Archive for the 'Finance' Category

Family , Kids and Money. Kevin O’Leary

English: Entrepreneur & Reality show personality

Family , Kids and Money. Kevin O’Leary. 2013. ISBN 9780385682404. Sort of the The Wealthy Barber meets The Dragon.  The advice is good, timeless and useful for today.  The thesis is that you are working and growing your wealth in order to create a legacy for future generations.  Quite the idea and one that many might find old fashioned. I found it to be relevant advice and if you follow it – you will be in better financial shape than if you did not. Having a financial plan gives you permission to succeed.   We all need a plan.

The Next Convergence. The future of economic growth in a multispeed world. Michael Spence.

Michael Spence

The Next Convergence. The future of economic growth in a multispeed world. Michael Spence. 2011. ISBN 9781429968713. The author is a Noble winner in economics and a well respected world economist He really looks at the differences of growth and hyper growth between developing  and advanced economies.  He clears away much of the useless dialoge and posturing among politicians and makes  strong case for what has happened and what has to happen.  Again we see that the US is not doing what it should to fix its own house in infrastructure, education and unemployment. Until it does it is acting as an anchor on its own and the world’s economies.  After you read this clearly written book, you will understand  much more what is going on and how countries are mis/behaving.   He also reiterates much of the warnings that are found in Why Boomers Bail.

Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster

English: Wall Street sign on Wall Street

Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster. Barbara T. Dreyfuss. 2013. ISBN  78-1400068395.

Guest post by Nora McCalluum , Senior Wealth Advisor, Portfolio Manager, ScotiaMcLeod.

Thank you for passing along the book Hedge Hogs  to me. I read it this weekend. What an interesting illustration of the personalities of the people who have caused so much damage and pain to so many people.

Makes me wonder if hedge fund traders need to have some (substantial!)degree of sociopathic tendencies.

Street Smarts. Adventures on the road and in the markets. Jim Rogers.

English: American investor Jim Rogers in Madri...

Street Smarts. Adventures on the road and in the markets. Jim Rogers.  2013. ISBN9780307986078. Co-founder (cw George Soros) of the Quantum Fund, Rogers retired at 37. Now living in Singapore, he has made a fortune and a life of shorting stocks, commodities, currencies and what have you.  A very entertaining read he has made pretty well every mistake you could , but he has learned from then all.  He is not  a fan of the US as it stands and although an American holds out little hope for it improving in the future unless it:

  • Sends all politicians to live back home away from the lobbyists and among the  electorate. With all the technology, why do they all have to be in Washington? Should do this in Canada too.
  • Bring all the troops home. it will save money and reduce enemies.
  • Reform the court system to drive down litigation. Losers should pay all court costs
  • Drastically improve the education system to teach to higher levels. Most politicians are now really ignorant.
  • Do the same to the health care system.
  • Drop the income tax system to a consumption tax system. no lawyers, breaks or accountants needed. Encourage/reward savings .
  • He would like the Europeans to let the nations default, while the strong ones can afford it.
  • Open up the countries to immigration and freedom of travel
  • Get rid of all sanctions and allow Americans to invest anywhere and bank anywhere. Get rid of even more bureaucrats

He is quite the character and is trying to see how he can invest in Burma and North Korea since they will need everything.  He likes China, the govt changes every five years. .  Brazil is run by Brazilians so they will screw up. India can not feed its people and is screwed. Russia is run by a dictator, is screwed up plus it will screw you.  You can read this one on four hour flight. It may change your view on most things.

the signal and the noise. why so many predictions fail – but some don’t. nate silver.

English: Icon representing Bayesian statistics

the signal and the noise. why so many predictions fail – but some don’t. nate silver.2012. ISBN 9781594204111. A hard book to classify. Better than Freakonomics and others of that ilk, this book has some pretty hard math and science behind it.  You will learn how gamblers, chess, baseball, poker, the stock market, climatology, weather, terrorism,  and earthquake forecasting schemas work and where they are weak.  As well you get some great advice on Bayesian mathematics, how to reduce  errors in your forecasts ( but never eliminate them, nor do you eliminate your bias).

Great lines (From many sources) :

  • The future seen as sprinkles of probability
  • With more evidence we can get closer and closer to the truth
  • The majority of scientific hypothesis deemed to be true are actually false
  • Big Data will make us more prone to failure
  • most data is noise
  • combining forecasts could reduce error 15-20%
  • the stock market can stay irrational longer than you can stay solvent
  • unknown unknowns are gaps in our knowledge – but we do not know they exist

Valuable book for your library – this is required reading to reset your brain away from common fallacies. Very readable, good for that trip to the UK and back . My only gripe is that the paper quality is too low – for my eyes I need a brighter white to  see the text.

Debt. The first 5000 years. David Graeber.

Wipe our Debt

Debt. The first 5000 years. David Graeber. 2012. ISBN 9781612191294. The author an economic anthropologist is a prolific academic writer. He was one of the architects of the Occupy Wall Street movement (penning the phrase we are the 99%).

I enjoy these types of thematic history books. Although his writing wanders ( and you will wonder where it is going) it is not enough to deter you from reading this very informative and well documented text ( the chapter notes are almost another book , fascinating).

He discusses honor, credit, slavery, religions  and sociological  history as it pertains to debt (which was developed to fund wars)  – building up to his core question – why should you honor your debts?  At times I wondered how he was getting to this, with a very strong argument against original pure barter theory, Adam Smith and economists in general.

He makes the case that bankers ( central anyway) are adept at making something out of nothing ( ie money or large debts).  This appears to be the basis of his rationale against bailing out the large Wall Street bankers if you do not forgive those who have mortgages under water, or sovereign states like Haiti who will never get out from under the debt load.

His thinking would likely have big forgiveness of many nation states debts  ( Greece etc), and he has the historical records to show why it was done in the past.  He also shows how  the whole world pays tribute to the US wrto their currency and  foretells a long view of China where they may be on their way to unseat the US dollar as the world reserve currency.

I did tend to agree with him that capitalism ( and greed)  requires a  belief that its time is limited, thus one has to grab what you can as quickly as you can.  He believes that capitalism is foundering and since it requires growth (and lots of permanent have nots to function) its flaws will eventually sink it.  He is not optimistic that the World can ever be a place where all are able to enjoy its fruits.

I recommend this book as a good thought and discussion provoker. Not for the light reader.

Dark Pools.High speed traders, AI bandits, and the threat to the global financial system. Scott Patterson.

Cover of "The Quants: How a New Breed of ...

Cover via Amazon

Dark Pools.High speed traders, AI bandits, and the threat to the global financial system. Scott Patterson.2012. ISBN 9780307887177.  Patterson wrote The Quants which I enjoyed so I was looking forward to Dark Pools.  It does not disappoint. He has the gift of rendering what could be numbingly arcane facts and numbers into a very compelling book that reads like a novel. I read it in one sitting – it is that good.  His focus on the people involved is appreciated by the reader.  That all said, this is not a comforting book. The system is rigged against us, the little investor, over the short and long haul. You do find out how these wizards make the money on the backs of others.  You end up with second thoughts as to why anyone still puts money into stocks.   A must read for anyone who interested in how their money works…for others through the use of very advanced computers and machine learning

The Unfair Trade. How our broken financial system destroys the middle class. Michael J . Casey

G20 Leaders Summit on Financial Markets and th...

The Unfair Trade. How our broken financial system destroys the middle class. Michael J . Casey. 2012. ISBN 9780307885302.  As managing editor of the Wall St Journal, Casey  has a cat bird seat on the world economy. This is an eminently readable book, which presents a reasonably balanced view of what happened, who pulls the strings and what mistakes were made y govt and business world wide.  But, and this is why I like it when journalists write these books, Casey points out what we can do looking forward.  As investors this is a good book to use to measure govt responses and help plan your own moves.

One  good point made is that China’s internal credit and currency policies have exported deflation to the rest of the world, by killing off sections of our economies.  If they stumble ( and many expect they will) .Australia, Brazil, South Africa, Indonesia and Canada will have massive resource sales slowdowns followed by big economic hits, which could trigger social disruption.

Another is that the massive debt burdens in Us and Europe will restrain growth in those economies for decades, forcing investment into the stoked up younger economies in the pursuit of profits.

His suggestions?

  • Stop backing the to-big-to fail banks by having a capital surcharge which will force them to break up . as well we shoudl look to Iceland which forced the bankers and bank shareholders to take the hit. Governments should protect taxpayers not bankers.
  • Oust the US dollar as the world reserve currency. This will force US to live more within its means and help politicians to make the tough decisions.
  • Force hedge fund managers to be  personally liable for their client’s losses.

The Speed Traders. Edgar Perez. A guest post by Nora McCallum of Scotia McLeod

Lincoln on U.S. one cent

Image via Wikipedia

The Speed Traders. Edgar Perez.  A guest post from  Nora McCallum of Scotia McLeod.  2011. ISBN 978-0071768283

Reg, thanks for passing along “The Speed Traders” by Edgar Perez.  I enjoyed reading this book. Most of the research to date demonstrates that HFT’s (and hedge fund managers for that matter) can have a period of very high success but ultimately fail. The extinction ratio for this investors class is very high. I think that the book gives a clear and concise overview of the (short) history and current role that High Frequency Trading plays in the capital markets. Given that speed is of the essence with this tool, I am not sure how much more time can be shaved off the technology; it will be very interesting to see how these trading techniques continue to develop and influence the global capital markets.

Training your customers for regular price increases. Pricing part 12

POMPANO BEACH, FL - OCTOBER 08:  Wal-Mart empl...
Image by Getty Images via @daylife

Training your customers for regular price increases. Pricing part 12.   If you want to be one of the successful companies who are able to regularly raise prices, through value selling plus other methods you have to start now.  Start when they first become a new customer.  i.e. start Day1 by reinforcing how to prevent late fees, change of terms costs, change order costs, decision delay charges, partial ordering charges and so on.

Use  psychology 101.

  • Stepwise small price increases are more palatable than one large one.
  • The power of 9 still reigns in setting price (sets a reference price).
  • Large cuts are seen as better than a series of small ones (increase the  perception of saving).
  • Humans love to see that they have avoided a cost versus having one forced on them ( The sense of something gained vs something lost).
  • Take an offer away when you say you will. ( Increase sense of loss)
  • Communicate your price increases many months ahead – see what the competition does

Use the power of stories

  • The need for vendors to remain viable
  • A mutual need for survival
  • All competitors will be treated equally

Be prepared for those who went to buyers school (e.g. Lowes, WalMart, IKEA, Safeway)

  • Run lots of “what ifs” prior to any large bids/contracts
  • Never volunteer you give price exceptions
  • Resist being bulled – cause they will try to
  • Maintain price integrity
  • Be ready to walk – they are talking to you because they want something from you.
  • Be prepared to let someone else go broke selling to them