Tuesday, October 31, 2006

Blog Roll Review

I have been mostly writing about books lately but am trying to work in a review of some of the blogs I read and why.

If you are like me, you read a lot of blog/websites that talk about investing and trading. After a while it can get a bit tedious.

I have found two websites that do a good job of discussing investing and trading but often break it up and mix in a little humor with links to off-beat news stories and other random, but interesting, stuff.

The sites are:

Tale Of The Tape


Wall Street Fighter

The Future Of Search?

Cool dude Eddie of The Rad Report left a comment on my last post expressing the opinion that I am pretty good at finding useful websites (thanks Eddie).

I must admit that I am a bit of a search geek. How do I know I am search geek?

Well I can tell you exactly where I was and what I was doing several years ago when I first read about a new search engine called "Google." Yes I like search that much. I actually have fun looking for things or being challenged to find something on the internet by coming up with the right combination of terms. That is why anything that brings a new twist on search is pretty exciting to me.

One such website that I came across today is Flowser (Think flowers + browser to pronounce it). It is a little bit rough to play with at this point, but essentially it takes the next step in searching, away from a written list results format to a "spider-web" or connection based result using graphics.

Right now what it searches is the amazon.com database and produces results across their product lines related to the search term in graphical form. While it is limited to Amazon right now, one can see the potential on any website that is based on connections, like Mybloglog.

I don't know if it is the future of search, bit it is worth a look.

Thanks to the guys at The Stalwart, which is how I first found out about the site.

Monday, October 30, 2006

Resource Review: World Catalog - A Great Way To Find Books

One of my goals in having this blog is to bring you resources that may save you time and money. Obviously, when it comes to books if you are not sure whether you want to buy a book, one of the easiest ways to save a buck is to take a look at it in the local library.

Now sometimes, especially if you live in a smaller town, your local library does not have the book you want. But that does not mean it may not be at another library a reasonable distance away from you. The problem is how do you know?

A really cool website to solve this problem is WorldCat. It is a search engine that states it lists "1.3 billion items in more than 10,000 libraries worldwide."

If you go to the site and type in author, title, or even ISBN number it will search its database. It will then list the results. You then click on the link for your book and on the next page it has a box where you can put your zip or state and it then lists several libraries by distance from your location.

For instance, my local library does not have a book I have been thinking about picking up, James Altucher's Trade Like Warren Buffett (Wiley Trading). So I typed in the title and my zip and found it is available in a public library only 18 miles away from me. The bonus is that this city library does not require that I be a resident of that city, just of California, in order to check books out.

So if you have been frustrated by the selection in your local library give the WorldCat site a try.

BONUS ALERT!! I have put the WorldCat search box on my website above so you can search right away.

Brett Steenbarger's New Book

Brett Steenbarger author of The Psychology of Trading: Tools and Techniques for Minding the Markets has a new book coming out. Whether you are a trader or investor, short or long term, understanding human behavior as it applies to markets is an important endeavor.

The new book is Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology (Wiley Trading) and is out November 3.

You can also visit Steenbarger's blog at TraderFeed

Sunday, October 29, 2006

Van Tharp's Update Out In November

The second edition of Van K. Tharp's "Trade Your Way to Financial Freedom" is out November 1, 2006. Great Thanksgiving reading so you don't have to talk to the in-laws. I will be reviewing it the next couple of weeks, but based on the first edition I can say you should get it now.

Saturday, October 28, 2006

Thursday, October 26, 2006

Wednesday, October 25, 2006

Resource Review: Fraser Publishing

Obviously most have heard of Amazon.com. But a nice little bookstore that I found the other day is Fraser Publishing.

As described on the website Fraser Publishing is:

"An extensive selection of books on Wall Street, speculation, investing, business, the stock market, and trading techniques for the creative self-investor, where all prices are discounted at least 30% from retail list price."

They offer books you cannot find on Amazon or at a lower price than Amazon because they are now the publisher. The best thing is that they offer many texts which are classics because they are considered original works that all other ideas flowed from. For instance, many have heard of John Burr Williams' The Theory of Investment Value, but most do not know that Williams also wrote Interest, Growth & Inflation.

If you are looking to build a library of books on trading and investing, as I am, then this bookseller is worth looking at.

Monday, October 23, 2006

Book Review "Pit Bull"

Pit Bull: Lessons from Wall Street's Champion Day Trader

What Is It About?

This book is about trading. Pit Bull is written by and is about Martin Schwartz, a successful trader first profiled in Jack Schwager’s Market Wizards: Interviews with Top Traders. The book is part biography and part how-to manual as the author uses the lessons he has learned both in life and in the market to explain his trading success.

What Did I Get Out Of It As A New Investor?

This book is not about investing. The author is an unabashed trader who buys stocks, commodities, options, and futures, and often sells them hours after purchase. However, the central lesson of this book is important whether you are an investor or a trader. Success in the market can only come where the investor/trader has an edge (a means of seeing a mis-pricing that others cannot or do not see) and is able to recognize and exploit that edge. This concept is one that every new investor and trader must grasp in order to be successful.

The Good News

This well-written book is an enjoyable read. Even those who do not view themselves as traders will enjoy the story told. Moreover, if you are a new trader this is a great book. Not only does it provide an insight into a successful trader’s process, the author provides a concise and well thought out chapter at the end of the book outlining his trading process.

The Bad News

As stated, this book will not teach the tenets of value investing. If you are looking for a tome on value investing, look elsewhere.

The Bottom Line

If you are someone who desires to be a trader then this book may be a worthwhile purchase. For those who are investors rather than traders, but still enjoy reading a good story about Wall Street, this book is definitely worth checking out from your local library.

Other Books About Traders

Saturday, October 21, 2006

Coming Soon To A Bookstore Near You...In 2008

I am pleased to provide what I believe is the first link to the new Warren Buffett book. And I do not mean a book about Warren Buffett. I mean the book of all books, the Warren Buffett book Buffett himself is cooperating on. Order yours today, only two more years to go.

Book Review "The Money Game"

The Money Game

What Is It About?

It is an understatement to say this book is about Wall Street. It is more than that. It is an insight into how Wall Street thinks. Simply put, this book reveals to the uninitiated just how mad the market really is.

What Did I Get Out Of It As A New Investor?

If you have wondered why the market is a fickle mistress this book may clear it up for you. There are no get rich quick tips; no how to make a million in a year. Rather, as the title indicates this book informs the new investor about the “Money Game” and just how it is played on Wall Street. Be forewarned, the author tells his tale in a very subtle manner; so much so that one may miss the points being driven home.

The Good News

This book is a great read. Its designation as a classic is well deserved. The overriding lesson taught is that Wall Street may never change, simply because it is repopulated every so often with a new cast of characters who have no memory of the past.

The Bad News

This book is now nearly forty years old. Therefore, one must give thought to the examples given in the book and update them to the present time to provide context to the modern reader.

The Bottom Line

The Money Game is a must read classic. I bought it and you should too. At the very least it should be the next book you check out from the library.

Friday, October 20, 2006

New Website "Valuewiki.com"

I came across this website today. It has the look and feel of wikpedia.com in that it allows users to register and add content.

It appears to have been recently created, so it is a bit light on content, but as more people use this website its utility may become apparent.

For instance, there are links to various Top Ten lists, such as brokers and blogs. Once the site grows and begins to assemble a body of data, it could help people save time when they are looking for relevant information covered by a particular list.

It also lets users post information on individual stocks. Obviously, on larger issues like MSFT and WMT there is ample info, but on some smaller companies and non-listed stocks Valuewiki could grow to be a good place for information.

The only questions I would have would be: 1) how to avoid the biases in users when allowing the creation of content about particular stocks; and 2) for the lesser known issues how will you separate solid information from simple pump and dump posts.

Overall this seems to be a good concept and I look forward to seeing it grow.

Monday, October 16, 2006

Book Review "The Neatest Little Guide to Stock Market Investing"

The Neatest Little Guide to Stock Market Investing (Revised Edition)

What Is It About?

The Neatest Little Guide to Stock Market Investing is written by Jason Kelly. Mr. Kelly has written several books and publishes an advisory newsletter, all of which can be found at JasonKelly.com.

This book is an introductory guide on how to think about the stock market and evaluate stocks. Some of the topics covered include how to make a trade; a study of successful “master” investors such as Peter Lynch, Warren Buffett, William O’Neil, and Phil Fisher; where and how to find research material; and how to build a core portfolio using easy to understand strategies.

What Did I Get Out Of It As A New Investor?

This is an excellent book for a new investor. It provides an overview of the general concepts all investors must grasp and then gives concrete specifics to apply this knowledge.

One of the best parts of this book is Chapter 2 where the author reviews several methodologies of successful investors. What is unique is that the author then provides a section where he highlights the key points of the “master” investors worthy of retention. For example, if the reader is having trouble understanding what it is that made Peter Lynch successful, the author makes it easy by listing those crucial points worthy of retention. For example, he cites Lynch's suggestion that you prepare a two-minute narration as to why you are buying a particular stock to reinforce the decision making process.

This book also offers several different strategies which even a beginning investor can implement. While no investor should blindly follow anyone else’s strategy, having a strategy explained and demonstrated in an easy to understand manner goes a long way in helping a new investor create a template of his own.

The Good News

If you are a new investor looking for a clearly written book which covers most (if not all) the topics you are wondering about, this is a great book. Not only does it answer many of the questions a new investor might have, it also provides “how-to” examples.

The Bad News

If you are not a new investor this book may not be for you. For the new investor caution must be urged. While the author’s track record has been audited (see CXO Advisory Group Guru Grades ) and is above average in comparison to other noted investors, no investor should ever blindly follow any strategy without contemplating whether the strategy is right for their personal needs.

The Bottom Line

The Neatest Little Guide to Stock Market Investing is a great book for new investors. I recommend it for purchase.

Resource Review: Morningstar's Classroom

As I have mentioned before I subscribe to the Morningstar premium service. But they have a lot of stuff that is free without that subscription. A really great and free feature I do not hear much discussion about is the "Investing Classroom" that they have on the website here. It may go unnoticed for the simple fact that it is not easy to find on the Morningstar website.

What is great about it is that it provides interactive tutorials where one can learn about stocks, bonds, mutual funds, and asset allocation. Each course takes you through short study sessions on subjects like how to read financial statements and how to value a company.

Here is how Morningstar describes it:

"Our courses cover everything you need to know, from the basics to advanced techniques. And our courses are conveniently short. You can complete each course in about 10 minutes."

If you are a new investor looking for a structured learning experience this is a good place to start.

Thursday, October 12, 2006

Reminiscences of a Stock Operator - Book Review

"Reminiscences of a Stock Operator"

What Is It About?

Reminiscences of a Stock Operator was written by Edwin Lefèvre, a noted financial writer during the first few decades of the twentieth century. The book is a fictionalized account of a prominent trader on Wall Street covering the period from the 1890’s through the original publication date in 1923. While a work of fiction, it is generally accepted that Lefèvre wrote this as a fictional account of the true life experience of Jesse Livermore.

The book is written as a first person narrative. The protagonist takes us through his early beginnings and explains his struggles towards a maturation of his trading process. Along the way, the reader is subtly instructed as to how this transformation was accomplished – as investing lessons are woven into the personal narrative.

What Did I Get Out Of It As A New Investor?

An argument could be made that a book about one of the most (in)famous stock traders ever to have swung on Wall Street can't possibly provide any insight to those who adhere to the tenets of value investing. That is the wrong position to take. This book provides one of the earliest articulations of understanding who is the best friend and worst foe of the trader and investor alike.

While this book provides a valuable learning experience throughout, its true value can be found early on in Chapter 5. Here, the narrative sets forth the realization of our trader that many people on Wall Street do not fail because they are wrong in their decisions; rather it is being right in their analysis but not being able to sit tight and hold fast to their convictions that lead these people to failure.

A selection from the text eloquently sets forth the proposition as follows:

“a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figures it must do…the market does not beat them…they beat themselves, because even though they have brains they cannot sit tight.”

This lesson doesn't apply to stock traders alone. Value investing is, at its core, the purchase of a company through common stock which is undervalued by the market as a whole. Yet how many value investors have bought a stock which reasoned analysis indicates is undervalued, only to grow nervous as the stock price falls, and then to sell too soon? As this book instructs, if one would have merely sat tight they would have been proved right.

Being a value investor is about finding value that others cannot (or do not) see. If your thesis is correct, then the hardest part of practicing value investing is resisting the siren song of the market as it tries to convince you that you are wrong. That is the lesson this book has taught me.

The Good News

Reminiscences of a Stock Operator is considered one of the all-time classics, and after reading it I understand why. It is well written; after 80 years, the book still makes for an interesting and satisfying read. An article in this month's issue of Smart Money (the monthly magazine of The Wall Street Journal) noted that famed investor Bill Miller re-reads this tome every year. Simply put, the book remains fresh no matter how many times it has been read before.

The Bad News

Those who strictly adhere to a value investing methodology may feel that this book is outside their investing framework. That point is not without merit. But whether one is an investor or a trader, understanding the role of emotions in either process is important. In order to gain the full benefit from this book, you must accept that the greatest impediment to successful stock market participation is one's own self. Anything short of that and this book will seem uninteresting.

The Bottom Line

I agree with the general consensus; this book is a classic that offers valuable investing insights. Reminiscences of a Stock Operator belongs on every investor’s and trader's bookshelf. I highly recommend purchasing it.

Wednesday, October 11, 2006

Resource Review: Value Investing News

George of Fat Pitch Financials has started a new website with a twist. It is Value Investing News. Here is how George describes it:

"Value Investing News is a community driven value investing news site. You can submit links to news items, bid up stories to the front page, bid down stories, and make comments. Members are rewarded for the success of Value Investing News by sharing in the Adsense revenue."

I think it is a great site to quickly see what others are reading and think worth while to share.

Tuesday, October 10, 2006

Book Review of "Bernard M. Baruch: The Adventures of a Wall Street Legend"

Bernard M. Baruch: The Adventures of a Wall Street Legend

What Is It About?

This biography covers the life of Bernard Baruch. Baruch was a famous stock market participant who made, lost, and made again several millions over several decades on Wall Street. The most interesting aspect of this book is discovering that Mr. Baruch was not only one of the more prominent investors/traders of his day, but was also a leading political player as an economic advisor to several U.S. presidents. The book is well written and presents a balanced narrative of an obviously complex man.

What Did I Learn As A New Investor?

As is the case with many biographies, this book presents a balanced examination of Mr. Baruch’s entire life – not just the part that involved the stock market. The most important part of this book, from an investing/trading perspective is a two page memo Baruch wrote on the basics of investment and speculation.

The memo covers such topics as:

Self Reliance - Do your own thinking. Remove emotions from the process.

Judgment - Consider and think on all facts. Do not let what you want to happen influence you.

Pliability - Be flexible. Recognize when your initial analysis was wrong and act accordingly.

There is also a short, but insightful, discussion of psychology and how it impacts investing and trading. Overall, I think this part of the book provides a new investor/trader with an introduction to the importance of having rules and following them.

The Good News

This is a good biography of an interesting man. The memo (referenced above) is well worth the time to read and study.

The Bad News

As mentioned, there is not much specific information on Bernard Baruch's investment process. While it is a good biography, those looking for a more definitive how-to guide should search elsewhere.

The Bottom Line

For those who like biographies, this book is a good read. For those more focused on searching for a how-to manual, I would recommend simply reading that portion of the book which contains the memo.

Overall this is a good book; but, one I recommend you borrow from the library rather than buy.

Thursday, October 05, 2006

Book Review of "Little Book of Value Investing"

"The Little Book of Value Investing"

This is the second in the “Little Book” series by Wiley Publishing. The first book, of course, was the best selling “Magic Formula” book by Joel Greenblatt.

What Is It About?

It will come as no surprise that this book is about value investing; that much is clear from the title. It is written by Christopher Browne, the managing director of Tweedy, Browne Company. Tweedy, Browne’s roots in value investing reach back several decades, most notably as broker to Benjamin Graham and Warren Buffett in the post-war period.

What Did I Get Out of It As A New Investor?

The book is well organized. It provides a road map that introduces value investing, describes what value investing is and is not, how to practice the art of value investing, and why (in the author’s opinion) value investing is the superior method of investing.

I wish this book was available last November when I first began thinking about and exploring investing ideas. The book presents in a straight forward manner a comprehensive overview of what comprises value investing. It does so in a manner that even the newest investor can grasp.

The first several chapters cover the basic thought process behind value investing, i.e. the concept of buying companies that are on sale at bargain prices much like one waits for a bargain sale at their local retailer. The next few chapters discuss exactly why one must purchase stocks at those bargain prices. This is where the book excels.

In Chapters 3 and 4, the book sets forth, in a manner a new investor can easily grasp, several concepts crucial to understanding the rationale behind requiring a “margin of safety” in one’s stock purchase. Can you find this information elsewhere? Yes, but not as clearly stated as in this thin volume. For me these two chapters make the book a worthwhile read.

Later, the book describes common characteristics of stocks suitable for value investors. Browne takes you through a simple but effective explanation on how to identify worthwhile, but inexpensive, companies to invest in. He does this by examining how to weed out the cheap and good from the simply cheap, using the balance sheet, income statement, and an easy to follow checklist for evaluating a company’s competitive advantage.

The last part of the book describes why sitting tight with financially strong, well-run companies provides exceptional returns over time. It does this by contrasting the simplicity of value investing against the more difficult strategy of market timing.

This is not to say that this book is perfect. My enthusiasm for the book springs from my status as a new investor. As a new investor I often struggled with unfamiliar terms and concepts; therefore, any material that simplifies the learning process I deem worthwhile.

However, the more experienced practitioner of value investing, who has experience and knowledge on how to value a company may find this book to be lacking in depth sufficient to provide anything new, other than a refreshing of the key concepts.

This book was not written for the experienced practitioner of value investing. Rather, it is clear that this book was meant for the broader audience who may not have the time or inclination to wade through the more detailed works on security analysis.

This book is a great complement to Joel Greenblatt’s book. “The Little Book That Beats the Market” provided a formula to new investors allowing them to quickly identify high quality, undervalued stocks. “The Little Book of Value Investing” goes one step further by providing the basic tools necessary to refine the results produced by the “magic formula.”

The Good News

If you are struggling to understand the concepts presented in other books on value investing, this book should help clear things up for you. The time saved in gaining this knowledge more than makes up for the cost of this little book.

The Bad News

Simply put, if you have been investing for a number of years, or can quote specific passages from Graham and Dodd's “Security Analysis”, this book may help remind you of the key points, but does not reveal anything new. The book jacket makes this point clear; experienced value investors are not the intended audience.

The Bottom Line

This is a good book for new investors and certainly worth purchasing.

Wednesday, October 04, 2006

New Links

Last week I tried (and failed) to create a link to the blogs I read at Netvibes.com. They have a way of making it public but is seems no to work for me. So I cam up with a new blog roll (found on the right) of what I am reading on a regular basis.

Dividends Are Not Money In The Bank

Where Is The Yield? has a nice post today on the dangers of sticking around with an ailing company for its dividend. Sometimes the problems the company faces can eventually lead to the dividend being cut. A nice post to read for those who count on dividends in their investment strategy.

Sunday, October 01, 2006

Resource Review: SSRN

I found this nice website the other day. It is the Social Science Research Network
SSRN. Basically it contains many papers written by academics and market participants on a wide variety of subjects. You can search it by title, author, or subject.

As an example you can type in "David Dreman" and get a 1997 paper he co-authored. Or type in "value investing" and get more than a few papers that may provoke some thought. It is a nice resource that I enjoy browsing.

Things I Pay For

One of the things that I often wonder about the blogs I like to read is what things (research, newsletters, publications) the writers of those blogs pay for or would pay for if they already get comped on them. I wish more of them would talk about those paid subscriptions they take that actually add value.

Since I wonder that I figured I should do it myself. Most of what I subscribe to is for educational purposes. Some of the things I pay for have actual stock picks, but I read them more for their teaching value. So here goes:

Outstanding Investors Digest

I subscribe to this newsletter. At first the $300 price tag might put you off, but for me I like that it is by issue and not time. Meaning that you are going to get 10 32 page issues (or 5 64 double issues) whether they come in one year or more.

OID has been around for some 20 years, and some have argued that much of its usefulness is irrelevant base don the web. For instance it was one of the only publications that would attend annual meetings like Berkshire's and then report on what WEB and Munger had to say. Well now in the internet age you can get that online for free.

But for me I think there is still tremendous value in OID because it provides perspectives and interviews that are not found on the internet. Overall I really enjoy it and find it very instructive.

Gannon On Investing Newsletter

Geoff Gannon has a great blog where he really shows a new investor what goes into fundamental analysis and some of the key things to look for in evaluating a company. Geoff also publishes a quarterly newsletter which goes for $75 a pop or $275 for a full year prepaid.

I have bought the first two issues and they have been really excellent. While you may or may not agree on the companies he profiles as inclusion in your own portfolio, for a new investor, reading on how value can be evaluated is worth the price.

Bill Fleckenstein

Many of you may be familiar with Bill Fleckenstein from his weekly article on MSN Money here. I read several of his MSN articles, liked what I read and subscribed. It is $120 a year. His newsletter provides a daily summary of his take on the market as well as Fleckenstein's selection of several questions he received from readers along with his answers. If you are looking for a unique perspective and opinion than it is worth it. I have learned a lot and consider it one of my best decisions as his insight as led to a better decision making process.


I subscribe to the premium service of Morningstar which is about $15.00 per month with yearly and multi-year prepaid discounts available. The premium service gets you access to over 1,700 or so analyst reports, their opinion as to the fair value of a company, and the premium stock screener.

The best thing about Morningstar is the fair value estimates and the stock screener. The stock screener lets you set up screens using some nice metrics. The one I like to use is just screening for those stocks Morningstar has as undervalued to quickly see who is on it. I do wish the screener was a little more flexible and easier to use on looking at multiple-year metrics.

I have not read too much on the internet at other blogs to know whether Morningstar's fair value analysis is in the ballpark. I am too new to form an opinion yet. So that is something that I would like to see.

One last thing, as a side note Morningstar does not rate its own stock, which I think a bit funny. I mean I get the whole conflict thing about pumping its own stock. But would that not apply to its advertisers as well. I mean I see ads for St. Joe, MSFT, AMEX, Fidelity, etc. on the site. So is their not a conflict about writing about a company that is driving revenue to you? Do you not have a conflict where your negative report might affect your own bottom line? And if their analysts and the Morningstar process is sound enough that this is not a worry than should not the Morningstar process be objective enough to rate its own stock?

Jason Kelly

This is one of the more recent things I signed up for. It is a newsletter written by Jason Kelly who also wrote a series of books which can be found on his website. The newsletter itself is actually quite reasonable at about $5.50 a month which comes with weekly updates.

This newsletter and the books are really great for the new investor. First, the first month of the newsletter only costs a penny, so your downside is pretty limited if you do not like what you have to read. Second, the newsletter is written in a way that is very readable to a new investor but not so simple as to be something you are going to outgrow. So far I would have to say that this newsletter is actually something that gives more value than you are putting in. I have only been reading for about a month but have already expanded my knowledge far beyond what I paid for.

That’s all I have time for write know. Next time I will talk about some magazines/newspapers I like as well.