Another book question

[rockrock]

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random walk is probably pretty bad for fundamental analysis/technical analysis stuff, as it doesn't go into depth and bashes it pretty hard. Investopedia.com has some good stuff.

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The point is that analysis is a waste of time and this is a good book to convince one of that.

Its like asking for some books that are good at teaching one to build a divining rod or to read tea leaves.

I'd rather point the poster to a work that debunks such nonsense.

[rockrock]

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anyone?

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Recommended Reading of academic papers

the radical guide to investing

Vanguard diehard's forums

Must read books

The best advice you can get is to check your premise and ask yourself "Does security analysis really work".

[Sniper]

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To outperform, you need either inside information or access to the trading desks at the big brokerage houses.


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Why do you think that access to trading desks is going to help you with long term investments?? Specifically, what information do you think those traders possess that gives them an edge in long term investing? (I will note that knowledge of order flow does give them an advantage in short term trading)

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Fama and French have a bunch of Nobel prize winning economists they run around with who say the same thing,

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Fama is also the director of research of Dimensional Fund Advisors, Inc., an investment advising firm with $69 billion under management Obviously, they have convinced a few people that they can beat the indexes [img]/images/graemlins/wink.gif[/img]

[Sniper]

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Sniper you are one of my favorite posters - I try to read everything you write.

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Thanks rock, I appreciate it!

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I'm sure there are those that do well day to day exploiting behavioral finance type ineffeciencies in the market - you may be one of them. We are talking about long term investing and asset allocation.

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As you know by reading what I write, my personal efforts focus on short term trading, and taking advantage of short term inefficiencies in the system is certainly a part of that.

However, that doesn't mean that I don't also have knowledge of long term investing issues.

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Its a losers game.

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Then how do you explain the success of William O'neill's CAN SLIM system or Value Lines 1 raked stocks, both with long term records of beating the indexes.

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Sure its fun in our ownership society, but there are volumes of work done by guys a lot smarter than me that convincingly argue asset allocation and indexing over individual stock picking and active management.


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If you only read some of the books, you can get a skewed perspective. Here are some of the things that have been written about...

<ul type="square">[*]Invest in Mutual Funds, because the experts there know more than you do.
[*]Invest in Indexes, because most mutual funds can't outpeform the indexes.
[*]Invest on your own, because you can make choices the mutual fund managers and indexes can't.[/list]I could go on, but all these theories on Personal management vs Actively managed funds vs Indexing, all get cyclical in their reasoning. The reason for this is simple, They are all right.

[Sniper]

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Its a great book that everyone else has read, making its contents and practical application irrelevant.

Think, people!!

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First, many people are clueless and haven't read very much of anything. Even, of those who have done some reading, a very small percentage have read that particular book.

Second, even if everyone knew how to do the same thing the same way, there would still be options for taking advantage of the "crowd psychology" that would therefore occur!

[crazy canuck]

Read anything by Swedroe or Ferri on why actively picking stocks for long term investing is a losers game.

You can't and won't win. (winning as defined by beating index).

See academic papers by Fama and French.

Basically, the sell-side of Wall Street is a scam.

"Lets take your money and my experience and turn it into my money and your experience" is their mission statement.

Most diehard indexers recommend value and small cap tilt and a big chunk of (half of equities) split in NON-US - i.e. equal weightings of VPL,VGK,EEM/VWO,EFV and VINEX.

Good luck


These opinions are from the 90s. According to my old empirical finance prof very few academics believe in the Efficient Market Hypothesis by now.

[rockrock]

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Its a great book that everyone else has read, making its contents and practical application irrelevant.

Think, people!!

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First, many people are clueless and haven't read very much of anything. Even, of those who have done some reading, a very small percentage have read that particular book.

Second, even if everyone knew how to do the same thing the same way, there would still be options for taking advantage of the "crowd psychology" that would therefore occur!

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There are huge value funds run by people that have read this book. Dodge and Cox, the myriad vanguard value funds, fidelity, t rowe, americamn, oakmark, blah blah blah.

The information in the book is useless for the individual investor because too many people with too much money know are familiar with the techniques.

The average investor is competing with literally hunderds of billions of dollars seeking seeking to buy value stocks (and all other kinds of stocks as well).

How delusional and arrogant to think could do better. Buy IJJ and IJS, 2 value indexes instead.

[rockrock]

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Read anything by Swedroe or Ferri on why actively picking stocks for long term investing is a losers game.

You can't and won't win. (winning as defined by beating index).

See academic papers by Fama and French.

Basically, the sell-side of Wall Street is a scam.

"Lets take your money and my experience and turn it into my money and your experience" is their mission statement.

Most diehard indexers recommend value and small cap tilt and a big chunk of (half of equities) split in NON-US - i.e. equal weightings of VPL,VGK,EEM/VWO,EFV and VINEX.

Good luck

These opinions are from the 90s. According to my old empirical finance prof very few academics believe in the Efficient Market Hypothesis by now.

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Actually several of those books are recent, as is some of the research cited.

Your professor is right about one thing - its worse now than ever before for the individual investor.

The big brokerage houses have "black boxes" generating amazing trading profits (see Goldman blowout quarter for example).

Hedge funds generating huge commissions get analyst downgrades/upgrades and other info FIRST from the trading desks of the big brokerage houses.

The individual investor has zero shot. EMH may not be a reality for the black boxes, proprietery trading desks, inside traders (see rebock insider trading scandal) or active investors like Icahn and Buffett but it is for the average man on the street.

To say otherwise flies in the face of mountains of evidence.

Even the great Warren Buffet said "our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the passive"

[Peter666]

This whole "index only" philosophy can be defied by some simple common sense. The index is an indication of average performance of a group of companies. We have decades of records of different indexes. List the companies that were the best performers on a year to year basis within their index. List the companies that were the poorest performers in the same index. Find what is common amongst successful companies. Find what is common in the least successful companies. Seek out companies that exhibit the good qualities and avoid companies that exhibit the bad qualities. Invest.

Making profits over the long term is not a fluke.

[DesertCat]

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Sell side Wall street loves buffet because they can point to him and everyone shakes their head up and down, with mouth wide open, believes they can do it.


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Wall street hates Buffett, because he rarely generates investment banking fees for them.

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He is a business owner and investor that takes an active management role in the his companies.



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He had a twenty year record of crushing the indexes before he bought his first company.

He takes no active role in his wholly owned businesses, the vast majority send him a check on a monthly or quarterly basis. You'd understand how silly this myth is (created I believe by a leading EMT academic), if you knew how few people work at Berkshire Hathaway HQ, and how many subsidaries they have.

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Buying 10,000 shares of IBM does not make you a business owner.


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According to Warren Buffett, it does.

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Check out Effecient Frontier, Random Walk Down Wall Street and The Only Investment Guide you'll ever need if you want irrefutable evidence that active stock picking is a losers game.


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EMT has been effectively been gutted by Buffett himself, in his famous speech "Superinvestors of Graham-and-Doddsvile". You should read this since you are well out of date in your understanding of the acceptance of EMT.

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Living the lie is more fun than indexing and asset allocation, I agree.

But its still a lie.


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The real lie is to rely on thirty year old "theories" that have suffered with time.

There is a great deal of truth in the EMT. Beating the market isn't easy, the market is frequently efficient.

But to say the market is alwasy efficient and can't be beat by stock picking is to ignore the records of dozens of value investors who've done it for decades on end.

The evidence that EMT proponents used was biased and incomplete. Mutual funds don't beat indexes as a group, but mutual funds suffer from extraordinary structural limitations. To beat the market in this structure requires extroardinary skill.

And your central advice is useful. Most investors are better off with index funds, but not because successful stock picking is impossible, but because it's hard.

But you need to stop closing yourself off to new information, and realize there are great long term investors who beat the market, and almost all of them do it the same way Buffett has.