Customer Reviews

Investing in One Lesson

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As a financial journalist for 25 years, I'm constantly asked to review investment books. Due to time constraints, I generally don't.

However, in the case of Mark Skousen's Investing in One Lesson, I found it well worth the time to both read and report on his new work.

Throughout the book, Mark systematically eliminates all the "noise" that makes investing appear overly complex. By simplifying many concepts that investors often view as incomprehensible, he leaves readers with a clear understanding of the difference between price and value, a company and its stock, and a business venture from a publicly traded entity.

When he begins teaching his investment classes at Rollins College and Columbia University, Mark Skousen holds up two pieces of paper -- a lottery ticket and a stock certificate. He asks, "Are these mostly the same, or are they mostly different."

Knowing the answer to this seemingly simple question could be the difference between investment success and failure.

It's a must read for the novice investor who frequently does not understand the counter-intuitive notions that a good company is not always a good stock or that good news does not necessarily spell higher prices for a company's shares.

Even for the most experienced investor, he offers compelling insights into the "efficient" market, investor psychology, the real stories behind the 1987 crash and the Internet bubble, the pros and cons of technical analysis, the misconceptions of growth versus income, and an in-depth look into his unique brand of contrarian analysis.

Despite a world of increasingly "sophisticated" computer models and technical strategies, Mark's exceptional new work helps remind us all that a combination of experience, knowledge and common sense remain the long-term investor's most important ally.

Twenty years ago, economist and libertarian Henry Hazlitt did something no one had done before.

He took dreary subjects like wages, profits, savings, taxes, tariffs, unemployment, unions and monetary policy and discussed them in a short, highly-readable book that was easily accessible to the layman.

The book was "Economics In One Lesson." And it remains a classic, one perhaps especially appreciated by those of us without the time or inclination to read a boring, stuffy economics text.

Now Mark Skousen has done the same thing for investors. It's called "Investing In One Lesson." It, too, is destined to become a classic. In fact, I can't imagine an investor who wouldn't benefit from reading it.

Why?

During my 16 years on Wall Street, I quickly learned that many investors have an implacable enemy standing between them and investment success: themselves.

They lack a thorough understanding of important investment principles. This causes them to cast about, trying (and abandoning) one investment system after another. Or buying hot tips from friends and colleagues. Or reacting emotionally - and usually regrettably - to rapid changes that regularly occur in financial markets.

Skousen's new book provides a much-needed antidote.

In straightforward language - replete with stories from his own experience - he explains how you can use the stock market as a foundation for financial independence.

Especially important, he reveals why a company's share price generally fluctuates much more dramatically than the prospects for the underlying business.

These fluctuations - often unjustified - create enormous opportunities. But you can't capitalize on them if you don't understand what's happening... or why.

In "Investing In One Lesson," Skousen makes it plain. Stock prices are determined at the margin.

What does this mean, exactly?

It means that on any given day, only a fraction of 1% of the shareholders of a company are actually selling their shares. Yet that tiny fraction determines the value of the entire company - at least temporarily.

A sudden imbalance in buy or sell orders can quickly push a stock dramatically higher of lower. Sometimes these changes are triggered by a change in the company's fundamentals.

But more often, a company's share price can skyrocket or collapse for reasons that have nothing to do with the outlook for the company... or for the economy.

Skousen correctly notes that stock prices can be pushed around by, for example, rumors, official buy or sell recommendations by major wire houses, short selling, computerized technical strategies, tax selling, good or bad publicity, insider buying or selling, fads, takeover speculation, bad news elsewhere in the sector, or a mindless herd mentality.

Short-term momentum traders often pile on too, creating even more havoc. But for investors who understand what is happening and why, tremendous opportunities are being created.

I'm talking about opportunities to buy at fire-sale prices - and opportunities to unload at extremely generous prices. Who can afford to pass on these?

It's a shame, really, that you can graduate with honors from one of the nation's top institutions of higher learning with only the foggiest understanding of what the stock market is, how it operates, or how you can use it to achieve financial freedom.

As a result, many potential investors shy away from the market, afraid that it is a massive casino and nothing more. (Those folks, especially, would benefit from reading his chapter on "Why Wall Street Is Not Las Vegas.")

Others don't realize that the stock market is the essence of capitalism, allowing even those of modest means to take an ownership stake in many of the world's most profitable businesses.

(Compare those odds with the well-known fact that 4 out of 5 new businesses fail in the first five years.)

In short, "Investing In One Lesson" is written for:

* Investors who want a quick understanding of how Wall Street works, and a simple, successful formula to build wealth in the stock market.
* Businesspeople and other professionals who have been successful in their careers but need a solid foundation for investment success.
* Investors who are unhappy with the performance of their brokers and money managers and want to understand how Wall Street really works.
* Investors who are overwhelmed with too many investment choices and want an uncomplicated approach to the market.

If you want to become a better investor, pick up a copy of Mark's new book "Investing In One Lesson."

I have worked in the financial services industry for more than 30 years and have been astonished by the dearth of good, solid investment advice that is available for people trying to understand the vagaries of the stock market. Mark Skousen has filled that void with his new book, Investing in One Lesson, recently published by Regnery. Skousen takes a common sense approach to the equities market, stripping it of insider jargon and arcane concepts, and offers beginners and experienced investors alike a sound plan for buying stocks. He writes about this unnecessarily complicated subject in simple English. Too many so-called professionals have deliberately confused the investing public in an effort to enhance their own careers. Skousen lifts the fog of confusion surrounding equities and discusses the essentials in his straightforward style. If you are interested in establishing a core portfolio of sound stocks that will serve you well over time, you can do no better than to start with Dr. Skousen's new book.

Jerome Tuccille
Vice President and author of
Trump, Rupert Murdoch, Alan Shrugged, and other books

This is not a book about how to pick stocks that only go up or how to draw magic graphs that will lead you to stock market riches. Instead, what Mark Skousen provides is a sound orientation to what investing is really all about, why investing in stocks is very different than buying a share of a private business, why income investing (dividends) makes a great deal of sense, and a look at other types of investments such as buying bonds and real estate.

He starts by telling the sad tale of someone he knew who was a very intelligent professional who ended up putting all his money in an off-shore fund that lost all his and his wife's retirement money; $750,000. Skousen notes that many very well-educated, successful professionals put so much effort into becoming experts in their field, and yet they take the precious fruits of their study, work, and saving and invest it haphazardly, without any real study, and chasing the latest fad just after it has begun going out of style. Of course disaster is likely to follow such a program.

This book is easy to read and understand. What Skousen says is sound and makes a great deal of sense. If you were to follow his principles you will, in the long run, likely be very much better off. The main lesson to remember is that "Wall Street is not Main Street" and "The business of investing is not the same as investing in a business". He takes you through the perversities of Wall Street and provides a primer on how stocks are issued, what affects stock prices, the problem of investor psychology, fads, momentum, and more. The thing he comes down to is that "dividends don't lie". Even so, he does offer some cautions and honest arguments against dividends. Still, I think his case is sound.

All the principles in the book are conservative, and focus on creating income (that you should reinvest until you need it). He provides a short list of other readings that he recommends, a helpful investing glossary, and a good index.

Reviewed by Craig Matteson, Ann Arbor, MI

Mark Skousen hopes this book will measure up to Henry Hazlitt's classic "Economics in One Lesson." Alas, not by a long shot.

The one lesson is that "the business of investing is different from investing in a business." Translation: investor psychology plays a significant role in the determination of market prices. Well, duh! His response to this insight is to recommend dividend-paying stocks over growth stocks. OK, that's a worthy concept, and Skousen responds ably to criticisms of the strategy. He then breaks out seven categories of such stocks, but interestingly, many of the recommendations in his newsletter don't fit into any of those categories.

Someone entirely new to investing will find here the basic concepts of investing and a handy glossary. But 5,000 other investing books offer the same. And most of them won't leave you feeling annoyed by the impression that Skousen slapped this together without benefit of an editor, and that his publisher used small pages and large type to fluff the material into a book.

Skousen is well grounded...aside from all the worthless commission hustlers out there trying to shove junk, crummy products down your throat, and underperform the market at the same time, Skousen makes good investing points without trying to sell sell sell, and pick your pockets for commissions, endlessly.

Investing in One Lesson is an easy-to-read book that explains why investing in a stock is different from investing in a company. The author clearly shows the reader why stock prices can fluctuate irrationally at times.

He provides lots of examples of stocks whose prices declined despite good profits (e.g. Yahoo) and stocks whose prices increased despite no profits (e.g. Miramar Mining).

The only disappointment to me was that it wasn't until Page 88 that he begins to explain the strategy (i.e. his belief that dividend stocks are the single best investment technique for investors and comprise the "one strategy" he is recommending.) My personal preference would have been that he expand further on the strategy earlier in the book.

But still, overall a good read.

I have read lot of books on investing over the years, but this book is just superb. I won't say it is the best, but it is in the top 10. I could not put it down. The author explains that even the most successful business owners, doctors, or lawyers, find little success in investing. They fail because they do not understand THE LESSON in this book, which is Wall Street is not Main Street. The business of investing is not the same as investing in a business.

In order to be a successful investor, one needs to understand the business of investing. The moment a company goes public, many things change. The value of the business is no longer equal to its price because its price is set by market participants that "vote" on it each day by buying and selling. Their combined decisions may cause wild fluctuations in prices of individual stocks, even if nothing happens to the underlying businesses.

I borrowed this book from the library, but I immediately bought it after I read because it was so good.

Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

It would be pointless to repeat all the great things about this book, such as explaining basic consepts of investing by very simple way and explaining many reasons for market fluctuations. Other reviewers have already pointed out the good things in this book, so I took the contrarian task to write about the (few) negative ones.

I think that the title simply promises too much. Already familiar with his magnificent book on the business cycle, "Structure of Production" and his monograph on investing, "Ludwig von Mises goes to Wall street", I was very happy when this title was released. Maybe I simply expected too much, because I was a little disappointed after reading this work. As a Hayek-Rothbardian libertarian geek I expected something like how to recognise bull and bear markets from the Money Supply data :)

In this book there is unfortunately very little about gold and commodities which is strange because of the ongoing strong bull market in these asset classes and because Skousen himself was one of the first gold bugs (although very reasonable one for his credit) in the 1970's. Maybe this is because Skousen has affiliated very much with stock market optimists like Jeremy Siegel whose WisdomTree Dividend funds he recommends (for Skousen's credit he has been superbullish on commodities in his newsletter "Forecasts & Strategies").

Summa summarum: easy to read, logical, but definitely not the last word on the subject... A good starting place for beginners and a great reference guide, but on the other hand contains maybe too little about recognising actually what to buy and why, especially if you want to buy ordinary stocks and not Mutual Funds. If you love Skousen's earlier works (like I do) you will find this one valuable and easily accessible anyway.

This is a well written book about value investing. My favorite all time book on the subject is Benjamin Graham's The Intelligent Investor, specially with the update by Mr. Zweig. However, I have given it to several friends and they haven't had the patience to go through it. This one covers many of the same points in a brief and concise manner. The example of the use of the Dogs of the Dow as a means of getting started was a neat way to get the value message across. I will probably start recommending this book instead of Graham's, because it is much more readable. If you want to learn to invest in value stocks this is one place to go.

Happy returns!