Review of Hedgehogging (Hardcover)

I previously worked in the hedge-fund industry and now teach college students about finance. Therefore, I found Barton Biggs' anecdotes both instructive and amusing, having seen some of the poor lifestyle choices that some hedge fund managers ("hedgehogs", according to Byron) make.

However, the book's strength is not an "inside look" into the world of hedgehogs, but a series of instructive vignettes about how to be an "investor". According to Biggs, a true investor sees one step ahead, while the rest of us are responding to the "now".

The true investor pays a high price for this insight. A true investor makes mistakes, is inevitably early, has doubts, lives in a lonely world, and is abandoned at precisely the wrong time by his most loyal investors. Sleepless nights, grinding teeth, and poor digestion are just part of the price paid. (I certainly can attest to this, though I would never claim to be a true investor. I guess that I am just a "journeyman".)

The goal of people with money to invest is to find these true investors, give them their money, watch them closely, and stick with them through thick and thin. One must constantly watch, though, for the weaknesses that often come with success.

In the first half of the book, Byron provides many instructive stories, centered on his town of Greenwich, of successful hedgehogs who let their money determine their lifestyles. Inevitably, pride comes before the fall, destroying both lifestyles and businesses.

I strongly recommend this book, not as an investment guide, but as an "investor guide" -- a guide on how to be a successful investor or how to find successful investors to work for you. This book fills an critical hole in my library.

Addendum January 8, 2006: I've spoken to a few friends in the business who are quite angry about the passages in the book concerning the Breakers meeting that is sponsored by Morgan Stanley. I, too, felt that Biggs' comments were unwarranted, but they did not detract from the book for me. There are many in the hedge fund community who feel that Biggs owes them an apology. I agree.



Click Here to see more reviews about: Hedgehogging (Hardcover)

Review of Stock Market Stratagem: Loss Control and Portfolio Management Enhancement (Hardcover)

I agree with other reviewers that this book deserves 6 stars. Over the last 30 years, I've accumulated a lot of investment books but this is the first I've seen that has a chance of withstanding the test of the many varied business cycles over time. I note that this book has been selected as a text for several "practical" college investment courses.

Here are the specific reasons I like this book:

First, this is a book about lifetime investment principles for the DIY individual investor. Glett's idea is to devise easy-to-use techniques to take advantage of high growth stock market opportunities while minimizing possible losses with "risk control" strategies. Central to both concepts is the notion of diversification, where a portfolio of stocks are developed that maximizes the opportunity of finding a few big winners (doubles and triples), while limiting the number of losers to a tolerable few.

Extensive knowledge of economics or financial analysis is NOT required. Rather Glett advocates letting the market make the key buy/sell decisions. To provide insight, the techniques are explained using paper-and-pencil with public data from the web, but suggestions for simplifying the process using professional computer software are introduced as well.

An actively managed portfolio is advocated, where market conditions dictate what and when to buy and to sell. It is a "contrarian" strategy with a twist. It advocates the selection of low profile stocks in emerging market sectors rather than just the big names. It is also a "momentum based" strategy with a twist. Glett's "Reverse Scale" strategy advocates allowing winners to run, while losers are cut immediately. The twist in each case, however, is that its diversification and loss-control strategies are constructed to reinforce each other to minimize risk as defined by the investor. One of the key outputs of this strategy is the discipline to execute a stop-loss order within minutes after buying the stock to guard against subsequent "unreasonable exuberance."

Glett advocates the use of technical (charting) techniques to determine a stock's trend in order to quickly narrow a list of potentials to a select few. Charting is also useful in determining loss-limits. Financial and fundamental data are then used to gage the trend's sustainability.

And finally, techniques are developed for recognizing the onset of a bear market at which point the portfolio goes into limbo where winners continue to run, but losers are not replaced. A technique for knowing when to safely get back into the market is also presented.




Click Here to see more reviews about: Stock Market Stratagem: Loss Control and Portfolio Management Enhancement (Hardcover)

Review of John Neff on Investing (Hardcover)

Mutual fund managers who can beat the market for a couple of years are a dime a dozen. Mutual fund managers who can beat the market for a couple of decades are practically unheard of. Which is why almost every investor hasheard of John Neff. In his 31 years as a bargain-hunting fund manager, hebeat the market in 22 of them. By the time he retired a few years ago, adollar invested in his Windsor Fund in 1964 would have returned $56, versus$22 for the S&P 500.

In JOHN NEFF ON INVESTING, one of the truemasters of Wall Street tells us exactly how he compiled this amazingrecord. With collaborator Steven Mintz, he explains what kinds of stocks helooked for (in a nutshell, low p/e stocks of companies growing earnings inexcess of 7% annually, often paying a respectable dividend) and a long listof qualifications concerning just what makes one low p/e stock better thananother. (A low p/e company growing too fast is suspect. A dividend yieldisn't always a must. Cyclical stocks should offer lower p/e multiples. Thelist goes on and on.) Just as importantly, Neff shares the wisdom of alifetime in the investment business, outlining the pitfalls that can trapthe unwary investor. (See Chapter 9, CARE AND MAINTENANCE OF A LOW P/EPORTFOLIO.

The meat of Neff's discussion of his investment style isincluded in the middle third of the book. Armed with this advice, aninvestor can easily begin to screen the stock market for companies that fitthe Neff mold. (MSN MoneyCentral Investor, at www.investor.msn.com, offersa powerful and free screening tool. There are many others.)

Elsewhere,Neff devotes the first third of his book to talking about his formativeyears in the investment business prior to taking over the Windsor Fund. Inthe final third of the book, he provides a journal describing hisinvestment activities at the helm of the Windsor Fund. He talks aboutcritical buy-sell decisions, why he made them, and how they worked out ...and also describes the ever-changing market environment in which he wasmaking them. (Reading this book is a great reminder that large-cap growthstocks don't always lead the market, as they have for the past five years.As such, it should help investors be better prepared the next time marketleadership changes.)

If you had the chance to sit down and talk with JohnNeff for a few weeks about his career and his investment style, what youwould get, though likely not so well structured, would be this book. I'dlove to spend those weeks with John Neff. But I wouldn't give up the chanceto have read this book, either. Few investors have achieved more than Neff,and his story deserves a place on any investor's reading list. ###



Click Here to see more reviews about: John Neff on Investing (Hardcover)

Review of How To Be An Index Investor (Hardcover)

I bought this book because of my confusion with index funds after reading different advertisements from newspapers and websites. The result of my learnings are three limit orders I just placed for different sector funds.

This book is written objectively without a slant towards a specific product. Also, written for the inexperienced as well as the professional trader. It provided some real insights as to how trading is accomplished (in plain English).

The bing "WOW" was seeing how I was being penalized as long term investor in mutual funds because of the annual tax distribution. Also, the majority of funds do not beat the S&P500 index!! Why invest in them when these new investment resources are available?

Highly recommend this book to all levels of investors.



Click Here to see more reviews about: How To Be An Index Investor (Hardcover)

Review of The Coming Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets (Hardcover)

I just finished reading The Coming Collapse of the Dollar and How to Profit From It By James Turk & John Rubino published in 2004. James Turk is founder of GoldMoney.com, the leading digital gold currency payment system. John Rubino is the author of How to Profit from the Real Estate Bust.

I've posted a lot about inflation and gold, the Federal Reserve, and the destruction of the US Dollar. I have read about the inflation that Germany experienced after WWII, the devaluation of the Mexican Peso and the Argentine Peso. If that is our future, I wanted to have some idea of what is in store for us and. The book is divided into four parts and is well written and difficult concepts are explained well:

Part One - Why the dollar will collapse
Part Two - Money Then and Now
Part Three - Wht Gold Will Soar
Part Four - Profiting From The Dollar's Collapse

In part one we learn that we have a fiat currency, backed by nothing except a decree that the US Dollar is legal tender. Throughout history, in order for governments to satisfy demands without raising taxes, a government not only begins to debase its money, but inflates as well. Both are happening in the US and no government has been successful. We have a history of that in this country with the Continentals and the Confederate currency, both worthless.

Another fact that dooms our currency is that we have too much debt. Total unfunded liabilities of the US are in excess of $43 Trillion, as a society we owe another $37 Trillion and Derivatives are in excess of $200 Trillion.

Then we have a trade imbalance which just topped $800 Billion for 2005. We have been up in arms lately by the Chinese wanting to buy Unocal, then Dubai wanting to own our eastern port management companies and Dubai wanting to own some of our critical defense industry by trying to buy Doncasters Turk and Rubino point out on p31:

Foreign investors now own about $8 trillion of U.S. financial assets, including 13 percent of all U.S. stocks, 24 percent of corporate bonds, 43 percent of Treasury bonds, and 14 percent of government agency debt. By the end of 2003, about a third of Fannie Mae's mortgage-backed bonds were being sold outside of the U.S.

That was in 2003 and it has gotten considerably worse. What's in store for us:

Over time, the gap between tax revenue and the demands placed on government tends to grow, and spending, borrowing, and currency creation begin to expand at increasing rates. Inflation accelerates, and the populace comes to see the process of "debasement" for what it is: the destruction of their savings. They abandon the currency en masse, spending it or converting it to more stable forms of money as fast as possible. The currency's value plunges (another way of saying prices soar), wiping out the accumulated savings of a whole generation. Such is the fate of every fiat currency.

The government wants to keep this game going as long as possible by issuing phony CPI numbers, then by excluding energy and food, concentrating on a "core" rate. Phoney low inflation numbers keep bond yields down and "COLA" adjustments low. What is the housing bubble, but selling USDs for a tangible asset. Gold is a warning sign and a rising gold exchange rate is fought by capping and leasing gold, until the central banks are short 12,000 to 16,000 tons. And now one of the tools Turk and Rubino use, The Fear Index, to gauge where gold is going in the next few years will be handicapped by the ending of release of M3 data.

Turk and Rubino do an excellent job of instructing you in Part Four. Can you profit from your knowledge of an impending collapse of the dollar? How can you protect yourself? How can you protect your accumulated savings?

I highly recommend this book to professional and novice, alike.



Click Here to see more reviews about: The Coming Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets (Hardcover)

Review of Technical Analysis: Power Tools for Active Investors (Hardcover)

For novices interested in technical analysis, there is so much material here it might seem overwhelming.But believe me, the effort at exploration is worth it.I've been successfully applying Appel's work since 1984, and this all-encompassing treatise was like looking over his shoulder, soaking in his 30 years of wisdom on the markets.

I was especially interested in the section on the relative strength comparing the performance of the NYSE to the NASDAQ.This area of the book alone is worth the price of admission.

Professionals in the field are likely to be familiar with most concepts in the book. But over the years, I've found many misapply the use of MACD, an excellent indicator Appel invented which has become a staple in technical analysis.All would be advised to read how Appel uses his own invention.

There's something for everyone in this book, novice and professional alike.Few have contributed more to technical studies and money management than Gerald Appel.Don't just put this on your bookshelf--read it, use it and learn from it.It will make you a better investor and trader.



Click Here to see more reviews about: Technical Analysis: Power Tools for Active Investors (Hardcover)

Review of Do-It-Yourself Hedge Funds: Everything You Need to Make Millions Right Now (Hardcover)

I bought this book with the expectation that it would teach me the behind the scenes details of hedge funds and also provide the real tools needed to start one, but in the end it is just a very high level guide to macro investment themes, diversification, and elementary valuation.If you have a finance background I would strongly suggest passing on this one and pick a different, more appropriate, book; you learned more in your introduction to finance class.Also, if you are under 30 I would also stay clear as you have probably learned more from watching Cramer on CNBC or just thru general internet use and blog reading.In this book, there is an entire chapter devoted to yahoo finance and where to find financial data and what it means.I am sorry, but if you don't even know where to find financial data or what an ETF is (which means you have probably never really invested), you should not be worried about "starting your own hedge fund" as this book misleads.You should stick with your day job and keep getting your stocks from "Money" and other sources with conflicting interests.

Of 10 chapters, I found the final 2 the only semi useful ones.The final chapter was more for entertainment value, but it did provide a valuable reminder that everything in life is zero sum and there is no place more zero sum than wall street.The 2nd to last chapter provides some hedge fund strategies and high level differences between them with a couple of examples.

I am sorry, but I really expected more from this book and I can't say I really took one thing away from it.I kept waiting for the "meat", but it never came.It is clear that the author targeted the largest audience possible, which would be non-financial main street who are just hearing the term "hedge fund" for the first time.

Disclaimer: I have a finance degree, a finance job, and have worked in a hedge fund before as a bottom of the barrel analyst, so maybe I expected too much, but I really didn't learn anything from this book and don't think anyone with any sort of finance background will either.



Click Here to see more reviews about: Do-It-Yourself Hedge Funds: Everything You Need to Make Millions Right Now (Hardcover)

Review of Rule Your Freakin' Retirement: How to Retire Rich by Actively Managing Your Assets (Hardcover)

Michael "Waxie" Parness really knows what he's talking about when it comes to making money in the market.If you're tired of losing money through mutual funds and want to take a more active role in managing your assets, this is the book for you.



Click Here to see more reviews about: Rule Your Freakin' Retirement: How to Retire Rich by Actively Managing Your Assets (Hardcover)

Review of Rule Your Freakin' Retirement: How to Retire Rich by Actively Managing Your Assets (Hardcover)

Michael "Waxie" Parness really knows what he's talking about when it comes to making money in the market.If you're tired of losing money through mutual funds and want to take a more active role in managing your assets, this is the book for you.



Click Here to see more reviews about: Rule Your Freakin' Retirement: How to Retire Rich by Actively Managing Your Assets (Hardcover)

Review of The ETF Book: All You Need to Know About Exchange-Traded Funds (Hardcover)

Let me say at the outset that I am NOT a professional investor, that I HAVE invested in individual securities as well as mutual funds for forty years, that I now, as a retiree, restrict myself to annuity income and mutual fund investments (mostly passive), and that I have not yet purchased ETFs, though Ferri's book convinces me ETFs could perform a useful function in my portfolio.

If, like me, you have not yet invested in ETFs but want to know how they are constructed, how they function, and what role they might serve in your portfolio, then Rick Ferri's book is the FIRST place you should go for a comprehensive guide to understanding ETFs.

Ferri's book can be read in, or through depending on the reader's interests.By this I mean his book divides into four free-standing, but continuous, parts.The first part deals with ETF Basics--the history, mechanics, and potential benefits and drawbacks.Part Two, a real eye-opener for this reader, focuses on index construction and provides an index strategy box akin to how Morningstar analyses mutual funds.Part Three broadens the discussion to styles and choices--from broad domestic/global indexes to equivalents of slice and dice strategies.Part Four shows, in detail, how investors can incorporate ETFs into their asset allocation plan--whether they are inclined to passive, active, or a combination of portfolio strategies.

Thankfully, Rick Ferri goes to great pains to communicate clearly with his readers.To my mind, he has no axe to grind, although as a professional portfolio manager he advocates passive investing.Ferri provides many alternative portfolios (passive, active, combo) spread along a continuum of life-cycle investing.

It certainly speaks well of this fine book that it receives the ringing endorsements of the likes of Don Phillips, David Blitzer, and Anthony Rochte, Senior Managing Director of State Street Global Advisors.Robert Uphaus



Click Here to see more reviews about: The ETF Book: All You Need to Know About Exchange-Traded Funds (Hardcover)

Review of Investing in a Sustainable World: Why GREEN Is the New Color of Money on Wall Street (Hardcover)

I thoroughly enjoyed Investing in a Sustainable World.Right from the Acknowledgements, I knew I was in for a treat.The book does a great job making the argument for sustainable investing, juxtaposing it to SRI, demonstrating its overarching merits, deconstructing the standard objections, and demolishing the long-held theories that support these objections.It makes extensive use of case studies and examples, many of which are new even to experienced readers in this space.Chapter 3 is especially informative in that examines the disjunctive approach to sustainability manifest by such premier investment organization as The World Bank, the Yale endowment, and the State of Connecticut.No reason to pull any punches when the evidence is clear. If this book does not move investors to act then I fear we will be wallowing in the mediocrity of myopic investment strategies and returns for much longer than 10 years.



Click Here to see more reviews about: Investing in a Sustainable World: Why GREEN Is the New Color of Money on Wall Street (Hardcover)

Review of Unconventional Success: A Fundamental Approach to Personal Investment (Hardcover)

I am a graduate of the Yale School of Management (with a focus in finance) and have been a fan of Swensen's for a long time.Unconventional Success is, in my view, a must read for anyone who has to manage their own retirement assets (which is most people today).

Swensen compellingly makes the case that (a) the vast majority of passively managed funds outperform actively managed funds (after fees), (b) the vast majority of the mutual fund industry allows profit motives to trump their fiduciary duty to investors, and (c) an individual investor's financial assets are best managed by non-profit organizations - i.e., Vanguard or TIAA-CREF.

Swensen lays out six "core" asset classes that should form the basis of an individual investor's portfolio, each of which should comprise between 5% and 30% of the portfolio.Below is the "generic" target portfolio outlined in the book:
1. Domestic Equity (30%)
2. Foreign Developed Market Equity (15%)
3. Emerging Market Equity (5%)
4. Real Estate (20%)
5. U.S. Treasury Bonds (15%)
6. U.S. Treasury Inflation-Protected Securities (15%)

Swensen also discusses "non-core" asset classes and why each should not be a part of an individual investor's portfolio.These "non-core" asset classes include:
1. Domestic Corporate Bonds, 2. High Yield (Junk) Bonds, 3. Tax Exempt (Municipal) Bonds, 4. Asset-backed securities, 5. Foreign Bonds, 6. Hedge Funds, 7. Leveraged Buyouts, and 8. Venture Capital.We spent so much time in business school glorifying these assets that I found the rationale for why they have no place in an individual's portfolio quite useful.

The most valuable lesson in the book for me was the importance of "quarterly, semi-annual, or annual" rebalancing - i.e. selling winners and buying losers to move various asset classes back to long-term targets (taking into account the tax consequences for post-tax accounts).This is a basic lesson, of course, but the reminder was still highly valuable.

The book does have a few shortcomings.The book can be a bit technical and dry at times, especially if the reader has no background in finance.I would have also appreciated more discussion of how non-financial assets (e.g., home equity) and personal liabilities (e.g., student loans, mortgage), should impact portfolio allocation.Overall, however, I think anyone with a 401k or a few thousand dollars to invest will benefit from a thorough reading of this book.




Click Here to see more reviews about: Unconventional Success: A Fundamental Approach to Personal Investment (Hardcover)

Review of Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe (Hardcover)

The book starts with a fly-on-the-wall description of big, offsite meeting in Boca Raton for J.P. Morgan employees.There they made plans to ensure that J.P. Morgan led the industry in credit derivatives.This story of the bravado of young party animals becomes the backdrop for how we got into this mess.These recently minted and overconfident traders and analysts risk takers, lead a headlong charge into a poorly understood market innovation.After that, Tett describes in detail the array of models, players and events that lead to the financial crisis and weaves them all together to explain the events like no other author yet has done.

Although the description of events are detailed, Tett leaves out explanations of how basic psychology and particular modeling errors contributed to the problem - such as the researched described in Hubbard's The Failure of Risk Management: Why It's Broken and How to Fix It (although Hubbard is talking about risk management in a broader sense than financial risks alone, I still recommend both books for this topic).But Tett is also more pragmatic and specific than Taleb's The Black Swan: The Impact of the Highly Improbable and makes more logically supported conclusions than Posner's A Failure of Capitalism: The Crisis of '08 and the Descent into Depression.

Tett seems to cover just about every aspect of the recent crisis that an author can cover without getting into specific mathematical modeling errors (Hubbard argues this is a critical contributor but it would be hard to elaborate without alienating much of the audience).She covers AIG, Bear Sterns, Fannie Mae, the credit rating agencies and the Basel II accords.She mentions Gaussian copula model, Goldman Sachs and the actions of Alan Greenspan.The details of Structured Investment Vehicles (SIV) and Value at Risk are included along with recent events like the Troubled Asset Relief Program (TARP).

I do not believe there is another single book that has this breadth of coverage combined with a logical picture of how they formed an avalanche of connected events.As of now, this is the single most important book on the topic, period.




Click Here to see more reviews about: Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe (Hardcover)