recs on financial handbook

Kiplinger's Guide to Investing Success: Making Money Today in Stocks, Bonds, Mutual Funds, and the Real Estate (Kiplinger's Personal Finance) (Paperback) is a nice overview. It's so full of good, sensible advice it's like having your mother next to you driving in heavy traffic. I'm using my copy as a doorstop (no joke). $15 you can't go wrong. Benjamin Graham is compelling for value investing. I was all enthused until I heard a quote from Warren Buffett to the effect that it's been 30 years since straight value investing made sense. There are any number of stock analysts who do valuation for you. It is one useful tool in your toolbelt. If you aspire to being something other than a lifetime employee I recommend Robert Kiyosaki's "Cash Flow Quadrant". One more narrow niche. Forget all the get-rich- quick gimmicks. You can use financial statements to analyse everything from a newspaper vending machine to IBM. Money pumps through a financial statement like blood pumps through a body. Good Luck!

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Do you happen to have a cite for this? I'd like to read the full passage and understand his context.

Thanks,

-Will

william dot trice at ngc dot com

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On Oct 11, 9:25 am, Will Trice wrote:

Buffett likes Benamin Graham and Philip Fisher. Two different methods. I was referring to the book ?The Warren Buffet Way (Investment Strategies of the World?s Greatest Investor)? by Robert G. Hagstrom (1994). One of the best investing books I have read. Unfortunately the world is complex. Even if you stick to a dozen rules, there may only be a couple companies at any one time that pass the test. No get- rich-quick methods. Buying cheap is a contrarian activity, so you better have loads of self confidence. At the risk of being annoying let me give you the entire paragraph from Chapter 2, page 46: ?In 1984, speaking before students at Columbia University to mark the fiftieth anniversary celebration of ?Security Analysis?, Buffett explained that there is a group of successful investors who acknowledge Ben Graham as their common intellectual patriarch. Graham provided the theory of margin of safety, but each student, noted Buffett, has developed different ways to apply this theory to determine a company?s business value. However, the common theme is that they are all searching for some discrepancy between the value of a business and the price of the securities of that business. Individuals who are confused by Buffett?s recent purchases fail to separate theory and methodology. Buffett clearly embraces Graham?s margin of safety theory, but he has steadfastly moved away from Graham?s methodology. According to Buffett, the last time it was easy to profit from Graham?s methodology was in 1973-1974.

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I would be skeptical of any investment advisor - including the esteemed Mr. B - who suggested that it was "easy to profit" from a particular investing methodology.

-HW "Skip" Weldon Columbia, SC

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I would suggest Field Guide to Financial Planning 2008 by Donald Cady. It's part of the Tax Facts series. Available on Amazon for about $40.

Jean Keener

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thanks all. i'll check into these recs.

grahams methods not working since the 70's may be true. but things are changing now and one thing graham talks about is these long market cycles. there is a part of the intelligent investor where he talks about bonds outpacing stocks for 30 years i believe. the conventional wisdom is that stocks are always a better long term buy, but to a person who is say 60... 30 years is probably the rest of his life.

i tend to feel that the market may have taken leave of rational rules and thinking around the 80's. this is based on nothing more then my spider sense. but if its true perhaps we are headed back to a more realistic rational time.

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I don't think there is a section like this, at least not in his 1973 edition. He does, however, imply that one cannot blindly rely on stocks beating bonds over 30 year periods.

-Will

william dot trice at ngc dot com

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Were the 1970s rational? The 1980s? Name a decade that was consistently rational. (I suppose "rational" would be something like, "stock prices rose steadily such that P/Es and some other fundamentals stayed fairly constant.")

My point is that time periods less than about ten years will show persistent irrationalities, and this is the nature of economics, free markets, etc.

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there isn't a section in the book about it. it's just something that stuck with me from the read. i have a newer version and perhaps it's in the commentary. i tried to find it quickly but couldn't.

i know the market is not rational, but i'm not talking about peoples emotions i'm talking about a relationship between and price and value. but i am just an enthusiastic amateur.

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For what it is worth, I meant the same, at least as best as "value" can be measured by various stock and company fundamentals.

AFAIC, even Warren Buffett borders on being a mere "enthusiastic amateur" when it comes to understanding the machinations of the market. The guy has much wisdom but he has also been burned like the rest of us. What distinguishes him from many other amateurs though is that he admits his mistakes. It's part of why he is among the best. There are few others I would propose are professionals. Robert Shiller and Jeremy Siegel come to mind, not that a PhD is sufficient to ensure one is a professional when it comes to understanding markets.

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