Customer Reviews: Markets Never Forget (But People Do): How Your Memory Is Costing You Money-and Why This Time Isn't Different
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on November 14, 2011
Using historical data, the authors adequately identify behavioral conflicts stemming from the clash between emotion and financial facts. As investors swing from the pendulum of fear and greed, it becomes clear that we all own some personal biases regarding financial markets. In a quest to be our own financial hero, it is more common that we end up our own villain at the expense of performance.

If you love and seek an interesting view on hard data and facts, you should enjoy this book. It is a unique assembly of financial history with an emphasis on U.S. equity markets. The application of financial history allows the authors to demonstrate how susceptible we are to flawed behavioral finance actions. To be more precise; if you enjoyed the writing style and content of any of Ken Fisher's previous books, you should expect to enjoy and value this book.

The bad news is that this book repeats a lot of material and themes from Fisher's and Hoffmans' previous works. The good news is that this book repeats a lot of material and themes from the authors' previous works. As the title of the book appropriately implies; Markets Never Forget (But People Do), I found myself shaking my head at myself and thinking, "I should have remembered that because I read it before in their previous books", yet I did forget and was glad I was afforded a much needed reminder.

If you are looking for good nail biting non-fiction financial storytelling book a-la Michael Lewis, this isn't going to be your cup of tea. If you are looking for extremely valuable and rich financial data that is organized and summarized in a way that allows you to apply the history, you are in luck.

The book is about half the length of one of the authors' previous gems, "The Only Three Questions That Count" (2008) which was 420 pages. "Markets Never Forget" is equally as good at getting the reader to realize that they can easily be fooled by misunderstanding what historically happens MOST of the time (regardless of what we want to believe emotionally or politically).

I expect students of history to enjoy this book tremendously and there are outstanding nuggets that I would even consider "required reading and understanding" if you are a financial advisor, portfolio manager or serious individual investor who is attempting to be a better longer-term investor (as opposed to shorter term trader).

If great books transcend multiple languages, this book may not pass the muster. I am a fan of Ken Fisher and understand that; he has an investment approach/perspective that is longer term in nature (stocks do better than bonds), investing is a probabilities game and not a certainties game, and he is an optimist/never a Debbie-downer (although I'd imagine it would be tough to be a pessimist in life if you were a billionaire money manager on the Forbes 400 list...). I don't believe Japanese investors would subscribe to the same level of equity euphoria as Fisher, nor do I believe European investors at the moment would be quite as willing to accept the same level of optimism of their investing and economic future as the authors do their own. Although with the addition of an extra chapter or two regarding Fisher's views on capitalism, socialism and politics, the book could then become recommended reading in countries that speak French, Spanish, Greek, or Italian.

The data, the examples, and the organized structure of the behavioral finance issues discussed are 5 star worthy. The writing style, storytelling, and entertaining qualities of the book are 3 stars (if you would use Michael Lewis or Andrew Ross Sorkin as 5-star benchmarks). I consider it "enjoyable required reading" rather than "fast entertaining reading."

If you don't understand and grasp the unique, original, and insightful historical references in this book and his former books, you may be doing yourself a disservice to your long term investing potential. It's hard not to love anybody that has been a stock studying junkie for 40 years like Fisher.
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on December 1, 2011
The key message of this book is that history repeats itself, but that the patterns are of so long duration that human beings fail to notice. The author has made this point before, but the value of this book lies in the examples (and maybe repeating the message).

It is an interesting reading if you follow the financial markets rather closely (at least a couple of times per week). The book is full of facts (mostly about returns) and that is why I don't think you will appreciate the book if you do not follow the financial markets closely.

The content of the book is good, but quite shallow. The author spends way too much time debunking uninformed newspaper headings. That would have been all-right if he would have added some more subtle points as well. The book has eight chapters and makes maybe two good points per chapter. In mind mind this is quite poor. However, the author is a proven "market guru" (see the CXO website's ranking) so the book still has value. (Ok, I am aware that somebody might object that just one good point could save you more than the price of the book.)

The book is written in an extremely informal and verbose style. Personally, I don't have a problem with informality, but I hate verbosity. Think about the book as being somebody's verbose blog. Is there value in having the material in book form? That depends on whether you prefer reading on the screen or reading a book. However, I wish the author would have learnt from some of the blogs that write informally without being verbose and meandering.

If you don't follow the markets closely, but want to read something by the author, you might give The Only Three Questions That Count: Investing by Knowing What Others Don't (Fisher Investments Press) a try. However, that book is even more verbose than the current books.
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on July 29, 2012
I first became familiar with Ken Fisher though Marc Pearlman's radio show 'Your Money Matters' [...]. Since then, I realized this is the same Ken Fisher whose investment firm sends me from time to time invitations to have my investment portfolio managed by his firm Fisher Investments [...]

Ken is a great interview and author. He is also a decades-long Forbes columnist. His compelling observations about the economy, politics and the role of history are central to the thesis of his book 'Markets Don't Forget - People Do'. The author expresses the role of personal bias inherent in decision-making and assumptions associated with making investments.

Ken provides a lot of empirical data to substantiate the facts - something many investors fail to acknowledge - even when unbiasedly expressed. Investing is essentially characterized as a plan of probabilities vs. possibilities. History is a lab of sorts where one can test a bias to determine cause and effect. Too, one's memory isn't usually as good as one thinks it is, particularly with regard to patterns of performance.

Simply, I hope to remember the data presented here as I listen to the economic and political talking heads through a different sort of filter - history. To ignore history is to expensively repeat mistakes and avoid profitable opportunities.
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on January 12, 2013
Many years ago money manager Ken Fisher with Super Stocks wrote one of the few useful books on GARP-investing. With the more recent The Only Three Questions that Counts he concentrated on the construction of a rational investment process. This time he zooms in on Behavioural Finance from a practitioner's perspective. The book is a cry to analyse and learn from history. Amen to that.

Fisher takes off from Sir John Templeton's combination of belief in entrepreneurship and his realization that most of the events we see today seldom differ in any material way from historical events, hence the quote "The four most expensive words in the English language are, `This time it's different.'" To be able to see how business creates value and prosperity over time and to put today's events in perspective one has to have a grip of history. Most of us think we do, when in reality we actually don't.

Not only do we forget prior events so that we don't learn from them. More importantly, we forget our feelings during those prior events. The effect of this is that we experience current feelings more intensely than we remember our feelings the last time something similar happened. The conclusion then is that today's events must be more important and unique than yesterdays. We lose perspective. By analysing history we can see more clearly and avoid walking into the same psychological traps time after time. "At its basics, investing is a probabilities game; it's not a certainties game." "[...] while investing is a probabilities game, it's not a possibilities game." Almost all tail events are possible but that doesn't mean you should invest into situations with bad odds. By "remembering" you can base investments on probabilities based on historical outcomes instead of personal gut feelings. "Market history is a lab. A testing ground for your hypothesis." If there has been no correlation between two events in history it takes a strong fundamental reason for it to be a link going forward. History presents a way of applying probabilities to forecasts.

After a brilliant preface and great first chapter you get the feeling that this could be the author's most important book ever. I don't think the rest of the text lives up to this - at least not if you have read any of Fishers previous books. The remaining chapters present a number of topics that Fisher thinks are misrepresented in the investment public's collective memory. They span over double dips, volatility, secular bear markets, the importance of debt, political influence on the stock market etc. Instead of reviewing these topics it would have been extremely interesting, as I see it, to know how Fisher (who after all is the founder of an asset management firm) would construct the organization, process, incentive schemes etc. of an investment firm to minimize the effect that psychological traps - like forgetting history - have on investment results.

I personally like Fisher's "grumpy old man"-style of writing. There is no questioning his passion for making the investment world a tad more rational or that the topics are thought-provoking, but he has written about them previously. I also don't agree with Fisher's unwillingness to recognize that, even though there are no economic secular bear markets, there are differences in expected returns for the coming decade based on starting valuation in for example Shiller-PE's or Tobin q's. This is what history teaches us.

Fisher is a long-standing columnist in Forbes. The fact that he for many years has had to structure his investment thoughts and put them into ink has made him one of the sharpest thinkers in finance. The topic of this book is deadly important but I would have wanted Fisher to try a little harder.

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on November 7, 2014
Excellent book! I was new to the market in 2008-09, this book would have helped through that period "of should I get in or not" in spring 2009. CNBC kept the fear level up with its, "double-dip recession" talk, "markets have gone too far, too fast" talk, volume is not in the markets talk, bear market rally talk, all the bs, scare tactics, "breaking news", and headline grabbers of today's media.
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on April 30, 2013
If you like reading about investing, you're going to love this book. I took it with me on a holiday to Sri Lanka, and couldn't put it down. Needless to say, Fisher isn't as popular with my wife as he is with me.

The book makes so much sense (as Fisher usually does) and I recommend it highly to anyone who wants to understand markets from a historical perspective. Understanding history, I believe (as does Fisher) is a key to understanding the present. As Mark Twain once said, "History doesn't repeat itself, but it certainly rhymes." Read this book if you want to be a better investor.

Andrew Hallam
Author: Millionaire Teacher-- The Nine Rules of Wealth You Should Have Learned in School (Wiley 2011).
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on March 6, 2013
Fisher runs an investment advisory firm, is a columnist for Forbes and makes The Forbes billionaire list, so he is a very successful investor. The biggest surprise in the book is that he never gives the results of his firm’s investments except that he has beaten the S&P 500.

He delights in taking a historical perspective and with many quotes over decades shows the same reaction to big changes in the market. The major point is that there is a historical upward bias in the market that favors long term investing in stocks. He pokes fun at the new normal, jobless recovery, and many other terms that are repeated and shows great similarities from other periods.

He points out that studies show investors feel potential losses twice as strongly as gains. The best and hardest time to invest is when a new bull market is starting. We fear it is a bear market rally, for which there is no accepted definition. The idea of a very long-term bear market, called a secular bear is also difficult to define. Since the market has a long-term bias one could say we are in a very, very long bull market with occasional bear market pullbacks.
Studies show that the average investor would earn far more by keeping their funds invested rather than getting scared when markets get low and selling, and then waiting till the market looks profitable to buy close to the high.

Volatility is sensed as being higher than before, and that unpredictable events, black swans, are occurring more often. He shows many periods that have shown big changes in volatility, this is sometimes called risk. Generally higher risk pays better returns.

Fisher explains his mindset of constantly questioning basic assumptions, attempts to predict, discerning cause and effect. Is the cause of an effect the only cause, is the relationship actually the reverse? National deficits are supposed to be bad, but it means that the federal government is spending more, and over a year, each dollar spent is multiplied by six. More money to spend is usually better for stocks. The very few times we have had surpluses have been poor for stocks. He argues that the measure of debt affordability should be what % of our GDP is the interest on the debt, not the % the debt is of the GDP. Our national debt looks more positive from this viewpoint.

The argument is very strong that different stocks and funds go through unpredictable long-term ups and downs. Equity risk premium (ERP) is a measure of the premium investors get in equities over a risk free investment like 10 year Treasuries (or some other time period). This is a good short term measure, but not as a long term predictor of stock returns. The PE ratio is similar.

Housing prices also fluctuate and are not great just as an investment. Greenspan’s very low interest rates and the changing of the tax from a single lifetime exemption of $500,000 to one of $500,000 every two years, both combined helped create the housing bubble. Gold has been in a long-term upswing and is known for its volatility, and perversely long periods of little change. Fisher considers it to be just another commodity, but many others from China and India consider it to be special, and it frequently moves opposite to the market, and has some inflation protection. It is very difficult to trade in and out of any area of the market.

Some historical trends to be aware of: small cap do well off the bottom of a bear market (difficult to identify), very large cap stocks do well in the last stages of a bull market. Generally coming off the bottom of a bear the sectors that did the worst the last 6 months will go up the fastest. Narrowing the spread between long and short term interest rates favors growth stocks, widening the spread favors value stocks. Sectors such as financials tend to be more volatile, heath care less.

The effect of national elections has different effects since the driving force is politicians mostly are concerned with doing what it takes to get reelected. Actual results show the S&P changes: 8% 1st year, 9% 2nd year, 19.4% 3rd year, 11% 4th year of a presidency. Interestingly if a Democrat is reelected the market averages 14.5% up during the election year and 8.9% up for the inaugural year. If a Republican is reelected the market averages 10.6% up during the election year and 2.7% up for the inaugural year.

The point is that many of the “facts” we hear and read are partially accurate and frequently misinterpreted. Big moves in markets are due to myriad trends, facts and interpretations of what is happening. Having reality differ from expectations can be a big factor in market changes.

Markets are international and this can open more opportunity and the safety of diversification (except when it doesn’t). It is one of many factors that can affect markets. For example lowering tax rates is usually a positive effect increasing market values, but Fisher feels that what is going on globally, especially making trade easier, is far more important.

This is a very interesting opportunity to see a bit of how a very successful investor analyzes our surroundings and makes investment decisions.
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on December 17, 2014
I read the book how true the book talk about the markets and how they are being used alot of it. And it is human psychology have gotten in away of investing that is why alot of people ends up losing in the market. When there is abuse the makers acts like a rubber band it will come down or up either way. That history repeats it self. When you compare the roaring 20's to the present it's almost identical in pattern.
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on August 28, 2012
If anyone has money with Ken Fisher of Fisher Investments, they know how badly Ken has played the last 4 years. He may talk a good game, but his portfolios are another story. He has been trailing his benchmark 10 years running. He completely whiffed on the credit crisis in 2008, claiming as late as August of 2008 that the market would be up on the year. Client portfolios were down 60% on the lows. He is flat on the year for 2012, and the market is up 12%. He was down 10% in 2011, when the market was up 5%. He's a perma-bull whose time has past.
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on September 2, 2012
This is one of the best books I have read. Ken Fisher, a great investor takes on topics many investors fail to realize or admit to. He states the market is not predictable as market chartists etc seem to believe. He backs it up with graphs and facts. One of the best things he tackles is the Federal debt. He takes the little known view that debt is good as many businesses know. Right now the hype is to balance the budget. It should not be balanced and was balanced before the great depression. He points out that debt benefits individuals, institutions and governments with each borrowed dollar changing hands an average of 6 times, spurring growth. I have always believed it but no one does. If we cut the spending it will devestate many and cause another recession. Love this book and Fisher's take on everything.
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