FYI | Nov 03 2011
By Rudi Filapek-Vandyck
The first thing that comes to mind when reading "Taming The Beast. Wall Street's imperfect answers to making money" by former WSJ editor Larry Light is how recent most modern aspects of the global financial sector are that most of us today would take for granted. Investing in global equities? Investing in indices? Balanced asset allocations? Putting an actual, calculated valuation to a share? You'll be amazed how young all of these modern optionalities are. Not that this has ever stopped investors from taking a punt, or giving it a go, or from making big bets. Greed, fear, stupidity, mass blindness and herd behaviour are from all times, as is about everything else that comes to mind when looking at today's financial world in disarray.
First in the role as senior editor, responsible for money and investing at Forbes Magazine, later as editor at the Wall Street Journal and then as an award winning journalist at BusinessWeek, Light has seen the old market theories being mixed up and replaced by new approaches and success formulas, though most new formulas, it appeared, came with a due by date. In the end, concludes Light on various occasions in the book, value investing may not immediately prove the winning formula at all times and under all circumstances, but it does remain the superior approach to investing in the long run.
This is not to dismiss the fact that the world of investing has dramatically changed over the past few decades, from the introduction of index investing by Vanguard's John Bogle in the mid-1970s (yes, it really did not exist earlier) to John Templeton opening up global equities to insular US investors through mutual funds from the mid-1950s onwards. Modern investing as we know it today, reminds Light in the opening paragraph of the first chapter, came to life when the world was burning down in the 1930s prompting Benjamin Graham to developed his valuation techniques (later made famous by Warren Buffett).
Taming The Beast is recent enough to include the GFC, China, Europe and the low growth recovery in developed economies post 2007, though its true value lies in the comprehensive stories about how modern household names such as Michael Milken, Jeremy Siegel, Thomas Price, Bill Gross and the earlier mentioned Bogle and Templeton delivered their contributions to a changing world. Light is an entertaining story-teller who knows a few things about investing in the share market and it shows.
Alas, this is also true when he ventures off into the world of investment alternatives, property, derivatives and commodities which clearly are not as strongly supported by personal knowledge, experiences and insights as are equities, and that too stands out. I personally would have preferred a few extra chapters on equities, but someone somewhere must have thought wouldn't it be better to capture everything in one single book. It seldom is. Taming The Beast is a highly entertaining read, full of knowledge with handy quotes and facts. For investors looking to broaden their knowledge and to learn from experts' experiences and insights, including the author's.
"Anticipating what is coming next is hard", offers Light. "The power to predict correctly does not reside in mere mortals. Investing success contains a strong element of luck. That said, alertness and nimbleness are virtues that give good investors a leg up, and a means to thwart fickle fortune." Light's advice is: read everything. Then ask (lots of) questions.
The book aptly concludes with a quote from Benjamin Graham listing two criteria for investing success: "One, you have to think correctly; and secondly, you have to think independently."
Taming The Beast. Wall Street's imperfect answers to making money. Publisher Wiley. Hard cover. 275p.
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