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FIsher and Hoffmans Go Data Mining Again
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.