Bob’s Reading List

Last update on: Jun 16 2020

Bob’s Reading List

Robert C. Carlson

Editor, Retirement Watch

The Age Wave is coming, and it will affect your retirement.
Whether you are 40 or 80, you cannot stop the changes. The government cannot
stop them either.
In this book, Bob Carlson shows what changes are likely
to occur, which scare stories to ignore, and how you should respond. Learn
the right way to determine how much you must accumulate for and can spend in
retirement. Learn how to plan health care expenses, manage your IRA, plan an
estate, reduce taxes, evaluate annuities, and much more.
If you want to plan your retirement using the New Rules of Retirement,
not the rules of thumb that are based on those who retired in the 1960s,
this is the book for you. You’ll find practical, well-researched and novel
strategies to create the retirement you desire.

Moneyball: The Art of Winning an Unfair Game

Michael Lewis

I knew this book was different when it was mentioned in most
of the shareholder letters by the top value stock mutual fund managers.
Moneyball is a baseball book on the surface. But its stories and lessons
can be used in investing, business, and other areas of life.The book
follows the Oakland Athletics, but doesn’t spend much time following their
on-the-field performance. The focus is on Billy Beane, the general manager.
Beane once was among the most sought-after baseball prospects. Almost all
his former coaches and teammates say Beane was among the best talents they
ever saw. But Beane never amounted to much of a big league player. Realizing
that his potential was unrealized, Beane decided that the factors big league
scouts use to evaluate players aren’t accurate. He looked for other ways to
spot talent. Another incentive for Beane is that Oakland’s owner is frugal.
Beane had to build a winner without the money to compete for top talent.Beane and his small management team learned to spot talented players that
other teams overlooked. Much like my favorite value stock pickers, Oakland
signed college and minor league players no one else wanted. These players
helped Oakland achieve one of the top winning percentages in recent years
despite having one of the lowest payrolls. After one of the unheralded
players became a star, Beane began grooming a replacement. He knew that once
a star player’s contract expired, Oakland couldn’t compete with richer teams
to keep the player.The material might sound dry, but it isn’t. Michael Lewis is a good
writer. He might also be a better interviewer. The candidate comments he has
throughout the book are amazing. Moneyball is an educational and
entertaining read.

The Art of the Steal: How to Protect Yourself And Your Business From Fraud

Frank Abagnale

Identity theft will be the crime of this
millennium. It dominates the news periodically when there are reports of
credit card info and other data of thousands of people being stolen, often
by either computer hackers or company insiders. Fraud is perhaps the most
common crime, and ID theft is another form of fraud. ID theft is growing
rapidly, however, and soon will be the major form of fraud.Frank Abagnale was perhaps the greatest con man in history. His
autobiography, Catch Me If You Can (Broadway Books; $14.95), describes
his five years scamming about $2.5 million in various frauds. The movie version
was produced by Steven Speilberg and starred Leonardo DiCaprio and Tom Hanks. Abagnale has spent 25 years since prison as a consultant
to governments, major corporations, and associations. Recently, he wrote The
Art Of The Scam to explain frauds and how to avoid
becoming a victim.Abagnale says ID theft is in its early stages and will hit full
force in about 10 years. It wasn’t even a federal crime until 1998. Abignale
gives tips on how to protect
yourself from ID theft, checking account fraud and theft, credit card theft, and
of course ID theft. You will be amazed at the things thieves do to learn
your personal information and use it to steal. You will be impressed with
the steps, often very simple ones, you can take to avoid theft.

When Genius Failed: The Rise and Fall of Long-Term Capital Management

Roger Lowenstein

When I talk with investment professionals, there is one thing on which
they agree. Everyone who invests should read When Genius Failed. Reading this narrative of the rise and fall of Long Term
Capital Management should keep you from getting caught in one of these investment
debacles. There are many common features in the story of LTCM and in
other financial debacles.LTCM, you might recall, was the little-known money management company that
was caught on the wrong side of the markets when Russia defaulted on its debt in 1998,
triggering a worldwide financial panic. LTCM borrowed so much that its bankers put
together a bailout to prevent major write offs and a possible financial meltdown.Financial superstars formed LTCM. They used the investment theories of a
couple of well-known finance professors (who were named co-winners of the Nobel
Prize for Economics just before the LTCM collapse). Very successful traders from top Wall
Street firms implemented the trading strategies. Yet, the whole thing
collapsed in a dreadful bankruptcy.Lowenstein details the reasons for LTCM’s collapse. More
important, he uses the experience to explain the faults in many popular
investment theories. LTCM’s biggest mistake probably was its belief that investing is all
science; that there is no art or judgment involved. The firm based its investment
positions on computer analyses of market history. The firm concluded that the historic
valuation ranges of different assets and the relationships between different assets would
change only for very brief periods. They believed that the markets would not have what the
professors referred to as a “ten sigma event.” They didn’t believe there
were periods when investors got emotional and irrational.

This last point is a reason I believe most investment professionals misuse
the Capital Asset Pricing Model and Efficient Market Theory – two ideas that garnered
Nobel Prizes for these professors. One reason to read the book is for its excellent
description of the shortcomings of these ideas that are widely accepted in the financial
community. Market anomalies, unfortunately, do occur.

When Genius Failed is essential for every
investor. It’s a fascinating story told well. It also contains good reviews
of many current investment theories and practices. I think it will help you
be a better investor.

Keep Your Brain Young: The Complete Guide to Physical and Emotional Health
And Well-Being
by Guy M. McKhann and Marilyn Albert

Concerned about those “senior moments?” Wondering if surgery
is the best solution for that aching back? Wondering how the brain affects
the rest of your body and your life? Many books and experts purport to
answer these and other questions. Keep Your Brain Young strikes me as
the best source of guidance on these key questions about aging.Drs.
McKhann and Young have practiced in the field for years. They use both their
experience and research to evaluate the different theories and treatments
available for different conditions. They separate myth from practical
science, and candidly let you know when a theory is logical but still not
fully supported by research.If you are wondering how to keep your brain young, and how to avoid
diseases of the body that are caused by the brain, read Keep Your Brain
Young.

Aging Well: Surprising Guideposts to a Happier Life From the Landmark
Harvard Study of Adult Development

by George M. Vaillant, M.D.

The keys to a long, happy life long have proved elusive.
Aging Well is the best effort yet at finding those keys. Three separate
studies followed three disparate groups of Americans from their teens
through old age. If you want to learn how to increase the likelihood of
having a happy, healthy, fulfilling life into your sixties and beyond, even
well beyond, this book is a great starting point.Those who think diet and exercise are the keys will be surprised. So will
those who think freedom from disease actually makes for a healthy life also
will be surprised. In the studies, those who described themselves as healthy
often were suffering from chronic diseases. Wealth, beyond a certain point,
also is not a strong measure of successful aging. Here’s one conclusion that
is not a surprise: Those who avoid alcohol and tobacco will age better than
those who regularly partake.What matters most are the choices people make as they age and how they
adapt to the consequences of those choices. Dr. Vaillant reveals the key
choices and how some people adapt to life’s changes better than others do.
The book is filled with case studies from the files of the three studies,
giving examples of those who aged well and those who didn’t.

The Tipping Point: How Little Things Can Make A Big Difference

by Malcolm Gladwell

Did you wonder how the Nasdaq began its unrelenting run to
5000? Did you especially wonder how the technology stocks could keep climbing long after
many analysts stated that the stocks were ridiculously overvalued? Were you baffled when,
after investors finally got comfortable with the inevitable rise of tech stocks, the
Nasdaq turned south and lost 60% of its peak value?

You can learn a lot about the Nasdaq bubble and other social phenomena in The
Tipping Point by Malcolm Gladwell. Gladwell says that social trends and epidemics
develop in similar ways and share three patterns. When these three patterns come together, a tipping point is reached.
That is the point at which a very small change or event very quickly causes a big change
in social behavior or conditions. In addition to examining the patterns that
make a trend, Gladwell reveals the different types of people that drive the
patterns and create a social epidemic.

The Tipping Point applies its principles to many different
types of behavior. Gladwell brings to light a lot of academic work that attempts to
identify the causes of tipping points in different fields, such as teen smoking, youth
violence, criminal behavior, children’s television, and many other areas. You’ll also read
case studies of why some product marketing campaigns work and others don’t. You’ll
also learn tips on raising your children or grandchildren. Hint: Peers matter most of all.

After reading the book, you will be able to apply its lessons
to the Nasdaq bubble and the other irrational develops in rational markets.

The problem is that we cannot forecast what will cause a tipping point or
when it will occur. There are many businesses that tried to create tipping points for
their goods but couldn’t do it. Others reached tipping points without any warning or
any extra effort on their part.

That could be the most important lesson of the book, and it is one that
informs our investing. We recognize that seemingly irrational trends can
continue for a while and that a few small changes can cause a bubble to
deflate or turn a bear market into a bull. That’s why we invest with
longer-term trends and fundamentals, wait patiently, and always seek to have
a margin of safety. We don’t want to be caught on the wrong side of a
tipping point.

Sandy Koufax – A Lefty’s Legacy

Jane Leavy

How does a high school phenomenon become an undistinguished
professional ball player who sits on the bench and merely survives for six
years? How does that same player suddenly become a force in the major
leagues? The Sandy Koufax story is an astounding one. Writers have sought it
for decades, but the privacy-oriented Koufax refused to participate. He
actively discouraged friends and associates from helping any writer.
Suddenly, he made an exception for Leavy. She gained access to and
apparently candor from those who knew Koufax from youth on.The Koufax
story is an amazing one. He is regarded as one of the best, most dominating
pictures in MLB history. Yet, his startling records really were established
in only six years. The first six years of his career were undistinguished.
Then, he became the pitcher that made the best hitters in the history of the
game feel helpless. The story is told against the backdrop of one of
Koufax’s perfect games, thrown in September 1965.What I like about the book is that it demonstrates Koufax’s record was
not due to merely luck or natural talent. These days, Koufax gives lectures
to scientists who are trying to explain the best way to throw a baseball.
Koufax uses drawings and demonstrations to show how he learned decades ago,
through experience, techniques that the scientists are just proving through
equations and experiments.I like the book, because I use the same perspective when evaluating money
managers. A manager who can explain rationally how past investments were
achieved interests me. That past performance might be repeatable. But a
money manager who doesn’t really understand why his picks worked out or
fails to learn from mistakes probably won’t be a long-term success.

Common Stocks and Uncommon Profits and Other Writings

Philip A. Fisher

If you want to learn how to invest in individual stocks,
this is the book to get. It actually is three small books published
together. The oldest was published in 1958. You won’t learn more about
evaluating companies and picking stocks anywhere else. Fisher was a
fundamentalist. He evaluated companies as businesses, not as stock plays or
short-term opportunities. You won’t find much about reading stock charts and
patterns or evaluating stock indicators. You might need another book to
learn all the accounting tricks a modern company can use in its financial
statements. But in this book you will learn all the questions that must be
asked, and how to get the answer, when determining if you want to own a
company for the long term.

Capital Ideas – The Improbable Origins of Modern Wall Street

Peter L Bernstein

Most people do not have a good handle of how to invest and
build a portfolio. Investing is much more than picking a few good mutual
funds or stocks. Yet, it is tough to find a book that will give you the “big
picture” needed to make decisions.Modern investment and finance theory is relatively new. It only started
in the late 1950s. In Capital Ideas, Bernstein traces the development
of those ideas. Fortunately, almost all the key theorists still are alive
and let Bernstein interview them for the book. You’ll learn how Modern
Portfolio Theory and the Capital Asset Pricing Model developed. Even if you
are not familiar with these terms, you need to understand them. Any
financial professional you consult likely uses them. Even many web sites
that develop recommended portfolio use these theories.I do not agree with all the investment theories developed in Capital
Ideas. In 2004, Bernstein began questioning some of the theories that he
previously was an ardent back of. The book ends in 1992, and there have been
some interesting theoretical developments since then. But the book does a
great job of bringing you through 1992 and is important to understanding the
advice available today.

Bob’s Reading List

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