A nice short book of unconventional wisdom, mostly about investing.
The most common reason why people do not succeed is that their research is faulty or limited to the confines of what is immediately available. Only through meticulous research will you obtain the knowledge necessary for success.
Look through each and every financial statement you can get your hands on, including the detailed notes. If you just read the annual reports of companies, you will have done more than 98 percent of investors. If you read the notes of the financial statements, you will be ahead of 99.5 percent. Verify those financial statements, as well as future projections announced by the top executives, by doing your own legwork. Talk to customers, suppliers, competitors, and anyone else who might affect the company. Do not invest unless you can say with absolute certainty that you are more knowledgeable about this particular firm than 98 percent of Wall Street analysts. Believe me, it can be done. But only with the extra effort.
When investing widely in a particular nation, begin by checking the strength of the country's basic institutions. Does it have respect for the rule of law? Does it crack down on corruption? Does the legal system facilitate ethical corporate behavior? You cannot do this by simply reading articles in magazines and newspapers. You must go to the country yourself and see, for example, if there is a currency black market. If one exists, then you know that the country has problems. Black market exchange rates exist only when the government is imposing artificial controls. The difference in parity between the official currency rate and the black market rate indicates the gravity of the problem in that nation.
In cases where I'm making an investment decision (or a decision about for whom to vote, et cetera), I cross-check information from the media with other available sources including government reports, international organizations, company reports, competitive views - whatever I can find.
George Patton once put it, “If everyone is thinking the same thing, someone is not thinking.”
If you are ever in a country that descends into war, I suggest you leave until it is over. Truth is always the first casualty of war, so you need to get your distance.
Your mother and I explored moving to Shanghai or Spain, and spending time in Punta del Este, Uruguay, or Cochabamba, Bolivia.
To think outside the established framework, to examine things independently - this is true philosophy. Studying philosophy trains a person to examine every concept and every “fact.”
Two ways of thinking:
Induction (proceeding from a specific conclusion to more general observations)
Deduction (proceeding from general evidence to a specific truth)
Neither method is better than the other. What is important is that you train yourself to apply both, so that you can think in a balanced way.
As an investor, I am always in search of “what is bearish.” When people are crazed about an overheated market and are oblivious of other investment possibilities, that's when I find a good deal.
Before you take your first overseas trip, study the history of your destinations. Without the historical context, you will not be able to fully understand much of what you observe. You can be a tourist and enjoy the scenic sites, but understanding is a far richer experience.
As soon as I hear everyone making claims for something that supposedly is innovative and unprecedented, I check whether the market is overheated and often pull out my capital. Be extremely doubtful when you have people proclaiming, “It's different this time.” Historically, nothing emerges as so entirely different; such claims are indicative of a state of mass hysteria.
As soon as you hear in the news about a hard landing in the Chinese economy similar to those in 1989 and 1994, consider it the best opportunity to buy into Chinese stocks or commodities.
Things were growing so fast that companies could not even get more office space (a sign of trouble, I now know).
Don't sell short simply because prices are high. Never sell short unless prices are astronomically expensive, and you detect negative change coming.
A good rule of thumb is to sell during times of market hysteria and buy during times of panic.
A cheap price alone is not sufficient reason to invest. If something is forever cheap, then it has no recognized value, and its stock may very well remain a worthless piece of paper. For a bargain to soar in price, there has to be a catalyst, and from an investment perspective, that catalyst is change. Whatever the change may be, it must have a significant impact within a country or an industry, and it must also be recognized as significant externally within a few years. If the change is real, others will notice the improvement, and prices will rise to reflect the new circumstances. New investors will catch on and prices can rise considerably for years.
If you are looking for success, be quick to start something new, something that no one else has tried.
And if you want to invest, look for the bear market.
Many have frequently profited by investing where no one else saw potential.
You can be rich if you have the courage to buy something while it is still under the radar of conventional wisdom.
The more certain something is, the less likely it is to be profitable.
Do not think in terms of what you wish. Never act upon wishful thinking.
Anytime that you think you've become a financial genius - when, in fact, you simply have had the good luck to turn a profit - it is time to sit back and do nothing for a while. If you stumble upon success in a bull market and decide that you are gifted, stop right there. Investing at that point is dangerous, because you are starting to think like everybody else. Wait until the mob psychology that is influencing you subsides.
My most successful investments were those in which I invested the most time and hard work, collecting all available information and researching every detail. If you don't understand something - I mean truly understand it - you will never be successful. Likewise, if you merely dabble in an area, you are gambling, not investing.
Ignorance is born of an outsized sense of self-importance. Never let yourself become arrogant. Study hard. The more you learn, the more you will realize how little you know - and armed with this humility, you will never lose sight of the distance that separates self-confidence and self-importance.
Anything that is a “must see,” “must try,” “must read,” should almost certainly be avoided, especially if it is popular.
Never ask someone how much money he or she makes, or how much something costs. Never tell someone how much your things cost. Never discuss how much money you make or have.
Always be early for appointments.