This book is the an incredible resource. It is over 2200 pages of small closely typed text, written by over 100 authors from both academia and business. Apart from articles it contains a Business dictionary, a world almanac and is supported by a web site that updates some of the content and contains summaries of the latest business books.
It's like a deeply discounted subscription to the Harvard Business Review.
This book is what it says it is! A great book, in terms of both content and physically
Sunday, July 19, 2009
Wednesday, July 15, 2009
Act Now or Suffer Later
I enjoyed this book even though I was previously aware of its economic arguments and suggestions for portfolio allocations. Mr. Schiff is passionate and sincere and that tone comes across in the book. For that, thank the excellent John Downes who has co-written several other good business books. Many other reveiwers here discuss the contents of the book so I won't go there.
I worked as a bullion dealer in the 1970's so this is my second "crash" cycle. Many people thought the US would collapse in the 70's due to inflation and a national debt of $1 Trillion dollars. Many thought gold would zoom to the moon. Instead, gold crashed and languished for over 20 years. That's because the US was able to shift gears.
Reagan pulled the US economy up from its tailspin by switching from printing money to issuing debt. He took advantage of the low US debt/GDP ratio to inflate debt by selling bonds to Americans and foreigners. It accomplished the same thing - letting the economy expand with a near infinite supply of cash liquidity. George W Bush then doubled the US national debt to $10 Trillion in only eight years. Low interest rates sucked in the public who took on enormous personal debt.
The US now can't rapidly inflate because the dollar would collapse and can't take on more debt because investors doubt it can be repaid in sound money. People don't accept the possibility of an economic crash because they think the US/Bernake/Fed will always be able to pull another rabbit from the hat. This complacency will lead to disaster for most investors.
The US is tapped out on debt both public and personal. The US has so debased the dollar that it has fallen tremendously since Bush II took office and continued the pattern of reckless spending.
If you don't want to believe Schiff when he warns of what's ahead then listen to Greenspan as he touts his recent autobiography. He states directly that the US will have inflation for the next 25 years. He says the outlook for stocks, bonds, and the general economy is 'gloomy' for the forseable future. He says the dollar will likely lose its reserve currency status. This is "The Maestro" talking. He says it's going to be bad. Schiff tells you how bad and what to do about it.
Some people here crticize Schiff for touting his firm's services. So what. He tells readers what to do, but most won't act for themselves. So, he provides the service. Currently, gold is at 725 (September 2007). That's not cheap, but it won't be cheaper in 2009. The US will have to reduce the rate of gov't spending and that will feed back into jobs and consumption. I doubt that the dollar will totally collapse, but when it's all said and done, we'll get a combination of "manageable" inflation and rising interest rates. Most other nations will also inflate as they prop up their economies and scramble to get their share of the world's increasingly costly oil.
The only asset that trumps oil is gold. Bite the bullet and get your share. Reduce your US stock exposure and don't go within 20 miles of a long-term bond. Your financial advisor will be of little help in these matters. Their loyalty is to commissions. You'll have to start thinking for yourself and acting on it even though it will make your stomach churn and give you a migraine.
I'd suggest a general portfolio of 25% gold (ETF or coins), 50% cash, and 25% international stock index fund. If inflation is gradual, the foreign stock will keep pace. If war or rapid inflation strikes, gold will win big. Hold cash to provide liquidity and to take advantage of opportunity. You shouldn't have to wait too long. The politicians will paper things over until the 2008 election. At least hold enough gold to offset declining purchasing power of a fixed pension. If you need 30k a year to live on, then hold that much gold - at least. Live cheap and get out of debt.
I worked as a bullion dealer in the 1970's so this is my second "crash" cycle. Many people thought the US would collapse in the 70's due to inflation and a national debt of $1 Trillion dollars. Many thought gold would zoom to the moon. Instead, gold crashed and languished for over 20 years. That's because the US was able to shift gears.
Reagan pulled the US economy up from its tailspin by switching from printing money to issuing debt. He took advantage of the low US debt/GDP ratio to inflate debt by selling bonds to Americans and foreigners. It accomplished the same thing - letting the economy expand with a near infinite supply of cash liquidity. George W Bush then doubled the US national debt to $10 Trillion in only eight years. Low interest rates sucked in the public who took on enormous personal debt.
The US now can't rapidly inflate because the dollar would collapse and can't take on more debt because investors doubt it can be repaid in sound money. People don't accept the possibility of an economic crash because they think the US/Bernake/Fed will always be able to pull another rabbit from the hat. This complacency will lead to disaster for most investors.
The US is tapped out on debt both public and personal. The US has so debased the dollar that it has fallen tremendously since Bush II took office and continued the pattern of reckless spending.
If you don't want to believe Schiff when he warns of what's ahead then listen to Greenspan as he touts his recent autobiography. He states directly that the US will have inflation for the next 25 years. He says the outlook for stocks, bonds, and the general economy is 'gloomy' for the forseable future. He says the dollar will likely lose its reserve currency status. This is "The Maestro" talking. He says it's going to be bad. Schiff tells you how bad and what to do about it.
Some people here crticize Schiff for touting his firm's services. So what. He tells readers what to do, but most won't act for themselves. So, he provides the service. Currently, gold is at 725 (September 2007). That's not cheap, but it won't be cheaper in 2009. The US will have to reduce the rate of gov't spending and that will feed back into jobs and consumption. I doubt that the dollar will totally collapse, but when it's all said and done, we'll get a combination of "manageable" inflation and rising interest rates. Most other nations will also inflate as they prop up their economies and scramble to get their share of the world's increasingly costly oil.
The only asset that trumps oil is gold. Bite the bullet and get your share. Reduce your US stock exposure and don't go within 20 miles of a long-term bond. Your financial advisor will be of little help in these matters. Their loyalty is to commissions. You'll have to start thinking for yourself and acting on it even though it will make your stomach churn and give you a migraine.
I'd suggest a general portfolio of 25% gold (ETF or coins), 50% cash, and 25% international stock index fund. If inflation is gradual, the foreign stock will keep pace. If war or rapid inflation strikes, gold will win big. Hold cash to provide liquidity and to take advantage of opportunity. You shouldn't have to wait too long. The politicians will paper things over until the 2008 election. At least hold enough gold to offset declining purchasing power of a fixed pension. If you need 30k a year to live on, then hold that much gold - at least. Live cheap and get out of debt.
A comprehensive (and demonstraby successful) investment approach - beyond mere stock screening,
A comprehensive (and demonstraby successful) investment approach - beyond mere stock screening, June 13, 2009
By William L. Lyman "FreeMarket" (ATLANTA, GA USA) - See all my reviews
(REAL NAME)
The CANSLIM stock investing methodology outlined in "How to Make Money in Stocks" is a time tested method that incorporates how the equity (stock) market(s) really work - for the passive, minority, outside investor. It is a 80/20 approach (with William O'Neil's approach, proprietary metrics and tools you can achieve 80% of the success with 20% of the effort) and explicitly rides the coattails of the market (read and react - don't fight/argue with the market). This system *IS* designed for the individual investor and small professional investor - I'm not sure it would scale for $250 million portfolios and above (but I'm not sure that it wouldn't either).
CANSLIM is part fundamental (here earnings growth is the primary focus), part structural, part timing/technical and part money/risk management (this part is **crucial** to investment success). The vast amount of other investing books will typically provide only a screening/selection approach, but "How to Make Money in Stocks" provides a comprehensive investment approach including stock selection, portfolio composition, selling criteria and money/risk management.
In short - buy stocks that have a reason to go up (a new product/management catalyst, a leading stock in one of the top 20% of the 196 IBD industry groups, strong earnings growth (>25%), solid Return on Equity (> 17%), reasonable leverage, etc.) when the stock is poised to breakout (strong and increasing institutional shareholder support, has outperformed at least 80% of the market over the previous 52 weeks, the stock is consolidating after a price run-up and breaks-out on trading volume that is significantly higher than the average trading volume over the last 50 days, etc.) and finally - and this is important - scale into your positions, pyramid up in the first 5% or price appreciation and cut you losses when the stock moves against you at 7-8% from your purchase price - NO QUESTIONS/NO EXCUSES/NO RATIONALIZATION.
Check out the independent and unbiased American Association of Individual Investors ([...]) - they have tracked the monthly performance of 56 stock screens since January 1998 (now 11+ years) and the CANSLIM screen is consistently in the top 3 screens with a compounded annual growth rate (CAGR) over that time in excess of 25%. While the AAII "recipe" for CANSLIM (and other screens for that matter)is a simplified approach and does not implement a strict constructionist approach (and contains buy rules only - no sell rules, just monthly re-screening - and no money/risk management techniques), it is an OUTSTANDING educational tool to learn about the pros and cons of the various stock screens and provides a starting point for anyone considering CANSLIM for their portfolios.
I personally have used CANSLIM with tremendous success since the late 1980s and participate in our local Meetup ([...]) where we utilize the CANSLIM approach. While most people assume this approach generates outstanding returns in the go-go bull markets (and it does), it really earns its keep in the down markets by utilizing the 7-8% stop loss on a stock by stock basis as part of a concentrated portfolio. It was a financial life safer in 1999/2000 and again in 2008/2009. Value investors (mutual funds), by contrast, were obliterated in 2008 - down some 50-60%! If that great "margin of safety" doesn't pay off in that environment - when does it?!
This growth/momentum approach differs substantially from a valuation driven approach (e.g., the Morningstar 5-star system based Morningstar's estimate of "fair value" of the stock compared to its current stock price). But if you trade based only on your (or a 3rd-party's) estimate of fair value, be prepared for some roller-coaster rides. In fact, check out Morningstar's own performance of their 5-star ranking system for the 2,000+ stocks that they cover and for their tortoise and hare portfolio - it pales in comparison to CANSLIM. The valuation only approach is for full-time professionals only - and even then - only the best of the best have been able to produce reasonable returns over time. Like the choice embedded in the title of Ned Davis's book "Being Right or Making Money", CANSLIM allows you to make money, while the purist value investors will argue about "being right" with *their8 discounted cash flow calculations (if only the market marched to that tune).
And finally, yes, the book discusses the Investors Business Daily (IBD) newspaper (and of course, CANSLIM) as the IBD newspaper and associated website ([...]) have the tools to easily implement the CANSLIM methodology (SmartSelect(TM) ratings and other proprietary metrics). And William O'Neil is not just another financial author - he is a very successful investor, entrepreneur and financial data services provider.
I wholeheartedly endorse this book and methodology - and recommend it to EVERYONE who is considering investing directly in common stocks. Even if they pursue another style of investing, there are many excellent lessons to embrace from "How to Make Money in Stocks".
By William L. Lyman "FreeMarket" (ATLANTA, GA USA) - See all my reviews
(REAL NAME)
The CANSLIM stock investing methodology outlined in "How to Make Money in Stocks" is a time tested method that incorporates how the equity (stock) market(s) really work - for the passive, minority, outside investor. It is a 80/20 approach (with William O'Neil's approach, proprietary metrics and tools you can achieve 80% of the success with 20% of the effort) and explicitly rides the coattails of the market (read and react - don't fight/argue with the market). This system *IS* designed for the individual investor and small professional investor - I'm not sure it would scale for $250 million portfolios and above (but I'm not sure that it wouldn't either).
CANSLIM is part fundamental (here earnings growth is the primary focus), part structural, part timing/technical and part money/risk management (this part is **crucial** to investment success). The vast amount of other investing books will typically provide only a screening/selection approach, but "How to Make Money in Stocks" provides a comprehensive investment approach including stock selection, portfolio composition, selling criteria and money/risk management.
In short - buy stocks that have a reason to go up (a new product/management catalyst, a leading stock in one of the top 20% of the 196 IBD industry groups, strong earnings growth (>25%), solid Return on Equity (> 17%), reasonable leverage, etc.) when the stock is poised to breakout (strong and increasing institutional shareholder support, has outperformed at least 80% of the market over the previous 52 weeks, the stock is consolidating after a price run-up and breaks-out on trading volume that is significantly higher than the average trading volume over the last 50 days, etc.) and finally - and this is important - scale into your positions, pyramid up in the first 5% or price appreciation and cut you losses when the stock moves against you at 7-8% from your purchase price - NO QUESTIONS/NO EXCUSES/NO RATIONALIZATION.
Check out the independent and unbiased American Association of Individual Investors ([...]) - they have tracked the monthly performance of 56 stock screens since January 1998 (now 11+ years) and the CANSLIM screen is consistently in the top 3 screens with a compounded annual growth rate (CAGR) over that time in excess of 25%. While the AAII "recipe" for CANSLIM (and other screens for that matter)is a simplified approach and does not implement a strict constructionist approach (and contains buy rules only - no sell rules, just monthly re-screening - and no money/risk management techniques), it is an OUTSTANDING educational tool to learn about the pros and cons of the various stock screens and provides a starting point for anyone considering CANSLIM for their portfolios.
I personally have used CANSLIM with tremendous success since the late 1980s and participate in our local Meetup ([...]) where we utilize the CANSLIM approach. While most people assume this approach generates outstanding returns in the go-go bull markets (and it does), it really earns its keep in the down markets by utilizing the 7-8% stop loss on a stock by stock basis as part of a concentrated portfolio. It was a financial life safer in 1999/2000 and again in 2008/2009. Value investors (mutual funds), by contrast, were obliterated in 2008 - down some 50-60%! If that great "margin of safety" doesn't pay off in that environment - when does it?!
This growth/momentum approach differs substantially from a valuation driven approach (e.g., the Morningstar 5-star system based Morningstar's estimate of "fair value" of the stock compared to its current stock price). But if you trade based only on your (or a 3rd-party's) estimate of fair value, be prepared for some roller-coaster rides. In fact, check out Morningstar's own performance of their 5-star ranking system for the 2,000+ stocks that they cover and for their tortoise and hare portfolio - it pales in comparison to CANSLIM. The valuation only approach is for full-time professionals only - and even then - only the best of the best have been able to produce reasonable returns over time. Like the choice embedded in the title of Ned Davis's book "Being Right or Making Money", CANSLIM allows you to make money, while the purist value investors will argue about "being right" with *their8 discounted cash flow calculations (if only the market marched to that tune).
And finally, yes, the book discusses the Investors Business Daily (IBD) newspaper (and of course, CANSLIM) as the IBD newspaper and associated website ([...]) have the tools to easily implement the CANSLIM methodology (SmartSelect(TM) ratings and other proprietary metrics). And William O'Neil is not just another financial author - he is a very successful investor, entrepreneur and financial data services provider.
I wholeheartedly endorse this book and methodology - and recommend it to EVERYONE who is considering investing directly in common stocks. Even if they pursue another style of investing, there are many excellent lessons to embrace from "How to Make Money in Stocks".
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