Book Review: All About Asset Allocation

July 23, 2017April 23, 2018 Douglass GakingLeave a comment

All About Asset Allocation is worth a read by every investor, even if you don’t buy into efficient-markets theory (EMT) or modern portfolio theory (MPT) and focus your investing on alternative strategies.

Richard A. Ferri uses tons of charts to help demonstrate the effectiveness of various kinds of diversification of the portfolio. He identifies the roles of various kinds of securities in the modern portfolio. He makes excellent cases for the importance of real estate exposure and international equities. He points out the weakness in the simplistic approach that many financial advisors take to investing in bonds.

Ferri demonstrates various strategies for hedging against inflation, interest rates, and other risks. He creates suggested allocation plans for investors at 4 different age levels and 3 different risk profiles. While I do not agree with all of Ferri’s theories and strategies, everything he advocates is research-based. His approach is appropriate for investors at any level, young or old, advanced or beginner. This is a great resource for anyone committed to meticulous portfolio management.

Book Reviews

Book Review: The Big Short

July 15, 2017July 15, 2017 Douglass Gaking1 Comment

the big short

The Big Short is more technical and more entertaining than I had expected. When it comes to coverage of the 2008 financial crisis, there are few in books or media who do an adequate job of explaining the mortgage-backed securities, collateralized debt obligations, credit default swaps, and other technical finance concepts involved. Michael Lewis manages to make sense of a complex system of debt speculation that the people who were responsible for understanding didn’t seem to understand. It is exactly what one might hope to get out of this book, but it’s not the thing that makes this book truly special.

What is really surprising about this book is its tone. Wall Street investors can be very brash. The investors covered by Lewis are outsiders. They share many characteristics with Wall Street stereotypes, but for various reasons they don’t fit in to those social circles. They are rogue investors, searching for any niche they can find, striving to be contrarian. They speak with a colorful vernacular; Lewis doesn’t bowdlerize. In fact, Lewis adopts a bit of the voice of his characters to better tell their story.

As the story progresses, the tone drastically changes. The events that unfold have huge implications for capitalism, democracy, and the history of the world going into a new century. Seeing how the men who predicted it profited from it and eventually reacted to it is what The Big Short is really about.

Book Reviews

Book Review: The Inner Game of Tennis

June 14, 2017April 23, 2018 Douglass GakingLeave a comment

Business Insider just published a piece about how this book guided the Golden State Warriors through their historic 2016-17 season. The piece shows a photograph of one of the best paragraphs of the book, which Tom Brady tweeted, showing where he wrote in the margin next to it. The Inner Game of Tennis: The Classic Guide to the Mental Side of Peak Performance has helped a lot of successful people get where they are today by focusing on a critical, but unemotional mindset.

I first read The Inner Game in the spring of 2004, at the end of a mostly unsuccessful freshman year in music school. The demand for hours of daily practice is one of the major reasons that people drop out of music school. Spending anywhere from 2 to 8 hours per day alone in a small room with your instrument, fighting to meet the standards of yourself and your professors, can quickly drive you insane. Continue reading “Book Review: The Inner Game of Tennis” →

Book Reviews · Investing

Book Review: Buffettology & The New Buffettology

June 6, 2017April 23, 2018 Douglass GakingLeave a comment

Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the World’s Most Famous Investor

There are plenty of books about Warren Buffett available at any bookstore or library. What makes this one unique is that it is not written from the perspective of Warren Buffett’s cult following. After her divorce with Warren Buffett’s son, Mary Buffett capitalized on a rare opportunity to publish insider information about one of the richest people in the world and his investment strategies.

Rather than quote Warren Buffett’s shareholder letters to death like most authors, Mary sticks to the details of Warren’s investments, how he made each choice and how it worked out. She provides a lot of quantitative data that is useful for reverse-engineering Warren Buffett’s portfolio.

Information from this book definitely helped me refine a few aspects of my investing philosophy and my screening process. Mary is concise and unemotional, making this a quick and productive read.

The New Buffettology

This sequel to Buffettology updates Mary Buffett’s analysis of Warren Buffett’s investing strategies from the first book. It is a fine addition to the library of materials available about Warren Buffett, adding new investment decisions from his history that I had not previously read about. It also brings readers of the 1997 Buffettology up to speed on developments getting into the 21st century, when the bubble of the 1990s burst, hurting many portfolios, but creating new opportunities for patient value investors.