“Wonderfully thin. It reads like a XIX century novel.”
“This book is outstanding, short, really focused. Read it with a pencil.”
— Tom Keene, anchor of Bloomberg T.V. show Surveillance Midday
The latest book by Kennneth (Ken) Fisher, “Debunkery”1(written with Lara Hoffmans) aims to make average people savvier investors by reducing the number of wrong decisions we take with our money. Following are the notes on an interview and a promotional video, both with Ken Fisher. I hope these sources give the reader a basic perspective on the thesis presented by the author. The article reflects the point of view of Ken Fisher and, when noted, Tom Keene.
About the Book
Comments on Some of the Chapters
Chapter 1: Bonds Are Safer Than Stocks.
Chapter 12: Stop-Losses Stop Losses.
Chapter 31: Baby Boomers Retire, World Ends, etc.
Chapter 34: High Unemployment is a Killer.
Chapter 35: With Gold, You’re Golden.
This book contains 50 short chapters; each chapter intends to debunk a so called myth or conventional wisdom, totally or in part. You may or may not agree with Ken Fisher’s rationale, but he surely deserves to be listened to. Kenneth (Ken) Fisher is the founder and CEO of Fisher Investments, a featured Guru and a Forbes columnist.
1. The complete book reference is: Ken Fisher with Lara Hoffmans. “Debunkery: Learn It, Do It and Profit From It. Seeing Through Wall Street's Money — Killing Myths.” Hoboken, New Jersey: John Wiley & Sons Inc., 2011.
The interview:
Surveillance Midday Interview
The Amazon promotional video:
amazon.com video
“This book is outstanding, short, really focused. Read it with a pencil.”
— Tom Keene, anchor of Bloomberg T.V. show Surveillance Midday
The latest book by Kennneth (Ken) Fisher, “Debunkery”1(written with Lara Hoffmans) aims to make average people savvier investors by reducing the number of wrong decisions we take with our money. Following are the notes on an interview and a promotional video, both with Ken Fisher. I hope these sources give the reader a basic perspective on the thesis presented by the author. The article reflects the point of view of Ken Fisher and, when noted, Tom Keene.
About the Book
- When people make active decisions in the capital markets, they are often more wrong than they are right and if they can reduce their error rate, they will end up being better off.
- By applying some techniques, any form of conventional wisdom is put to the test to check whether it is false. If so, it is possible to say that this conventional wisdom is a myth and you should not follow its advice.
- Debunkery is the debunking of myths.
- Debunkery came in handy after the recent bear market and more than a year or so of recovery. There is a social tendency to follow conventional wisdom and get into short term, keeping ourselves from the longer term where we would be better served. Disavowing ourselves from some widely held myths, will keep us on track towards where we want to get to.
- The only thing that really matters is what is shortly ahead; I can only focus on 2011 and maybe 2012. There are no 20-year futures at least not listed — there is evidence about Warren Buffett writing very long-term derivatives). We need to be in the fretting zone which ranges from
30 days to 30 months.
- The fact is that 85 percent of professional investors lag the market. You have got to know something other people do not to justify making an active decision. If you do not believe you know something other people do not, you are better off being passive.
- Everybody makes mistakes in investing, nobody is right all the time, this is a probabilities game not a certainty game.
Comments on Some of the Chapters
Chapter 1: Bonds Are Safer Than Stocks.
- Fisher states: “Stocks are more consistently positive than bonds historically given just a bit of time. Therefore, over the longer term, they have been less risky. Stocks are safer than bonds? Sure looks that way.”
- Not only in the US, but throughout all developed nations as well. If you look at the long-term volatility, stocks end up being lower risk than bonds. This is almost always true.
- Most people have a 3 year or longer time horizon. Some might think that they do not, but if given a moment to think they would realize that actually they do. In most cases, volatility in those longer time periods is lower for stocks than it is for bonds. If you take the shorter term, volatility is greater for stocks than for bonds.
Chapter 12: Stop-Losses Stop Losses.
- From the book: “Stop-losses don’t work because stock prices aren’t serially correlated. That means price movements by themselves don’t predict future price movements. What happened yesterday doesn’t have a lick of impact on what happens today or tomorrow.”
- Tom Keene commented. “Tattoo this phrase to your brain.” Pros seldom use stop-losses. Amateurs use stop-losses galore.
- There is the notion that if the market is down for x percent and you get out, you win. History shows that this tactic does not stop losses but stops gains. Once out, it does not indicate how to take you back in.
- You should be always forward looking.
- So when do you sell? Knowing when to sell a stock is the toughest thing to do. “What you have to say is: What did I do that was wrong? And what do I see moving forward now that makes me right? This is very hard to do.
Chapter 31: Baby Boomers Retire, World Ends, etc.
- “Stop fearing the boomers. Maybe the selling boomer sells to a young Brazilian or
Peruvian up-and-comers. GDP is growing there at twice US rates.”
- Boomers are, roughly on average, wealthier than their parents, and are in a better
position than we think to retire.
- The real issue is not the boomers but the emerging markets which collectively have
more GDP than the US
- The US economy will follow the same direction than the global economy. The US may lead or lag, but will go on the same path.
- All markets have a time to get in and a time to avoid. There is too much optimism on emerging markets now.
- Currently the place to be is the US at the upper middle cap companies. There is too much pessimism about the US and America is doing better than people think.
Chapter 34: High Unemployment is a Killer.
- After every recession or bear market people think that high unemployment will keep us from recovery. People need to have jobs so that a fraction of the income can be spent and increase consumption. Consumption will make the economy grow again. The myth is that recoveries are driven by consumers. This is not true, recoveries are initially spurred by an increase in inventories and business investments. Unemployment has remained very high for long periods after the recession has ended.
- Unemployment is a lagging indicator not a leading one. This is regularly missed by people in
society and is one of the myths that we are better off without.
Chapter 35: With Gold, You’re Golden.
- Many people consider gold as a safe haven. Gold is a commodity and as such, its prices have experienced large fluctuations.
- Gold’s long term returns have come from 15 percent of the total trading months of the metal. The other 85 percent of the time, gold has been a money loser.
- So, to invest in gold, you require a precise ability to time it. If you do not possess it, then gold is not safe for you. If you do possess it, then maybe gold is safe for you.
This book contains 50 short chapters; each chapter intends to debunk a so called myth or conventional wisdom, totally or in part. You may or may not agree with Ken Fisher’s rationale, but he surely deserves to be listened to. Kenneth (Ken) Fisher is the founder and CEO of Fisher Investments, a featured Guru and a Forbes columnist.
1. The complete book reference is: Ken Fisher with Lara Hoffmans. “Debunkery: Learn It, Do It and Profit From It. Seeing Through Wall Street's Money — Killing Myths.” Hoboken, New Jersey: John Wiley & Sons Inc., 2011.
The interview:
Surveillance Midday Interview
The Amazon promotional video:
amazon.com video
