418 of 432 people found the following review helpful
on January 16, 2007
Full disclosure: I am a financial advisor. And I've read Kenneth Fisher's column in Forbes since he started writing it 22 years ago.
This is a superb book. The sub-title is "Investing by Knowing What Others Don't" and it is the best book I've read on investing and asset managment in years.
The author is an investment manager based in California, who also writes a monthly column in Forbes magazine. He's a pretty successful guy, ranked 297 on the latest Forbes 400 Richest American's list. Yup. That's successful allright.
His father is Philip Fisher, also a pretty famous investment manager, who was known for recognizing good companies, and then buying and holding their stock - sometimes for decades. Lastly, Fisher has an interesting philanthropy - redwood trees. He has endowed the only university chair dedicated to a single species of tree.
On to the book. Here's the only negative: Fisher has a slightly cute sense of humor, which I found a little annoying at times.
But the pluses are huge.
The three questions are: (1) What do you believe that is actually false? (2) How can I fathom what others find unfathomable? And, (3) What the heck is my brain doing to blindside me now?
Each of the first three chapters is dedicated to explaining one of the three questions. The first chapter debunks many "facts" about markets that are actually wholly or partially incorrect myths. Here are two examples: High P/E markets are riskier than low P/E markets (P/E stands for price-earnings ratio and is one of the most fundamental valuation metrics for stocks) and a weak U.S. dollar is bad for stocks.
In the second chapter Fisher makes the point that the only way to beat the financial market is to know something the market doesn't know, or at least ignores. This is pretty basic. The market (prices of stocks, commodities, currencies, bonds, etc) has already discounted in the underlying pricing known knowledge; to outperform the averages, you have to know something not widely known.
The third chapter is how our mental processes frequently work against us in trying to sort through meaningful data and relationships. Fisher refers to the market as "The Great Humiliator" (TGH) where we are constantly at risk of allowing our emotions, like pride and regret, get in the way of rational decisions. For example "confirmation bias" where we seek evidence confirming our preset notions and reject contradictory evidence. And of course very applicable to other aspects of our life, besides our finances.
The remainder of the book - six chapters plus a short and interesting conclusion - expands on the three questions. The chapters have titles like "Capital Markets Technology", "Shocking but True", and the last chapter "Putting it all Together."
Much of the analysis is quite brilliant. For example I loved his examination of U.S. budget deficits, and why they are not negative for the financial markets - or for the country. COULD they be a negative - YES - but only if we do certain stupid things in managing our fiscal and monetary policies. He step by step builds a powerful case that, if anything, the United States is underleveraged - we could easily manage more debt. He gives several examples of debt-free developed countries with stagnant economies and lower standards of living.
I could go on and on. Get the book if you want a mind expanding read about managing your money (And your life! Much of what he says has applicability to all facets of life). Their are 42 pages of appendixes, including showing his audited records as a prognosticator in his Forbes column and the performance of his money management firm.
His record shows that Fisher doesn't just talk the talk; he has walked the walk.
193 of 205 people found the following review helpful
on January 6, 2007
I am an individual investor who has read dozens of books on investing, the markets and economics. I have read Ken Fisher's columns in Forbes but I have never acted on his recommendations. Fisher has turned many Wall Street myths on its head. For examples: high PE ratios do not necessarily imply reduced stock returns; one should think about earnings yield rather than PE ratios and plot earnings yield against 10-year bond yields to decide on value; budget surpluses can actually dull stock returns; trade- account- and budget-deficits are all potentially good for the stock market; an inverted yield curve is not necessarily bad for the stock market; the global yield curve is important, etc. The 3rd section is about behavioral finance. A better take on behavioral finance is Beyond Greed and Fear by Shefrin. Fisher talks about the importance of international investing and he does not believe it really matters whether the dollar is strong or weak. He thinks that if you have 10 year time horizon, you should be 100% in equities. He has low regard for gold and commodities. He thinks high oil prices are not necessarily bad. His opinions are backed up with well researched data, with lots of graphs and statistics which is easily understandable even for a no-Math brain like me. I learned so much from this book.
I do have some criticisms. There is a lot of redundant material and some repetition. Editing could have been better. He criticizes Warren Buffett's Berkshire Hathaway for underperforming the S&P in 2003, 2004, and 2005. But Buffett had a fantastic return over the long run. In the appendix of the book, between 1996 and 2006 Fisher's annualized return was 11.5% after fees. From 1995 and 2005 Buffett's average annual gain was more than 18% after taxes. (This does not include 2006 when Berkshire Hathaway had a blockbuster year gaining almost 25%!) Which is why I have 25% of my portfolio in this one stock, violating Ken Fisher's rule of not having more than 5% in one stock.
73 of 75 people found the following review helpful
on February 4, 2007
Whatever philosophy about investing you may hold, Ken Fisher's "The Only Three Questions That Count: Investing by Knowing What Others Don't" will enrich your thinking and improve your performance. Make no mistake: this book is not just good; it's great!
As the title implies, to get to the nuggets of truth--and superior performance--that others miss, you must ask three questions: what do you believe that is actually false; what can you fathom that others find unfathomable; and what the heck is my brain doing to blindside me?
Fisher addresses these questions with wit and verve, writing in a breezy and provocative style that makes the reader want to keep turning each page. Fisher's argument begins with the efficient market hypothesis--that all information known by the investment community is already priced into the markets. Absent trading on inside information, which is illegal, how, then, can an investor beat the market? The answer, Fisher says, is to ask the first of the three questions and realize that much of what is believed by others is simply not true.
Fisher shows this by testing the mathematical correlation between commonly held beliefs and subsequent investment returns. Are high P/E markets riskier than low P/E markets? Will government deficits lead to economic collapse? Will rising oil prices seal the doom of common stock returns? Analyzing the historical data, Fisher shows that each of these beliefs--and many others--is a myth.
Once an investor accepts that the conventional wisdom is mistaken, he can next ask Fisher's Question Two and fathom what others find unfathomable by ignoring the noise and focusing on events and relationships that do correlate.
The third and final step in Fisher's methodology (what the heck is my brain doing to blindside me) helps investors to avoid typical mental errors--overconfidence, hindsight bias, confirmation bias, and order preference. Many readers will be familiar with this material, which draws on the realm of behavioral finance, but Fisher's presentation is both crisp and enjoyable.
At the conclusion of the book, Fisher instructs the reader on how to use the three questions to build a portfolio that beats the market. Distilled to its essence, his advice is to adopt a benchmark, think globally, and overweight or underweight when asking the three questions gives the investor an advantage over the market.
The book is a treasure trove of keen insights. One piece of advice I found particularly helpful was Fisher's observation that the market offers just four possibilities: to be up a lot, up a little, down a lot or down a little. Only in the situation where an investor reasonably concludes the market will be down a lot does it pay to alter one's asset allocation and disfavor equities, since over long periods of time, the market moves inexorably higher, and in the other three scenarios, efforts to time the market may cause the investor to miss equity upsides when the downside risk was minimal in any event.
Occasionally, Fisher's unabashed praise of deficit spending and freewheeling capitalism seems a bit over the top, sounding more like a paean to a Republican political platform than sound economic analysis. Still, Fisher is convincing in his argument that our fears about these policies may be misplaced and that they may promote the growth of the economy and boost stock markets worldwide.
After reading the book, you will never again take any conventional investment advice as a given--and you will be better off as a result.
66 of 69 people found the following review helpful
on December 13, 2006
In the Preface to The Only Three Questions That Count, Ken Fisher asks, "Who am I to tell you anything, much less anything that counts?" So, who am I to write a review? Well, for starters, I've actually read the book. And that must count for something!
In this book, Ken Fisher brilliantly debunks common beliefs held by most of today's investors and blazes a new path for investment success based on his own time-tested strategies, "out of the box" thinking, and continual self-examination. There aren't many investment books out there that can have you laughing and scratching your head at the same time, but this book manages to do just that. My favorite subchapter: "Anything the French Can Do We Can Do Better."
For a student of the market such as me, the countless charts and graphs throughout the book and the 40 pages of market data found in the Appendix (going back to 1830!) are worth the price of the book alone. But it's about much more than numbers and charts, it's about approaching the markets as a science, not as a craft, as most investors now do. This will be an uncomfortable leap for many readers because Ken Fisher asks you to put all of your previously held beliefs about the markets aside and to essentially start anew. And that starts and ends with the three questions.
So, what are the three questions that count? 1) What do you believe that is actually false? 2) What can you fathom that others fund unfathomable? 3) What the heck is my brain doing to blindside me?
For starters, he argues (and I would argue proves) that P/E ratios tell you nothing about risk, higher oil prices are good for stocks, and gasp, America actually doesn't have enough debt! How did he come to these conclusions? As he explains, by flipping things around, back testing ideas with historical market data, and making sure that anything found by looking at US markets can also be found in foreign markets. Example: The P/E ratio tells you nothing about market risks and opportunities, but the E/P (or earnings yield) of the market compared to global bond yields tells you a lot.
At the end of the book, Ken Fisher urges any reader who can debunk one of his own beliefs by using a scientific, yet simple spreadsheet analysis (he actually explains in the book) to write him and share their findings. He is humble enough to admit that the book is much bigger than him. It's about using real science to debunk any market belief that is not rooted in truth, perhaps even one of his own. And for a man who manages more than $30 billion and doesn't seem to need our help, I simply find that unfathomable!
145 of 162 people found the following review helpful
on January 3, 2007
I am an investment professional and partner in a firm with over $700 million under management. As such, I'm a guy who thinks about investing a minimum of 12 hours a day, most days a year, and has done so for 13 years now. I read a lot about my profession, because I assume that I will never know everything, so my entire career will be driven by continual education, So I hope it is clear to you that I take investing very seriously.
Let me be very clear when I tell you that this book is really a masterpiece. It belongs in a very, very elite category of investment tomes. The "knock" on Fisher is typically wrapped around his firm's aggressive marketing techniques. These techniques irritate some of people, particularly his fellow professionals. Not me. I just see Ken's asset-gathering techniques as more evidence of this successful ability to "think different," and I suspect that some people in the industry are more than a bit jealous of Ken's enormous success in the last few decades.
Anyway, buy the book. Read it once, then read it again. Read it if you are a beginner or a seasoned pro. You're going to learn some cool facts, and you're going to see some common investing myths "busted." This alone is worth the price of the book. But most importantly, you're going to learn how to think for yourself, which is very valuable indeed. In fact it's priceless.
107 of 119 people found the following review helpful
on July 17, 2007
Fisher acknowledges that being smarter and better trained is not enough to beat the market based on commonly available news and information. (Page xxiii) Yet he claims that his three questions will allow you to do just that. The inconsistency is breathtaking. By using his three questions, he says, you can know things that others don't. He is in effect claiming that his three questions will make you smarter than the market, because you will be able to look at publicly available information and then out-think and out-analyze other investors. Sorry, I'm not buying it. Maybe he would be worth paying attention to if his track record were truly outstanding. It isn't. The book's Appendix K gives his track record with real investments. His 10 year annualized return is 9.9%, compared to 8.3% for the S&P 500. His return is quite good but not impressive enough to discount the role of luck. What would be impressive? Well, if Fisher really had a handle on beating the market, he ought to be able to beat the market by a convincing margin, say 1000 basis points. Or even 500. Performance that good, or even better, is quite possible. The Olympic standard is Warren Buffet: when he was managing an investment partnership, from 1957 to 1969, he got a return of 29.5% per year before his fee, compared to 7.4% for the Dow. On the other hand, Fisher's three questions are great questions for stimulating serious thinking. And some of his contrarian arguments are interesting and worth pondering.
28 of 29 people found the following review helpful
on September 2, 2007
I consider myself fairly well read when it comes to investing, but I was really suprised by this book.
I've poured through books by and about Warren Buffett, Charlie Munger, Jim Rogers, some of the new classics (Market Wizards by Schwager) and some of the old classics that never go out of style (Reminiscences of a Stock Operator, Money Game). I was actually just browsing through my local bookstore when I saw this.
Fisher's well known for his advertising. His ads though, and his style turned me off (somewhat analogous to a doctor that advertises on a bus stop or a lawyer advertising in the back of a phone book, you just don't quit trust it).
He's got some real gems in here though. The book could have been about 150 pages shorter, but the essence of it, that the only way to beat the market is to know something that others don't, is spot on.
If you answer his 3 questions before investing (especially #3, what is your brain doing to mess you up), you'll be well ahead of the game.
It's amazing that people will invest huge sums of money in the market, and not even know what the biases are that cause misjudgement. Fisher does a beautiful job of reducing things down to "primitive man", and what was great for hunter gatherers 50,000 years ago hunting lions is terrible for your portfolio.
Still, I think the book falls into some traps that most other investment books fall into:
-Some of it is too neat, too ivory tower, too clean and mathematical. There's no people in the book, there are no memories.
For example, he thinks stocks have no correlation to past results. The odds of a stock moving tomorrow up or down are 50-50.
But investors have memories. Investors got scarred for life after the '29 crash, they never felt the same way about stocks again. I don't think stocks have a 50-50 chance of moving up or down after that. It also doesn't take into account where companies are in their life cycle. It doesn't take into account competitive advantage (or lack thereof).
-A direct quote from the book..."Since 1926, there have been 66 15 year rolling time periods. In 61 of them (92%), stocks beat bonds, returning an average of 481% while bonds returned 150%"
He then adds to the arguement, and basically says stocks always outperform bonds, buy stocks. But most people get into stocks at the wrong time! There's no mention of valuation, there's no mention that people buy stocks when everyone else is buying them.
People can and do lose money...if you bought stocks in the mid 20's or later, you didn't break even for 20 years. If you bought stocks during the raging bull market of the 60's and held, you got killed. The DOW was at 700 in the early 60's and 800 in the early 80's, after some grueling declines. Business Week ran their famous (infamous) cover in 1979, "The Death of Equities". People were putting their retirement money into gold and diamonds back then.
People do not buy stocks equally during all time periods. There's some other arguements made that can be a little dangerous. Some of the arguement made about the deficit, the declining dollar, I don't know.
Fisher is obviously brilliant, he's on the Forbes 400, but no one should be above questioning or critical thinking. Absolutely come to your own conclusions. I don't think some of the arguements will hold up in 15-20 years.
But still, it's well worth adding to your library. Some of the key chapters should be re-read many times to get all the nuances.
39 of 42 people found the following review helpful
on December 8, 2006
I read a review of Ken Fisher's new book The Only Three Questions That Count in the Financial Times in November. The book has only recently been published and I devoured my copy over a weekend. I have read many investing books, but to me, this book goes much farther than simply investing. Ken's book consists of three simple questions that he walks you through and he gives examples of how to use these three questions. He has charts, graphs, and lots of data to back up his arguments, but basically at the core, Ken gets to the heart of how you think and how to analyze why you think that.
Ken Fisher is an interesting guy himself. He's on Forbes Richest Americans list, he's friends with Jim Cramer who wrote the foreword, he's a Forbes columnist, and he manages $30 billion for his clients. I thought the book was thoroughly engaging and I actually laughed in certain places. There are not many investment books out there that show you how to be a better investor, while being tons of fun to read.
If you are a hard core investor - and been investing for years and years - or a neophyte - just starting to wrap your head around the big bad stock markets - I would highly recommend buying this book. It's a really intuitive, informative look at the markets and how they shape our world.
26 of 27 people found the following review helpful
on January 22, 2007
This book is so refreshing. I'm just over half way through and yet it has already changed my way of thinking in several areas. Ken has debunked several of the commonly accepted investment guidelines used by amateurs and professionals to make their investment decisions. I now think differently about the "trade imbalance" and the "national debt". I'm thinking more globally. I also have a better understanding of why it is so difficult for so many to accept reality in these areas. And, its all delivered in a very readable format with a dry wit. I can't wait to see what the rest of the book has to offer. Thanks Ken Fisher. You've opened my eyes.
30 of 32 people found the following review helpful
Who's the best investor of the 20th century? Most would say Warren Buffett. Upon close review, it's possible that Ken Fisher's father, Philip Fisher might be the man more deserving of that title, or maybe Benjamin Graham. Buffett looks upon both men as his mentors. After reading this book it became obvious that Ken Fisher is very clearly his father's son.
If you are a reader of investment books, you probably realize that most of them don't have all that much to say, and very few give you concepts that are truly ACTIONABLE. I have found, and maybe you have too, that only a handful of books out of every 100 are truly special. As regarding investments, "The Only Three Questions That Count" makes the list.
This book is like anything else in life. You immediately know when something is fabulous, whether it's a book, a vacation, a new acquaintance, or a life experience. You just know when the real thing has turned up. I always ask myself some questions about books as soon as I get to the first page.
Is the author scattered? Is the book organized in a fashion conducive to learning? Is the author wrapped up so tight in his own mask of brilliance that he can't make himself understood? These are the questions I naturally gravitate towards when going through a book, and I do about a book a day. The author has one overall premise that is pervasive to understanding this book. "INVESTING BY KNOWING WHAT OTHERS DON'T". Here's why you need to read this book:
· HE RUNS HIS OWN MONEY MANAGEMENT FIRM
This has allowed Fisher to amass a fortune putting him on the Forbes 400 List. This means very simply that the man is the REAL THING. Every day he is in the trenches being measured by one criterion. How has he performed against the ENTIRE world of Professional Money Managers, and in Fisher's case, he has consistently won throughout his long career. He's writing about what he knows, knows so intensely that he is acknowledged to be one of the best in the world at it.
· HE CONTENDS THAT IT IS OUR BELIEF SYSTEMS THAT DISALLOW US FROM MAKING BIG MONEY IN THE MARKET
Fisher is the only person I have read, and I have read all of them, who gets down into the very basic concept of what is our core beliefs as human beings, and how have these core beliefs held us back from distilling the truth about how to make money in the market. He's dead on accurate. He attempts to answer 3 vital questions in the book.
· Question 1) WHAT DO I BELIEVE THAT IS ACTUALLY FALSE?
This is the first KEY question that Fisher believes we must all ask ourselves as it regards the market. We must challenge ourselves to be absolutely brutally honest. Fisher believes that such an absolutely core belief that is false, will be a belief shared by the vast majority of other investors. If you want additional information on this concept, study Carl Jung the early 20th century psychoanalyst, and his concept of the SHADOW.
· Question 2) WHAT CAN I FANTHOM THAT OTHERS FIND UNFATHOMABLE?
This has to do with out-of-the-box thinking, to use Fisher's term. Make sure your poker-playing buddies aren't around when you indulge in this type of thinking. You will get sucked right back into your daily habitual ways of thinking about things.
If you really want to go deep into this way of thinking, study the history of Einstein's refusal to accept the veracity of Quantum Theory. You will be absorbed and fascinated by it. If you want to go deeper, read Thomas Kuhn's "The Structure of Scientific Revolutions" which will change everything you have ever believed about the history of science, and show you out-of-the-box thinking at its best.
· Question 3) HOW CAN I OUT-THINK MY BRAIN, WHICH NORMALLY DOESN'T LET ME THINK TOO WELL ABOUT MARKETS?
In essence Fisher is telling us that the problem with our stock market performance is NOT in the stocks, it is WITHIN us, in our souls, in our minds, in our internal programming. Thirty years ago, John Train said basically the same thing in a book called the "Money Masters". You can a used copy of the book. Train had interviewed the greatest investment minds of that time including Buffett, Templeton, and Ken Fisher's father Philip Fisher.
It seems that Fisher believes that we have to delve into our brain, and come to a true understanding of our real selves, in order to enter the world of investments, and make wise choices. You can see this kind of thinking play out right before your eyes when Buffett talks. There is clarity of self in his thinking that I have never seen in another human being.
These three questions become the subject of Chapter 1, 2, and 3, in Fisher's book. These questions are overall subsets of Fisher's main concept, which is again, "INVESTING BY KNOWING WHAT OTHERS DON'T. The author then spends the next several hundred pages taking you through various concepts, examples, histories, and whatever he believes is necessary for you to transform yourself into the type of investor that he is.
If there is a leap of faith here, it is that he believes as human beings we can overcome whatever it is that is holding YOU and ME back from being all that we can be as investors. If you have an OPEN MIND, and are willing to give this author an opportunity to help you be different from the crowd, he just may be right. Good luck to you, and I hope that you have found this review helpful.