Overview of the Book

In "The Age of AI: And Our Human Future," renowned diplomat and strategist Henry A. Kissinger, along with co-authors Eric Schmidt and Daniel Huttenlocher, explores the profound impact of artificial intelligence (AI) on our society, politics, and daily lives.

Kissinger's analysis delves into a wide range of topics, including the implications of AI for human identity, the balance of power, and the relationship between AI and our collective sense of reality. "The Age of AI" serves as a crucial guidebook for policymakers, technologists, and individuals who seek to understand and harness this transformative force in order to build a brighter future for humanity.

Purpose of This Book Review

In this review, we aim to provide a summary of the key points in the book. We will critically evaluate and assess the impact of artificial intelligence on human society, identity, and decision-making.

Kissinger's book offers an essential roadmap for understanding the rise of artificial intelligence and its implications for our daily lives. He explores the profound changes that AI will bring to our society, from advancements in health and environmental protection to innovations in law enforcement and defense purposes. Kissinger talks about the revolutionary technology of neural networks and how they shape our relationship with reality. And therefore, challenges our understanding of human intelligence and the balance of power.

Kissinger provides insights into the potential risks and benefits of AI, highlighting the importance of making informed decisions that benefit humanity as a whole. By critically examining Kissinger's perspectives, this book review aims to contribute to the ongoing discourse on the impact of AI on our human future.

Summary of Key Points

In "The Age of AI: And Our Human Future," Henry Kissinger offers a comprehensive exploration of the rise of artificial intelligence and its impact on human society. Kissinger's expertise in foreign policy provides a unique perspective on the advancements in neural networks and their implications for our daily lives. He discusses various aspects of reality that AI approximations can affect, such as health, environmental protection, law enforcement, and defense.

One of the key points raised in the book is the importance of ethical considerations and social contracts in using AI. Kissinger emphasizes the need for decisions made by AI to prioritize the well-being of human life and the human mind. He also raises questions about human identity and the potential challenges AI presents for civil society organizations and political systems.

By delving into these concepts, Kissinger highlights the significance of understanding the impact of artificial intelligence on our decision-making processes. He underscores the need for responsible and informed choices that consider the potential consequences and ensure a balance of power between humans and AI.

Analysis of Content and Ideas

Kissinger's expertise in foreign policy and national security strategy lends him a unique perspective in this examination of the age of AI. He recognizes the doctrinal deficits in the US national security strategy. And discusses the core concepts, arguments, and insights surrounding the use of AI.

One notable aspect of the book is Kissinger's exploration of the lack of organizing principles and moral concepts in the age of AI. He highlights the importance of establishing ethical considerations and social contracts to guide the use of AI. Kissinger emphasizes the need for decision-making processes that prioritize the well-being of humanity as a whole and ensure a balance of power between humans and AI.

In dissecting these concepts, "The Age of AI" urges readers to understand the potential consequences of AI and make responsible choices. It serves as a wake-up call for the adoption of informed decision-making processes that consider both the benefits and risks of AI.

Overall, Kissinger's analysis in this book provides valuable insights into the age of AI and prompts us to examine our relationship with artificial and alternative intelligence.

Critical Evaluation

One of the book's strengths lies in its emphasis on the need for ethical considerations and social contracts in the age of AI. Kissinger effectively argues that technological advancements, particularly in the realm of AI, require a moral framework to guide their use. This discussion highlights the importance of decision-making processes that prioritize the well-being of humanity as a whole.

However, the book also has its weaknesses. Kissinger's writing style can be dense and academic, making it challenging for a general audience to fully grasp the concepts he presents. Additionally, while the book examines the potential challenges AI poses for civil society organizations and political systems, it falls short in providing concrete solutions or action plans to address these concerns.

Despite its weaknesses, "The Age of AI" is an important contribution to the field of artificial intelligence. The book's impact lies in its ability to spark conversation and further research on these vital topics. The book's impact and importance lie in its ability to initiate discussions about the ethical considerations and social contracts necessary for an AI-driven world.

Impact of Artificial Intelligence on Human Society, Identity, and Decision-Making

Kissinger argues that the rapid advancement of AI requires us to carefully consider its consequences and establish a moral framework to guide its use. This book delves into the questions and challenges that AI presents. And it examines how AI influences our society, shapes our sense of identity, and influences our decision-making processes. Kissinger’s thought-provoking work prompts readers to reflect on the ethical implications of AI and encourages conversations about its role in shaping our human future.

Understanding the Effects of AI on Human Society

One of the key perspectives presented in the book is the consequences of AI's rapid advancement. While AI excels in analyzing vast amounts of data quickly, it lacks the morals and ethics inherent in human decision-making. This dichotomy raises important questions about the role of AI in shaping our future.

The authors highlight that AI has the potential to revolutionize industries, from healthcare to law enforcement, thereby improving our daily lives. However, there is also a concern about the balance of power and the potential misuse of AI for nefarious purposes. Kissinger and his co-authors stress the need for careful consideration and responsible governance to harness the potential of AI for the betterment of humanity.

Overall, "The Age of AI" provides an essential roadmap for understanding the transformative effects of AI on human society. It prompts us to reflect on our relationship with technology and its impact on our daily lives, while emphasizing the importance of social contracts and ethical considerations in navigating this rapidly evolving digital landscape.

Exploring the Impact on Human Identity and Life Choices

Advancements in artificial intelligence (AI) technology have had a profound impact on human identity and the way individuals make life choices. The increasing integration of AI and intelligent systems into our daily lives has reshaped our perception of self and influenced decision-making processes.

AI technologies, with their ability to collect, analyze, and interpret vast amounts of data, have become powerful tools in shaping human identity. They provide individuals with tailored recommendations and suggestions, which can influence their preferences, beliefs, and even sense of self. For example, social media algorithms use AI to curate personalized content, reinforcing certain worldviews and potentially narrowing individual perspectives.

The reliance on AI for life choices also raises ethical implications. As individuals delegate decision-making to AI systems, there is a risk of relinquishing personal agency and becoming detached from our own desires, values, and intuition. The question arises as to whether AI-driven decisions truly align with our own authentic selves or are merely approximations based on patterns identified by algorithms.

These ethical dilemmas become particularly pronounced in critical areas such as healthcare, finance, and relationships. Relying solely on AI for medical diagnoses or investment decisions may neglect the holistic understanding of human experiences and undermine individual autonomy.

In conclusion, the impact of AI on human identity and life choices cannot be underestimated. While AI offers convenience and efficiency, its integration into decision-making processes raises important ethical considerations. It is crucial that we remain conscious of the potential limitations and biases of AI systems and ensure that human identity and agency are safeguarded in an increasingly AI-driven world.

Examining Digital Technology's Role in Human Decision-Making

The book explores the impact of digital technology, particularly AI, on human decision-making. And it gets into offering valuable insights into the balance between human agency and AI-driven choices.

The authors highlight how AI's advanced capabilities allow it to discover trends, identify images, and make predictions with remarkable accuracy. For instance, AI algorithms can sift through vast amounts of data to recognize patterns and provide deep insights. However, the reliance on AI for decision-making raises concerns about the authenticity of these choices. Are AI-driven decisions truly reflective of our own desires, values, and intuition, or are they mere approximations?

The paradigm shift from physical maps to network platforms is also explored in the book. As algorithms shape our access to information and filter content, human values and input are increasingly influenced and potentially compromised. The power of algorithms to curate personalized content on social media platforms, for instance, has the potential to narrow perspectives and reinforce certain worldviews.

Throughout the book, Kissinger et al. emphasize the need for thoughtful deliberation on AI's role in human decision-making. They highlight the importance of maintaining a balance between the incredible advancements of AI technologies and the preservation of human autonomy and agency. This roadmap provides a deeper understanding of the challenges and opportunities presented by AI, urging society to navigate the age of AI with caution and wisdom.

Developing a Social Contract for AI to Follow in our World

Developing a social contract for AI is of paramount importance. It holds the key to shaping a harmonious relationship between humans and artificial intelligence. With AI's increasing presence in our daily lives and decision-making processes, it is crucial to establish clear guidelines and principles that govern its development and implementation.

A social contract for AI should address the potential repercussions and ethical considerations associated with AI-driven decision-making. By defining moral boundaries and ensuring transparency, we can navigate the complex landscape of AI technologies by incorporating values, empathy, and accountability.

To establish limits and incorporate ethics into the use of AI, governments, universities, and private-sector innovators have significant roles to play. Governments can enact policies and regulations that set standards for AI applications, ensuring they align with societal values. Universities can educate the next generation of AI experts. Private-sector innovators should prioritize ethical practices and promote responsible AI development.

Moreover, addressing the balance of power between humans and AI is crucial. Although AI can enhance decision-making processes, it should never overshadow human agency and autonomy. The role of AI in national policy decision-making must be carefully defined and critically evaluated to prevent the erosion of democratic processes and to maintain human-centered governance.

Identifying Aspects of Reality that Machines Cannot Match Humans In

While artificial intelligence (AI) has made significant advancements in recent years, there are certain aspects machines struggle to match humans in. One of the limitations of AI lies in its understanding and replication of human experiences and emotions.

Human creativity, for instance, is a complex process that emerges from a combination of our unique cognitive abilities, experiences, and emotions. While AI can mimic certain creative tasks, such as generating art or music, it lacks the depth and nuance of human creativity. AI systems operate based on predetermined algorithms and data, limiting their ability to truly think outside the box or produce novel ideas.

Intuition is another aspect of reality where AI falls short. Humans have the remarkable ability to make quick, instinctive decisions based on intuition, drawing from their vast repository of knowledge and experiences. AI, on the other hand, relies heavily on data-driven decision-making, lacking the instinctual understanding that humans possess.

Furthermore, empathy and moral judgment are crucial qualities that humans possess in their interaction with others. AI algorithms may be able to analyze and understand emotions to some extent, but they lack the genuine emotional connection and moral framework that guide human empathy and decision-making.

The unique qualities that make humans distinct from machines in perceiving and interpreting the world lie in our capacity for subjective experiences, emotions, and the ability to navigate complex social dynamics. While AI has its place in augmenting human capabilities, it is important to recognize and appreciate the aspects of reality where humans excel, in order to maintain a balanced and harmonious integration of AI into our lives.

Considering How We Can Maintain a Balance of Power with Machines

Maintaining a balance of power with machines is a crucial task requiring careful consideration. Insightful books like "The Coming Wave: Technology, Power, and the Twenty-First Century's Greatest Dilemma" by Mustafa Suleyman and "The Handover: How We Gave Control over Our Lives to Corporations, States and AIs" by David Runciman offer valuable perspectives on this complex issue.

One approach to maintaining a balance of power is through robust regulation and governance frameworks. Suleyman highlights the importance of establishing comprehensive policies that address the risks and ethical implications of AI. Clear guidelines can ensure that AI is developed and deployed responsibly, promoting transparency, fairness, and accountability.

Furthermore, fostering a collaborative human-machine relationship is crucial. Runciman emphasizes the need for humans to actively engage with AI systems rather than passively surrender control. Humans should be empowered to make informed decisions and have meaningful input in the development and application of AI technologies. This includes fostering multidisciplinary collaborations and involving a diverse range of stakeholders in the decision-making process.

While there are potential risks associated with AI, such as job displacement and privacy concerns, there are also significant benefits. AI has the potential to revolutionize various industries, from healthcare to transportation, improving efficiency and advancing innovation. However, addressing the social and psychological aspects of the human-machine relationship is essential. Building trust, ensuring transparency, and addressing the fears and anxieties surrounding AI can help foster a healthier and more harmonious coexistence.

Creating Solutions to Help Law Enforcement Monitor Its Usage

Law enforcement agencies play a crucial role in ensuring public safety and security. As artificial intelligence (AI) becomes increasingly integrated into various systems and processes, it becomes essential for law enforcement to effectively monitor its usage. Here are potential solutions that can be implemented:

1. Enhanced Training: Law enforcement personnel should receive specialized training on AI technologies and their capabilities. This will enable them to better understand how AI systems work, how they can be misused, and how to identify potential risks or violations.

2. Collaborative Partnerships: Building partnerships with AI developers and researchers can facilitate better understanding and monitoring of AI systems. By working closely with experts in the field, law enforcement can gain insights into the latest developments and anticipate potential misuse.

3. Data Governance: Implementing comprehensive data governance frameworks is essential to ensure that AI systems are used responsibly and lawfully. This includes establishing protocols for data collection, storage, and access, as well as guidelines for data sharing between law enforcement agencies.

4. Ethical Guidelines: Developing ethical guidelines specific to AI usage in law enforcement can help prevent the misuse of AI technologies. These guidelines should address issues such as bias, discrimination, privacy, and transparency, ensuring that AI is used in a fair and accountable manner.

5. Oversight and Accountability: Establishing oversight mechanisms and accountability frameworks is crucial to prevent AI from being used for malicious purposes or infringing on individuals' rights. Independent auditing and regular reviews of AI systems can ensure that they align with legal and ethical standards.

Monitoring the usage of AI in law enforcement requires a multi-faceted approach. By enhancing training, fostering collaborative partnerships, implementing data governance, developing ethical guidelines, and establishing oversight mechanisms, law enforcement agencies can effectively harness the benefits of AI while ensuring its responsible and lawful use.

Conclusion

This entire book is a must read for any technologist. AI will play an important role in our future. AI processes more data, more efficiently than any human will. And it can detect aspects of reality humans have not detected yet. All workers from clerical to physicists will work side-by-side with AI. This will lead to a bright future if harnessed correctly.

But how AI progress is up to us, wrong decisions could set a country back years or even decades. And cede control to other countries. Countries that may not be philosophical or economically aligned with us. 

To get a jump start on how policy makers should think about AI and all its advancements, I highly recommend reading what is now one of my favorite books.

One of the most popular books on investing is "A Random Walk Down Wall Street" by Burton G. Malkiel. Amazon tells me it has sold over 2 million copies. This book has helped people make sense of investing for over 50 years. It's perfect for new investors learning the basics. And also for those looking to brush up on their knowledge.

Investing can seem complicated. It involves lots of numbers, charts, and jargon, leaving many feel overwhelmed. But this book breaks things down in a simple way.

One of the main ideas in the book is the "random walk theory." This theory says that it's hard to predict the future movements of stock prices. Therefore, trying to outsmart the market might not be the best strategy. Instead, Malkiel recommends investing in a broad range of stocks to spread out risks.

As I've said before, this is advice that 99% of people should take. Unless you want to study markets for hundreds of hours and then follow it for thousands more, you're best off buying an index fund. Burton Malkiel explains why better than anyone else.

For those wanting to take the next step, the book talks about different ways to think about investments. It also discusses common mistakes people make and how to avoid them. 

By reading "A Random Walk Down Wall Street," you'll get a solid foundation. You'll learn important concepts and strategies to you make smarter investing decisions. 

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The Efficient Market Hypothesis

Let's chat about the Efficient Market Hypothesis. EMH is the basis for all modern portfolio theory. It says that stock prices already reflect all available information. Thus making it nearly impossible to consistently predict future price movement..

Burton Malkiel has a famous quote that sums it up:

"A blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts."

It's a fun way of saying that trying to outsmart the market is like trying to guess which way the wind will blow.

So, what does he say this means individual investors like you and me? Note, we don't believe this here at Barbell Alpha. But it means the market's direction is unpredictable. Therefore, picking stocks or timing the market is a bit like trying to catch a butterfly with a net - we might get lucky sometimes, but we can't keep doing it over and over.

Instead, we should think about creating a diverse investment portfolio. This way, we're not relying on just one stock or one investment strategy to perform well.

EMH isn't perfect. Some investors do manage to outperform the market. But it's essential to remember that this is rare, like finding a needle in a haystack. By understanding the Efficient Market Hypothesis, we can make smarter decisions about our investments and avoid chasing after the wind.

Two Investing Methods: Technical vs Fundamental Analysis

"A Random Walk Down Wall Street" introduces two important ideas that help us understand how people think about investments. These ideas are called "Firm Foundations" and "Castles in the Air." Let's talk about what these ideas mean.

First up, we have "Firm Foundations." This idea is about figuring out the actual value of an investment. We call this "fundamental analysis."

When people talk fundamentals, they are trying to figure out how much money a company can make. They're looking towards future profitability. Things like the company's products, how well it's managed, and the competition are important.

This way, they can decide if the investment is overvalued or not. It's like trying to figure out how much a car is worth by looking at its features, mileage, and condition.

On the other hand, "Castles in the Air" is a totally different way of thinking about investments. This the "technical analysis" angle.

People who follow this idea don't really care about the actual value of an investment. Instead, they focus on what other people think the investment is worth. They try to guess which investments will become popular and buy them before everyone else does. Then, they hope to sell them at a higher price later on. This approach is like trying to figure out which new toy or gadget will be the next big hit and buying it before it sells out.

So, why do we need to know about these two ideas? By understanding these two ways of thinking, we can start to see how people's beliefs and expectations can affect the prices of investments. Sometimes, people might be focused on the actual value of a company, while other times they might be more interested in what everyone else thinks.

In the end, "Firm Foundations" and "Castles in the Air" give us a way to make sense of the fluctuations in individual stocks as well as the entire market. They show us that there's more to the stock market than just numbers and charts. It's also about how people think and what they believe. 

Mind Over Money: Emotions and Psychology in Investing

When it comes to investing, our brains can sometimes be our worst enemies. Emotions and psychology play a huge role in how we make decisions about our money. It's kind of like going to the grocery store when you're hungry – you might end up buying way more snacks than you need, even if you know it's not the best idea.

In "A Random Walk Down Wall Street," Burton Malkiel writes,

"The investor's chief problem – and even his worst enemy – is likely to be himself."

This quote highlights the fact that, as humans, we often let our feelings get in the way of making smart choices.

One example of this is something called "herd mentality." It's like when everyone starts wearing the same trendy clothes, and you feel like you have to join in too. In investing, people might jump on the bandwagon and buy a popular stock just because everyone else is doing it, even if it doesn't make financial sense.

Some people call this the "madness of crowds." And don't think this can't happen today. Human nature remains the same. The average investor will see the headlines about markets ripping higher. And he'll see other active investors, who are likely not as smart as he is, get rich. And then he'll buy at the peak. 

This fear of missing out (FOMO) is the bane of successful investing. This often happens in growth stocks, which were like shiny new toys that investors can't resist. These stocks come from companies that are predicted to have above-average earnings growth. These stocks often rocket higher, but these high price come with a higher level of risk. And when the company can't live up to the anticipated growth rates, the stock plummets.

The opposite of this is value investing. This approach is all about finding stocks that are undervalued compared to their peers. But beware! Some stocks might be cheap for a reason, like a company struggling with massive debt or fierce competition. It's like finding a sweet deal on a used car, but then discovering it has a ton of hidden problems. These are called "value traps."

Another emotional pitfall is called "loss aversion." Imagine you're playing a game, and you're terrified of losing points. In investing, this fear can cause people to hold onto poorly performing investments for too long, hoping they'll bounce back, instead of cutting their losses and moving on.

To avoid falling into these emotional traps, it's crucial to stay aware of our feelings and keep them in check. Think of it like wearing a seatbelt when you're driving – it's a simple way to stay safe and avoid getting hurt.

The key is to create a solid investment plan and stick to it, no matter what emotions are swirling around in our heads. By doing this, we can navigate the wild rollercoaster of investing and make more rational decisions, leading to a better financial future.

One example of this was the tech bubble covered in chapter 4. 

Chapter 4: The Biggest Bubble of All Time: Surfing on the Internet

This chapter is packed with valuable lessons for investors. Imagine the dot-com bubble as an enormous wave that surfers tried to ride, only to wipe out when it crashed.

First, let's talk about the crazy excitement around Internet stocks. During the late 1990s and early 2000s, people were nuts about tech companies. It was like a gold rush, and everyone wanted in on the action. Investors threw money at anything with ".com" in its name. Picture a crowd at a sold-out concert, scrambling to buy tickets to see their favorite band.

But all good things must come to an end. When the dot-com bubble burst, many investors lost big. Companies that once seemed unbeatable went belly-up. Imagine a hot air balloon soaring high in the sky, only to suddenly deflate and plummet back to earth.

So, why did the bubble burst? One reason was unrealistic expectations. People believed the Internet would change everything, and profits would skyrocket. It was like expecting to find buried treasure in your backyard, only to dig up a rusty old can instead.

Another factor was the lack of solid business plans. Many dot-com companies didn't have a clear path to profitability. It's like starting a lemonade stand without figuring out how to make lemonade or knowing how much to charge.

The main takeaway is don't get swept up in the hype. It's important to do your homework and think critically before jumping into any investment. By understanding the lessons from the dot-com bubble, we can avoid making the same mistakes and be better prepared for the ups and downs of the investing world.

The Power of Index Funds: A Smart Investment Choice

For some reason all the most popular investing books say that passive investing is better than active management. And maybe that's a good thing... Most people investing their money don't take the time to learn skills to create above-average returns.

Index funds are like all-you-can-eat buffets – they offer a little bit of everything, allowing you to sample a wide variety of flavors. In the world of investing, this means buying a piece of many different stocks, giving you a more diverse portfolio.

In the book, Burton Malkiel writes, "The only way to "beat an index" is to invest in something other than the index. Why would you, when the only source of long-term risk and return data is the index?" This quote emphasizes the fact that index funds can be a smart choice for many investors, as they often outperform other investment options over the long term.

So, why are index funds such a big deal? One reason is that they're low-cost. Imagine going to a fancy restaurant and ordering a bunch of dishes à la carte – it would be pretty pricey, right? But at a buffet, you can try all those dishes for a fraction of the cost. Similarly, low-cost index funds have lower fees than most mutual funds, which can help boost your overall returns.

Another advantage of index funds is that they're low-maintenance. Index funds allow you to "set it and forget it." This is a simple plan to make money in the financial markets. And why many people like these kind of books.

The bottom line is that index funds are an excellent option for investors to create a diversified portfolio. This allows investors to make easier investment decisions and a simple path to wealth. 

Embracing the Lessons from "A Random Walk Down Wall Street"

The key takeaways from this guide to investing are simple. The efficient market theory says the market is already priced perfectly. And it is impossible to consistently beat the market. 

If an investor wants to beat the market they need to take on additional risk. Those with a higher risk tolerance can move out further on the efficient frontier of portfolio theory. This is the strategy that many financial advisors employ for their clients today. 

The unpredictable nature of the markets and the impact of emotions and psychology on our choices, make the market's tough to navigate.

But with the knowledge we've gained, we can traverse this complex landscape more confidently. By embracing diversification and index funds, we can build a solid foundation for our portfolio. 

As we forge ahead on our investing adventure, let's keep in mind the wisdom of Burton Malkiel's words:

"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

Patience, discipline, and a focus on the long term will serve most well in their quest for financial success.

To read further, please use this link to purchase the book. You’ll be doing me a solid by supporting the blog. Thank you.

95% of traders fail. Do you know why? 

It's not because they don't understand the markets. Nor is it because they unlucky. Everyone reading this has likely read books and countless forum posts on how to analyze stocks. We've likely spent hours learning fundamental analysis of a business. And we're told if we combine that with technical analysis we'll win. 

But that doesn't always happen. Often the market turns against us.

The difference between the typical trader and the successful trader, is the mental habits.

We are often our own worst enemy when it comes to market speculation. We trade on feel or chart patterns. But then we don't take profits and endure the mental anguish of watching a winner turn to a loser. Or we ignore or stop loss because of the erroneous adage "it's not a loss until you realize it." And then we watch it go to zero. 

So if you're frustrated with your trading results, despite studying your ass off, read this book now. 

Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas is must-read for all investors. In fact, I know many seasoned traders who go back and reread this book every year. it's that important to internalize the concepts in this book. 

With that said, let's get into the top takeaways.

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You Must Manage Your Emotions

The main reasons for lack of success in the markets boils down to managing our emotions. As traders we often know what we should do, but we deviate from what we know is right. As we progress through our trading journey, we often want to try new things or trade from our "gut." 

This is a recipe for bad habits. And that leads to poor decision-making which can undermine your trading performance. it's why many individual traders fail at trading. It's not from a lack of trading skill, it's from a lack of disciplined. The rest of the concepts in this book will help to become a disciplined trader. 

Mark Douglas puts it best when he says

"The best traders think in a number of unique ways. They have acquired a mental structure that allows them to trade without fear and, at the same time, keeps them from becoming reckless and committing fear-based errors."

But getting to that mental structure can be a monumental challenge. The rest of the lessons in this industry classic help the novice trader gain that framework. 

Focus on Process over Outcome

The main goal for traders is to follow their system. We should make quality decisions and then don't get fixated on the outcome of individual trades.

 Having a strategy and sticking to it is far more important than individual trade outcomes. The goal should be to make trades that are in line with the system, not necessarily those that will yield quick profits. No matter how good a trader’s system is, there will always be times when it doesn’t work. 

Sometimes we get erratic market movement. That doesn't necessarily mean our system is broken. It could just be short-term market conditions. 

Trade With Discipline

Successful traders follow their trading plan consistently. And they avoid impulsive decisions. 

Remaining disciplined ensures proper execution of your trading strategy. Douglas says, "To be a consistently successful trader, you have to be willing to make 100 percent of your trades from a disciplined mind-set, 100 percent of the time."

The typical journey of a trading goes from being undisciplined to incorporating strict rules to follow their trading systems.

Cultivate Self-Awareness

You can go through all the programs on trading psychology you want, but the hardest skill to learn is that of self-awareness. It's difficult to look inward and admit that we are doing something wrong. 

It's important for traders to access their strengths, weaknesses, and any potential biases impacting our traders. But with proper self-awareness, you can make any necessary refinements to your trading strategy... And hopefully improve overall performance. 

I'm not sure anything I can say can change ones view of themself. If you have a set nature of beliefs, it is often difficult to change them. It takes an immense amount of mental flexibility and mental fortitude to look inward. 

Develop a Winning Attitude

"A winning attitude is a positive expectation of your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better."

Adopting a positive mindset and belief in your ability to succeed is super important. Of the hundreds of variables that could impact a trade, this is the most important. 

Without cast iron certainty of your ability to succeed, you will struggle. A positive mindset will help you better cope with the emotional challenges of trading. 

Professional traders know they can win. They are probably one of the most arrogant groups of people on the planet. But they have no doubt of their ability to make money. 

Accept Risk

"If you can learn to accept losses as a natural part of the trading process by believing that you will always be able to take advantage of the next edge, the fear of losing will no longer have any effect on your ability to execute your trades."

If you can accept the fact that all trades come with risk, it will help all the other pieces of the mental game come together. Being able to accept risk will keep you focused on the process. And it will keep you from making bad mistakes because you bet your entire capital position. 

If the trades are too concentrated, emotional decisions will overtake what we know is the proper strategy. And being too heavy in a trade is a recipe for disaster in the stock market.

What seperates the winners from the losers is how traders handle the positions going against them. And to properly handle those, you have to be emotionally unattached to the money involved.

Continuous Learning and Improvement 

 We need to continuously learn about about ourselves, our trading strategy, and market analysis. This way when any trading issues arrive, we will know how to handle them. 

But knowing more will give us confidence to make the proper decisions to maximize our profits. 

Trading in the Zone covers many concepts of trading psychology. And learning about ourselves is one of the best investments we can make in our trading. 

This article just covers the tip of the iceberg of knowledge Mark Douglas drops on readers in this book. I can't recommend reading, or listening to this book repeatedly. 

If you enjoyed this article want to buy the book, please click this link to support the blog. 

The definitive guide to investing in Real Estate Investment Trusts (REITs) is the book "Investing in REITs" by Ralph L. Block.

Block is a renowned real estate investor, specifically in the unique investment vehicles called REITs. He spent decades as a securities analyst, portfolio manager, and REIT investor,. And this book has his most valuable insights and knowledge. This is a go-to resource for new and seasoned investors alike.

REITs offer an opportunity for passive investors to participate in the real estate market without directly owning or managing properties. They have gained popularity over the years for their potential to generate income and diversify investment portfolios. This article distills the book's most important concepts to provide you with a solid foundation for understanding and investing in REITs.

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Basics of REITs

Real Estate Investment Trusts (REITs) are companies that own, operate, and/or finance income-producing real estate properties. These real estate companies give investors direct ownership into hundreds of properties. This is instant diversification of investors.

But not just any company can say it's a REIT. To qualify, a company must comply with certain legal requirements. The most important one is that it must distribute at least 90% of its taxable income to shareholders in the form of dividends.

And the beauty of this is that by doing so, REITs are exempt from paying federal corporate income tax. This way investors can get tax-free distributions and avoid the double taxation problems that plagues many corporations. This way only the investor pays the taxes on the dividends. This makes REITS an attractive option for income-focused investors and financial planners.

This tax-advantaged status allows for REITs to offer above-average dividend yields and cash flow for investors enjoy passive income.

Investors can buy publicly-traded REITs on the open market at their current stock price. Many successful investors have bought a collection of individual REITs to create their real estate portfolio.

Different Kinds of REITs

There are three main types of REITs: Equity, Mortgage, and Hybrid.

• Equity REITs own and operate income-producing real estate properties, such as office buildings, shopping centers, and apartment complexes. They generate revenue primarily through rents collected from tenants. And the REITS act as property managers for the properties they hold.

• Mortgage REITs invest in mortgage loans or mortgage-backed securities tied to commercial or residential properties. These REITs generate income from the interest on loans and mortgage-backed securities.

• Hybrid REITs combine elements of both equity and mortgage REITs, investing in both income-producing properties and mortgage loans or mortgage-backed securities.

It's important to understand the differences between REITs. Each type of REIT offers a different risk and reward profile, so understanding these categories is essential for building a diversified investment portfolio.

REIT Valuation Metrics

Just like all investments in the stock market, accurate valuation is crucial for making huge returns. Key valuation metrics for REITs include Funds From Operations (FFO), Adjusted Funds From Operations (AFFO), and Net Asset Value (NAV). Understanding and applying these metrics can help investors identify attractive investment opportunities and make better decisions.

• Funds from Operations (FFO): FFO is a measure of a REIT's operating performance, calculated by adding depreciation and amortization expenses back to net income and subtracting any gains from property sales. FFO is commonly used to evaluate a REIT's ability to generate cash flow, as it eliminates the impact of non-cash items such as depreciation. Investors can compare the FFO per share of different REITs to identify which companies are generating higher cash flows relative to their share price. A higher FFO per share generally indicates a more attractive investment.

• Adjusted Funds from Operations (AFFO): AFFO refines FFO by accounting for capital expenditures and other non-recurring items, providing a more accurate representation of a REIT's true earnings potential. AFFO is often considered a better indicator of a REIT's dividend-paying capacity and is thus an important metric for income-focused investors. By comparing the AFFO per share of various REITs, investors can identify those companies that have a higher likelihood of maintaining or growing their dividends. A higher AFFO per share typically suggests a more attractive investment opportunity.

• Net Asset Value (NAV): NAV represents the estimated market value of a REIT's underlying real estate assets, minus its liabilities. NAV is useful for determining whether a REIT is trading at a discount or premium to its intrinsic value. To calculate NAV per share, divide the total NAV by the number of outstanding shares. Investors can then compare the NAV per share to the REIT's market price. If the NAV per share is significantly higher than the market price, the REIT might be undervalued, presenting a potential buying opportunity. Conversely, if the NAV per share is lower than the market price, the REIT may be overvalued, which could signal a selling opportunity or suggest caution in buying.

In summary, investors can use FFO, AFFO, and NAV metrics to compare different REITs and identify more attractive investment opportunities. A higher FFO and AFFO per share generally indicate stronger cash flow generation and dividend-paying capacity, while the NAV per share offers insights into whether a REIT is trading at a discount or premium to its underlying asset value. By considering these metrics in conjunction with other factors, such as property type, geographical location, and market conditions, investors can make more informed decisions when selecting REITs for their portfolio.

But it's not just valuation metrics that matter for this asset class. Part of the investment process is to also analyze the REIT's balance sheet. Investors should ensure the company is not overleveraged.

Debt is a huge factor in real estate investing. Using other people's money, is what makes real estate such an incredible opportunity. But debt is a double-edged sword. Investors must ensure a REIT has the earnings power to pay down or refinance its current debt load.

And just as importantly, that the REIT doesn't have too high of a payout ratio. If the fund is paying out more than it can sustainably, a cut in future dividend payments is likely.

Building a Diversified REIT Portfolio

Diversification is essential in managing investment risk. When selecting REITs for a diversified portfolio, consider factors like geographical location and market capitalization. But also pay attention to the property type. REITS contain rental properties like residential dwellings and corporate offices. But there are also warehouse, computer data center and hotel REITs. 

A well-balanced REIT portfolio should include a mix of these factors to mitigate the impact of market fluctuations.

Novice investors can also turn to REIT mutual funds and ETFs. These provide even more diversification as they invest in a basket of REITs... Further spreading risk across multiple real estate sectors and geographical areas.

REIT Dividends and Performance

REITs have a history of outperforming the general stock market. For example, between 1972 and 2020, the FTSE NAREIT All Equity REITs Index, which tracks the performance of U.S. equity REITs, generated an annualized return of 12%, surpassing the S&P 500's 10% return during the period.

This performance indicates that REITs have been a valuable component of an investment portfolio, offering both capital appreciation and income generation.

Dividends are a key component of the total return generated by REITs. Since REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends, they typically offer higher dividend yields compared to other asset classes. This income stream is appealing to income-focused investors. And these dividends can grow over time if the underlying properties generate increasing rental income.

Factors influencing REIT dividend yields include interest rates, property market conditions, and a REIT's payout policy. 

REITs in Rising Interest Rate Environments

The performance of REITs in a rising interest rate environment can be more complex. On one hand, rising interest rates can increase borrowing costs for REITs, potentially reducing their profitability and dividend-paying capacity. Additionally, higher interest rates can make fixed-income investments more attractive, causing some investors to shift their capital from REITs to bonds.

On the other hand, interest rates typically rise when the economy is growing, which can lead to increased demand for real estate, higher occupancy rates, and rising rental income. In such scenarios, well-managed REITs can benefit from improving market conditions, offsetting the negative impact of higher borrowing costs. Furthermore, many REITs have long-term, fixed-rate debt in their capital structures, which can help insulate them from the immediate impact of rising interest rates.

It's important to note that not all REITs perform equally in a rising interest rate environment. Some sectors, such as those with shorter lease durations (e.g., hotels and self-storage facilities), may be more responsive to changes in economic conditions and can adjust their rents more quickly. These sectors may exhibit stronger performance during periods of rising interest rates compared to REITs with longer lease durations, like office or retail properties.

Conclusion

I can't tell you everything there is to know about REITs in one short blog post. If you find this attractive asset class intriguing, please read Ralph Block's "Investing in REITs" to dig deeper. And if you click these links to purchase the book, you'll be supporting the blog. Thank you and happy investing.

What Is The Big Short?

The Big Short: Inside the Doomsday Machine is a non-fiction book by Michael Lewis about the build-up of the housing and credit bubble during the 2000s. The book focuses on several investors who recognized the potential for the bubble to burst and bet against the housing market. This position that these investors took in 2007 - 08 was referred to as "the big short." 

The book tells the story of these individuals and the events leading up to the financial crisis, explaining complex financial concepts in an accessible way for a general audience. It also explores the role that greed, hubris, and a lack of oversight played in the crisis. The Big Short was a best-seller and was made into a successful movie in 2015.

It follows Michael Burry (Christian Bale), Mark Baum (Steve Carrell), Jared Vennett (Ryan Gosling) and Charlie Geller, Steve Eisman and Jamie Shipley (Brad Pitt) as they discover the poorly structured high-risk loan securities that have been given AAA ratings by credit rating agencies, repackaged and resold in highly questionable ways.

All investors should read and understand this story. It's an important lesson in spotting bubbles and unfettered manias in investment markets. And most importantly, how to take a reasonably sized bet with an asymmetric payoff. This trade is the quintessential Barbell Alpha investment. These guys risked a little to make a lot.

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Understanding The Big Short

The housing market bubble that led to the global financial crisis was fueled by a number of factors, including excess speculation and the creation of complex financial instruments that made it easier for people to speculate on the housing market. Here are a couple examples from The Big Short that illustrate excess speculation in the housing market:

1. The creation of mortgage-backed securities (MBS): One key factor that contributed to the bubble was the creation of mortgage-backed securities. These are financial instruments backed by bundles of mortgage loans. These securities were created by banks and sold to investors, who believed they were low-risk investments because they were backed by real estate. However, the securities were actually quite risky because they were often backed by subprime mortgages, which were given to borrowers with poor credit. As housing prices began to decline, many of these borrowers defaulted on their loans, leading to the collapse of the mortgage-backed securities market.

2. The rise of subprime lending: Another factor that contributed to the bubble was the rise of subprime lending. This is the practice of giving mortgage loans to borrowers with poor credit. These loans often had high interest rates and risky terms. As expected, many borrowers were unable to make their payments. As the subprime mortgage market grew, housing prices soared, leading to excess speculation in the market. When the housing market eventually collapsed, many subprime borrowers defaulted on their loans, leading to the collapse of the mortgage industry.

Michael Lewis showed the excess in borrowing in a couple ways. But perhaps the most vivid example from the book was the adult entertainer from Miami. While at a gentlemen's club, the entertainer told the investor (I think it was Burry, but I can't remember for sure) that she bought 5 houses and was able to get loans for each of them. 

Also rampant during the time were what are called NINJA loans. These are No Income, No Job Applications. The borrower inevitably defaulted under an enormous load debt. But banks made these loans because they figured they'd make more on the upside of the underlying real estate during a foreclosure sale. 

But like all good bubbles, things come to an end. 

Michael Burry of Scion Capital and Jared Vennett realize the housing bubble will burst, leading to the collapse of the US economy. Charlie Geller and Jamie Shipley make a fortune on their bets against mortgage-backed securities when the housing market collapses.

Burry produced nearly 500% returns for investors who stay with him through the duration of the housing market's collapse.

How Burry Did It

He paid close attention to credit default swaps. CDS's offered fixed terms of repayment that allowed investors to potentially make much greater returns than their initial investment should the company in question go into debt within the given period. We can think of these as an insurance contract against mortgages defaulting. 

At the start, when Burry got involved in this, no one could purchase credit default swaps on subprime mortgage bonds. They weren't a thing. But Burry got investment banks to create these for him. 

Burry was cautious when selecting credit default swaps from banks not as prone to the mortgage bond market's collapse, so he had a lower risk of them becoming insolvent and being unable to make payments when those bonds went bad. One bank in particular he selected was Deutsche Bank.

And this proved prescient as the bank was able to buy back the CDS from him at much higher prices. And as we mentioned above, his payoffs were huge. 

The End Game

I'm sure most of us remember the carnage brought upon the markets from the housing collapse. It ended well established investment banks Bear Stearns and Lehman Brothers. These banks unwittingly became to levered up on MBS and other instruments like collateralized debt obligations (CDOs). And when the subprime mortgage bond market collapsed, these institutions collapsed with it. 

Michael Lewis's The Big Short is a great reminder that Wall Street greed always ends poorly - with investors and banks losing billions of dollars. 

But the more impressive lesson comes from following the central characters in the book. People like Michael Burry, Steve Eisman, and John Paulson. These guys all saw the impending housing market crash in the marking and positioned themselves to profit from it. 

These guys are all smart people, but it didn't take a genius to know that excess growth in subprime loans and the huge derivative markets surrounding these new financial instruments would blow up. We saw this last year with the cryptocurrency markets. The money was coming too easily. And now we know why... it was all a house of cards. And anyone shorting crypto last year also made a lot of money. 

Spot the bubble, make money from the trend on the upside, but then use some of those profits to position yourself for the bubble bursting. It is possible to make money when the markets go up AND down. 

To fully learn these lessons, I highly encourage everyone to read the book. And if you'd like to support the blog please purchase the book through this link. 

Who Is Michael Lewis

Michael Lewis’s 1989 book Liar’s Poker cast a lurid light on Wall Street bond-trading house Salomon Brothers. In his new book The Big Short, Lewis presents the division in financial markets between two character types: the bull and the bear. The Big Short is an account of the greatest financial fraud since the 18th century, which occurred when the market Wall Street created in housing debt of very poorest Americans fell to bits in 2007 and all but engulfed the world in 2008.

Michael Lewis is a journalist who has made a name for himself by exposing the inner workings of Wall Street. His book The Big Short, which was later adapted into a movie, detailed the events leading up to the 2008 crash and the people who profited from it. Lewis' work has been praised for its ability to make complex financial concepts accessible to readers without sacrificing accuracy.

In his New York Times bestseller Panic: The Story of Modern Financial Insanity, Lewis examines five major financial upheavals and their underlying causes. Through anecdotes and humor, he paints an accurate picture of what happened before each event and analyzes what actually happened in hindsight. Greed is identified as the first deadly sin when it comes to markets, as it leads to underpricing of risk and eventual catastrophe. Michael Lewis' work serves as an important reminder that Wall Street should not be trusted blindly; instead, we must remain vigilant in order to protect ourselves from another financial crisis. 

The 2008 global financial crisis was a devastating event that shook the world economy and left many people reeling. The cause of the crisis was largely attributed to Wall Street firms turning subprime mortgages into toxic financial products, enabled by ratings agencies that were supposed to police risk. While most financial institutions and government regulators failed to foresee the meltdown, there were a few investors who managed to anticipate it and make a fortune off it.

What Works on Wall Street is a book written by James P. O'Shaughnessy, in which he presents the results of his research on stock market investing. The book discusses the findings of a study that analyzed the performance of various investment strategies over a long time period, including more than 50 years of stock market data.

O'Shaughnessy's research focused on identifying the factors that have historically correlated with strong stock market performance. He found that certain characteristics of a company, such as its size, value, and earnings growth, are strong predictors of future stock market returns. He also found that certain investment strategies, such as buying and holding a diversified portfolio of stocks, can lead to strong returns over time.

The book teaches readers how to use data and analysis to identify stocks that may have the potential to outperform the market. It also provides practical advice on how to implement these strategies in a real-world investment portfolio. Overall, the book is intended to help readers understand the factors that contribute to long-term stock market success and to make informed investment decisions.

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This Book is Huge... Do I Read the Whole Thing?

The size alone of this book is daunting. But the good news is, most of this book just breaks down the results of the many stock screens that James O'Shaughnessy and team have run. 

Note: A stock screen is a set of parameters an investor selects

And really you can focus on the best-performing investment strategies. No one says we need to read about the below average performance screens. 

But I do recommend reading the beginning to understand O'Shaughnessy's approach to stock selection and portfolio management. 

What Are Stock Screens?

A stock screen is a tool used by investors to filter and identify stocks that meet certain criteria. Stock screens are typically used to narrow down a universe of potential investments to a more manageable list of candidates that are more likely to meet the investor's specific goals and criteria.

Stock screens can be used to filter stocks based on a wide range of criteria, including financial metrics such as price-to-earnings ratio, earnings growth, and dividend yield. Also they can use fundamental factors such as industry, market capitalization, and geographic location; and technical indicators such as moving averages and relative strength.

Investors can use stock screens to identify stocks that meet certain criteria, such as value stocks, growth stocks, dividend-paying stocks, or stocks that have a particular risk profile.

Stock screens can also be used to identify stocks that meet certain financial goals, such as generating a certain level of income or achieving a certain level of annual returns.

Stock screens can be run on financial websites or through brokerage platforms. And can be customized to fit the specific needs and preferences of the investor. They are a useful tool for investors looking to narrow down the universe of potential investments. This helps individual investors (and professionals)  find stocks that meet their specific goals and criteria.

How to Utilize These Strategies

The best stock screening tool I've found is TradingView. This is a great charting service which I pay for, but I believe the screening tool is free. And you can set up a majority of the strategies in this book using that screener. Or if you can't find some metric they use in the book, you can probably find a related measure to recreate these successful strategies on your own. 

One important factor they harp on in the book is that investors should buy all the stocks in the screen. So if the screen is to find the 25 best stocks that meet the criteria, you should be all 25. In a way this is a passive investing strategy, but it prevents us from falling into our biases. 

Many individual investors fall into the trap of undisciplined buying. They chase stocks and high stock returns. They fall victim to the sexy story stocks. And if one of us goes and buys the most interesting stock in the screen, we are likely to pick a stock that underperforms the average stock going forward. 

So before you say a strategy doesn't work, make sure you follow it to a T. 

And these time-tested investment strategies are just that... Time-tested. Some of these strategies have underperformed their benchmark for years. So don't get discouraged if the first month you try this strategy, you underperform the market. It could happen for years. But eventually, these long-term strategies will outperform again. 

He says it's not worth our time to chase tips or try to outguess others. Passive management tends to beat the market with less risk when compared to actively managed portfolios. Investing using the traditional value measure like price-to-earnings ratios will make money. But we can do better by adding measures like the price-to-book or price-to-sales ratios or higher shareholder yield will do better... And then if we add in strong price momentum, we can start making real money in stocks. 

The Cornerstone Growth Strategy

As the book goes on, we start to get to the more complex multifactor models. And one of the models he highlights is his cornerstone growth strategy. This strategy involves: 

1. Picking stocks =from the All Stocks Universe

2. A growing EPS

3. A P/S ratio < 1.5

4. Display the best 1-year performance in this All Stocks Group

This methodology makes sense. It combines traditional measures like growing EPS and combines them a price-to-sales ratio and price momentum. 

This gets us stocks that are not only cheap, but also have growing earnings and momentum.... Two qualities Wall Street looks for in an ideal value stock investment.

Personally I'd like to see cash flow metric and maybe a buyback yield incorporated in this screen, but it's not necessary. But the brilliance of this book is that we can take these screens and see if we can add to them and make them better. 

Conclusion

There are many more screens in this insightful book. These screens show you the types of stocks that do well, and those that don't, over long periods of time in the markets. 

There's no blog post long enough to cover all these strategies. So I encourage anyone looking to incorporate these quantitative strategies into their portfolios to buy the book and read it through.... And start making these screens, and improving them, on your own. 

To buy the book, and support this blog, please use this link. 

This book is written under the pseudonym Adam Smith. The real author is widely believed to be George J. W. Goodman. A successful stock market trader. His book has been described as a "must read" because of its unique style and insight. It's definitely worth reading if you want to understand the inner workings of the financial world.

The Money Game is an essential book for people to get an understanding of the intricacies of money and how human nature plays into the markets. George Goodman uses a delightful sense of humor to rely these lessons in a way that's easy to read... And that will stick with you for years to come.

When published in 1968, Paul A. Samuelson declared the book a modern-day classic.

But in this book he extolls many lessons he's learned from his long career as an institutional investor. None more important than the first...

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You Better Love "The Game"

He explains that there are two types of people: those who care about the market, and those who don’t. And he says that the price paid by each type of person differs.

"The investment game is intolerably boring save to those with a gambling instinct, while those with the instinct must pay to it 'the appropriate toll.' This really does say it all. We have more than 26 million direct investors in this country, i.e., people who have actually bought stocks. Not all of the 26 million are fiercely active, but the number grows all the time, making the stock market a great national pastime...Sometimes illusions are more comfortable than reality, but there is no reason to be discomfited by facing the gambling instinct that saves the stock market from being a bore. Once it is acknowledged, rather than buried, we can 'pay to this propensity the appropriate toll' and proceed with reality."

Gamblers must be a toll. That involves things like the time spent looking at charts, fees for making trades, and likely missing out on large moves. And to be successful, you better like following the markets... Because you're going up against people that do. 

"If you are a successful Game player, it can be a fascinating, consuming, totally absorbing experience, in fact it has to be. If it is not totally absorbing, you are not likely to be among the most successful, because you are competing with those who do find it so absorbing."

And you will need to spend the time to do this... An individual investor can't half-heartedly scroll through charts for a few minutes a night and expect their stock market investing to be successful.

The Cyclical Nature of Bull and Bear Markets

 Goodman says the two strongest emotions in the stock market are greed and fear. I'd go on to say these emotions rule crowd mentality in all walks of life. But we can see this played out, in real-time, in the stock markets. 

"In rising markets, you can almost feel the greed tide begin. Usually it takes from six months to a year after the last market bottom even to get started. The greed itch begins when you see stocks move that you don't own. Then friends of yours have a stock that has doubled; or, if you have one that has doubled, they have one that has tripled. This is what produces bull market tops. Obviously no one rationally would want to buy at the top, and yet enough people do to produce a top."

And that's when the market tops... Then the fear kicks in...

"When stocks start down, the tendency is to wait until they come back a little before lightening up. They head down further, and the idea that you have made a mistake, that you have been betrayed by your own judgment, can be so paralyzing that you wait a little longer. Finally faith evaporates entirely.

If stocks were down 10 percent yesterday, they may be down 20 percent today. One day, when all the news is bad, you have to get rid of the filthy things which have treated you so cruelly. Again, it all ends in a kind of paroxysm that is not fun unless you have anticipated it."

 The bear market will end when things look the worst... And no one logically wants to buy. But that's exactly when the successful portfolio managers will dip their toes into the water. And that's why professionals tend to outperform individuals.

Concluding Thoughts

Goodman also says that the same thing will not always work in the markets. So don't get attached to any one method or metric. And don't get your identity tangled up in your trades. That will make it harder to objectively get out of a trade. 

Here at barbellalpha.com we take calculated risks. But we should have a defined exit plan before placing any investment. And if that stop out event hits, we hit the sell button. 

The Money Game is a great book about mass psychology in the markets. And it holds true just as much today as it did 60 years ago. Human nature doesn't change after all. 

To buy this book, and support this blog, click here. 

This book gives timeless advice on finding stocks ready to surge. Some naysayers will tell you this book is outdated, but I disagree. Technical analysis, in many ways, is a

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n exercise in human psychology. And human psychology doesn't change. 

There are several editions of this book, I recommend the latest, fourth edition here. 

In this book, author William J. O'Neil tells us everything from how to invest in the stock market to what sector to invest in. It tells you exactly when to buy and when to hold onto your investments. It even tells you how much money you need to start investing.

This book is perfect for beginners because it doesn't require any prior knowledge. If you are looking for a complete investing system, this book is for you.

But don't let that dissuade you from reading this if you're an advanced trader. I go back and reread this book every now and then as it has a unique investing strategy to follow. And one that is complex. And I pick up something new with every read.

The CAN SLIM Method

CAN SLIM is an acronym for how to pick stock with explosive profit potential. At first, the CAN tells us the qualities that make up quality companies worth investing in. The SLIM part tells us what to look for in a quality stock to help us make money immediately. 

For any of us looking for a little shortcut, William O'Neil is also known as the founder of the Investor's Business Daily. This publication helps individual investors take control of their investing. And its main purpose (in my opinion) is the list of the top 50 stocks according to this system. 

That's the overview. Now on to what each letter in William O'Neil's CAN SLIM stands for.

C: Currently Accelerating Quarterly Earnings and Sales per Share

We want to invest in profitable companies... And companies that are growing their earnings quickly and consistently. 

The important number, according to O'Neil is earnings per share (EPS). We can find these numbers at any stock investment website. The calculation is total quarterly income divided by the number of shares. 

We want to see this growing... A retraction in EPS can result in a stock pulling back. 

We want to see 

In his book "Beating Wall Street," Jim O'Neil says that current Big or Accelerated Quarterly earnings and sales per share are the best indicators of future stock performance. He explains that the reason why he believes this is because explosive quarters are the most predictive of stock price movement.

A: Annual Earnings Increase

Accelerating growth is important for both long term and short term investors. Long term investors want to see accelerating growth because it indicates that management is doing what it takes to grow the business. Short term investors look for acceleration because it indicates that the company is growing faster than the competition. In addition, short term investors like to see big increases in sales because it gives them confidence that the company is expanding into new markets.

Short term investors should focus on sales acceleration. If you find yourself investing in a company that is experiencing slow growth, consider buying shares of another company that is experiencing accelerated growth.

N: Newish Company, New Products, New Management, New Highs

Some of the largest gains in recent bull markets have come from newer companies... Or companies that have reinvented themselves. 

And we're not saying to hold onto these all the time. These aren't buy them and forget them kind of stocks.

But when these explosive new companies continue higher, hang on. We can see massive gains. I could show you hundreds of charts of new companies that had big runs. And these runs generally occurred when sales and likely earnings were moving higher.

Most of the chapter O'Neil spends on stocks making new highs. He talks about how stocks should form a proper base before breaking higher. There is a lot of nuance here. But generally you want to see a decent period of consolidation... Not a V-shaped recovery. Especially as the uptrend continues and matures. 

These are the quality characteristics we look for to improve our stock selection. Now onto the qualities we look for in these quality stocks. 

S: Supply and Demand

We want to see stocks with high volume and few outstanding shares (a low float). That combination of high demand and low supply can find explosive stock market winners. 

If you're looking for stocks than squeeze higher, you can't find any better indicator in all of stock literature. 

L: Leader or Laggard

Ideally we're investing in a company that's a leader in its industry. And O'Neil said he doesn't mean the company with the largest market cap. They're not necessarily the leader. He said the leader is

"The one with the best quarterly and annual earnings growth, the highest return on equity, the widest profit margins, the strongest sales growth, and the most dynamic stock-price action."

We want to avoid laggards because their stocks tend to underperform. And if we see a boost because the leader hit a small snag, it could just a be a sympathy gain in the stock. Not something that has any kind of staying power. 

I: Institutional Sponsorship

Institutional investors are responsible for over half of the market capitalization of the S&P 500 Index. They make up about $2 trillion worth of shares, according to the latest data from the Securities Industry and Financial Markets Association (SIFMA). This makes them one of the most influential groups in the financial world. 

The proper stock should have at least some institutional ownership. That gives does a couple major things. 1. it provides a floor on the stock in the event of a pullback, 2. provides a liquid market. 

But O'Neill says we should be wary of oversubscribed stocks - those with too much institutional ownership. There may be no one else to purchase the stock. Ideally institutions will be increasing their position in any stock selected.

M: Market Direction

It's easier to make money in stocks when the market is going up. The CAN SLIM Strategy is no exception. Buy when stocks are trending up. O'Neil and his Investor's Business Daily will tell us if they believe the market is in an uptrend. And if the uptrend looks a little long in the tooth, they'll say it's an "uptrend under pressure."

When To Sell Your Stock

O'Neill says we should sell a stock if it retreats more than 7% - 8%. That seems a little tight for a stop loss. But if the stock pulls back 8% AND breaks below a major support level, then fails a retest... It's time to get out.

Before implementing any trading strategy, please figure out the exit strategy. This is probably the most important part of the system.

The Cup And Handle Pattern

This chart pattern is called the "cup and handle." It is a bullish reversal chart pattern that occurs when prices move above resistance levels. Prices then fall back down to support levels. A bearish version of the cup and handle occurs when prices move below support levels.

There are different ways to trade the cup-and-handle pattern. One way is to buy the breakout. Another way is to sell the breakdown. You can use technical analysis tools like trendlines and moving averages to help determine where the price action is likely to go next.

These stock charts will look like a little cup - the bottom - and then a period of consolidation after that first move which makes a handle. And it's one any chartist should be able to spot quickly. 

This Book Is Worth Reading Every Couple Years

I come back to this gem frequently. And hopefully you will too. William J. O'Neil's technical analysis teachings can help us an any type of market. Even in bear markets there are opportunities... But these teaching can also get us out of the market... Which is just as important. 

To purchase this book, mark it up, and support this blog, please click this link.

From Las Vegas to Wall Street with Edward Thorp

Edward O. Thorp, born in Chicago in 1932, grew up in California and graduated from UCLA.  In 1967, Thorp published "Beat the Dealer," a book that described a system for beating the market. The book became a bestseller and inspired many people to start playing blackjack.

Thorp then parlayed his success in blackjack to a new kind of casino... The new derivatives market. He was trading options off based off the famous Black-Scholes model before Black and Scholes published their model. 

Thorp’s first hedge fund was Princeton Newport Partners. They never had a down year. And they compounded money at 19% annually for nearly 2 decades - slaying the S&P 500.

Edward Thorp's second book "Beat the Market" explained how we systematically beat the market as a hedge fund manager. Another good book that we'll review later... But "A Man for All Markets" is probably the best book by Thorpe. This book not only covers investing and gambling strategies. Thorp conveys his outlook on life... And I have to say, he's one of the most balanced people out there.

With his intelligence, he likely could have been a billionaire. But he decided his life wouldn't change much if he made more money. And he found more enjoyment in leisure activities and spending time with his wife Vivian. 

But this book is still full of investing wisdom.

Wait to Bet until You Have an Edge

Before making any investment, you should know why you're making a bet with a positive expected value. 

Thorp was one of the most successful blackjack players because he knew his edge. He played the proper strategy, but that alone isn't enough to gain an edge at the blackjack tables. Thorp figured out that if he counted cards and bet more when there were more high cards than normal still yet to be dealt he had an edge.

Individual investors can do the same thing in the markets if they study the markets and look hard enough. That's what we do here at barbellalpha.com. We look for edges to make concentrated bets and take home surefire money.

It's all about knowing your circle of competence. In the financial markets, there are thousands of ways to make money. It's impossible to be great at all those ways. 

But most people are not like us. They aren't putting in the time to learn strategies dealing with options, arbitrage, and other asymmetric bets. Those people, Thorp says, should just buy and hold stocks. Then let the power of compounding work for you. 

I agree. This is what I tell most people to do. If they don't want to spend the time to learn and then follow the markets, they should just buy a low-cost index fund. 

Wait For the Fat Pitch

The key to a successful investment strategy is to wait for the fat pitch. If you don't like the prices the market is offering, you don't have to do anything. Successful investors also know when to sit in cash. 

The term "fat pitch" refers to companies whose shares trade at a discount compared to their intrinsic value. A fat pitch can occur because the market does not recognize the potential risk associated with the company. Or it could mean that the company has limited competition.

But the fat pitch could also be a dislocation in the market. One example I can think of from Thorp's history is the SPAC market in 2008. During the Great Financial Crisis, even SPACs got beaten down. SPACs, commonly known as black check companies, hold just one asset: cash. With that cash, they look to bring a private company public. And if they don't, the investors receive the cash back. 

These SPACs were trading at such a big discount they were yielding about 12% annually until they were forced to return cash to investors. 

Thorp backed up the truck and bought these investments. This is one of the few sure bets in the stock market.

While it's not a 100x return investment that will make a legendary investor, it's a bet that will pad your track record over a long period of time.

Size your Positions Appropriately

One of the most important concepts from Edward O. Thorp's bag of tricks is the Kelly Criterion. This is something many gamblers follow to make sure they can stay in the game.

I'm not going to give the exact formula... Here's the important concept:

The less certain of the payoff you are, the smaller the bet size you should make. That will allow you to stay in the game until that bet pays off. 

So if you're buying out of the money calls that expire shortly, you should not put 50% of your capital in that play. It's a low probability outcome. But it's one that if you can stay in the game for long enough, you can hit some winners and come out ahead. 

But if you're looking at a sure bet, like the SPAC example from above, you can bet a lot. Because you're certain it will pay off. This is important to remember when making investments. 

You always want to have the capital to continue playing. Do not blow up your account. 

Conclusion

In conclusion, even when Thorp isn't specifically giving investment advice, we can learn ways to make excess returns from him. 

It's important to know your circle of competence... And when you get the fat pitch, jump on it. But don't overplay your hand. 

But there's so many more great life lessons in this book. It's one every person should read... Whether or not they are a serious investor. Thorp's outlook on life is unique amongst people that have garnered the success of his. 

To buy the book, and to support this website, please click here. 

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This is the first biography about Buffet. He is very private person who hardly ever gives interviews. The Snowball explains how Warren Buffett became who is today. And this book will help you to understand why Warren Buffett is unique among investors.

Snowball is the only complete biography in which we learn about Warren Buffett's life stories from the man himself. Buffett gave Alice Schroder complete access to his personal life including his family, friends, and business associates. Alice Schroeder's monumental biography of one of the world's greatest investors is one all investors should read... Even if you're not a value investor, you can take away many great lessons from the fascinating stories of this man.

The First Lesson - Start early

You've probably heard this advice many times before. But starting something new isn't always easy. In fact, sometimes we're too scared to start because we think we'll fail. We worry about what others might think. Or we don't know how to do it.

But there are ways to overcome those fears. And even though you might feel like you don't have enough time, you actually do. So take action now. You won't regret it.

Just put some money into an index fund. It's easy and won't take you more than an hour to set up. But starting early will give you the ability to compound your gains... And as Einstein said, "the eighth wonder of the world is compound interest." This can have a massive impact on your wealth when it comes time to retire.

Money Brings Freedom.

At the age of 10, Berkshire Hathaway CEO Warren Buffett learned about the power of money. In his autobiography, he wrote that he had just finished reading Ayn Rand’s book “The Fountainhead” and it inspired him.

Buffett recalled how he read the book and immediately understood what it meant to have wealth. He wrote: "I knew I wanted to make lots of money because money gave you freedom. You could buy anything you wanted -- even things you didn't want. And once you owned something, you never had to worry again. Once you had enough money, you'd never have to work another day in your life. You could live however you liked. You could travel anywhere in the world, meet anyone you pleased, say or do anything that came into your head. If you had money, no one could tell you what to do."

Having this motivation behind you, can help propel you forward in life and business. The ability to have this freedom is an amazing privilege One I think everyone should strive for. But that's just me...

A Stock Is the Ownership of a Small Piece of a Business

Owning a stock gives you a stake in a company, it's a piece of ownership. You don't own the whole company... And you probably don't even own enough shares to influence management's decision. That's ok. Buying stocks is generally a passive investment... One where other people are working to make you money.

If you want to learn more about the company, read the annual report. Warren Buffett is a huge proponent of reading annual reports and financial statements to learn how the business is ran and how revenue and expenses are accounted for.

To learn the classification of what assets the company owns and what kind liabilities they have, read the balance sheet. To learn how much money a company makes, look at its income statement.

That's the basics of a company... And a good start to becoming a successful stock analyst. And it's important to do your own research.

The Dangers Of Following The Leader.

Warren Buffett says he doesn't know much about investing. He does know one thing, though; he knows that following others is dangerous. "The most important lesson I've ever learned," he told CNBC's Becky Quick, "is don't try to pick stocks just because some smart person thinks they are good."

Buffett's advice isn't too dissimilar to the words of Benjamin Graham, author of Security Analysis. In 1937, Graham published a book titled The Intelligent Investor, in which he described the importance of understanding the market, and how investors shouldn't follow the herd mentality.

Don't follow hot stock tips.

Graham wrote that investors should avoid following trends, and instead look for companies that are undervalued, and ones that are likely to outperform the market. This way, he argued, people could invest in companies without worrying about whether or not everyone else was buying them.

In his book, Graham describes the concept of value investing, where investors seek out businesses that are cheap relative to their earnings potential. Value investors believe that there is a difference between price and value, and that the former often overstates the worth of a company. They argue that while prices reflect the current state of the market, values represent future growth.

According to Graham, this type of thinking is essential for long-term success. If you want to make money in the stock market, you must learn to think like a buyer. You must ask yourself questions such as: What do I really know about this company? How well positioned is it to succeed? Can it continue to grow? And, perhaps most importantly, how much will it cost me to buy shares now?

This philosophy is something that Buffett has always followed. For example, he bought into Coca Cola in 1965, despite the fact that many analysts thought the company was overpriced. Instead, he looked at the fundamentals, and saw that Coke had been growing steadily since 1885. He believed that the company had a strong brand name, and that consumers would pay a premium for products that tasted great.

When Buffett purchased Coca Cola, the company was making $1 billion a year. Today, it makes $50 billion annually.

Focus on Quality of Quantity

Warren Buffett is known for making big investments into companies... And even buying companies in their entirety. Buffett's business acumen helps him decide which companies are worthy of investing. But he sticks to what he's good at. He doesn't spread himself thin and invest in a bunch of technology stocks that he doesn't understand their business.

Buffett's biggest investments are in insurance companies. He is a great insurance industry analyst. Berkshire Hathaway itself is an insurance company. And one of his top investments ever was buying insurance company, Geico.

And even now, his portfolio is concentrated in his biggest holdings which include Apple, Chevron, and Bank of America.

Buffett also kept this true about the people in his life. His main mentor was Benjamin Graham - a great mentor to have. Benjamin Graham's book "Security Analysis" is a seminal book for all financial analysts.

And he has worked a long time with his business partner Charlie Munger. These two built Berkshire Hathaway into the behemoth that it is today.

Keeping quality investments and people in your life is better than having a lot of those things.

Mr. Market is Your Servant, Not Your Master

Graham's famous quote about Mr. Market comes from an essay he wrote called "The Intelligent Investor" published in 1949. In it, he writes: "I believe that most people are usually too timid to invest intelligently; that they do not act because they fear loss; that they lack courage and persistence; that they are unwilling to make sacrifices; that they prefer dividends to growth; that they think security rather than adventure is the chief object of life, and that they are satisfied with mediocrity."

He says the financial markets are often bipolar. One day they'll want $80 for a stock and just a few days later it can want only $40 for the stock.

We don't have to accept the prices the market gives us at any time. If the market is euphoric and selling a company at $80 and we think it's only worth $50, we don't have to buy it. We can wait for a more reasonable valuation.

In fact, if we are patient, often times the market will sell us a stock at a huge discount. We might be able to buy a stock we think is worth $50 for $30. Those are the soft pitches we should wait for as investors.

Use a Margin of Safety

A margin of safety is one of the most important aspects of value investing. And that's what you get for waiting to buy a company worth $50 for $30.

We talked about the Margin of Safety when reviewing Seth Klarman's book with the same title. You can read our synopsis here.

This is what Buffett and Munger do at Berkshire Hathaway. They wait for a stock to go on sale and take a large position.... And if they don't see any companies at valuations they like, they don't invest.

Buffett has taken criticism for sitting on billion of dollars in cash. But he was patiently waiting for a fat pitch. And when he sees it he pounces. Like he did when he bought energy companies in late 2021 and Apple a couple years before that.

We can learn a lot from studying the investing greats. That's why I started BarbellAlpha.com. To share the lessons I've learned and help followers build the foundation of knowledge to build their wealth.

And Snowball by Alice Schroeder is arguably the best book on Buffett.

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The Rise of Long-Term Capital Management

In 1993, LTCM was formed by three academics: John Meriwether, Robert C. Merton, and Myron Scholes. This combination, along with some well-known traders, is the financial equivalent of 1970s Boston Celtics. It was the all-star team of the financial markets. They were the smartest and best in the world... And they knew it.

The fund quickly racked up some impressive wins with very little volatility. Over the first four years they returned an astounding 30 percent per year. These wins drew a lot of investor attention and a lot of investor capital.

It soon became one of the largest hedge funds in history. Many wealthy investors clamored to get into the fund. But they had a waiting list. By the end, they raised $5 billion at their peak, which I'm told was 2.5 times larger than Fidelity's Magellan Fund - the largest mutual fund at the time.

A Hedge Fund With Too Much Hubris

All this success went straight to the heads of those in charge of LTCM. And this is a lesson that all barbell investors can heed closely.

Remember, we try to keep 80% of our assets in safe investments that won't go down in value... Even if the market crashes. This requires us to keep a close eye on our risk management of the majority of our portfolio.

And no matter how good our strategy is we need to be aware that an unexpected crisis, such as the Asian crisis in 1998, could cause vicious market swings that lead to losses.

The people behind LTCM were the smartest in the world... Likely smarter than all of us (a humbling thought!) and even their models broke.

Even mathematical models that were supposedly safe. Remember, no matter how good a strategy has been the future price of securities are unknowable. Use the lessons learned in this book to remember to remain humble. And never overextend your portfolio.

Here are the three lessons we can take away.

All Investable Edges Eventually Get Competed Away

Meriwether & Co. set up their investment fund to take advantage of spreads and arbitrage opportunities in the world markets.

Arbitrage is the process of purchasing one asset and immediately reselling it at a higher price. For example, you might buy an ounce of gold in the U.S. for $1,700. And then immediately sell an ounce in Asia for $1,710. If you do this over and over again, you make money every single time. In fact, there are many different types of arbitrage trades, including currency swaps, options, futures contracts, and interest rates.

Long-term capital management (LTCM) was a hedge fund that specialized in making money via arbitrage. Or so they said. They exploited spreads in the foreign bond and currency markets. When the markets got out of whack, they would enter a position and then close out once the market returned to normal.

But LTCM's visible profile caught the attention of a lot of investors. There were copycats and then there were those who took positions against the fund when they spotted weakness. Eventually the markets broke. It was a "fat tail," black swan event. An event that is never supposed to happen.

And when the Asian Financial Crisis swept the globe. South Korea and Taiwan saw their currencies decimated. And the Russian default on their bonds rattled the markets in ways we hadn't seen in decades.

LTCM was caught with their pants down. And the problems were magnified by their biggest sin... Or next lesson.

And that strategy works as long as the markets are normal. But eventually

LTCM Utilized Crazy Amounts of Leverage

They had complex academic models showing they were properly hedged and the risk was contained. The belief in this allowed them to borrow billions more dollars... And buy derivative securities with a notional values in the trillions of dollars.

The problem with LTCM was that they took on too much risk. This was their fatal flaw. One of their main strategies involved betting on a rise in interest rates, which meant that they needed to borrow money cheaply. This allowed them to invest even larger amounts of capital. But there was one small problem: no bank would loan them money because they didn't want to lose money themselves. So they borrowed from each other, creating a giant pyramid scheme.

Experts say LTCM's leverage ratio peaked 28 to 1... Which is crazy. But when we factor in these derivatives, that ratio was much higher.

When the markets turned, LTCM had a lack of capital to close their positions. And they needed to be bailed out by investment banks and the U.S. government.

LTCM's Last Weeks were Plagued by "Impossible" Events

LTCM’s model's didn't predict the collapse of the Russian bond market. But it happened.

They were overly confident in their expert knowledge and complex models. But models are meant to be broken. We're not going to talk about crazy events that could happen in the future right now. They are by definition unknowable. If we knew something bad would happen, we would prepare for it ahead of time. There would be no surprises.

Black swan events happen all the time... they seem to happen more and more in recent decades as the financial system becomes more intertwined.

I'm sure we will see many more of these events... Likely every couple years. So buckle up.

Don't get to cocky in your models or trading plans. They may work with amazing success now. But remain humble. Don't try to leverage up and hit a homerun... You may get lucky, but odds are eventually, you'll blow up like the LTCM guys.

Or if you see a trading strategy that touts a 99% success rate be careful. These strategies usually involve picking up small 2% returns. And it works great. But when they markets turn, you can lose everything if you leverage up.

Mind your risk.

That's the most important lesson for barbell investors to remember here.

When Genius Failed is a great book to read as a reminder to remain humble. Click here to purchase this book.

A dollar saved is worth more than a dollar earned.

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Value Investing: From Graham to Buffett and Beyond is one of the seminal books on value investing. In this book, author Bruce C. Greenwald features some of the world's most successful value investors. And he breaks down the methodologies they use to trounce the market. 

Spoiler alert: it's more than just looking for cheap stocks and underappreciated asset values on the balance sheet. 

Greenwald is just the man to tell us about these value investing principles. He is a professor of Finance and Asset Management at Columbia Business School. And he's also the academic co-director of the Heilbrunn Center for Graham & Dodd Investing.

Through this position, he has taught many successful investors the way value investing. In fact, The New York Times describes him as “a guru to Wall Street’s gurus.” 

Any investor looking to dig into the fundamentals of a company should understand these following concepts from the book. 

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Enduring Value and Competitive Advantage

The concept of competitive advantage is very simple. A company has a sustainable competitive advantage over another firm because it offers customers something better than what the competitor provides. This is true whether the product is tangible, such as a car or a computer, or intangible, like customer service. In either case, the company must offer something unique, superior, or differentiated.

A superior product is on form of competitive advantage Greenwald mentions. And to maintain that advantage, companies need to spend on research and development and advertising. These are necessary expenses and should not be frowned upon. 

Another advantage for a company can be due to supply factors. An oil company like Saudi Aramco can sustain high returns on capital because they are swimming in oil that is easy to pump out of the ground. As long as those Ghawar oil field has oil, it will be cheaper for them to produce oil than the deep water drilling rigs off the South Texas Gulf Coast.

Another sustainable advantage can be a lower cost of capital. Companies in more stable political jurisdictions can borrow money from investors for less than companies in less stable countries. This lower cost of capital will help the company expand and continue operations. 

In theory, competitive advantage is easy to identify. But in practice, it is often difficult to determine whether a company truly enjoys a competitive advantage. This is especially true in industries where there are many competitors offering similar products or services.

Value investors believe that companies that enjoy a competitive advantage tend to outperform those without one. They base this belief on the fact that most firms do not maintain a competitive advantage indefinitely. Over time, competition erodes a competitive advantage.

For example, General Motors enjoyed a strong position in the automobile industry for decades. Then came Toyota Motor Company, which offered lower prices, greater fuel efficiency, and superior quality vehicles. GM eventually lost market share and went bankrupt.

This is one example of losing a competitive advantage over time.

Current earnings power

Bruce Greenwald's valuation approach is to find the current earnings power value (EPV) of a company and compare it to the net asset value (NAV). To do that he uses the following formula:

Adjusted earnings / costs of capital

He defines adjusted earnings as the sustainable level of cash flows distributable to owners. This formula also assumes that the future cash flows stays the same. In other words the company will have a 0% rate of growth. 

That's quite the assumption, but it creates a conservative value to work with. 

Greenwald also suggests subtracting the debt and adding cash to that calculation to back out any leverage. 

Then to determine the franchise value of the company, he takes the EPV and subtracts the NAV from it. The NAV is just the assets minus liabilities or another number is the tangible book value. 

And that's the basis for Greenwald's investment strategy for stock market beating returns. 

Price is what you pay, value is what you get

Value investing is a strategy where investors purchase shares they believe are undervalued at current market prices. They compare the current value to the present value of future distributable cash flows. If the stock price is less than the PV of cash flows, you may have a bargain.

And he talks about the "margin of safety" investors like Benjamin Graham and Seth Klarman have popularized. Graham has said that the margin of safety should not be less than 33% of the fundamental value of a company. In other words, if you think the value of a companies shares is $100, you should not pay more than $67 for those shares. 

By building in this cushion, you can help protect against a loss of capital. 

This framework has set the foundation for investment decisions of value investors over the past few decades. Famed investors like Warren Buffett, Charlie Munger, Mohnish Pabrai, and more.

This summary can't possibly explain all the details Greenwald goes into. More concepts he talks about are the network effects of modern companies, business cycles, and how growth rate impacts valuations. The ability for companies to return excess cash is fundamental in both public and private markets. 

Greenwald's Value Investing book comes highly recommended for all barbell investors. To purchase please click here.

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Who Is Nassim Nicholas Taleb?

Nassim Nicholas Taleb is one of the world's most influential thinkers today. Taleb has crossed the chasm from financial to mainstream. His beliefs stem from the unpredictability in the financial markets, but by taking these and applying to other fields, he has become well known for unconventional ways for the world run.

He has written several books including Antifragile, Fooled By Randomness, The Black Swan, and Skin In The Game. His work focuses on probability theory, risk management, statistics and economics.

And Fooled by Randomness is based around the financial markets. But many of the biases he mentions plague humans in everyday decisions. Everyone, no matter what walk of life they come from, can learn something about themselves by reading this book.

Today, we'll talk about the most important lessons Taleb tries to impart upon us through this book. 

We often confuse luck with randomness

This sounds a bit depressing when we think about it. But Taleb posits randomness is a common factor in life... And luck plays a bigger role in our lives than we like to give it credit. 

However, it's a common flaw many people posses. When good things happen, we think it is because of our hard work and grit. We deserve to have this good thing happen. Or when we make a successful investment, we "knew" it was bound to succeed. 

And when something goes against us, it's because of "bad luck." It is rarely because we were dumb or didn't try hard enough. 

It's impossible to determine the impact of randomness in our lives... Or our investments. But we should try to not get too cocky.

In my opinion, one of the worst things aspiring traders can do is get too confident in one idea or trading methodology. They rack up a few winning trades and get cocky... Then they level up their trade size much higher than they used before... And of course, that's the time the trade goes against us. And one oversized trade can ruin a string of good trades.

So it's important when making investments or trades that we use appropriate position sizing. That way if something goes against us, we can live to fight another day.

But this leads us to another of his big lessons... One many of us are taught from a young age.

Life isn't fair

Sometimes we don't get what we deserve. And sometimes the best person doesn't win. That's just how life works. 

We must be prepared for these outcomes. At times we must take a chance in life. And sometimes those chances won't pan out. 

I'm sure many of us have applied for a job and saw someone of inferior intelligence get the job. Or many a man has tried to woo a girl only to see her pick the jerk instead. 

Sometimes bad things just happen... And we should be prepared for that. And it never hurts to have a plan B or C ready to go. 

We are inherently poor at understanding the impact of rare events.

The world is full of surprises. Even the most mundane things can turn out differently than you expected. This is especially true when it comes to decisions. You might think that you're making the best choice possible, but sometimes there are hidden factors that influence our choices.

One example is that we often overestimate how likely something will happen. When we see something very unlikely, we tend to assume that it won't happen. But what if we don't understand the odds behind the event? What if we ignore the fact that rare events do happen?

In one study, researchers asked people to estimate the likelihood of three different types of events occurring. They found that participants tended to underestimate the chance of rare events like extreme weather and natural disasters. In another experiment, participants were shown images of rare events and asked to predict whether they'd ever occurred. Again, they underestimated the chances of these events.

This tendency to ignore rare events could lead us down some interesting paths. For instance, if we believe that rare events never happen, we'll probably try to prevent them from happening. If we feel that extreme weather is unlikely, we might build infrastructure to protect ourselves against it. However, ignoring rare events can actually make us less prepared for future events.

These are what Taleb calls "black swan events." These events can be anything to a precipitous drop in a stock's price to a one in a hundred year flood. Both of these can cost us a lot of money (or even our lives) if we are not prepared. 

That's why we buy insurance on our house. We never hope to use it, but if we need it, we're glad to have had it. 

This is also why Taleb buys far out of the money options. He feels that the markets misprice these options because people are bad at predicting rare, black swan events. 

These types of strategies have a very low win rate, but when they pay off, they pay off in a big way... Buying these low probability event options is actually one of the most durable investing strategies over time. 

But to do that you have to ignore your short-term performance... You will bleed money for a time. Until the next big event happens... But that's what we look for here at barbellalpha.com. 

And the last big idea is sort of related, but not completely. 

Block out the Noise... In both the media and the stock market

A majority of news stories are just noise. Most won't matter a week from now... And a vast majority will be forgotten by this time next year. If that's case, why pay attention to it? 

Same goes for many of the hottest shows of the time. Does anyone really remember or care about the Tiger King show that was big early in the pandemic? Not really. 

Wait for news to pass the test of time. I'm continually a month or so behind on my podcast listening. I do that partially on purpose. I want to listen to the best information that will be important in the future.

If I hear someone talk about last month's topic du jour, I skip the podcast and go onto another one. 

Or if I get behind on reading my emails, then find myself deleting a lot of emails from a certain sender, that one is not important and gets unsubscribed from. 

Most of the daily news, especially news in the stock market isn't relevant in the long run, if even today. Wall Street likes to have a narrative for why stocks moved. But in reality, oftentimes the narrative gets tied to the movement in stocks. 

Ignoring these headlines gives me more time to focus on important concepts and learnings. 

I learned that in large part from Taleb.

This is one of many life changing techniques you can take away from reading Taleb's works. We will be covering more of these in greater detail as time goes on. 

To purchase this book and support the blog please click here.

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In 1992, hedge fund manager Seth Klarman published his seminal value investing book "Margin of Safety." This book is a must read for anyone investing in businesses for long-term investment opportunities. 

It is such a classic that today, purchases a copy of this book will run you thousands of dollars... If you can even find one. But today, you can learn the main lessons from this book for free.

To overly simplify the main message of his book investors should figure out the fair value of an investment and only purchase when prices fall well below that fair value. 

This is the margin of safety... Because even if you were a bit off in your calculations or the company underperforms, you can still make money on the investment. Or at least not lose as much.

This sounds simple.... But in practice this can be a very difficult thing to do. It requires an immense study of the markets, industry, and individual companies. 

And at times like now (late 2022) when the market is crashing, it looks like there are no safe investments. But perhaps this is the perfect time to buy beaten down companies below their intrinsic value... And earn a superior rate of return in the markets.

Seth Klarman's Investing Hero 

In the introduction Klarman gets right down to business. He says that investors like Warren Buffett and Charlie Munger know what they're doing. 

We should study these successful investors and their investment decisions. We will see that these gentlemen buy businesses at fair values that will give them great investment returns. Their investment process allows them to build an investment portfolio of attractive investments at reasonable prices. 

This way you can minimize the impact of bad luck on your investment portfolio. Reducing investment risk is one of the most important things people can do to be successful. It goes back to Buffett's two rules of investing: 1. Don't lose money. 2. Never forget rule #1.

Klarman also says we should study how others lost money. That way we can avoid their mistakes.

One of the biggest mistakes people make is investing in a mania. This is when we see investors, including our neighbors, flock to the hot stock. Often times the novice investor will feel a bit of FOMO (fear of missing out). And they will jump into the stock as it spikes higher.... And they inevitably lose money and reality sets into the stock market. 

This kind of investing is easy because you're following the crowd. But speculation like this is a waste of time. It's dangerous. We want to take the harder road and remain disciplined And invest where the crowds are not.

The Efficiency Of The Market

Efficient markets is a scam. If markets were efficient, value investing wouldn't be a thing. 

Value investing is based on the idea that the market is inefficient and investors can beat it by buying companies whose shares are selling at low prices relative to their intrinsic worth. Value investors look for stocks trading at a discount to their underlying economic fundamentals. These stocks tend to be cheap because the market doesn't recognize how good they really are.

But eventually, hopefully after we've invested, the market realizes how undervalued these companies are. And the price rises. 

We can take advantage of extreme volatility in the markets buy buying low. Then if we take a long-term investment horizon, we can earn superior returns. 

How Wall Street Works Against Investors

Wall Street is supposed to work for investors. But there are incentives for Wall Street to sell products that don't always serve the best interest of investors. In fact, there are even incentives for investment bankers and hedge fund managers to make money while undermining the companies they're supposedly helping.

We can look at IPOs as an example of this. Klarman says, "Investors even remotely tempted to buy new issues must ask themselves how they could possibly fare well when a savvy issuer and greedy underwriter are on the opposite of every underwriting." 

He goes on to say the deck is stacked against buyers of IPOs. Steer clear of the initial offering. This isn't to say there isn't a time to make an investment in a company that has recently gone public though. Commonly there's a time about six months after the IPO when insider's lock-up period ends. And they can sell stocks. Look for irrational changes in the market price around that period.

Institutional Investors also tend to do a poor job managing money. Their primary goal is to not  to deviate too far from the overall stock market return. If they go through a periods of underperformance they could face investor redemptions and lose their job. 

Therefore, it is prudent for individuals to take control of their investments. 

Value Investing: The Art of Business Valuation

The key lessons in this book revolve around value investing.

First, let's talk about what value investing is not. It's about buying the cheapest security on the market. It's not about only buying on market declines nor is it about an endless process to find the perfect investment.

Klarman is not a fan of top-down investors. He says, "Many professional investors employ a top-down approach. This involves making a prediction about the future, ascertaining its investment implications, and then acting upon them."

He says this method gives no margin for error. It requires being right about the future. That's a difficult proposition. Whereas looking for companies trading below their intrinsic values is easier.

Paying too high a price for individual investments can eliminate returns of even perfect trade execution over many years. 

One lesson investors today could have heeded more closely is that Klarman said during periods of unusually low interest rates, all securities tend to become overpriced. Value investors need to be careful during periods of low interest. As of the time of writing, fall 2022, we are seeing the effects of investing in low interest rate environments... Eventually those low interest rates end. And market participants are getting wrecked as the overvalued market corrects.

But now we can likely find some attractive opportunities in the markets if we look closely. To do that, investors need a very disciplined approach to the financial markets. 

Another useful quote from the book is, "The first, and perhaps most important, step in the investment process is knowing where to look for opportunities..."

Areas of Opportunities for Investment Success

To find good investment ideas, it's important to find companies with catalysts. Some catalysts Klarman mentions are:

• Thrift Conversions - when banks go public it's a good time to invest. it's an accounting trick, but essentially the book value doubles... And returns follow. Peter Lynch also talks about these. 

• Liquidations - if you take a quick look at the financial statements and see a stock is trading below book value, a liquidation can provide a quick return for investors. 

• Bankrupt securities - Sometimes companies can come out of bankruptcy in a dominant market position. And with its previous debts restructured are written off, the company is in a better financial position. 

• Spin-offs - Sometimes a company will spin-off a segment that is growing or unwanted. These can provide opportunities because often these spinoffs are not in any indexes right away. So any market tracking fund, is forced to sell the spun-off security. This pushes the price down and can build in a margin of safety for investors. 

• Rights Offerings - These offerings are often free for investors. And sometimes you can maintain the right and sell the original security for what you previously paid for it... Giving you a risk free investment. These can lead to great rates of return with no downside risk.

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Margin of Safety Can Help Meet or Investment Goals

The lessons in this book can take our investing strategies from a speculative undertaking to a nearly surefire, market beating investment strategy. And help us find those asymmetric investment opportunities that allow us to beat the market. And finding sexy safety margins will help preserve our capital in the event of any unforeseen market fluctuations. 

This investment book is a must read for any buy-and-hold investor... And even has some lessons we can apply to short-term trading. 

No summary will do the book justice... But this should help give some ideas where to look for and how to apply Seth Klarman's Margin of Safety.

The book is based off the life of one of the most successful traders of all time - Jesse Livermore. Livermore made and lost millions trading stocks and commodities... And then made and lost millions again.

Livermore had many tips and quotes for successful stock speculations. He was successful when he followed his rules. But his biggest speculative blunders occurred when he ignored his rules and thought he was smarter than the market.

Seeing the results of going against ones trading rules makes this book particularly instructive. Most traders spend time reading about trading strategies and technical analysis. But the big money is made and lost through the psychology of speculators - in between our two ears. 

Let's continue on to learn the lessons to make smart trading decisions... And to avoid the blunders made by unsuccessful investors.

The Market as a Teacher

The best trading lessons come from the market itself. Livermore said,

There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!

Every time we book a loss, we should analyze the trade closely. See what happened and if we can avoid making the same mistake in the future. 

Winning traders learn from their losses.

Market Psychology & Trading

Most traders, even novice traders, have sufficient knowledge to make money in the markets. But we all have one big enemy... That chief enemy is ourself.

Traders need to be able to learn from their mistakes and at the same time not become shell-shocked. They have to take action when the market price action dictates it. And follow their plan. 

Livermore's top trick to market speculation is to add to winning positions... And never add to a losing position. But it's difficult to mentally follow this strategy. Especially after a few losing trades. But if that's the strategy, we have to be mentally prepared to do that. And to avoid the temptation to take a quick profit.

Guard Against our Own Nature

Speculators often fall victim of their own weaknesses. They listen to the wrong person who tries to persuade them to buy or sell something that they don't actually want. Speculation is a dangerous game because it involves taking risks. But there are ways to avoid being one of those speculators who lose money.

The most important thing you must do is understand what drives you. What motivates you? Why do you trade? Do you like making money? Or do you enjoy trading? If you're motivated by making money, you'll probably end up losing money. You'll find yourself jumping into trades that make no sense. And you'll likely see some pretty big swings in your account.

If you're motivated by enjoying trading, you'll take fewer risks. You won't be afraid to miss out on a few trades. And you'll keep your emotions under control.

For example, let's say you're a day trader. You wake up early every morning, check the market, and decide whether or not to go long or short. Then you place your trades. This might work great for a while. But eventually, you'll start missing opportunities. Your emotions will get the best of you. And you'll begin to panic about getting caught short. So you'll start selling off positions. And you'll become fearful of buying again.

You'll notice that you're starting to feel guilty about missing out on potential profits. And you'll start feeling anxious about having taken too many losses. All of this will lead to another round of missed opportunities. And you'll start panicking about getting stuck in a losing position.

So you'll start overreacting to small moves in the market. And you'll start worrying about how much money you've lost. And you'll start thinking about quitting.

This happens because we humans tend to act according to our nature. We follow our instincts. And we tend to ignore our rational side. Our emotional side.

What does this mean for traders? It means that we need to guard against our own nature. Because if we fail to do this, we risk falling victim to our own weaknesses.

And if you're a trader, you could easily fall prey to these tendencies.

It was my sitting that made me money

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!" - Jesse Livermore

As traders we often want to take advantage of every move in the stock price. But it's important to remain patient. Sometimes the best trades are taking no trades at all. 

We must understand the market we are in and trade with the market. Successful traders don't try to fight the market. They find... 

The Line of Least Resistance

A line of least resistance refers to the path along which prices tend to move.

If you're in a bull market, the line of least resistance is higher. If you're in a bear market the line of least resistance is lower. 

Successful stock traders will look at the overall market to see if we're in a bull or bear market. Then they look for individual stocks that are trending in the same direction and invest in those. Finding stocks trending inline with the market is one of the best ways to make money in the market.

This concept is based on the idea that prices are attracted to areas of support and resistance. If a stock moves into a new area of support, it tends to continue moving upward. Similarly, if a stock breaks out lower of a previous range, it typically keeps moving downward.

Be Careful Trying to Pick Tops and Bottoms

One of the hardest things to do in the market is to pick a top or a bottom. Many people try... It's the hero trade. But the unpredictable markets make this a losing strategy. The market movements tend to last longer and move further than traders think. 

The old adage saying, "the markets can remain irrational longer than you can stay solvent" rings true. 

In the stock market, there are many different ways to make money. We don't need to pick the hardest ways to do so. 

Livermore says 

One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

More profitable words have never been spoken. 

Many More Great Lessons Inside This Book

This book is full of insights on how to extract money from the financial markets. Wall Street doesn't have a monopoly on making money. And Jesse Livermore can help traders pull regular wages out of the markets.

We've barely scratched the surface in this article. Anyone wanting to trade in the markets to make real money should read this book.

Livermore is proof that if we take the time and learn successful trading strategies and apply the proper psychology, we can beat the market. That's what we preach here at barbellalpha.com.

Novice investors and experienced traders alike can learn from this financial classic. 

To purchase this book and support this site please click here.

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Charlie Munger is one of the most successful investors of our generation. Over the course of a remarkable career, he built one of the world's greatest fortunes. He is a brilliant thinker and a superb writer -- and he is underappreciated by the public. In Poor Charlie's Almanac, he shares what he has learned about investing during his long career.

In this book Charlie shares his thoughts about what he calls "the most important investment decision you'll ever make." He says it's not whether to invest in stocks, bonds, real estate or gold, but how you live your life.

Munger started his career in a law firm, but something about it didn't click with him. He saw that a lawyer could work 80 hours a week for fifteen years to become a partner... Which earns you the right to continue working 80 hour weeks.

To him that was short-term thinking. He could earn a lot of money this way, but it wouldn't set up his life the way he wanted it. Munger argues that investors are often too focused on short-term returns, while ignoring long-term growth potential. 

Leaving the law firm to try investing was a gamble for Munger, but it's one I think he's glad he made. He says a lot of people suffer from doubt-avoidance tendency. They doubt the outcome so they tend to avoid making a tough decision like leaving a lucrative job.

But taking the gamble is more often than not worth it according to Munger. 

Here are a few more top lessons learned from Charlie Munger's speeches over the years. 

Rationality and Decision Making

Rationality is about making decisions that are based on evidence rather than emotional responses or intuition. Rationality is about thinking clearly and logically. Emotions and intuition play a role in decision making, but rationality is what makes us better decision makers.

When we make decisions, we sometimes use our emotions and intuition to guide us. We don't always act rationally.

Everyone suffers from psychological tendencies and it's important to understand the pitfalls in our decision making.

Sometimes we just react emotionally without thinking things through. For example, you might want to go out for drinks tonight because it feels like fun, but you know you shouldn't drink too much alcohol. You could rationalize your decision by saying something like "I'm having fun." But sometimes we don't even realize that we're acting irrationally.

We can learn how to improve our decision making skills by understanding why we make some of the choices we do. We can also become aware of biases that influence our behavior. These include:

• Confirmation bias, where we tend to seek information that confirms our beliefs

• Overconfidence bias, where we overestimate our ability to make good decisions

• Hindsight bias, where we look back at previous events and see patterns that weren't there.

Objectivity and Changing One's Mind

If you're looking for objective facts about anything, it's hard to find them. This is because there are no such things as "objective facts." There are just different opinions. And people hold those opinions differently.

Some people think that they know what the truth really is; others don't even bother trying to figure out what the truth actually is. But why does one person believe something while another doesn't? Why do some people change their minds over time? How can we learn to make better decisions? 

This is something Charlie talks about a lot in his speeches. He says he has an "iron prescription" that helps keep him sane if he starts drifting towards on intense ideology over another. 

This prevents from locking himself into a certain line of thinking. We see this a lot in investing... Any time people follow an investment idea with religious zealousness, we should be wary. 

The $TSLAQ crowd never wavers despite Tesla turning a cash flow positive.

Both the bitcoin skeptics and bitcoin "hodl-ers" have been proven right and wrong at different periods. 

And the tech bulls, like Cathy Wood of Ark Invest, were right for years, but then their heavy ideology didn't allow them to sell when all the signs of a market top appeared in late 2021 and early 2022. 

This is another tendency that plagues people. Munger calls this inconsistency-avoidance tendency. People don't want to appear inconsistent so they avoid making decisions... Even when new data says they should change their mind.

Practice Divergent and Contrary Thinking

According to Malcolm Gladwell, practice divergent thinking to create ideas and ways of doing something. This is because it forces us to think outside the box and look at different possibilities. He says that we often rely too much on our existing knowledge and experience to solve problems and come up with solutions. 

Gladwell explains that practice contrary thinking helps us break out of our comfort zone and challenges our preconceptions. This allows us to see things differently and make connections we wouldn’t normally make.

For example, he says that if someone tells you that people who wear glasses tend to be smarter, you probably won’t consider wearing glasses. But if you tell yourself that people who wear glasses are likely to be smart, you might start considering getting some frames.

Framing of our minds is important (pun intended). Many successful people have a curiosity tendency which keeps them learning about many new things. And incorporating new data. 

And they will read thoughts that are opposite of their own. They introduce cognitive dissonance into their lives. This is something 95% of the population is sorely missing today... Especially in the political realm. Republicans and Democrats can't even get together and have a civil conversation anymore. 

But this also goes to investing ideologies. Value investors think the growth investors are wrong. The perma-bears get angry with the bulls. We should always be reading opposing viewpoints.

Reduce Complexity

Charlie Munger believes simplicity is the best way to approach life. In the book, he explains how complexity creates problems. Instead, he advocates focusing on the basics and reducing everything down to its most basic form.

Conventional wisdom makes up believe complexity equals insane wisdom. But often times because of academic psychology, we make things more complex than we need to.

In the world of investing, it's easy to become enamored with complex formulas and models. But Charlie says that's where you run into trouble. You end up trying to fit too many variables into one equation. And while that might work well enough for some situations, it won't always produce good results.

Instead, Charlie suggests simplifying things to their simplest form and letting those simple rules guide your decisions. This allows you to focus on what matters most.

Build a Latticework of Mental Models

Charlie Munger, Warren Buffett’s longtime friend and Berkshire Hathaway vice chairman, says that we should build a "latticework of mental models." He explains how he came up with his idea during a conversation with Warren Buffett.

Munger says that there are three ways to approach learning something new:

1. You can read about it, listen to someone talk about it, watch someone do it, etc.

2. You can try to imitate what you see done.

3. You can build a latticework. This involves building multiple models of the subject matter, connecting them together, and continually adding new ones.

For example, Munger suggests that people should start by understanding the basics of investing, such as value investing, fundamental analysis, and technical analysis. They should then move onto reading books about those topics, listening to podcasts, watching videos, etc. Then, once they understand the fundamentals, they can begin applying them to real world situations. For example, they could look at companies that fit into one of the categories above, and decide whether they want to invest in them.

Munger adds that the third method is important because it helps you avoid getting stuck in a rut. If you just focus on imitating what you see others doing, you might end up repeating the same mistakes over and over again. By building a latticework of models, however, you can constantly add new ideas and information to your repertoire.

Learn Models from Different Fields

Models are useful because they help us understand something we don't know much about. In fact, models are everywhere in our lives, and there are countless examples of people combining models from different fields to achieve amazing results. For example, consider how a doctor uses medical knowledge to diagnose diseases. Or think about how a scientist combines scientific knowledge with engineering expertise to build bridges.

The acquisition of wisdom from different fields can help us be better investors. 

For instance Learning better mental habits, like creating mental models, can help us organize the massive amounts of information we consume every day. We can separate the noise from the important facts... And that helps us see the bigger picture. 

In late 2022 the most important things moving the market is the rate of inflation and the projection of future rate hikes by the Federal Reserve. Learning about these trends is more important than following what politicians are doing in DC, if Germany will have enough natural gas this winter, or what the earnings trends are in the S&P 500. 

This is just one example of many examples. 

Understanding Investing and Business Strategy

Warren Buffett says it’s important to put aside one hour every day to dedicate to learning something new. He suggests reading newspapers and magazines, watching documentaries, listening to podcasts, attending lectures and classes, and even taking online courses. This helps you develop skills and knowledge that you can apply to your life outside of work. You might find that you enjoy learning new things and want to pursue a career in finance, marketing, sales, management, etc.

Find High-Quality Businesses

Warren Buffett says it's important to find businesses that are growing rapidly. "I like buying things that grow," he told CNBC's Becky Quick recently. "And I don't like investing in anything that isn't growing."

Buffett added that he doesn't mind owning a stock that's down 50% over the long term because he knows that eventually the company will rebound. But he does prefer to avoid companies that haven't been growing for some time.

He said his favorite way to identify such companies is to look for those that have had rapid growth in recent quarters. For example, Berkshire owns about $1 billion worth of shares in Coca-Cola. "We've owned Coke for quite a while now," he said. "But what we're seeing now is really good growth. And I think that's going to continue."

The Oracle of Omaha also noted that he looks for companies that are expanding into new markets. He pointed out that Berkshire Hathaway bought a majority stake in Lubrizol in 2011. "Lubrizol makes chemicals," he said. "They make products that go into making plastics. They've got a huge market."

Moats and Competitive Advantage

A moat is a source or competitive advantage. Companies should keep widening their mounds. In fact, it is better to build a moat around your business than to try to compete directly with competitors.

One way to do this is to invest in research and development. This helps you develop products and services that no one else offers. Then, you can charge a premium price.

Another way to widen your moat is to focus on customer experience. You want customers to love you. If you provide great service, you will attract repeat customers.

If you don't offer something unique, someone else will. So, make sure you're offering something people really value.

The best investment you can make is yourself

Warren Buffett once said that people are too busy worrying about what others think of them to worry about themselves. He believes that it is important to take care of yourself because no matter how much money you earn, you cannot buy happiness. In his book "The Snowball", he shares some advice on how to improve oneself.

He recommends that everyone should start saving money early in life. This way, they can spend less later on and save up for retirement. They must learn to live within their means. If they fail to do so, they might end up living under debt.

Buffett advises people to invest in themselves rather than in real estate or stocks. He explains that there is nothing wrong with owning a home. However, he thinks that most people overvalue homes. He warns that houses are not like ATMs where you withdraw cash whenever you want. You don't really know how long you'll be able to use your house. Therefore, you need to plan ahead and prepare for the future.

In addition, he says that people should stop spending money on things that they don't need. For example, he doesn't believe in buying expensive watches. Instead, he suggests that people go out and buy a nice watch for $10. Then, they can sell it for $50. This way, they will realize that they wasted money on something useless.

Lastly, Buffett advises people to work hard and become successful. He mentions that if you're working hard and doing well, you won't feel guilty about spending money on yourself.

That’s great advice… And that’s what all subscribers to BarbellAlpha.com should strive for. Every day to get a little bit better and to grow our skills a little bit more. It’s important to set aside that time to build up our knowledge, skills, or business.

To purchase this gem of a book and support the website please follow this link.

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About The Four Pillars of Investing

In William Bernstein's Four Pillars of Investing, he tells readers how to build an investment portfolio meant to win in the long run. He doesn't tell you what to buy... Which is what many people want. But he explains fundamental concepts to help investors make smarter investing choices on their own. 

The phrase "if you give a man a fish, you feed him for a day. But if you teach him how to fish, you'll feed him for a lifetime." 

This book teaches you how to invest... It doesn't tell you want to buy. 

Bernstein does that by giving readers the four pillars framework. Those include:

1. Basic knowledge of investment theory

2. Understanding of the history of investing

3. Psychological aspects of investing

4. An inside look of the business of investing... How Wall Street takes our money

About William J. Bernstein

William Bernstein is one of America’s most respected investment writers. Although if you've read one of his books, you've pretty much read them all. 

He focuses on building a bulletproof portfolio of indexes match the financial market's returns over the long-run. He believes the average investor should focus on allocating between asset classes, rather than selecting individual stocks or bonds. 

Bernstein is a strong supporter of the modern portfolio theory. This theory says there is a perfect portfolio of assets that maximizes returns given a certain level of risk. 

Here at barbellalpha.com, we don't believe that to be the case. We're living proof of the fact the individual investor can take money out of the markets. But it takes time, research, and discipline to do so. Something most people don't have.

So if you want to work and follow the conventional wisdom, this is for you. You can then let the power of compounding slowly build your wealth over the next 30 - 40 years. 

Everyone else should get a good refresher of the capital markets from reading this book.

Pillar One: The Theory of Investing

The theory of investing states that there are three factors that make up the foundation of successful investments: risk, return, and diversification.

Risk refers to how much potential loss you're willing to accept. Return is what you hope to gain from your investment. And diversification is about spreading your money around different types of assets.

But investors need to accept a level of risk if they want even average stock returns. Risky assets tend come with higher investment returns. 

He also notes that past performance doesn't always predict future returns. But it does help us understand why certain strategies work better than others.

His studies find that short-term returns from the average person are random at best. 

And he found that even professional money managers often can't beat the market. 

Index funds or passive mutual funds beat active management over the long term. This is because index fund managers don't try to pick individual stocks; rather, they buy a basket of stocks that track a particular benchmark like the S&P 500.

Active management is a waste of your time. You'll never find a strategy that consistently outperforms the market. So why bother trying?

Pillar Two: The History of Investing

Financial history is an important part in investing. In fact, it’s one of the most important parts. You want to know how much money you’re losing every month, what types of investments are working, and whether there are any red flags that could lead to trouble down the road.

But financial history isn’t just about numbers; it’s about understanding why things happen. And while you might think that learning about the past is easy, you’d be wrong.

The problem is that people tend to forget the lessons of the past because we don’t like to admit our mistakes. We prefer to look forward rather than backward, even though looking ahead is far easier. This leads us to make decisions based on emotions—which is never good. Instead, we should learn from the mistakes of others. If you do, you won’t repeat those mistakes yourself.

And the mistakes investors made in the 20th century, and even the 19th century, are getting made again. Human nature never changes... Which gets us into the next pillar.

Pillar Three: The Psychology of Investing

Investors are often too emotionally attached to individual stocks and sectors, leading them to make poor investment choices. This is known as overconfidence bias. Overconfident investors tend to focus on short term trends rather than longer term fundamentals. In addition, they tend to ignore risk factors such as volatility and correlation. They think they have a diversified financial portfolio when they actually don't.

The biggest risk most investors face are not a brutal bear markets, bad companies, or cheap stocks getting cheaper. But it's the choices they make in uncertain times. This is the foundation of behavioral finance... 

The good news is that there are ways to overcome these biases. By understanding your own psychological makeup, you can avoid falling prey to these mistakes. Here are some tips on how to do it:

1. Know yourself

What motivates you? What makes you angry? What scares you? How does stress affect your mood? These questions help identify your personal quirks. Once you understand why you act the way you do, you can take steps to change those behaviors.

2. Recognize your biases

Overconfidence bias is just one example of cognitive biases. Other common ones include anchoring bias, confirmation bias, availability heuristic, hindsight bias, etc. Understanding your own biases helps you recognize them in others. For instance, if someone tells you something is true, you'll probably believe him because you're biased toward believing people. If you hear about a stock that's performing well, you might buy it because you've been conditioned to think that it always goes up.

3. Think rationally

Pillar Four: The Business of Investing

Investing is about making money long term, not just trying to outsmart the market. There are lots of ways to do it, and many people make a living doing what they love. But there are some things you can learn that will help you become better at investing. This pillar covers those things.

The first thing you need to know is that the goal isn’t beating the market; the goal is making money over time. If you want to beat the market, you need to find something else to invest in.

You shouldn’t follow the financial press because they don’t tell you anything useful. They report on what happens in the markets, which is important, but they often miss the big picture. When they talk about stocks, bonds, currencies, commodities, and ETFs, they tend to focus on the short-term movements of prices.

The investment industry loves this... It sucks investors into the markets by exploiting human nature. The brokerage industry gets more brokerage fees (or now likely more data so their large clients can front run your trades). 

If you want to understand how the economy works, you need to look beyond the headlines. To really understand what’s happening, you need to dig into the numbers.

When you start looking at the data, you realize that the financial press doesn’t give you much information. Most of what they say is wrong.

Conclusion

And there you have it, the four pillars of investing. This is great information for the beginning investor. And if you want to follow traditional financial, you can make money over a long period of time. But your rate of return will be just average.

Best case scenario, you retire comfortably. Worst case scenario, the market crashes right before you want to retire and you end up working longer. That's the risk you take following this traditional expense.

We strive to avoid that risk here at barbellalpha.com ... Our barbell portfolio approach is mostly in low-risk investments. Investments that don't go down much, if at all... The we shoot for the stars with the edges of our portfolio. Here we'll buy investments with the potential to go up well over 10x and learn low risk trading strategies that can yield market beating returns.

Keep reading to learn more about these strategies as we navigate the markets together. 

To purchase this book and support the website please click this link.

Overview of The Psychology of Money

This book uses stories of real world people to illustrate points to help readers change their behavior and make better financial decisions. In particular, it teaches financial concepts such as saving, spending, investing, debt, and retirement planning.

Award-winning author Morgan Housel is most known for his writings on personal finance. He's a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers. And he won the New York Times Sidney Award as well as a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism.

Housel is also a partner at the Collaborative Fund - which is a collection of fund managers looking for profitable investments that also do good in the world. I'm not sure how their performance is, but they have an impressive collection of fund managers contributing to their brain trust. If you want to read his latest thoughts, his blog is here.

Like most top-selling personal finance books, this one teaches basic financial skill in attempt to get people better financial outcomes by retirement. The Psychology of Money is a bit basic for hardcore readers of barbellalpha.com, but if you're just starting out, this book can help the average person achieve a better financial outcome in life by increasing investment returns over a long period of time. 

For a recap of his bestselling book on financial success, continue reading. 

Gaining Experiences with Money Makes for Better Investment Decisions

As we learned in Chapter 2, there are many different ways to save money. Saving is often associated with putting something away in a jar. But there are many other types of savings, including setting aside money for future expenses, having a rainy day fund, and even just making sure you always have some cash on hand.

In Chapter 3, we looked at the difference between a budget and a plan. A budget is simply a list of things you want to spend money on; a plan is a set of goals that you work toward over time. He discussed why it is important to develop both a frugal budget and a plan, and we looked at several examples of budgets and plans.

We also explored the importance of understanding where our money goes each month. This includes tracking every purchase we make, whether it is online or offline. By keeping track of our purchases, we can see exactly where our money goes, and we can adjust our spending habits accordingly.

Chapter 4 focused on the topic of credit cards. Credit cards allow us to pay for items without immediately paying cash. However, credit card companies charge interest on outstanding balances, meaning that we end up paying more over time. As long as we keep our balance low, though, credit cards can be useful tools.

Chapter 5 examined the concept of debt. Debt is sometimes necessary, but it is usually best avoided. There are many reasons why debt is a problem. One reason is because it makes us feel like we don’t have enough money. Another reason is because it forces us to live beyond our means. Finally, it creates problems down the road. When we owe money to others, we have less money left over to spend on ourselves.

The Magic Ingredient in Compounding Is Time

Compound interest is the most important concept in investing. Housel calls it "confounding compounding" but compounding need be confounding.

His example in the book is Warren Buffett. Of his $84.5 billion net worth at the time of publication, $81.5 Billion Came After His 65th Birthday.

Now we don't need $3 billion to achieve financial independence, but it's important to understand how compounding works. 

Over a long time horizon, interest can compound to make an extraordinary return. For example, if you put away $100 per week for 40 weeks, you'd have $3,200 saved. At 5% interest compounded annually, you'd have about $65,000 by the time you retired in a few decades.

Just a little bit of savings can create a huge impact down the road. 

Getting money vs. keeping money

A correct money mindset is important in our financial life. Getting money involves taking risks, whether it's going to college to get a better job, or leaving that job to start your own business. 

But keeping money involves avoiding risk and bad decisions. I'm reminded of Warren Buffett's rules of investing: #1 Do not lose money, #2 Never forget rule #1.

Finding out what 'enough' is

A Lot of People Think Saving Money Is Boring

Many people think that saving money just involves sitting around counting pennies. They believe that saving is boring, and that it takes too long. They feel that spending is fun, and that they shouldn't deprive themselves of anything they want.

But saving money doesn't have to be boring. In fact, it's one of the best ways to enjoy life. When you spend less than you earn, you have more money left over to do whatever you want. You can go out to dinner, take a vacation, donate to charity, or pay off bills. You can splurge on yourself once every few months. Or you can use your extra cash to help others.

Money doesn't buy happiness, and there are plenty of people who make more money than you do. But there are many ways to measure success in life. One way is to look at how much money we spend versus how happy we feel. We've found that those who are happiest tend to live within their means, while those who are less happy often overspend.

In fact, according to research conducted by the University of Chicago Booth School of Business, being able to say no to spending money is one of the most important factors in determining whether or not someone is happy.

In a study published in the Journal of Consumer Research, researchers asked participants about their feelings of satisfaction and self-esteem based on different levels of income. They discovered that the number one factor influencing both measures of well-being is having enough money to meet basic needs.

The researchers concluded that "the ability to say no to spending is critical to achieving happiness."

So why do some people find themselves struggling financially even though they work hard? And why do some people seem to have everything they want, while other people struggle to keep up with bills and credit.

That's a good question. But how do you know what's enough? 

We need to think about the lifestyle we want to live when we retire, how much that will cost, and how much we need to invest and what rate of return you'll need to get there.

Leave room for error

When coming up with these calculations, you'll want to leave a little room for error. Maybe over the next 30 years we won't make a 10% average return on our stocks. And if that's the case, we don't want to be short and impede our lifestyle choices. 

For example if you find you need to save $500 a month to fund your retirement lifestyle while earning a 10% rate of return, you may want to up it to $600 a month. That way if returns don't quite live up to expectations... Or you get more conservative with your investments as your wealth grows... You will still meet those retirement goals.

Or if you're like most people, you probably don't know how much money you'll have when you retire. And even if you do, you might not understand compounding. But there are some things that you can control. You can make sure that you save enough each month. You can avoid debt. And you can invest wisely. If you do those three things, you'll end up with a nice nest egg.

Knowledge Meets Its Match with Emotion

Emotions are powerful motivators. Because of this, people often believe that if they knew all the information, they'd behave better. But research shows that knowing doesn't always mean acting; sometimes it just makes people feel things. A recent study showed that people who knew that they could lose money if they gambled weren't much less likely to gamble than those who didn't know they could lose money. And while some people might say that they wouldn't gamble if they knew they couldn't win, others would say they'd continue gambling anyway because they enjoy it.

So, while knowledge may motivate us to take action, it doesn't always translate into behavior.

It's important to make proper financial decisions in real time to avoid an accidental impact on our future savings. And Morgan Housel's latest book helps people realize the psychological impact of money. 

The correct lesson to take away from this book is that even though we know what we need to do, behavioral finance says many will make poor decisions... Especially in the event of a stock market crash. 

This is important to remember right now as the forces in finance push the market lower. But it's important to stick to your plan. Many people talk about how "time in the market" is more important than "timing the market." 

And in fact, with some stocks down 80% or more it could be a good life business decision to look into these stocks for asymmetric growth opportunities. These are the kind of investments that could go to $0 and you'd lose 100%, but they have an equal chance of going up 1,000% or more. We want these kind of investments to fill the ends of our barbell portfolios. And there are plenty of these opportunities in the market right now. 

Summary

This book can help the average person achieve a reasonable level of independence financially. And shows how any reasonable investor can beat the money game with proper asset allocation and conservative investing strategies. 

Morgan Housel is right. And this top-selling book is written for that person... The person who wants to take a hands on approach to investing, but doesn't want to spend all their time following the markets. If that sounds like you, please read the book for all the details to successfully implement these strategies... And to master your mind around money.

To purchase this book and support the website please click here.

Investment advice is everywhere. There are books, blogs, podcasts, videos, and even apps designed to help you navigate the world of investing. But how do you know what advice to trust? How do you separate fact from fiction? And most importantly, what does it really take to become successful?

In "The Only Investment Guide You Will Ever Need" author Andrew Tobias distills his decades of experience into a single book. This book cuts through the clutter and tells you exactly what you need to know about investing.

This guide covers everything from understanding basic concepts like diversification and compounding interest to managing risk and taxes. It explains why index funds are often the best choice, and provides practical tips for choosing among mutual funds. Finally, it teaches you how to build a solid financial plan that works for you.

This book is written for anyone looking to learn more about investing. And like our review on The Little Book of Common Sense Investing this is not one we recommend for the Barbell Investor. Here we scoff at the idea of passively investing our money to pray and hope the bond and stock markets continue to rise. We take unique, active approach to grow our wealth in a faster, more predictable manner.

This investment book is written for the average person who wants to put their investments on autopilot. And also for people who don't want to use an investment professional who will put them in load index funds... This is for bond and stock market investors looking to self-direct their retirement investments.

Why Listen to Andrew Tobias

Andrew Tobias is an award winning journalist who writes about finance. He is the author of four books including Fire and Ice, winner of the 2015 Pulitzer Prize for general non-fiction. His most recent book, The Invisible Banker, explores how big banks manipulate our financial system and why we don't know it.

Tobias graduated from Harvard Business School. But he didn't take the traditional route and join an investment bank. His whole life was a bit unconventional... Which he documented in a pseudonymous autobiography. 

His easy going writing style is a breeze to get through. But his books are packed with information... And his personal finance advice books are worth reading for the average person.

Mini Summary

The book covers every aspect of investing, from how to invest in stocks, bonds, real estate, and cryptocurrencies, to how to manage taxes and retirement accounts. There are chapters on topics such as understanding risk and return, diversification, asset allocation, and portfolio management. The Andrew Tobias explains each topic thoroughly and provides examples of how it applies to real life situations.

His First Lesson: There are No Reliable Methods to Quickly Grow Wealth

I'd agree with this point... With one caveat. This is for people who don't study the markets, learn specialized investment strategies, and look for asymmetric investment opportunities like we do at barbellalpha.com.

But most people should stick to basic investment vehicles like passive index funds. Any extra money they make should be methodically invested from time to time into no-load passive funds. No fancy investments are needed.

Great advice for our non-investing friends.

Have a Financial Plan Before Worrying About Investments

Having a financial plan lets you avoid unnecessary debt. Having a financial plan helps people achieve goals faster. You can set yourself up to succeed if you have a financial planning process.

People should consider investing before worrying too much about retirement. If you don't invest now, it could affect how much you are able to save later.

A good investment strategy begins with having a financial plan.

Tobias says people should have a greater income then expenditures. Great, simple financial advice.

The Only Way to Reliably Make 18% a Year

Pay down credit card debt. He says no investments will make 18% a year. So pay down your credit card debt and other high-yielding debt as soon as possible.

What To Do With Your First $5,000

Put this money into an account with no risk of losing value. And just be happy with a low interest rate. This will be your emergency fund.... So if an unexpected expense comes up, you won't have to go back in credit card debt. There is no substitute for money. 

After that you can think of what to do with your investments.

The first place to start savings

"One should employ tax-sheltered accounts to invest for one's retirement and for advanced academic education of one's progeny."

Tobias says we should utilize IRAs, 401(k)s, and their Roth components.

From there he places an emphasis on stocks and bonds to grow wealth. And he gives plenty of advice on risk. But since we don't follow his methodology here, that's all I'm going to say about this. If you want to learn more about financial planning of this nature read the book or seek professional advice.

And in a recent interview Andrew Tobias gave his thoughts on some newer investments like crypto assets and venture capital.

Crypto Is Not an Investment

The term "cryptocurrency" is often used interchangeably with the word "bitcoin." This is wrong. Cryptocurrencies are digital assets designed to work like currency, but there are many different types of cryptocurrencies. 

There are three main reasons why cryptocurrencies are not investments. First, they don't provide any financial return. Second, they're not backed by anything tangible. Third, they're volatile.

People make fortunes investing in cryptocurrencies, but most of those investors are speculators looking to profit off the price swings. They're hoping that the value of the cryptocurrency will go up, rather than down. If you want to invest in cryptocurrencies, you'll need to have a plan to sell them for a profit once the price goes up. Otherwise, you could lose everything.

These are his words, not mine.

Venture Investing

The term "venture capital" refers to the practice of financing start-up businesses. In recent decades, venture capitalists have become increasingly sophisticated about how to evaluate potential investments. They are now able to analyze the financial performance of startups, assess the quality of management teams, and predict future trends.

In addition, many VC firms have developed sophisticated models that help them make better decisions about where to allocate their resources. These include quantitative models such as Monte Carlo simulations, and qualitative models such as value chain analysis.

As a result, venture investors have been able to generate returns that exceed those of traditional stock market indices. For example, according to a study published by the National Bureau of Economic Research, venture-backed companies outperformed publicly traded S&P 500 companies by over 20 percentage points per year.

However, there are risks associated with investing in early stage technology companies. A startup may fail to deliver on expectations, or it could go bankrupt. If you do decide to invest in a startup, you must agree to take some risk. This includes accepting the possibility that your investment might lose most or all of its initial value.

Three Favorite Quotes

Investing is a personal choice. You don't have to do it. But if you want to make money, you've got to put some skin into the game.

There are three main ways to go about investing: stocks, bonds, or mutual funds. Each one has pros and cons.

Index funds beat the market over long stretches of time. They're like a hedge fund without the fees.

The Final Say

We just scratched the surface of what is covered in the book. Anyone looking to automate their investments should read this cover to cover. The advice here is just as applicable as now as it was when this book was first written 40 years ago. 

It's good to have this basic financial knowledge in your tool belt when talking to friends who aren't that interested in stocks. But this is just that - basic knowledge.

To purchase this book and support this website please follow this link.

Even though You Can Be A Stock Market Genius was written in 1999, the opportunities within the secret hiding spots of the market still exist today. The special situations that Joel Greenblatt present to us in this book still exist today.

Why do these investment opportunities still exist a quarter century after this was first published? The answer comes down to money. Many opportunities in the special situation investing corner of the market are too small for big money managers to take advantage of. 

This gives individual investors, who have smaller investment accounts, a huge advantage in the markets. As to what these opportunities are, keep reading. But first let's talk about the author.

Greenblatt is one of the most successful stock investors of all-time

Joel Greenblatt not only beat the market when he was spearheading the investments for Gotham Asset Management, he crushed the stock market. 

Over a period of time stretching over a decade his hedge fund, Gotham Capital, averaged annual returns over 50%. That's incredible - a run that great over long periods of time is unheard of in today's world. These returns make him one of the most successful fund managers of all time. Beating even the best portfolio managers including Seth Klarman and Peter Lynch.

The last I heard, Greenblatt is a member of the adjunct faculty at the Columbia Business School where he teaches "Value and Special Situation Investing." The Columbia Business School professors are among the greatest investors including Benjamin Graham - the father of value investing. As well as grooming some of the top investment experts of all-time including Warren Buffett, Tom Knapp, and Bill Ruane.

But I digress. At Columbia Greenblatt teaches the special situation investing style he made famous in You Can Be a Stock Market Genius.

Strategy #1: Spin-offs

In stock investing, spin-offs are when a company sells off its assets or parts of itself to another company. This can be done through an initial public offering (IPO) or it can be done privately. In either case the new company will usually pay more than the old company because they're buying something valuable.

For example, if you own shares in General Electric Company (GE), you might see them split into two companies. As GE did with NBC Universal. One part would become Comcast while the other part became GE. If you owned GE before the split, you'd get paid twice for your original purchase price. Once from the sale of GE and once from the sale of Comcast.

If you bought GE at $30 per share and sold it at $40 per share, you'd receive $10 per share. You'd also receive $10 per share from the sale of Comcast which would bring your total return to $20 per share.

Another example was Exxon Mobil (XOM) which spun off their refining business into a separate company called Valero Energy Corporation (VLO).

Spin-offs can be a great opportunity to smart people to earn extra profits. Sometimes the company being spun off is sold en masse by investors. There can be lots of reasons for this, but the selling can get overdone, making it a cheap stock. 

Or sometimes the company being spun off was ignored or overlooked by investors under the big corporate umbrella that previously housed it. And now as a free company, it can pursue a more visible path and gain investors interest.

Either way, this is a great opportunity for investors to earn an above average return on capital. 

Strategy #2: Corporate Restructurings

A corporate restructuring is when a company reduces their debt load by selling off assets or splitting themselves up into different divisions. 

This restructuring can cost the company money in the short run, bringing down profits... And making the company's long-term prospects look worse than they really are. 

An investor skilled in security analysis can dig deep and look behind the curtain to see what's really going on at the company. And if the company successfully restructures, it's stock is likely to soar higher in the following months and years. 

Strategy #3: Merger Securities

Greenblatt defines merger securities as stocks issued by companies who have agreed to merge with each other. 

The idea here is that the company being acquired typically trades at a discount to the purchase price. And investors can buy these companies and wait for the stock prices to match the acquisition price. This is also called merger arbitrage.

This can be a great way to make big stock market profits. But you must be careful to do your due diligence on the deal. Because if it falls apart, the stock price of the company being acquired is likely to head lower... And you may not be able to get back your entire initial investment. 

Strategy #4 Rights Offerings

Sometimes, albeit with increasing rareness, common stocks will issue a rights offering in conjunction of a spinoff. In Greenblatt's words

"Any time you read about a spin-off being accomplished through a rights offering, stop whatever you’re doing and take a look. (Don’t worry, they’re quite rare.) Just looking will already put you in an elite (though strange) group, but— more important— you will be concentrating your efforts in an area even more potentially lucrative than ordinary spin-offs.” 

 I don't see any active rights offerings right now, but if Greenblatt says it's something to look for, we should look for it. 

That's the Gist of it...

Those are the four main strategies for average investors to beat the market. This article is just meant to scratch the surface of this book full of investment advice for those looking to purchase individual stocks. 

If you want to learn more about Greenblatt's proven strategies, I highly recommend purchasing the book and reading it cover to cover. 

To purchase this book for more details on these strategies and to support this website please follow this link.

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