I am reading ‘Taming the lion’ by Richard Farleigh. Been only through a couple of chapters, yet, I am hooked. His views are very clear and the reasoning is impeccable. Nice read and very informative.
On a regular basis, we hear analysts who predict multiple future events like “Sensex is about to re-trace to 12380 in short term before making another upmove to 15800 levels and subsequently to break the old highs sometime in 2009″.
As if the future of markets and even the exact levels therein is something well within their predictive capacity. I wonder why they failed see the same in Jan 2008 while the same experts predicted “at 21 PE and 21000 levels, India has a lot of steam left (compared to china which traded at 45 PE aparently!) in terms of upmove potential”.
Months of market bloodsheds (and many suicides) later, they still predict stuff with absolute confidence and with the air of someone who knows it all.
One theory of Richard which strikes me most is that the market prices are about correct at any given time. Put differently, the collective intelligence of the system is far greater than any individual professional/trader/investor.
The most common mistake is to assume that investment success is easy. This is encouraged by so called “expert” views which appear in the media and imply that market prices are somehow flawed, and that there are plenty of opportunities.
The irony is that in thinking it’s too easy, investors make it more difficult. It leads them away from the truth: the starting point must be that market prices are normally about right, and that any opportunities can only be found by identifying their cause and understanding how they work. We need to be careful, experts are vastly over-rated. Most professionals in the markets are not actually outguessing the price, but are making money from clients, transactions and commissions.
Probably this is something CNBC’s and NDTV’s of the world do not want you to read.
I am also reading ‘How to get rich’ by Felix Dennis in parallel. This book impresses me more on the literary quality rather than the real financial advice provided. Well written, amusing and liberally sprinkled with poetry-his own and of other poets, and lots of nice quotes.
In nutshell his message is this: Ardently want to be rich. And be compulsively determined. And be prepared to sacrifice anything (happiness and health included).
I am more inclined to be the Lion Tamer rather than the Gladiator.
