This is the first book in that line, so I started at the beginning. I can't wait to read the rest."

 

Endgame: Bobby Fischer's Remarkable Rise and Fall - from America's Brightest Prodigy to the Edge of Madness

by Frank Brady
Recommended

Comment: "This book was fantastic. Frank Brady knows more about Bobby Fischer than any other living person.
I loved following Bobby's fanatic/obsessive preparation and rise in the chess world and then hated what the pursuit of the world's #1 position did to him as he descended into a sad character on the fringe of society. This book was not exactly an apology for Fischer, but it did have those qualities. For example, Brady gave a number of reasons why Fischer may have become anti-Semitic, one being to strike back at the US Chess Federation.
Reading this book got me so excited about chess that I am going to start learning the game. I think it will give me skills on thinking strategically.
This book is definitely worth your time."

 

The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America

by Alex Berenson, Mark Cuban

Recommended

Comment: "What a fantastic read. Alex Berenson is a captivating writer who masterfully wove together many different narratives - accounting, government regulatory, and stock market history as well as the stories of corporate misdoings by Computer Associates, Enron, Tyco, and Worldcom. "

Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics)by Philip A. Fisher, Ken Fisher
Comment: "My expectations for this book were high. I was severely disappointed. The best part of this book is that it's over. The worst part of this book is that Phillip's son Kenneth owns the rights to the book. He took that privilege and ran with it. Kenneth, a billionaire investor, droned on for a dozen pages of prologue before writing another 27 for the introduction. If you happen to pick up this copy, and I suggest that you don't, skip all of Kenneth's writing. It's horrible.
Phillip writes like I hope that I don't: overly verbose with too complicated a structure. His writing also has too many references to previous statements so quoting him is impossible. In my view, the best investment writers drop little nuggets of wisdom. Because of the way Fisher writes, you won't get much of that from this book. The other problem with the writing is that there are too many examples so the book doesn't stand up historically. I don't want to read about Dow Chemical in the '50s or Motorola in the '70s. Both of these stocks are also written about because Fisher owned them which I found highly annoying.
I did find bits and pieces that I believe was adopted by other investment managers, e.g. three year rule, buying something when it is priced well and not haggling over 1/8ths.
However, I recommend that you skip this book."

Best Passages from Peter Lynch's Beating the Street: Part 1

I just finished Peter Lynch's Beating the Street. While the stock picks are dated and not useful anymore, the insights into Lynch's stock thought process were invaluable. I'd like to share some of them with you by recording some of the passages I underlined:

• [On retirement] there comes a point at which you have to decide wheter to become a slave to your net worth by devoting the rest of your life to increasing it or let what you've accumulated begin to serve you.
• Unfortunately, buying stocks on ignorance is still a popular American pastime...When people discover they are no good at baseball or hockey, they put away their bats and their skates and they take up amateur golf or stamp collecting or gardening. But when people discover they are no good at picking stocks, they are likely to continue to do it anyway.
• The stock market is the one place where the high achiever is routinely shown up.
• A retired fund manager is qualified to give only investment advice, not spiritual advice.
• Peter's Principle #3: Never invest in any idea you can't illustrate with a crayon.
• IBM is an approved stock that everybody knows and a fund manager can't get into trouble for losing money on.
• The key to making money in stocks is not to get scared out of them.
• In dieting and in stocks, it is the gut and not the head that determines the results.
• A successful investor does not let weekend worrying dictate his or her strategy.
• Peter's Principle #4: You can't see the future through a rearview mirror.
• [Successful investors] somehow manage to develop a disciplined approach to investing that enables us to block out our own distress signals.
• If you don't buy stocks with the discipline of adding so much money a month to your holdings, you've got to find some other way to keep the faith.
• Whenever I am confronted with doubts and despair about the current Big Picture, I try to concentrate on the Even Bigger Picture.
• The Even Bigger Picture tells us that over the last 70 years, stocks have provided their owners with gains of 11 percent a year, on average, whereas Treasury bills, bonds, and CDs have returned less than half that amounts.
• A successful stockpicker has the same relationship with a drop in the market as a Minnesotan has with freezing weather. You know it's coming, and you're ready to ride it out, and when your favorite stocks go down with the rest, you jump at the chance to buy more.
• Whereas companies routinely reward their shareholders with higher dividends, no company in the history of finance, going back as far as the Medicis, has rewarded its bondholders by raising the interest rate on a bond. Bondholders aren't invited to annual meetings to see the slide shows, eat hors d'oeuvres, and get their questions answered, and they don't get bonuses when the issuers of the bonds have a good year. The most a bondholder can expect to get is his or her principal back, after its value has been shrunk by inflation.
• People who sleep better at night because they own bonds and not stocks are susceptible to rude awakenings.
• Here's a good strategy for convertible investing: buy into convertible funds when the spread between convertible and corporate bonds is narrow (say, 2 percent or less) and cut back when that spread widens.
• Fund managers and athletes have this in common: they may do better in the long run if they're brough along slowly.
• Peter's Principle #7: The extravagance of any corporate office is directly proportional to management's reluctance to reward the shareholders.
• Flexibility is the key. There are always undervalued companies to be found somewhere.
• I always ended these discussions [with company's management or investor relations] by asking: which of your competitors do you respect the most?
• Small [caps] is not only beautiful, it also can be lucrative.

I think that's long enough for one post.

Haiku - You deserve some time off

I used to love work,

Ran hard after the carrot.

Where has my life gone?

-JDW



Bobby Fischer is a badass

Two of my favorite quotes so far in the book "Endgame", a biography of Bobby Fischer:

"But why would Geller expect Fischer to take a quick draw? Fischer's entire record as a player shows his abhorrence of quick draws and his wish at every reasonable (and sometimes unreasonable) occassion to play until there is absolutely no chance of winning. No draws in under 40 moves is an essential part of his philosophy."

and

"Taking nothing for grandted was one of the key's to Fischer's success."

 The whole book is worth a read and is easily accessible for the chess outsider like me. I love reading biographies. The more you read the more you realize there is a pattern of success: hard work bordering on obsession. For instance, it was estimated that between his ninth and eleventh birthdays Bobby played a thousand games a year. Between his eleventh and fourteenth birthdays he played 12,000 games a year. Another example: in 1970, Fischer left NYC to go to the Catskill mountains to prepare for the World Championship match against Spassky. In the four months that he trained there he spent 12 hours a day 7 days a week reading, thinking, and preparing for one match.

I'll have more on this book after I finish it.

Notable and Quotable from Alex Berenson's "The Number"

I just finished The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America. What a fantastic read. Alex Berenson is a captivating writer who masterfully wove together many different narratives - accounting, government regulatory, and stock market history as well as the stories of corporate misdoings by Computer Associates, Enron, Tyco, and Worldcom. It was a great read.

As I've written before, I like to underline as I go along. Here are some of my favorite passages, which will give you an idea of how good a writer Berenson is. All of the points are attributable to him unless otherwise specified.

• "It is difficult to get a man to understand something when his salary depends on his not understanding it." -Upton Sinclair
• On Wall Street, not all numbers are created equal.
• Earnings per share is the ultimate benchmark of a company's success or failure.
• Earnings per share is the number for which all the other numbers are sacrificed. It is the distilled truth of a company's health. Earnings per share is the number that counts.
• But the trouble with bubbles...the trouble with bubbles is they don't last.
• Accountants are the plumbers of capitalism, unappreciated but vital to the system.
• Bear markets have villains. Bull markets have heroes.
• A conglomerateur who runs out of acquisitions is a very unhappy conglomerateur. He's stuck managing the companies he has already bought, which are all too often third-rate companies in slow-growth industries. Winners buy; losers manage. Worse, the skills that make a successful conglomerateur-salesmanship, impatience with details, and a huge ego-are more or less the opposite of the skills needed to successfully manage a company.
• Diversification is no protection against loss if that diversification consists of owning a diverse group of second-rate stocks.
• If Wall Street's history proves anything, it is that investors of all sizes examine financial statements much less closely when stocks are rising.
• In Wall Street's version of heaven, the strip clubs don't have covers and every month is January. In hell, on the other hand, the calendar always reads October.
• "You start as an analyst, but you end as an ambassador."
• Bill Barnhart of the Chicago Tribune: "When you boil down the entirety of a corporate enterprise to a few pennies, the chances for error, misunderstanding and mischief are immense."
• [Stock] options are worth something even when they're not worth anything. They are as close as Wall Street comes to believing in an afterlife.
• Roger Lowenstein on executive compensation, specifically the abuse of stock options: "By turns, a system designed to motivate became one to simply enrich."
• The clash between longs and shorts is about more than money; it is the eternal battle of hope and realism.
• Short-sellers are the little voice in the middle of the night, the voice a CEO cannot allow himself to hear: Your numbers are crap. Your new product is way behind schedule. You're booking sales for which you'll never get paid. You're burning cash. The competition is ruinous. You don't have a chance. That $200 million you raised last year, it's gone. What now? To executives, that voice is death, so the shorts are killers.
• During the worst panics, the market does not make even a halfhearted attempt to rally. It closes at the day's lows, and one has the sense that if not for the 4 P.M. bell, prices would fall until the Dow and the S&P 500 and every stock in them all hit zero, and even then traders would try to sell short. The very concept of a bottom is laughable. Only a night's rest can bring sanity back to the world...But the worst crashes do not last just one day.
• After the first day of a crash, no one can know where it will end. It is a force of nature as much as any hurricane or earthquake.
• Michael Lewis on the 1990s: "A boom without crooks is like a dog without fleas...A healthy free-market economy must tempt a certain number of people to behave corruptly."
• It's time for all of us, investors and executive and managers and employees, to admit what we already know: Just because a company hits its earnings targets doesn't mean it is flourishing; just because it misses for a quarter or two doesn't mean that it is failing. Just because a company has grown 15 percent a year for a couple of years in a row doesn't mean it can grow 15 percent a year forever. Only a handful of companies has earnings that can be smoothly plotted more than a few months in advance. Business doesn't work that way. Life doesn't work that way. [Emphasis my own] Planes run late; meetings go badly; contracts don't get signed when they're supposed to. Hire good people is hard; making good acquisitions is harder. Even well-run companies have a tough time keeping decent financial controls, figuring out where to invest research dollars, and satisfying investors and the media. And not ever investment pays off in three months. Sometimes smaller profits now can mean a better business and bigger profits later.
• The number is a lie. We need it; we can't avoid it. But it's still a lie.

Hush thee, my babe, Granny's bought some new shares,
Daddy's gone out to play with the bulls and the bears,
Mommy's buying on tips, and she simply can't lose,
And baby shall have some expensive new shoes!
-September 1929 in the Saturday Evening Post

Notes from Seth Klarman's Youtube Videos

I came across some videos of successful money manager Seth Klarman of the Baupost Group. Klarman is the author of the $900 book, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. When I was watching I was blown away with the rapid-fire investment truisms. So I decided to jot them down:

• value investing is a risk averse approach - focus on risk before return
• Ben Graham's net working capital test - if you can buy a stock for less than 2/3 its networking capital (working capital - all liabilities) then that's a bargain. You are buying a company for less than you could liquidate the business for.
• three underlying pillars:
• Focus on risk before return. Focus on multiple scenarios, i.e. what can go wrong, what's the worst thing that can happen. Create a range of possible outcomes, don't rely on single point estimates. Volatility isn't risk, volatility creates opportunities.
• The world is oriented toward relative performance. People who are risk averse should be focused on absolute returns. If you are focused on absolute returns, the idea of losing other people's money is abhorent. If you're focused on relative performance then you're OK with that.
• The importance of being bottom-up and not top-down. Interest rate and the stock market direction forecasting are incredibly difficult to perform well.
• Baupost. When they set it up they wanted to have flexibility - a wide mandate - in order to have as large an opportunity set as possible. The more weapons available in your mandate  the better chances you will have to take chances of mispricings. They also set it up to have capital alongside their clients. They don't allow people to have significant holdings outside the firm. The firm is highly collaborative; people are able to make an impact even at a junior level. Capital isn't siloed or allocated to specific people; it is able to move to different opportunities as they arise. Baupost's edge is in complicated situations.
• To invest in something you need an edge. They need to have a reason that they will outperform. The biggest edge someone can have is a long-term orientation. It's easy to say you do, but harder to implement it. Also, you need a catalyst: what is going to cause a mispricing to correct itself. Or a supply/demand imbalance like distressed debt where, as a bond is down-graded, there is forced selling.
• Spin-offs and index inclusion/exclusion are both good sources for deals.
• Relationships are important. They work hard to have the best clients and the best brokers. Trust. The team has worked together for a long time.
• Pharmaceutical company that invented a number of drugs - PDL Biopharma 30% IRR on the likely collections from drug patents.
• Risk vs. Return:
• Intensive sensitivity analyses on everything they do. A whole variety of assumptions. E.g. what if defaults are 5%, 10%. If a security, even with Depression-like scenarios, passes these tests then it is a good buy.
• Easy to find things that aren't efficiently priced.
• Baupost never uses modern finance, i.e. WACC or ROIC. Instead, use a range of values.
• Often the greatest opportunities are around the peripheries of things. If people are looking at
  the S&P 500, you should look at the 501st company. Where do we earn enough to buy and hold this entire company?
• Which value managers do you admire?
  Buffett and Munger for one.
  FPA Crescent team. Southeastern Asset Management. Tweedy Brown.
  Paul Singer. David Abrams. Perry Capital. Jeff Hallis. Michael Lowenstein. Steve Mandel.
• Looking for egregious mispricings. Looking for low-risk, high-return situations.
• Never believe that something will go well beyond fair value. We don't hold on for the last nickel. Don't fall in love with a stock because it acts well.
• One of the biggest mistakes that investors make is overdiversification. This presupposes that losses will be one-off events rather than the entire market moving against you. This limits your return and doesn't really limit your risk that much.
• You need to be able to tell a great idea from a good idea.

What I Learned from Phillip Fisher's Common Stocks

I would not recommend the book Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) for anyone. However, my displeasure with it didn't deter me from finishing it once I picked it up. I don't quit on things. My philosophy is: power through. These are my general feelings on the book, written as part of a review on the Amazon reading list app of LinkedIn:

"My expectations for this book were high. I was severely disappointed. The best part of this book is that it's over. The worst part of this book is that Phillip's son Kenneth owns the rights to the book. He took that privilege, ran with it, and abused the hell out of it. Kenneth, a billionaire investor, droned on for a dozen pages of prologue before writing another 27 for the introduction. If you happen to pick up this copy, and I suggest that you don't, skip all of Kenneth's writing. It's horriblely egotistical, monotonous, and empty of any informational value whatsoever.
Phillip writes like I hope that I don't: overly verbose with too complicated a sentence structure. His writing also has too many references to previous statements so quoting him is very difficult. In my view, the best investment writers drop little nuggets of wisdom that are highly quotable. Because of the way Fisher writes, you won't get much of that from this book. The other problem with the writing is that there are too many examples so the book doesn't stand up historically. I don't want to read about Dow Chemical in the '50s or Motorola in the '70s. Both of these stocks are also written about because Fisher owned them which I also found annoying.
I did find bits and pieces that I believe was adopted by other investment managers, e.g. three year rule, buying something when it is priced well and not haggling over 1/8ths.
However, I recommend that you skip this book."

Not enjoying the book also didn't prevent me from learning. I keep a journal of ideas that I want to keep when I read. I want to share with you those ideas that I came away with from this book. [I cleaned up his gratuitously elongated speech for my own records.]

• In the case of really outstanding companies, the information is so crystal clear that even a moderately experienced in vestor who knows what he is seeking will be able to tell which companies are likely to be of enough interest to him to warrant taking the next step.
• You need to have patience if you want to make big profits from an investment. Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens.
• Doing what everybody else is doing at the moment, and therefore what you have an almost irresistable urge to do yourself, is often the wrong thing to do at all.
• Just as even the best professional baseball players cannot expect to get a hit more than one out of every three times he comes to bat, so a sizable number of stocks are bound to produce nothing profitable at all.
• If you want to gauge a management's orientation towards profits (short- vs. long-term) then look to the treatment of customers and vendors. It provides a very good indicator.
• Stocks should not be bought where the dividend payout is so emphasized that it restricts realizable growth.
• Practical investors usually learn their problem is finding enough outstanding investments, rather than choosing among too many.
• Usually a very long list of securities is not a sign of a brilliant investor, but of one who is unsure of himself.
• To make big money on investments it is unnecessary to get some answer to every investment that might be considered. What is necessary is to get the right answer a large proportion of the very small number of times actual purchases are made.
• His three principle, two I's and an H: integrity, ingenuity, and hard work.
• A good place to start with a conservative investment is with an industry's lowest cost producer, because:
• the higher margin allows the company to weather poor business conditions better
• the margin also allows the company to earn enough that they won't need to seek additional financing
• The largest profits in the investment field go to those who are capable of correctly zigging when the financial community is zagging.
• Contrary opinion is not enough, however. When you do go contrary to the general trend of investment thinking, you must be very, very sure that you are right.
• Three year rule: each investment should be given three years in order to draw a conclusion from the investment thesis.
• "If you can't do a thing better than others are doing it, don't do it at all."

First Quarter 2011 Reading List

I wanted to take some time to share with you my thoughts on the books that I've read in the first three months of the year. In December, I decided to share all of the books that I read in 2010. As a person who reads roughly a book a week, the post was too bulky to be very good. [I was bogged down with studying for the CAIA designation so I slowed down in late February/early March.] So I decided to break it up into quarters. In the future I might do it in a monthly post.

Thursday, March 31

Fooling Some of the People All of the Time

by David Einhorn

Recommended

Comment: "This book was wonderful. It was exactly the way the book "Confidence Men", the story of the struggle William Ackman had in his pursuit of raising concerns of MBIA, should have been written. Mr. Einhorn grabs the reader's attention from the first chapter. If he weren't already a successful hedge fund manager he would definitely be able to find employment as an author. It was that good. Joel Greenblatt claimed that he read the book in two sittings. That wasn't possible for me, but it did only take me three days. I couldn't put it down.
In all of the books I read I mark passages that are outrageous with !. This book's margins are covered in them. The story of Einhorn's struggle with management is characterized by outlandish claims, horrific valuations, childish rants, and CIA-type operations.
The takeaway question I came away with was: is the cost of being publicly short (and subsequently being right) worth it? With all the strains and scrutiny Mr. Einhorn and Mr. Ackman went through, I'm not sure I can say that it is."

Monday, March 28

The Tao of Inner Peace

by Diane Dreher

Comment: "This book was very interesting for the first 150 pages. That section of the book encompassed most of the self-improvement instruction which was wonderful. I enjoyed how she blended Tao Te Ching passages with both explanations and everyday examples. However, the rest of the book wandered through a miasma of self-congratulatory hippy BS like recycling and bringing your own reusable bags to the grocery store. Not helpful at all. If anything, this book will make me explore the Tao Te Ching further because I found it to be both fascinating and enlightening."

Wednesday, Mar 23

Season on the Brink

by John Feinstein

Comment: "It is tournament time! I thought I'd get my head in the game by reading a story about Bobby Knight.

This book was a fair portrayal of a complex man. Feinstein describes Knight as a highly loyal, nice, caring, intelligent albeit tempermental and controlling. The book is really an insider's look at the Bobby Knight 1985-86 team, the year after the chair throw at Purdue and the year before his third championship season. It was a season of ups and downs. I think Feinstein did a good job of describing what it was like as a player in Knight's locker rooms even if his narrative of the games was a little too elaborate."

Tuesday, Mar 15

Power: Why Some People Have It and Others Don't

by Jeffrey Pfeffer

Recommended

Comment: "Great book on power and influence. Stanford Professors Jeffrey Pfeffer lays down the argument to gain more power and then proceeds to detail how you can go about getting it. This book was not just a well written blueprint. Rather, it was pretty thought provoking as well.
For instance, at one point he discusses democratic institutions and how they are the exception, not the rule in all of our society's organizations, be they companies or non-profits or government agencies. It made me question why, growing up and in school, adults always stress voting and consensus-building as the method to make decisions. I think that is just another way we under prepare children for success in adulthood."

Monday, Feb 28

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition

by Warren E. Buffett, Lawrence A. Cunningham

Recommended

Comment: "The best source for information on Buffett's investment style and thought process is Buffett himself. Lawrence Cunningham effectively organizes Buffett's essays from 30 years of annual reports (not the partnership letters mind you) into very clearly defined narratives that follow a syllabus-like approach. After finishing it, I can't believe what took me so long to find this book. The value that this book provides is well worth the cost and the time to read it. I recommend it to anyone who is at all interested in Buffett."

Tuesday, Feb 15

All the Devils Are Here: The Hidden History of the Financial Crisis

by Joe Nocera, Bethany McLean

Recommended

Comment: "Great book on the financial crisis. Nocera and McLean start their book much earlier than the other books in the genre. They explain all of the legislative and regulatory changes as well as the development of the mortgage backed securities and subsequent securitizations that occured in the 1980's and 1990's as laying the groundwork for the 2003-2007 housing bubble. The only shortcoming of this book is that the authors stand on the backs of other books such as Fool's Gold and Too Big Too Fail to quickly go through the narrative of the actual crisis. The meat of this book, and its comparative advantage, is in developing the backstory. I learned a ton about Fannie and Freddie and MBS's by reading this book and I recommend it to anyone with an interest in these topics."

Monday, Feb 7

The Lords of Discipline: A Novel

by Pat Conroy

Recommended

Comment: "This book is a gripping novel about the "Carolina Military Institute", a not-so-clever euphemism for the Citadel. Having no military background I thought this book might fall flat for me, but that wasn't the case. Pat Conroy weaves many different narratives together superbly, including a discussion on the Vietnam era, the vanity and "what's behind the curtain" in Southern aristocratic society, as well as the solitary man against the established order main narrative.
I've now read three Pat Conroy books in the last four months and I've loved all of them. I encourage you to seek them out. I think I'll eventually pick up "My Losing Season" which is supposed to be more autobiographical about his experience in college because of my positive read of this book."

Monday, Jan 31

Buffett: The Making of an American Capitalist

by Roger Lowenstein

Recommended

Comment: "This is the book that all other Buffett books should be judged by. If you want to know about Buffett, not just the man as you'll get in "The Snowball, but also his investing then this is the best book to read."

Tuesday, Jan 25

Lives of the Laureates, Fourth Edition: Eighteen Nobel Economists

by William Breit, Barry T. Hirsch

Comment: "This was a Christmas present. Lives of the Laureates is a compilation of 18 lectures given at Trinity University by Nobel laureates in economics. Many of the lectures are thick with names and titles and read more like a bibliography than an autobiography. But then you get to the really interesting economists like William Sharpe or Paul Samuelson who are able to see past the litany of their papers and connect the dots of their careers.
There are many themes in this book, like the fact that they all seemed to become indoctrinated into the mathematics of economics through PAS's "Foundations of Economic Analysis" and the Chicago school thread seemed to run through all of them." 

Monday, Jan 24

Quality of Earnings

by Thornton L. O'glove

Recommended

Comment: "This book was a fantastic exposition on what to watch out for when it comes to a company's earnings. It talked about everything: inventory schemes, nonoperating/nonrecurring income, and increasing/decreasing expenses. I thought it was not just fascinating, but very informative. I can really apply these principles in my own due diligence.
Also, if I get into a doctoral program this fall, I will definitely re-read this book for doctoral ideas because I had at least a dozen in my first pass-through."

Thursday, Jan 13

A Practical Guide to Racism

by C. H. Dalton

Recommended

Comment: "Despite the shocking title, this book is laugh out loud hilarious satire. Almost every page has a joke that made me chuckle. I never knew a book could be so funny."

Monday, Jan 10

The Number: What Do You Need for the Rest of Your Life and What Will It Cost?

by Lee Eisenberg

Comment: "As the title suggests, this book is about thinking about the rest of your life. But do not be led astray, while it does talk at length about "the Number" the computation of the number is cast aside as an afterthought. The author seems to have an ax to grind with the personal finance industry which he believes spends to much time focusing on the quantitative value of the number while underemphasizing the more important aspect of the number, which is what that money can buy, i.e. happiness. If there is anything that I dislike about the book, which was interesting and engaging if not infuriatingly repetitive, it is the deceptive nature which it breaches into a genre which it clearly is not. If it were actual personal finance then the computation of the number would not be discussed only included as an appendix. Rather it favors a broad discussion of what that money should buy - the pursuit of a passion is the author's preference - so that it functions more as a self-help book to enjoying retirement rather than actually planning for it."

Thursday, Jan 6

Machine of Death: A Collection of Stories About People Who Know How They Will Die

by Ryan North, Matthew Bennardo, David Malki !

Recommended

Comment: "Holiday fun reading!
This book is a collection of short stories revolving around an idea that was spawned by a comic that Ryan North, of Dinosaur Comics fame, printed in 2005. In the comic, T. Rex talks about a machine of death which prints ambiguous readings and is never wrong.
This book was a whole lot of fun, but on a deeper level this book touched on two extremely complex issues, free will and the struggle between order and chaos. I would recommend it to anyone because it was highly entertaining."