Customer Reviews

Debunkery: Learn It, Do It, and Profit from It-Seeing Through Wall Street's Money-Killing Myths

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Now I know what Debunkery means! This book was 50 short lessons on all the ways people mess it all up in investing. I recognized more than a few errors that I had certainly made, and some more I'll be sure not to in the future. The book is divided into five parts, but you can jump around and hit ones that interest you most. I just read it from start to finish in about two days. Well worth it. It's written in the lively style I've come to expect from this author. Fisher is good at describing complex topics in a way even a guy like me can understand. There are lots of lessons that stick with you, for example, I never knew that June, July, and August are together the three best months. No more "Sell in May" for this guy. Lots of charts, lots of graphs, lots of good takeaways. Put this on your wishlist.

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? That is laughable as three quarters of US debt is owned by the American people. What little China has is about the same as Japan. And my favorite one is that stock market prices are too high. Nope, they are just fine if you look at them using a logarithmic scale.
Boom, boom, boom. He knocks my ducks down one by one. I have just mentioned eight or nine of my pet theories that he demolished. In his book, he does this to 50, Count them 50, of people's beliefs that are not based on any sort of statistical science. All they are is confirmation bias, seeing patterns where they are not, or using fear or our instincts or a pet theory or a "financial adviser" or a pet book or the news to control our investing. Down they come, one by one. In each couple of pages, there is a nice graph or chart or Excel table that takes these pet theories and proves each one to be bunk. What a blow to me, the great thinker? Laugh out loud.
So, if everything is okay, which it is, and these are not the end of days, what is the proper way to invest? As it is has always been, invest in the stock market in a diversified portfolio going for the long-term. 50% of the investment should be in foreign markets, and 50% in US markets. The mutual funds should be in a broad spectrum of different companies, and not get fixated over any particular group of companies or stocks. The mutual fund should be based on an index and not try to "beat the market" or do a lot of buying and selling (Standard and Poor 500 for US and the MSCI for global is a good bet). This is especially true of any stocks that you may own in your own company, which should be no more than 5% of your total portfolio. Once you're in, you stay put and don't try to time the market. The only time you sell is when you need the money for living expenses when you retire. That's it. The way it is always has been.
So, when my CDs start to expire, I am going to get back into the stock market. Yes it is risky as we have seen many a time during our lives, but the author is shown, using cold hard facts, that it is still the best investment strategy that we can make for the long term.
I missed out on some great growth opportunities when I prematurely sold out. Yes, I have money, but it is just sitting around waiting for inflation to knock it down. As I don't expect to die tomorrow, I need to plan for long-term and start reinvesting in the stock market. It is the only prudent thing to do for the next 20 years. Geez, was I wrong! Thank you, Mr. Fisher.
PS, am buying a half a dozen books for XMas. I cannot think of a better gift for my kids and relatives.
PPS. Just when I thought I understood where Mr. Fisher is coming from, I am reading his "The Only Three Questions That Count" book. Man, does he slaughter all the REST of my beliefs, especially about the national debt (too LOW), Trade Deficit (ignore it, it means nothing) and US savings habits (way higher than the government reports). Another must read.

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. But one cannot allege that his discourse is not backed by some serious knowledge and facts.

It is not a coincidence that he has been labeled a "Market guru" in the title of a book, recently published about him. He is not one of those who tell others what to do but are unable to do themselves what they promote.

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.

As well as testing hypotheses, and treating statements in the press as hypotheses to be tested, he recommends analyzing past data to discover patterns. When a statement is made, ask: "Has it happened before? With what consequences? How often?"

In all, Fisher recommends eight methods for debunking conventional ideas, and gives fifty examples of widely held ideas that don't stand up to scrutiny.

Among the myths that Fisher debunks is the belief that high levels of government debt lead to ruin. History shows that for over a hundred years when Britain was at the height of its power, national debt touched over 250% of GDP and consistently exceeded 100%.

To his credit, Fisher encourages readers to turn his debunking methods on his own examples. Like all of us, Fisher is subject to human frailties of perhaps seeking evidence to confirm his own beliefs.

For example, he says on two occasions on page 52 and later on page 76, that there is no evidence for price momentum in stock prices. This is curious since there is evidence: Fellow Forbes columnist, Mark Hulpert, in January 1996 mentioned several examples ranging from The Value Line Investment Survey to academic research; and research since then including studies by James O'Shaughnessy that reach different conclusions to Fisher.

Fisher, like all of us, would be well advised to following the advice of Douglas Adams: "See first, think later, then test. But always see first. Otherwise you will only see what you were expecting. Most scientists forget that." Confirmation bias is one of the biases mentioned by Fisher. Being aware of confirmation bias is a step in the right direction, actually avoiding it is more difficult.

I think this is a good practical book that is useful for investors and for everyone trying to make sense of political debates about economic matters. Where ever possible we should test things for ourselves using empirical evidence rather than relying on conventional wisdom. Fisher provides some simple yet useful techniques. Debunkery should be compulsory reading for so called financial experts and media commentators.

Ken Fisher and Lara Hoffmans write well. This book is accurate (with a few quibbles), and succinct. I know these topics well; it took me less than three hours to read it.

There are many half-truths that travel around Wall Street. There are still more that come from salesmen. There are those that your investing friends will teach you.

Some come from the idea that the economy affects the markets in the short-run, or that good or bad policy will drive the market higher or lower.

Markets are far less predictable than we imagine. They abhor simple rules. Indeed the "rules" created in one cycle may be pure poison in the next one.

Also, absent war on your home soil, pestilence, plague and rampant socialism on a greater level than what Western Europe has seen, equity markets are pretty resilient. Fisher's native optimism has served him well in his lifetime. There are few pessimistic millionaires.

That leads his asset allocation advice to be more geared to stocks, and more than the norm to foreign stocks. (Which is good so long as the rule of law is maintained.)

In general, Fisher has written a very good book here. The points are made briefly in an average of four pages each. For those that want a quick introduction to the many fallacies on Wall Street, this book will do an excellent job. After that, you can look to other books to fill in the details.

Quibbles

In Chapter 15, he mistakes immediate annuities for fixed annuities. Immediate annuities are annuities that are paying out now. Fixed annuities are those that pay interest, whether they are immediate or deferred (not paying out now).

In Chapter 16, he talks about Equity Indexed Annuities. He misses several things:

1) Growth is more typically guaranteed at 2-3%, not 6%.

2) He misses Asian design contracts, which offer higher participation in exchange for having the option pay out on average returns over a year. People don't get what they are giving up there, but it looks better to them.

3) The surrender charges are higher and longer than they are for other deferred annuity designs.

There are other details that I think he mangles, but in his main thrust he is correct in both chapters to steer people away from any annuity aside from immediate annuities for those who need income. Anything the insurance company can do with annuities, you can do, and cheaper.

But if Mr. Fisher wants to write about life insurance products more, maybe he would like to get a life actuary on staff, or at least someone with the LOMA credential.

Aside from that, Mr. Fisher should read "This Time is Different" by Reinhart and Rogoff. Government deficit levels are not a thing of indifference, though they will affect stocks less than long bonds.

My penultimate quibble is that many common sayings are true within limits. The limits imply broader models that might be discovered by multivariate regression. There is little of that in the book.

Finally, the rule should be sell in April, buy in October. More at my blog, I have an article to write.

Who would benefit from this book:

Ordinary people who don't have a lot of time to consider each issue would benefit from this book. They get a broad amount of protection from a single book. The lessons come quickly, and immunize investors against a lot of investing mistakes.

I have a close friend who has an IRA managed by Fischer Investments. He was 69 yrs old in 2008 and his account lost 57%. Yes he's recovered about 2/3 of the loss but he would have been better off buying SPY ETF at .05% fee and performance would have been almost identical. I guess I'm skeptical of this

Ken Fisher is a living legend. His record for picking successful stocks is unparalleled. You should learn as much as you can from Ken.

Ken's new book is perfect for people short attention spans. You can read it in chunks. It has many words of wisdom that are mostly simple commonsense.

This is good book and I recommend it to any and all investors.

May I suggest you get your 'Debunkery' book and go to the bottom of page 111, take your sharpie and write "STOP HERE!"
I was impressed with this book until the middle, noting differences in opinion only on the "sell in May", and dollar cost averaging sections. After page 111 someone became senile and I do not think it was me. Page 112 asks if a strong dollar is good for stocks. Isn't the question if a healthy economy (stocks) is good for the dollar? Fisher states the thesis of this section more succinctly in a recent investor newsletter of his with "Whether the dollar is weak or strong means little to stocks." The problem with that statement is that stock values are MEASURED IN DOLLARS. It is like saying 'Yes I know the king recently decreed the mile to be only 4,000ft but look on the bright side, you now get an additional 2MPG!" No I don't! That's ludicrous! Dare I say- It's bunkery!
P.141 "So, the economy is better off even when the government borrows and spends very stupidly, because the later spends [as the money passes through the economy] average out to normal." Thats odd, compare that with P.204 "If you were buying Greek debt, you were thinking of it as high-risk high return potential-not US Treasury safe." No, I was waiting for the benefits of the 'very stupid spending' to 'average out!' And compare both of these statements to P.198 where Fisher claims that the view that Greece will not be able to sustain its debt service is "nonsense." For a book published on October 11, 2011 this is quite the prognostication as Greek two year bonds hit a high of 84% in mid-September! Later on that very page he states, "Greece should also serve as a reminder to the perils of an entitlement society." But hey isn't that just "very stupid spending?" As Ken Fisher himself likes to point out, "You can't have it both ways." Oh, wait, that's right, Ken thinks Greece is in good shape... I hope he didn't load up on too many on those "high return potential" Greek bonds those silly inflationists were shorting!
And who can forget what I will call 'the parable of the bankrupt farmer' of P.207, which compares a farmer (who apparently can not produce more than he consumes) to the economy of the US, "Our huge trade deficit [earlier described by Fisher as insignificant in % terms], instead of being harmful, can be seen as evidence of long-term economic vibrancy." Really? Sounds like the symptoms of a stagnating, uncompetitive economy propped up by unsustainably increasing debt levels to me! Debunkery #48 is itself - bunk.
Also compare P.209, "If we grow faster than they do, we can afford to buy more from then than we export to them." To P.214 China's growth is at 8.5% when it's "slow." I wonder what that would mean for what they should be able to afford to import? But... they don't import much. I suppose in Fisher's view that it opportunity lost. I see it as spring loading their currency (yuan) for significant appreciation, but who am I?!

In short, it is amazing to watch this Fisher fellow get as far as he has, himself a Billionaire, manages $32 Billion, and yet demonstrates such little understanding of currencies or the effects of central bank interventions. Most puzzling, Fisher writes to 'Debunkify' the inflationists (by stating that US debt is not too high et al) and passes on the opportunity to criticize the Fed on P.119. He then writes a glowing review of Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It which is based on projecting, get this, the inflation of the 70's, to our current situation. Fisher writes on P.201 of 'Debunkery' "... unless we see a repeat of the gross monetary policy errors that ruled the 1970's... we're more likely to see a period of relatively benign rates for some time." Uh, Ken, if the Fed doesn't mess up, how do you get the returns in the book you liked? Again, "You can't have it both ways." I think we can conclude where the senility lies!
Go ahead read the first half, I highly recommend it. Then put the book down before the second half causes you to lose what assets you gain by understanding the first.

If you want to learn what to believe, and what to discredit, when it comes to grappling with the financial markets, read this book. I also recommend "The Only Three Questions that Count" by Mr. Fisher.

In the spirit of MythBusters, this book is a fun ride. And, it hits on a wide array of markets, economics, politics, global issues, you name it. Its an easy to read style. I don't normally read a lot of investing books myself. I bought this as a gift for a family member but ended up reading it and enjoying it thoroughly. For anyone on your holiday gift list who likes investing book or maybe needs some investing help, this is a great option.