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Debunkery: Learn It, Do It, and Profit from It -- Seeing Through Wall Street's Money-Killing Myths Paperback – October 11, 2011


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Debunkery: Learn It, Do It, and Profit from It -- Seeing Through Wall Street's Money-Killing Myths + The Only Three Questions That Still Count: Investing By Knowing What Others Don't + Markets Never Forget (But People Do): How Your Memory Is Costing You Money-and Why This Time Isn't Different
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Product Details

  • Paperback: 234 pages
  • Publisher: Wiley; 1 edition (October 11, 2011)
  • Language: English
  • ISBN-10: 1118077016
  • ISBN-13: 978-1118077016
  • Product Dimensions: 5.7 x 0.7 x 8.7 inches
  • Shipping Weight: 10.9 ounces (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (31 customer reviews)
  • Amazon Best Sellers Rank: #412,674 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

Amazon Exclusive: Q&A with Author Ken Fisher

What exactly is Debunkery?
Debunkery is a comberation. Decades back my wife started calling all the semi-understandable words I made up “comberations”— an operation that is part combination, part abomination and yet you know largely what it means instantly. With debunkery, I hope you intuitively get that it’s myth debunking —with a twist. The twist is that it’s a game, of sorts. A serious game, of course, because we’re dealing with money and capital markets—serious topics. But games and play are part of how we learn. And debunkery—particularly in investing—is a game requiring dedication and practice. So, debunker means unearthing truths or, at the very least, overturning common but widespread and frequently harmful market untruths, myths, and misperceptions most investors fall prey to.

Far too many investors believe their goal should be to be error-free. This is utterly wrong. All investors, even the long-term best investors, make many, many mistakes. See it this way—if you can be right on average 70% of the time over the long term, you aren’t just a great investor, you are a living legend. But that means being wrong 30% of the time. Your aim should be to understand you will make errors, while trying to avoid the commonest mistakes many (if not most) investors make. That can help you improve your long-term results. And Debunkery can show you how.

It seems like everyone is so down on the stock market right now. What made you want to write a book about investing now?
There’s a social tendency, easily documented, following all bear markets to continue to think all the problems newly emerged and envisioned in the previous bear market mean stocks can’t ever rise again—or at least not for a long, long time, usually defined as “the next decade.” Usually, folks then think we’re in a period where “it’s different this time”—Sir John Templeton’s famous “four most dangerous words in investing.” Actually, this concept is normal after every big bear market, and not “different this time” at all.

The bigger the bear market, the more people are likely to remain dour and fearful for a long time afterward. And fear particularly makes people turn to the safety of “common wisdom” or follow those rules of thumb that “everyone knows.” Of course, it’s often “wisdom du jour.” But in Debunkery, I show that very often “common wisdom” isn’t so wise and is in fact a harmful myth. Doing debunkery helps you see more clearly what the harmful myths are so you can better avoid making long-term costly errors.

Many people worry now that consumers won’t spend enough to help the economy recover, but you say consumers aren’t as important to GDP as people think. Is that right?
This is an easy one to see right with debunkery because a lot of data exists around GDP and consumer spending. Consumer spending is over 70% of GDP—so it is very important! But consumer spending is also very stable—almost infinitely more so than people believe. It doesn’t fall much during recessions, so it needn’t come roaring back. I walk through the history of this in Debunkery.

Most of what we buy is boring—toothpaste, health care services, rent, etc. We keep doing that even in bad times. The biggest part of spending is services—which is huge and relatively stable. The smallest part of consumer spending are the big ticket, discretionary items you read about in headlines—like cars, appliances, vacations. And spending on those things does fall in recessions, but more stable spending on services and staples simply swamps falling spending on more discretionary items. In fact, in the last five recessions, consumer spending as a percent of GDP actually jumped, because consumer spending remained relatively stable while other parts of the economy—like trade and business spending—fell much more. Consumer spending doesn’t fall much, so it doesn’t have to bounce much. You can see that easily with Debunkery.

Amazingly, you also say stocks can and should rise on high unemployment. Is that right?
Almost everyone gets this wrong, even though vast amounts of data are publicly available going back a long way, as I show in Debunkery. In every single recession since 1929, unemployment stays high and rises even after the recession ends. And stocks rise before recessions end—almost always—basic rule. Stocks lead the economy by a good notch, jobs lag by a huge notch.

This seems counterintuitive but isn’t. Think like a CEO would. You don’t want to hire before sales and profitability have recovered. You want to hire after you are confident you see a clear pick-up. And sales and profitability don’t recover clearly until the economic recovery gets underway. Plus, you probably had productivity gains through the recession, thanks to cost-cutting and just simply figuring out how to do more with less because you had to—so you may be able to handle increasing sales with a smaller staff. Then too, the unemployment number is wonky—it’s perfectly normal to see rising payrolls alongside rising or plateauing unemployment as people who had given up on their job search come flooding back to the job market, inflating unemployment numbers. All this adds to unemployment being a lagging, not a leading, market and economic indicator.

As I show in Debunkery, it would be weird, perverse, and inconsistent with all of history for unemployment to rise before the economy recovers. Your time would be better spent worrying about almost anything else—maybe reruns of the Beverly Hillbillies.

You encourage investors to do better with mutual funds by sending their spouse on a spending spree?
Yes! Many investors think their “no-load” mutual funds (i.e., mutual funds without a sales charge) are a cheap way to diversify. I have no issue with no-load mutual funds versus load funds. But it’s a proven fact that, on average, no-load fund investors do much worse than the funds themselves and they badly lag the S&P 500—and even lag investors who invest in funds with heavy loads. Why? Because no-load funds are convenient to trade, so they do it—much too often. They make moves at the wrong times, and that seriously hurts.

The fee load fund investors pay up front—sometimes as much as 5%—serves as a behavioral spine. They trade far less, hold their funds much longer—don’t in-and-out at all the wrong times, buying high and selling low—so their performance over time is much better even including those outrageous load fund fees. No-load fund investors on average hold their funds way too short a time for their own good because they trade them whenever they feel the urge, not having that behavioral “spine” the load fund investor feels.

What no-load mutual fund investors need is an artificial “spine” as a barrier to get them to trade less and hold longer. So, my point is, buy no-load funds but set up a contract with your spouse first. Every time you trade them you must forfeit 5% to your spouse that he or she can do whatever they want with—to be blown on whatever frivolous (or non-frivolous) thing they want. The threat of a punitive spousal shopping spree can be just the discipline you need to trade less. And even over a period as short as 5 years, the benefit of sitting tight should easily outweigh the cost of creating your 5% artificial spine. It also motivates you to pick your funds more carefully.

--This text refers to the Hardcover edition.

Review

'...challenges and refutes common, widely held investing myths and misperceptions... bite-size chunks-where you can read one chapter or many...' (Euroinvestor.co.uk, October 2010). '... thoroughly recommended... If I were a novice investor, I'd make sure I read this book and memorised the first 32 lessons ' (Financial Times, November 2010). --This text refers to the Hardcover edition.

More About the Author

Ken Fisher: CEO of Fisher Investments

Ken Fisher is founder, Chairman and CEO of Fisher Investments, an independent money management firm managing tens of billions of dollars for large pension plans, endowments, and foundations globally, as well as thousands of high net worth individuals.

Ken Fisher: Forbes Columnist

Ken Fisher is best known for his over 30 year tenure as Forbes' Portfolio Strategy columnist--the third longest running columnist in Forbes 90+ year history. Third-party research firm, CXO Advisory Group's "Guru Grades" ranks Fisher among the most accurate stock market forecasters over recent years.*

Ken Fisher: Bestselling Author

Ken Fisher has written ten books on investing and personal finance, four of which were New York Times bestsellers. Recent books include 2013's The Little Book of Market Myths, 2012's Plan Your Prosperity, 2011's Markets Never Forget, 2010's Debunkery, 2009's How to Smell a Rat, 2008's The Ten Roads to Riches, and 2006's The Only Three Questions That Count - all published by John Wiley & Sons. Other books include 1984's Super Stocks, 1987's The Wall Street Waltz, and 1993's 100 Minds That Made the Market. Ken Fisher's books have been translated into 9 languages, reaching over 3/4 of global GDP.**

Fisher Investments Press

Ken Fisher's firm, Fisher Investments, embarked on a publishing imprint with John Wiley & Sons in 2007, focusing on investing-related topics. Titles published under the imprint, Fisher Investments Press, so far include 20/20 Money and Own the World and the Fisher Investments On series, which focuses on the 11 primary investing sectors. The series includes in depth coverage on nine popular financial sectors, and Emerging Markets.

Other Ken Fisher Contributions

Ken Fisher has been published, interviewed and/or been written about in many major American, British, Canadian, German and Swiss finance or business periodicals. Fisher has been on the Forbes 400 list of richest Americans and the Forbes Global Billionaire lists since 2005. Ken Fisher is also on Investment Advisor magazine's prestigious IA-30 list of the 30 most influential people in and around money management over the last 30 years.***

*http://www.cxoadvisory.com/gurus. Based on a report completed in 2013 by CXO Advisory Group. The final report, titled "Guru Grades", contains accuracy ratings for 68 forecasters collected over a period from 2005 to 2012 including market forecasts by Ken Fisher as published in Forbes. Ken Fisher's market forecasts in Forbes represent his personal forecasts of the overall market and are not an indication of the performance of Fisher Investments. Not all forecasts may be as accurate as those in the past. Investing in securities involves the risk of loss. Past performance is no guarantee of future results.

**Based on countries' official languages and GDP reported by the IMF, as of April 2013.

***http://www.thinkadvisor.com/2010/05/01/thirty-for-thirty

Customer Reviews

Its an easy to read style.
D. Jean
So, when debt is owned by folks that hate you like China, it can be just as bad, if not worse, than when debt is owned by friends, like 1956.
Fredrick P. Wilson
This is a great book for the novice investor.
Jerry Ralls

Most Helpful Customer Reviews

23 of 27 people found the following review helpful By John E. Pombrio on December 11, 2010
Format: Hardcover Verified Purchase
What a fool I have been. Nothing like brutal facts to destroy a beautiful theory! Ken Fisher does it with such panache too.
You know, I've always thought myself as a savvy investor. I did all the right things at all the right times. I invested in the stock market for the long term and never wavered all through the precipitous drop in 2001 to 2003. When I was laid off in 2004, I wisely decided to get out of the stock market and going to long-term CDs. That was a mistake.
Yes, I know, the great recession of 2008 to 2009 was a vindication of everything that I believed in as a "savvy investor". But the stock market just bounced right back. It wasn't supposed to do that! We have high unemployment, tons of foreclosed houses for sale, bankrupt car industries, and a major hit to the financial sector. It is a great depression, right? No, that is completely wrong. Everything is fine and this time, like all other times, it was just a recession, just like all the others.
Why the sudden switch in my thinking? It is from this book called Debunkery by Ken Fisher. In it, he demolishes all of my pet theories about investing, brutally destroying them with cold hard facts and evidence, one by one. How embarrassing is that?
Baby boomers? No effect. High unemployment? Not really. Government debt being too high? No, it is just about the same as it always has been. Government spending too high? That is actually good as it puts money into people's pockets. Huge trade deficits? Actually that is good for business and the country. The Dow Jones industrial? A worthless benchmark. Buying CDs? Bad mistake. Lower taxes, higher taxes? No effect on the stock market. Consumers spending less money? No, not really- this recession was mostly about businesses not investing. China owns a lot of our debt?
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9 of 9 people found the following review helpful By Bruce Pulbrook on August 20, 2011
Format: Hardcover
Written in an informal style this is a practical book for investors wanting to improve their chances of success by avoiding common misconceptions. It is intended to be useful, enjoyable and informative, and it succeeds.

Ken Fisher is chief executive of an investment management firm that from 1995 to 2009 out performed the MSCI World Index and the S&P 500 Index. Ken Fisher's father, Philip Fisher, was also a successful investor, author, and an influence on Warren Buffet who acknowledges Ben Graham and Philip Fisher as having had major influences on his investment style.

This is not a book on how to select stocks but provides methods for testing the veracity of commonly held beliefs and debunks fifty of them.

It covers commonly held misconceptions, Wall Street wisdom, things "everyone knows," and lessons that can be learned from history (but haven't been learned) and what can be learned from thinking globally.

The author contends that markets are complex "probability games" rather than "certainty games"; that market prices adjust for things that are already known; and move in anticipation of expected future changes.

Fisher says investing tends to be taught as a craft where knowledge is passed down from graduate [business] schools, investment banks and brokerages, but the things that are taught and learned are already included in market prices.

To get an edge as an investor, Fisher advocates treating investing as a science and using the world as your laboratory to debunk common misconceptions. He recommends using the scientific approach of developing an hypothesis, testing, confirming, and retesting continuously.
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11 of 13 people found the following review helpful By Sylvester on December 29, 2010
Format: Hardcover
The author is a seasoned investor and writer and it shows. He elegantly smashes a lot of investment prejudices and provides many practical investment tips you can implement right away. Sometimes, he just gives some hints that you can check and complement by yourself, going on the internet or otherwise.

For example, after retiring last year, I made a lot of research to invest my retirement savings as efficiently as possible. I studied many books, did some research on the internet, made countless simulations with Excel about the "behavior" of mutual funds from different firms, but I did not manage to be able to check the correlation between funds. Meeting many investment advisors (about 10!), I told them that I was frustrated of not being able to evaluate the correlation of the funds I was interested in. Not one told me that it was very easy to do with Excel! In chapter 37, on the price of oil and stocks correlation, Mr Fisher astutely give a hint that if calculating the correlation between assets with Excel intimidate, we only have to ask any teenager... So, having no teenager around, I decided to check in the Excel help. It is a very easy function to perform. I am now able to check the correlation of the mutual funds in my portfolio!

One of the strength of the book is the crucial insights about behavioral finance the author provides. This aspect of investing is at the root of many blunders many unaware investors are prone to. No wonder he has written many scholarly texts on the subject before.

If the author provides a sometime what may seem a too positive outlook on the market, it is a much needed counterpoint to the gloomy outlook that most have come to revel in since 9/11.
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