Customer Reviews

The Either/Or Investor: How to Succeed in Global Investing, One Decision at a Time

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This is a very valuable resource for serious investors. It is not for everyone. The concepts presented in this book take a certain level of knowledge to implement. It takes time to learn the concepts and to stay abreast of what is happening in the world.

The first thing that Mr. Winter does is to dispel the myth that you can become automatically wealthy by following the buy and hold method of investing. He does a good job of showing the dangers of the buy and hold philosophy of investing.

Unfortunately, far too many Americans will not take the time to understand the basic factors controlling the domestic stock markets let alone trying to understand the more complex global markets.

There are, in my opinion, three major lessons in this book. The first is while buy and hold may have worked at one time, it no longer works.

The second major lesson has to do with effective decision making. Here Mr. Winter gives a good lesson on binary decision making. Simply reduce every decision to a yes or no outcome. It does not matter how much you study a question, eventually you need to make a decision. So learn to structure your research so that you arrive at an either/or decision.

The third major portion of the book is a set of concepts or questions that an astute investor needs to examine. These questions concern where and why you will invest or choose not to invest in a given situation. For example, should you invest in the developed world or the developing world? Should you invest where a country is ruled by the rule of power or the rule of law? Should your investment decisions be based on fear or greed? It is interesting that he defines greed as a sub-set of fear, that is, we actually fear that we are not going to get our share.

There are twenty-one either/or questions that he presents with a full explanation of the significance the question has on our investment choices.

The book is well written and easy to understand. However, it is not for the casual reader. While understanding the concept of binary decision making will improve the decision making process for some, I would not recommend you read the book just for that purpose.

If you are a serious investor, with a strong desire to become a successful investor, then this book should be high on your reading list. It does not dwell on the fundamentals verses the technical charts. It looks at investing from a higher perspective. The book examines the various factors that impact successful investing. In a changing world, where events happening around the world affect what happens everywhere, you really need to understand the interactions. This book does a very good job of making the complex financial world at least understandable. Mr. Winter also gives you are detailed model to follow to stay informed about how the changes will affect your investment decisions.

While this book came out BEFORE the recent economic troubles, the decision model Clark Winter shows you still makes sense. He is not advocating a specific investment model or advising you to target certain markets. He says that you can't make good investment decisions until you know how to make good decisions and that makes a lot of sense to me.

He points out that one of the reasons the United States has a negative savings rate is that we tend to buy and hold and that life gets in the way of our creating wealth. We have life emergencies, unexpected needs, divorces, death, and so forth. Instead, Winter wants you to be more active in keeping your money deployed. Not so much as a stock picker or a technical trader, but in making a series of binary (either / or) choices.

You should balance fear versus greed, compare the developed and the developing world, look at anti-immigration versus talent migration, whether or not you have too much or too little information, and whether or not interest rates are rising or falling.

Winter's four basic rules for investing are:

1) Don't lose money - because when you do you put pressure on your investments to produce unrealistic returns just to get back to even.

2) Don't invest where the big investors are putting their money - because their large purchases push the price higher and you end up paying too much for the return you will get.

3) Find a waterfall and put your bucket under it - Winter credits this to George Soros.

4) Open your mind - because the world changes from moment to moment and you will miss opportunities if your mind is blinded by focus on the wrong things.

He also points out the relevance of Col. John Boyd's OODA loop for aerial combat to investing. You need to Observe the investment environment, Orient yourself to take advantage of the situation, Decide what you are going to do, and Act quickly without hesitation.

Winter points out that too many ordinary investors try to invest like the best investors and end up trying to do things they cannot do. Instead, you should stay within your talents, experience, and make the most of them by making the best decisions available to you and you can still do well. Consistent good choices are better than erratic and only occasionally excellent choices.

Interesting reading that you might find helpful.

Reviewed by Craig Matteson, Ann Arbor, MI

I liked this book. As I read it I kept telling myself there is some really good content included between its covers. I'm not sure I can say it was particularly well written. But it passes as a great primer for someone who is thinking of taking the plunge and getting involved in the stock market. It covers all the basics that one should consider before taking their hard-earned money and investing it into something that hopefully will generate a reasonable return.

This book is clearly aimed at an audience of want-be investors who really have no clue as to how to go about getting started as an investor. It is not a technical book. It does not go into fundamental analysis or technical analysis. But it does talk about earnings reports, risk, and things that have an impact on both: politics, economics, environment, and exogenous factors. It talks about the need to keep an open mind, avoid unecessary risk, and to follow the money. In a nutshell, this book explains that investing can be a very complex thing. But successful investors try to keep it simple as possible in order to avoid information overload because overload leads to indecision which is not good.

This book is the first one that I have read that goes into how investing and everything that goes into it is in a state of flux. When the world revolved around the US it was pretty easy to keep track of things. However, today everything is being globalized. The US is no longer the center of things - it is turning into just another player. As a result, it's getting more difficult to stay on top of investments. If this subject is one that interests you, then I suspect the instant book will be right up your alley.

I would have liked the book better if it had been better written. Each of the first four parts felt to me like chapters themselves. And the fifth part felt to me like a conclusion. I was totally shocked when the introduction to a 195-page book totalled 29 pages. That's just way too long! And if Part V is considered the conclusion, then it totalled 14 pages. And I didn't feel as though the conclusion really pulled the book together. However, after subtracting out the intro and conclusion, that leaves just 152 pages to be divided among 21 chapters. You do the math. That's just not right. 4 stars!

PS. I encourage you to examine the Search Inside feature for this book offered by Amazon. There you can see the chapter titles included in the book's Table of Contents.

I originally avoided Clark Winter's The Either/Or Investor because the title is uninspiring and brought back visions of Søren Kierkegaard. I am happy I reconsidered.

Clark Winter isn't your ordinary Wall Street denizen. He dedicates his book to his "wife and family," which tells you right away he knows his priorities. You can almost imagine him zipping across the landscape in a Pontiac G8. He seems to admire GM and the car business--which is part of the problem, because he wrote his book before March 2008 and the auto industry's current woes. If you can ignore his sanguine predictions about car companies and auto usage (see page xxxiii, where he praises GM over Ford, and says, "Even rising fuel prices will probably not make much a difference, as American habits are extraordinarily ingrained." [p. 147]), the rest of his book is a joy to read. His comments on immigration are particularly timely, given America's increasing protectionist sentiments:

Despite the belief that immigrants don't contribute much to society besides low-level work, they are in fact instrumental in starting businesses that serve other immigrants. In the United States, individuals start more than 550,000 new businesses a month, according to the Ewing Marion Kauffman Foundation. Latin American immigrants start more business[es] than any other group, following by immigrants in general. [p. 33]

On the whole, immigration is good for investors. It brings new customers, new incentives to innovate, new markets, new competitors, and new capital into the market. The savings rates of immigrants are higher than those of the native born, which adds to capital formation. What immigrants, legal or otherwise, take out of the system in terms of municipal services, they probably make in sales taxes on the goods they purchase. Immigrants start new businesses--and therefore are a greater source of new employment--than their native-born counterparts. Additionally, these new companies add to the capital stock of the community in another way. They bring their talents, hopes, dreams, and skills to countries that are increasingly postindustrial and therefore less inclined to do the jobs that those at the bottom rungs of the economic ladder are willing to take on. All in all, there are few reasons to oppose immigration from an investment perspective, much less a cultural one. [p. 35]

Most investing books have insightful or funny anecdotes and facts, and Mr. Winter's book is no exception. He talks about teaching his son economics while driving to grandma's house [p. 54]; Singapore's rise [p. 66]; the economic concepts of alpha and beta [p. 106]; sentiment's role in the markets [p. 70]; and the role of "expensive beef" in Argentina's rise and fall [p. 73]:

Poverty doubled from 27 percent to 54 percent, and millions of Argentines had their life savings wiped out...During all that time, the diet never changed. If it had, Argentines would have brought down their government. [p. 70]

Mr. Winter's main point is that ordinary investors can invest better simply by paying attention. He calls this "thematic investing," or concentrating on a subject whose outcome might be reasonably predictable [p. 72]. Although he doesn't explicitly say it, he favors momentum trading, because buy-and-hold investors are subject to the vagaries of geopolitical events and other events beyond their control:

You could always be a buy-and-hold investor, but that isn't likely to work, either, as you could lose a lot of money in the process. Markets can and do go to sleep for years, as they wait for geopolitical events to sort themselves out. [p. 72]

Going back to Argentina, if an investor understood or learned how important beef was in Argentina's traditional diet, s/he may have been able to profit. For instance, Mr. Winter's "reality-based" investor could have done well by trading beef/cattle futures, or perhaps by stockpiling beef before the Argentine peso collapsed. However, Mr. Winter supplies his own counterargument when he describes Macao as a good investment opportunity:

If Macao is a good enough investment for Steve Wynn or Sheldon Adelson, two of the most successful investors in Las Vegas real estate, it may be a safe bet for individual investors as well. [p. 77]

Unfortunately, Steve Wynn's Wynn Resorts (WYNN) and Sheldon Adelson's Las Vegas Sands (LVS) have been two of the worst-performing stocks this year. Both invested heavily in Macao. What's the lesson? Even if you know which direction the wind is blowing, it doesn't necessarily mean a beneficial storm will occur at the spot you predict. (Somewhere, John Bogle, an ardent buy-and-hold advocate, is smiling.)

Despite these "oops" moments, I learned a lot from Either/Or. Mr. Winter can explain complex ideas without sounding as if he's speaking down to his readers. On page 94, he explains why companies go public, despite the higher scrutiny (they want liquidity and access to more sources of funding). On pages 95-96, he discusses derivatives (you can almost hear the foreboding music in the background as you read):

[T]he variety of futures contracts available has increased dramatically and the number of contracts has increased exponentially. There are now many more futures contracts in oil traded than actual barrels of oil to be delivered...While futures are supposed to create more orderly markets, sometimes they can add disorder in the marketplace.

I also learned some more interesting facts. For example, Brazil is an oligarchy: "In Brazil, for example, twenty thousand families control 80% of the wealth." [p. 123] Also, the bottom of an oil barrel contains the most valuable liquid:

[W]hen the oil is refined, the lightest components become gasoline and kerosene and jet fuel, which sell for a couple of dollars per gallon. The next heaviest component becomes heating oil, which also sells for a dollar or two a gallon. What is left at the bottom of the barrel is the heavy, tarlike residue that is turned into thousands of different organic chemicals and pharmaceutical compounds...[these can] sell for anywhere from a few dollars a gallon to thousands of dollars a pound.

I'll leave you with Mr. Winter's investing rules:

1. Don't lose money

2. Don't invest where the big investors invest

3. Find a waterfall and put your bucket under it

4. Open your mind

Mr. Winter is obviously a man with both feet planted firmly on the ground. If you're skeptical of buy-and-hold investing, or if you just want to learn more about a different investment style, you may enjoy his book.