A Week of Reading. Zweig, Graham, Beinhocker and Grantham
I’ve enjoyed the following four articles/excerpts over the last week. If you haven’t read them already I encourage you to do so.
1. I’ve enjoyed Scribd for over a year and thought everyone one else was as well. To my surprise I recently discovered that it is not as well known as I thought. The Dividend Guy highlighted this fantastic Jason Zweig article, Lessons and Ideas from Benjamin Graham. I’ve been struggling though Security Analysis so this article was a timely pickup for me. It is full of great advice for all investors.
- “get out of stocks when they are overvalued and stay in cash or bonds until stock get cheap again” It doesn’t get much simpler than that, though the difficulty is all in the execution and even seasoned investors get swayed from the rational path.
- “Graham consistently beat the market by 250 bps [2.5%] a year for more than two decades…Graham was an extraordinary good investor.” Many investors aim way to high and fool themselves that they can outperform the market by 10% or more every year.
- “the importance of focusing not on what people ought to do to get optimal results but, rather, on what they can do. The best investing advice is not theoretically ideal but psychologically practical.”
- “Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage” How many people are guilty of this over the last six months?
- “devote at least as much attention to a company once they own it as they did when they were considering buying it in the first place.” I can only do that with a concentrated portfolio of under twenty companies.
2. The Origin of Wealth: Evolution, Complexity and the Radical Remaking of Economics by Eric D. Beinhocker. I’ve only read the free download of Chapter One, but that is enough to convince me this is a must read book. I’ll order it soon from Amazon.
- Beinhocker explores how “complexity economics” provides provocative insights on issues ranging from creating adaptive organizations to the evolutionary workings of stock markets to new perspectives on government policies. A landmark book that shatters conventional economic theory, The Origin of Wealth will rewire our thinking about how we came to be here–and where we are going.
3. The Last Hurrah and Seven Lean Years Jeremy Grantham’s quarterly letter. [Free registration required]
- Absolutely brilliantly written and chock full of good advice. ” …have a simple battle plan of determining levels at which to reinvest and to stick to it absolutely” That advice was presented as an antidote to investors too terrified by the recent declines to deploy cash. I think that advice can be used more widely. A key takeaway for me from George Soros is investors should always have a battle plan for each position and their overall allocation. They should then monitor the positions against the plan and imperatively always react and continue to update the plan. The letter is a must read for all investors. A tip of the hat to MDC for highlighting this one.
4. Reinvesting when Terrified by Jeremy Grantham [Free registration required]
- “There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it. Since every action must overcome paralysis, what I recommend is a few large steps, not many small ones. A single giant step at the low would be nice, but without holding a signed contract with the devil, several big moves would be safer.” Read the article it is only one page. I know I’ve repeated the above advice, that’s how important I think it is.
The Best Twenty Dollars an Investor Could Spend
OK, perhaps not the best, but it is the next twenty I’ll be spending at Amazon.
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