How Futures Trading Changed Bitcoin Prices PDF Summary

How Futures Trading Changed Bitcoin Prices PDFSome hail it as the future; others warn that it may be the newest economic bubble.

Either way, few people haven’t heard of bitcoin by now.

In this May 2008 FRBSF Economic Report, authors Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak and Patrick Shultz take a careful look at “How Futures Trading Changed Bitcoin Prices.”

Who Should Read “How Futures Trading Changed Bitcoin Prices”? And Why?

“How Futures Trading Changed Bitcoin Prices” is not exactly an article for people who have been, are, or are planning to trade with bitcoins or bitcoin futures.

Simply put, there isn’t any investment advice here – especially not in relation to Bitcoin.

However, there is an interesting conclusion concerning the relation of price dynamics and futures trading in general.

Which should make this article interesting for any future investor or trader.

About Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak and Patrick Shultz

Galina B. Hale Galina B. Hale is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco.

Arvind KrishnamurthyArvind Krishnamurthy is a Professor of Finance at the Stanford Graduate School of Business, with a Ph.D. in Financial Economics from MIT.

Marianna Kudlyak and Patrick Shultz are both research advisors in the Economic Research Department of the Federal Reserve Bank of San Francisco.  

“How Futures Trading Changed Bitcoin Prices PDF Summary”

Nobody knows who Satoshi Nakamoto is, or even if it is one person for that matter.

But many people know that, almost a decade ago, he/she/they developed the bitcoin and devised the first blockchain database.

The first decentralized digital currency, bitcoin was hailed by the leaders of the bitcoin movement as “inherently anti-establishment, anti-system, and anti-state,” not to mention “fundamentally humanitarian.”

Now, between January 2009 and February 22, 2017, bitcoin’s price never exceeded $1,150.

And, then it suddenly started skyrocketing, reaching $19,511 on December 17, 2017.

Coincidentally, the day bitcoin reached its peak was the very same day the Chicago Mercantile Exchange (CME) opened up a futures market for the cryptocurrency.

In barely a month, bitcoin’s price fell to half of its peak price and is currently at half of that, selling at about $6,000 per bitcoin.

So, you can’t blame the authors of “How Futures Trading Changed Bitcoin Prices” for seeing much more than just a coincidence between bitcoin’s fall and the opening of the futures market for bitcoins.

Even less so if you take into consideration that the same happened in the home financing market in the 2000s, when “financial innovations in securitization and groupings of bonds” attracted optimistic investors, before instruments were created which “allowed pessimistic investors to bet against the housing market.”

Similarly, the advent of blockchain introduced a new financial instrument, bitcoin, which optimistic investors bid up, until the launch of bitcoin futures allowed pessimists to enter the market, which contributed to the reversal of the bitcoin price dynamics.

Simply put, before December 17, 2017, there was no way for pessimists to bet on the decline in bitcoin prices.

The only ones who traded were optimists who, by buying bitcoins, were betting on the rise of bitcoin.

It’s always easier to bet on the rise because all you need to do is just buy a bitcoin.

However, once CME futures trading for bitcoin was launched, pessimists entered the equation.

Now, they could finally bet on the bitcoin prices going down, by short selling the digital currency.

The prophecy was, once again, self-fulfilling: as many people took short positions on the digital currency, its price started falling, and this triggered even more pessimism.

According to the authors, this pricing dynamic happens over and over again:

Once derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value.

Now, the only question left is: do we know the real price of bitcoin?

Of course, this is not an easy question to answer.

However, in time, by analyzing some fundamentals such as mining costs, transactional demand, regulatory governance and the use and benefits of rival cryptocurrencies, investors will reach a clearer picture of bitcoin’s value.

By then – it’s all a speculation.

Key Lessons from “How Futures Trading Changed Bitcoin Prices”

1.      Bitcoin Was the First Decentralized Digital Currency
2.      Bitcoin’s Decline Coincided with the CME’s Opening of a Futures Market for the Cryptocurrency
3.      In the Future, Sell Before the Futures

Bitcoin Was the First Decentralized Digital Currency

Bitcoin is a cryptocurrency, i.e., a digital currency not backed by any asset of intrinsic value.

Launched in 2009, it was the first decentralized digital currency since its system was designed to work without administrators or a central bank.

Bitcoin’s Decline Coincided with the CME’s Opening of a Futures Market for the Cryptocurrency

Between 2009 and February 22, 2017, bitcoin’s price was relatively steady, never passing the $1,150 threshold.

However, during the next 11 months, it skyrocketed, and on December 17, 2017, one bitcoin was selling at a price of nearly $20,000.

That very same day, the Chicago Mercantile Exchange opened the futures market for bitcoin.

This provided pessimists with a mechanism to express their opinion about bitcoin by short selling. In merely a month, the price of bitcoin halved, and half a year after that, it revolves in the realm of $6,000 per bitcoin.

In the Future, Sell Before the Futures

“How Futures Trading Changed Bitcoin Prices” argues that Bitcoin’s price volatility is consistent with the rise and collapse of the home financing market of the 2000s, i.e., that, once again, the price dynamics was reversed once futures were launched.

If the logic of the authors is sound, be sure to sell before the futures start trading during the next investing craze.

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“How Futures Trading Changed Bitcoin Prices Quotes”

The launch of bitcoin futures allowed pessimists to enter the market, which contributed to the reversal of the bitcoin price dynamics. Click To Tweet

The rapid run-up and subsequent fall in price after the introduction of futures does not appear to be a coincidence. Click To Tweet

As speculative dynamics disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation. Click To Tweet

Optimists bid up the price before financial instruments are available to short the market. Click To Tweet

Once derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value. Click To Tweet

Our Critical Review

“How Futures Trading Change Bitcoin” is a well-written, tightly-structured, thought-provoking analysis of a hotly debated topic. Highly recommended.

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A Short History of Financial Euphoria PDF Summary

A Short History of Financial Euphoria PDFReady for a new speculative bubble?

Because as John Kenneth Galbraith’s “A Short History of Financial Euphoria” demonstrates, if there’s one thing history has taught us it’s that there will surely be one very soon.

Read ahead to find out why.

Who Should Read “A Short History of Financial Euphoria”? And Why?

In “A Short History of Financial Euphoria,” John Kenneth Galbraith offers “dourly irreverent analyses of financial debacle from the tulip craze of the seventeenth century to the recent plague of junk bonds.”

Chances are you’ll forget the origin and the effects of all of them in the blink of an eye, which will expose you to the manipulative schemes of charlatans and cons in no time.

Which is why it’s all but necessary to not merely read, but also constantly reread Galbraith’s 100-page classic.

John Kenneth GalbraithAbout John Kenneth Galbraith

John Kenneth Galbraith was a Canadian-born economist and diplomat, one of the leading proponents of American liberalism of the 20th century.

A long-time Harvard faculty member and professor, Galbraith served in the administrations of four American presidents (Roosevelt, Truman, Kennedy, Johnson).

One of the few people to receive both the Medal of Freedom and the Presidential Medal of Freedom, Galbraith was USA’s Ambassador to India under Kennedy and a widely respected public intellectual for the duration of the Cold War.

A prolific author, he wrote numerous books, including a few successful novels. His trilogy on economics – “American Capitalism,” “The Affluent Society” and “The New Industrial State” – is still hotly debated and thoroughly analyzed.

“A Short History of Financial Euphoria PDF Summary”

There is nothing in economic life,” writes John Kenneth Galbraith near the end of his “Short History of Financial Euphoria,” so willfully misunderstood as the great speculative episode.

And this, even though on the face of it, everything should be quite plain and simple.

It all starts with a bidding war over some asset a few people believe is so rare and important that its value should only increase in the future.

That’s, after all, the basic economic rule: when supply is low, and demand is great, prices rise.

Add to this the yearning desire of many people to become rich overnight, and you get a recipe for disaster!

Because soon enough, investors join in.

Why should they not?

It’s their job to get the most out of anything, and bubbles are the perfect way for them to earn some money.

And since they are usually the earliest players, they actually do – and they do it big time!

Of course, these investors are not exactly humble people, so they start tooting their own horns, and soon even more people start investing in the asset the price of which, in the meantime, has blown ridiculously out of proportions.

The scary thing is that in this second group of people there are usually even quite a few intelligent analysts who are aware that at some point in the future this bubble must burst, but who, nevertheless, expect to be able to take their money back before that happens.

Some do. Most don’t.

And when the inevitable happens – the market crash – many lose substantial amounts of money; many more lose absolutely everything.

The strange thing: in a decade or so, financial euphoria strikes again.

Why?

In the opinion of Galbraith, it is because of several unchanging factors.

Since these are probably the most important insights of his book but are mostly scattered through brilliant historical analyses of many speculative bubbles, we tried to systematize them so that you can follow them better.

#1. Short-term fiscal memory

When it comes to money, Galbraith says, people never seem to learn anything. “There can be few fields of human endeavor,” he says, “in which history counts for so little as in the world of finance.”

In other words, when it comes to get-rich-fast schemes, you can burn yourself numerous times, because wanting more is part of your very human nature.

Rationality is just a note on the margin.

#2. The fallacious link between wealth and intellect

Most people believe that wealthy investors are, by definition, smart.

Which is why they have devised all those fancy epithets about the likes of Warren Buffet, Peter Lynch, and George Soros!

However, since almost everything that happens in life and in the markets is governed by chance, it’s all but crazy to believe that some people have found a surefire way to earn money.

In fact, most of the time, they have just been lucky.

The majority doesn’t think so.

So, it is inclined to be the victim of Ponzi schemes and speculative bubbles.

#3. Nobody believes the pessimists

Almost every bubble comes with a Cassandra or two.

Before the market crash of 1929, Paul M. Warburg foresaw the collapse and the depression, but his warnings fell on deaf ears, with the public claiming that he (a Jew) was “sandbagging American prosperity.”

Most wanted to believe Irving Fisher who famously proclaimed that the “stock prices have reached what looks like a permanently high plateau.”

Just a few days before the market crashed.

#4. Everyone chooses to ignore the real reasons

Charles Mackay, in his remarkable 1841 classic “Extraordinary Popular Delusions and the Madness of Crowds” (a defining influence on Galbraith’s book which thoroughly recounts its three chapters), commenting on the South Sea Company bubble, writes thus:

[In the autumn of 1720,] public meetings were held in every considerable town of the empire, at which petitions were adopted, praying the vengeance of the legislature upon the South Sea directors, who, by their fraudulent practices, had brought the nation to the brink of ruin. Nobody seemed to imagine that the nation itself was as culpable as the South-Sea company. Nobody blamed the credulity and avarice of the people-the degrading lust of gain…or the infatuation which had made the multitude run their heads with such frantic eagerness into the net held out for them by scheming projectors. These things were never mentioned.

The truth is – these things never are.

Even though:

#5. Bubbles are an inherent part of the market

Speculation is part of the market, and it will always be that way.

Contrary to what many will say, the market is not infallible, since humans are not infallible as well.

Regulations can help, but even they can’t contain mass euphoria and gullibility.

So, as long as there are people and markets, there will be bubbles as well.

Key Lessons from “A Short History of Financial Euphoria”

1.      People Suffer from a Short-Term Fiscal Memory
2.      Believe the Pessimists – for Your Own Sake
3.      Bubbles Are Inherent Part of the Free-Enterprise System

People Suffer from a Short-Term Fiscal Memory

When it comes to money, people tend to forget everything, including the most disastrous financial crashes in but a few decades.

That’s why it’s too optimistic to hope that people will ever learn their lesson when it comes to speculative bubbles.

Believe the Pessimists – for Your Own Sake

Every speculative bubble comes with a Cassandra or two: a prophet of disaster whose prophecies nobody believes until it’s too late.

Unfortunately, more often than not – or, rather, for most of the people involved – they are the only ones who are actually right.

Could it be that the pessimists are also right in the case of, say, Bitcoin?

Bubbles Are Inherent Part of the Free-Enterprise System

Markets are not perfect.

Bubbles are a part of them, and, as long as there are markets, it is inevitable that many people will lose huge amounts of money due to ruinous speculation.

The earlier you realize this, the better for you.

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“A Short History of Financial Euphoria Quotes”

The circumstances that induce the recurrent lapses into financial dementia have not changed in any truly operative fashion since the Tulipomania of 1636-1637. Click To Tweet

The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version. Click To Tweet

There is nothing in economic life so willfully misunderstood as the great speculative episode. Click To Tweet

Speculation buys up, in a very practical way, the intelligence of those involved. Click To Tweet

In a world where for many the acquisition of money is difficult and the resulting sums palpably insufficient, the possession of it in large amounts seems a miracle. Click To Tweet

Our Critical Review

“Financial Euphoria” – to quote a great review – is a keeper, the sort of book you’ll recommend to other investors. It is brief, readable, with a statesman-like style, yet not above the heads of small investors.

Originally, Galbraith wrote it as a warning. Unfortunately, as he explains in the Foreword to the book’s second edition, a warning he grew to believe that has no value whatsoever:

In the first foreword to this volume, I told of my hope that business executives, the inhabitants of the financial world and the citizens of speculative mood, tendency or temptation might be reminded of the way that not only fools but quite a lot of other people are recurrently separated from their money in the moment of speculative euphoria.

I am less certain than when I then wrote of the social and personal value of such a warning. Recurrent speculative insanity and the associated financial deprivation and larger devastation are, I am persuaded, inherent in the system. Perhaps it is better that this be recognized and accepted.

Unsurprisingly, Galbraith ends his book with a depressing question: “When will come the next great speculative episode and in what venue will it recur?”

That was 1994.

Unfortunately, we know now the answer.

And, yet – frighteningly – the question is still valid.

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Retire Inspired PDF Summary

Retire Inspired PDFIt’s Not an Age; It’s a Financial Number

When are you planning to retire?

At the age of 66, of course – that’s what the law says!

Well, Chris Hogan says something else:

Retire Inspired” – when you like.

Who Should Read “Retire Inspired”? And Why?

If you want to retire earlier and you want to retire with more money – you need to have a proper plan.

In that case, Chris Hogan’s book is just the right one for you: it is certainly one of the best on the topic, if not the very best.

As Hogan says: “You are the CEO of your own retirement.”

And this book will tell you how to execute the hell out of it!

Chris HoganAbout Chris Hogan

Chris Hogan is a former All-American football player, a popular motivational speaker, a best-selling author and, quite probably, “America’s leading voice on retirement.”

Published in 2016, Hogan’s “Retire Inspired” instantly rose to the top of many bestseller lists, and his eponymous podcast has millions of downloads.

Hogan is a regular contributor to the EntreLeadership podcast and constantly works with numerous leaders, athletes, and entertainers.

Find out more at https://www.chrishogan360.com/

“Retire Inspired PDF Summary”

Let’s start our summary with the subtitle of Chris Hogan’s book.

Spoiler alert: we’ll end it with its title!

So, according to Chris Hogan, retirement is not an age, but a financial number.

But, of course it is an age, you say, since lawfully I can’t really retire before the age of 62 even if I want an early pension plan.

And the last time I read the normal retirement age in the United States was 66 – and should be 67 by 2027!

And that’s where it already gets suspicious!

Namely, just like our 8-hour workday or our 5-day work week, these numbers are merely provisional and, what’s more, are a remnant of an age past which shouldn’t concern you!

In the United States (and, more or less, the world) pension laws are merely a century old, going back to the Sherwood Act of 1912 when the Government decided that all veterans of the U.S.-Mexican War and Union veterans of the Civil War are entitled to a pension once they reach the age of 62.

Two decades later, and the Social Security Act of 1935 established (among other things) a system of old-age benefits for workers, which stated that anyone over the age of 65 is entitled to a pension from the state.

But, why 65?

Well, to understand this we must go back a bit and cross over the Atlantic.

Namely, in the second half of the 19th century, Communists were threatening to take control of Germany, so, in an attempt to outwit them and stifle their pleas for the workers, the German Chancellor Otto von Bismarck practically invented retirement, announcing that he will pay a pension to any nonworking German over the age of 65.

However, there was a catch!

And what a catch, Mr. Otto!

You see, before people invented penicillin and stuff, not many people made it to 65!

And even after that, when Roosevelt staked his reputation on the Social Security Act of 1935, the average life expectancy in the U.S. was no more than 60!

So, in other words, it was no problem for Social Security to satisfy the needs of the retired population, for the simple reason that there was barely any!

Fast forward eighty years and the world’s average life expectancy is above 70 and America’s almost 80!

So, now you see the problem!

And you can understand why many people – including us – are afraid that Social Security won’t be around for them when they retire.

Not that it makes much of a difference that it is there now!

Namely, since the sheer number of people who retire is way bigger than before, and since most of them take pensions for a lot longer than ever expected, the amount they take gets smaller and smaller by the year.

Two frightening statistics:

The average payment for social security is $1,194 a month!

One in three Americans relies solely on it!

Hence the 401(k) and your duty to save yourself enough money for your old age.

And hence the subtitle of Hogan’s book: retire not when the law says you should depending on the age, but when you calculate that you’ve saved enough money so that you can see Social Security as nothing more but an icing on the cake:

It is time that we started reclaiming the idea of retirement. Retirement is not the finish line; it is the new beginning. Retirement is not your last paragraph; it is the long, rich, rewarding final chapters of your own book—as many pages as you can dream up. Retirement is not the end of your life; it is the beginning of the best years of your life!

Be aware that you’ll face four obstacles along the way. Hopefully, we’ve already helped you to conquer the first two: misunderstanding what “retirement” means and depending on Social Security alone.

The other two are people’s tendency to act like sheep and their lack of planning capabilities.

This book helps to overcome both with a ton of good advices.

So that you can finally – retire inspired.

Key Lessons from “Retire Inspired”

1.      The Invention of Retirement
2.      The Four Obstacles to Retiring Inspired
3.      The Five Fundamentals of Inspired Retirement

The Invention of Retirement

Retirement is not an old phenomenon.

In fact, it was first introduced by German Chancellor Otto von Bismarck in 1883 in an attempt to thwart Communist efforts to take control of the Government.

And when he proclaimed that he would pay money to every nonworking individual over 65, Bismarck had a somewhat sinister plan.

Because, you see, the average life expectancy at the time in Germany was below 60!

Today, it’s way over 70 when the whole world is taken into account!

And it’s almost 80 in the United States.

So, you really think that Social Security can keep up the pace?

The Four Obstacles to Retiring Inspired

Retiring at the age of 65 – or 62, or 67 – is a social construct, one that has nothing to do with reality for decades.

The point:

Retire when you earn enough money to retire, not when you get to a certain age.

However, you need to overcome the four obstacles to retiring inspired:

Obstacle #1: Misunderstanding “Retirement”
Obstacle #2: Depending on Social Security
Obstacle #3: Acting Like Sheep
Obstacle #4: Not Having a Plan

The Five Fundamentals of Inspired Retirement

Chris Hogan’s retirement plan is based on five fundamental premises.

First of all, dreaming – but in a specific, detailed way which will motivate you and help you commit to a long-term plan.

Of course, you need to execute that plan and never back away from it for a second, which means that you should need to be vigilant all the time.

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“Retire Inspired Quotes”

For I know the plans I have for you… plans to give you hope and a future. (Jeremiah 29:11) Click To Tweet

In my opinion, Chris Hogan is the voice of retirement in America today. (Via Dave Ramsey) Click To Tweet

We need to start by getting rid of all the negative feelings and assumptions we have attached to the word ‘retirement’: ‘dried up,’ ‘end of life,’ ‘insecure,’ ‘winding down,’ ‘broke,’ ‘disengaged,’ ‘worst years of my life,’ ‘afraid.’ Click To Tweet

It’s hard to live your dream in your golden years when you’re trying to make it on an income that’s actually below the poverty line. Click To Tweet

Studies have shown that half of 401(k) participants have less than $10,000 saved for retirement – and those are the people who are actually doing something! Click To Tweet

Our Critical Review

Chris Hogan is a protegee of Dave Ramsey, and we don’t need to tell you who Dave Ramsey is.

But, basically, when it comes to money, if Dave Ramsey approves of a book, you’re going to need a lot of arguments to say otherwise.

And we have none.

Because, even though it’s true that many books may improve your life, this one can do that literally.

And, what’s more, dramatically.

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The Essays of Warren Buffett PDF Summary

The Essays of Warren Buffett PDFLessons for Corporate America

Are you an investor or a manager?

Want some tips on how to get rich?

Here they are, as simple as they get, and straight from the horse’s mouth!

We present to you the best of “The Essays of Warren Buffett.”

Who Should Read “The Essays of Warren Buffett”? And Why?

If you are an investor or a manager – or have any interest in Wall Street whatsoever, Warren Buffett is probably to you the same Jehovah is to the Jews: a God.

So far, we’ve introduced you to his ways via a proxy.

And it’s not that Robert P. Miles’ “The Warren Buffett CEO,” Alice Schroeder’s “The Snowball,” or Robert Hagstrom’s “The Warren Buffett Way” are not exceptional books, or that these essays offer an earth-shatteringly different Buffett from the one you can infer from those three books.

But it’s a bit different when you hear it from the man himself.

Warren BuffettAbout Warren Buffett

Warren Edward Buffett is an American investor, business magnate, and philanthropist, the chairman and CEO of Berkshire Hathaway and the third richest person in the world.

Born in Omaha, Nebraska, Buffett graduated from Columbia Business School, where, influenced by the philosophy of his mentor, Benjamin Graham, he first became interested in value investing.

Soon he teamed up with Charlie Munger and, after they acquired the textile manufacturing firm, Berkshire Hathaway, they started trading on Wall Street.

The rest, as they say, is history, that can be neatly summed up in the monikers Buffett has earned due to his financial successes: “The Wizard,” “The Oracle,” “The Sage.”

Having pledged to give all but 1% of his fortune to charitable causes, by sheer numbers, Buffett is quite probably the greatest philanthropist in the history of humanity.

“The Essays of Warren Buffett PDF Summary”

About a decade ago, an article in “USA Today” noted a staggering fact: that there are 47 books in print that have Buffett’s name in the title, and that “no other living person, aside from U.S. presidents or other major world political figures, is named in so many titles, except the Dalai Lama.”

Even so, “The Essays of Warren Buffett” is, basically, the only one Buffett’s name is also listed under the author.

Needless to add, it’s also Buffett’s favorite one.

Described by the Wizard himself as “a coherent rearrangement of ideas from my annual report letters,” “The Essays of Warren Buffett” is actually a carefully edited and organized selection of Buffett’s letters to the shareholders of Berkshire.

In the words of the editor – the American scholar Lawrence Cunningham –

The letters distill in plain words all the basic principles of sound business practices. On selecting managers and investments, valuing businesses, and using financial information profitably, the writings are broad in scope, and long on wisdom.

The central point of Buffett is always the same: investors should ignore the market, focusing all of their energy on identifying good businesses and buying them at a good price.

Time will do the rest.

Why shouldn’t it?

If it doesn’t, then the basic premise of capitalism – Adam Smith’s “invisible hand of the market” – is, more or less, wrong.

To sum this up in a more memorable way: market prices don’t express business values but should eventually. Mr. Market is a volatile, manic-depressive fellow and you can’t trust him in the short run. In the long run, he will come to his senses – if you don’t lose yours in the meantime.

Good investors are those who can isolate themselves from the fluctuations of the market and assess businesses based on their inherent value:

So smile when you read a headline that says ‘Investors lose as market falls.’ Edit it in your mind to ‘Disinvestors lose as market falls—but investors gain.’ Though writers often forget this truism, there is a buyer for every seller and what hurts one necessarily helps the other. (As they say in golf matches: ‘Every putt makes someone happy.’)

Buffett was never interested in running businesses: he made his fortune by purchasing promising businesses and assigning talented managers to operate them.

Even so, he was only buying all – or significant portions – of businesses he understood, continuously emphasizing that, essentially, there’s no difference between buying a business and investing in one.

Diversification is pointless: you should only focus on investing in businesses you actually understand.

During the 1980s – Buffett points out – it’s exactly because of the fact that people ignored this advice that Wall Street got both its junk bond kings and paupers.

Don’t doubt for a second that you’ll probably end up being a part of the latter group since when there are manias, the ratio between success and failure stories tends to rise exponentially to the detriment of the majority.

And you, unfortunately, are usually the rule – not the exception.

Enjoy the Full Summary

The Essays of Warren Buffett 

Key Lessons from “The Essays of Warren Buffett”

1.      Investors Rarely Lose When Market Fails
2.      There’s No Difference Between Investing and Buying
3.      Like Investor Like Manager

Investors Rarely Lose When Market Fails

Markets fail.

Everybody knows that.

If you try to answer yourself the questions “why” and “how” you’ll probably end up with an investment strategy very similar to the one Warren Buffett strictly adheres to for decades.

Namely, markets fail because, at a certain point, the discrepancy between the inherent value of a company and its stock prices is just too enormous to hold up.

You can try to be a maverick and base your investment strategy on profiting from these discrepancies in the short run, but, as history has taught us, you’re bound to make a mistake or two eventually – some of which may be very costly.

Warren Buffett’s commonsense strategy is much safer: only buy shares in companies which have an inherent value and expect returns in the long run.

Mr. Market is a manic-depressive guy, but, he eventually comes to his senses.

Don’t lose yours by trying to understand him.

There’s No Difference Between Investing and Buying

In essence, Warren Buffett says, there’s no difference between buying a stock in a company and buying the company itself.

In other words – you will certainly hesitate a lot before buying a company you know nothing about, based on its market value alone.

Then, why would you invest in one?

Aren’t you merely trying your luck?

Like Investor Like Manager

Buffett’s investment strategies are deeply rooted within a personalized philosophy of honesty.

Well, so are his managerial advices.

In his opinion, Berkshire’s shares must maintain a close relationship with the company’s intrinsic value, so that shareholders receive real profits which represent the company’s results over the period of the shareholders’ holdings.

Unfortunately, the pressures to report a profit and the focus of companies on their stock prices have resulted in numerous accounting manipulations, which, in Buffett’s opinion, are everything that’s wrong with society.

Honesty has always been the best politics in both investing and business, says Buffett.

And we must try – for the sake of humanity – to keep this truism alive.

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“The Essays of Warren Buffett Quotes”

A horse that can count to ten is a remarkable horse—not a remarkable mathematician. Click To Tweet

As happens in Wall Street all too often, what the wise do in the beginning, fools do in the end. Click To Tweet

Having first-rate people on the team is more important than designing hierarchies and clarifying who reports to whom. Click To Tweet

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful. Click To Tweet

The requisites for board membership should be business savvy, interest in the job, and owner-orientation. Click To Tweet

Our Critical Review

“The Essays of Warren Buffett” is described, in the blurb of its fourth edition, as “the gold standard of its genre.”

And when we included in our list of “Top Finance and Investing Books” in history, we noted that this is Buffett’s most autographed book.

So, in other words, he approves its message.

We’ll be mad not to.

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One Up on Wall Street PDF Summary

One Up on Wall Street PDFHow to Use What You Already Know to Make Money in the Market

“Leave it to the pros” is the one advice Peter Lynch will never give you when it comes to investing.

In his dictionary, “professional investor” is an oxymoron.

And a well-prepared amateur investor is next decade’s millionaire.

So, what are you waiting for?

This book’s stocks are rising by the minute.

Learn immediately how to always be “One Up on Wall Street.”

Who Should Read “One Up on Wall Street”? And Why?

Peter Lynch, Warren Buffett, and Charlie Munger are widely revered as possibly the best investors in history, nothing short of titans in the field, wizards with investment records which comfortably put them in a league of their own.

And it’s no coincidence that all three of them are proponents of the same philosophy.

Namely, Benjamin Graham’s value investing, which is based on the premise that your only interest should be undervalued companies with inherent worth, which, in turn, you can only know if you research them well.

In other words – as the subtitle of this book says – use what you already know to make money in the market, not the market fluctuations.

This book should be all but a gospel for those who want to learn how.

Peter LynchAbout Peter Lynch

Peter Lynch is an American mutual fund manager, investor, and philanthropist.

He graduated from Boston College and earned an MBA from Wharton. In the meantime, Lynch got a job as an intern with Fidelity Investments, mainly because he was caddying for D. George Sullivan, Fidelity’s President.

In 1977, he was named the head of the Magellan Fund which was worth $18 million in assets. During his 13-year tenure, Lynch consistently more than doubled the S&P 500 market index, averaging almost 30% annual return.

By the time he resigned in 1990, Magellan Fund had grown to more than $14 billion in assets, becoming perhaps the world’s best-known actively managed mutual fund.

Lynch has so far published three books, all co-written with the freelance financial writer, John Rothchild: “One Up on Wall Street,” “Beating the Street,” and “Learn to Earn.”

“One Up on Wall Street PDF Summary”

Whether it’s a 508-point day or a 108-point day,” writes Peter Lynch in the “Prologue” to “One Up on Wall Street,” in the end, superior companies will succeed, and mediocre companies will fail, and investors in each will be rewarded accordingly.

The point being:

The manic-depressive Mr. Market isn’t your friend and trying to earn your money by attempting to predict his behavior is one of the worst things you can do.

But, wait a second, you say! If so, what about all those people working on Wall Street whose job is basically that: predicting the market?

What about Lynch himself and all the other MBAs from Wharton?

Is Lynch seriously saying that their degrees and the millions of dollars they are currently earning are just a fluff and a façade?

If you are expecting some twist at this point, you’re about to be disappointed.

Lynch’s answer to your question is a resounding “yes”:

Stop listening to professionals! Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.

“Nothing has occurred to shake my conviction that the typical amateur has advantages over the typical professional fund jockey” – he adds in the introduction to the millennium edition.

In fact, in Lynch’s opinion, “professional investing” is an oxymoron on par with phrases such as “deafening silence” and “military intelligence.”

In other words – there’s no such thing.

So, when E.F. Hutton talks, contrary to the popular dictum, everybody is not supposed to be listening, but, instead, everybody ought to be trying to fall asleep:

When it comes to predicting the market, the important skill here is not listening, it’s snoring. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them.

What does this mean in practice?

Well, it means that you should never invest in any company before you’ve done your homework on the said company.

This means: research its earnings prospects, find out everything you can about its financial condition and competitive position, spend some time studying its vision and plans for expansion, and so on and so forth.

Because only by doing this you can be sure that you’re not buying a lottery ticket, but a company.

As Warren Buffett says, in essence, buying a stock is not much different from buying a whole company, and we’re pretty sure that you would think twice before buying a company judging solely on the current market trends.

Speaking of which –

In Peter Lynch’s typology, there are six different types of companies – learn to differentiate them, so that you should know when and how much to invest, in addition to what kind of return you can expect and in how many years you should expect it.

Slow growers are usually “large and aging companies” which “are expected to grow slightly faster than the gross national product.”

Stalwarts grow a bit faster, but, even so, you can’t expect them to be agile. Since, after all, these are the heavyweights such as “Coca-Cola, Bristol-Myers, Procter and Gamble, the Bell telephone sisters, Hershey’s, Ralston Purina, and Colgate-Palmolive.”

The fast growers are “small, aggressive new enterprises that grow at 20 to 25 percent a year.” Obviously, these are among Lynch’s favorite investments. “If you choose wisely,” writes Lynch, “this is the land of the 10-to 40-baggers, and even the 200-baggers.”

Cyclicals usually follow a rise-fall-rise pattern, rising and falling in a more predictable manner than the rest of the companies. “The autos and the airlines, the tire companies, steel companies, and chemical companies are all cyclicals.”

Turnarounds are “no growers” which, from time to time, are capable of rebounding. Since they are all but Chapter 11 signoffs before that, turnarounds are some of the most exciting companies to look out for. Lynch made a lot of money from Chrysler.

Asset plays are companies which have been overlooked by Wall Street – Lynch says that Wall Street overlooks asset plays constantly – even though they sit on assets you know have some inherent value.

This categorization is not final, notes Lynch. Companies constantly switch between categories, and your job is to research when and how.

So that you know how much to invest.

Key Lessons from “One Up on Wall Street”

1.      Determining the Company You’ll Invest In: The 6 Types of Companies
2.      The 13 Traits of a Company Which Make It an Attractive Investment
3.      Signals to Tell You Which Companies to Shun

Determining the Company You’ll Invest In: The 6 Types of Companies

Before investing in a company, be sure to discover its why and its story.

Afterward, determine its category.

It can belong to one of these six: slow growers, fast growers, stalwarts, cyclicals, turnarounds, and asset plays.

Turnarounds and fast growers offer the best opportunities but be wary of miscuing your investment on the cyclicals.

The 13 Traits of a Company Which Make It an Attractive Investment

Once you realize a company has a product which guarantees it’s going to be a success even if an idiot runs it, then you’ve found your investment.

However, there are 13 additional traits which may further direct your decision.

These are all good signs:

#1. It sounds dull – or, even better, ridiculous.
#2. It does something dull.
#3. It does something disagreeable.
#4. It’s a spinoff.
#5. The institutions don’t own it, and the analysts don’t follow it.
#6. There’s something depressing about it.
#7. The rumors abound: it’s involved with toxic waste and/or the Mafia.
#8. It’s a no-growth industry.
#9. It’s got a niche.
#10. People have to keep buying it.
#11. It’s a user of technology.
#12. The insiders are buyers.
#13. The company is buying back shares.

Signals to Tell You Which Companies to Shun

Just as there are signals to tell you which companies are good investments, there are signals which may suggest the opposite.

For example, it’s never a good idea to buy “the next big something” or to invest money in “the stock with the exciting name.”

In addition, don’t buy stocks which people lower their voices to share with you. These are “the whisper stocks,” “the whiz-bang stories,” the long shots.

Beware middleman companies as well, i.e., companies which cell 25 to 50 percent of its products to a single customer.

Finally, avoid diworseifications, which is a too good a word to require further explanation.

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“One Up on Wall Street Quotes”

The odds against making a living in the day-trading business are about the same as the odds against making a living at racetracks, blackjack tables or video poker. In fact, I think of day trading as at-home casino care. Click To Tweet

The basic story remains simple and never-ending. Stocks aren’t lottery tickets. There’s a company attached to every share. Click To Tweet

It’s impossible to distinguish cod from shrimp when your mutual fund has lost the equivalent of the GNP of a small, seagoing nation. Click To Tweet

But rule number one, in my book, is: Stop listening to professionals. Click To Tweet

Success is one thing, but it’s more important not to look bad if you fail. There’s an unwritten rule on Wall Street: ’You’ll never lose your job losing your client’s money on IBM.’ Click To Tweet

Our Critical Review

When we were making our picks for our “Top Finance and Investing Books” list some time ago, one of the first things we decided upon was the inclusion of both “One Up on Wall Street” and “Beating the Street.”

Not only because of the fact that reading Peter Lynch is extremely fun and enjoyable. But because following his advices may make you rich.

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Beating the Street PDF Summary – Peter Lynch

Beating the Street PDFAs the manager of the Magellan Fund, he averaged 29.2% annual return during a period of thirteen years.

No wonder they call him a legend.

Ladies and gentlemen, let us introduce to you Peter Lynch, explaining the art of “Beating the Street.”

Who Should Read “Beating the Street”? And Why?

If we’re asked to compare them, we’ll probably have to say that as much as “One Up on Wall Street” serves as Peter Lynch’s investing theoretical framework, “Beating the Street” demonstrates this theory in practice.

If you have the time and you’re serious about investing, then read them both.

If not – then we guess it’s sounder that you start with “One Up on Wall Street,” and then move on to “Beating the Street.”

However, if you are younger, you have an even better option than the two: buy Lynch’s “Learn to Earn,” appropriately titled “A Beginner’s Guide to the Basics of Investing and Business.”

Peter LynchAbout Peter Lynch

Peter Lynch is an American investor and mutual fund manager, who currently spends a great deal of his time mentoring young analysts and giving away some of his money to charity.

After graduating from Boston College and earning an MBA from the Wharton School, Lynch got a job with Fidelity Investments.

In 1977, he was named the head of the then-obscure $18 million worth Magellan Fund. When Lynch resigned from his position thirteen years later, the fund was worth more than $14 billion in assets.

In fact, during his tenure, the Magellan Fund averaged a 29.2% return, the best in the world and in history – to this day.

Lynch has co-written few books – including this one – with John Rothchild, a freelance writer who has authored few financial books on his own as well, such as “A Fool and His Money” and “Going for Broke.”

“Beating the Street PDF Summary”

Let us start our summary the way Peter Lynch starts his book – with a tale.

Back in 1990, Joan Morrissey, a teacher at St. Agnes School (a Boston area parochial school), was inspired to test the theory that you don’t need a Wharton or a Quotron MBA to excel in equities with her seventh-graders.

So, she tasked them with making mock investments.

The only rules of the game: they have to research their choices and explain to their classmates the reasons behind their investments.

The result?

The seventh-graders beat the S&P 500 index by a significant margin, their portfolio returning 69.6 as opposed to the S&P 500 total return performance of 26.08 for the period between January 1, 1990, to December 31, 1991.

The lesson?

Know your investments and try not getting too fancy: the stock-picking methods of the successful investors are usually “much simpler and generally more rewarding than many of the more baroque techniques used by highly paid fund managers.”

Speaking of stocks – Lynch is very adamant that bonds and certificates of deposit are never the right way to go, since carefully chosen stocks with dividends pay returns and, over a lengthy period, will almost certainly increase substantially.

Chapter 3 – titled “A Tour of the Fund House” – is the one many may be tempted to read first, since in it Lynch explains, for the first time, how to devise a mutual fund strategy, comprehensively and in detail.

The next three chapters are, as Lynch says, a “three-part retrospective: how I managed Magellan during 13 years and 9 major corrections.”

In them, Lynch analyzes the factors which ultimately contributed to his successes, concentrating on the methodology behind his decisions, and steering away from “idle reminiscence.”

Lynch explains why he chose certain stocks – Philip Morris, GM, Ford, Chrysler, Volvo, General Electric, and Fannie Mae – and how the investments paid off, transforming the small, closed Magellan fund from a $100 million obscure fund to a $10 billion giant.

Most of the book – from Chapter 7 to Chapter 20 – chronicles Peter Lynch’s way of choosing the 21 stocks he recommended in the 1992 Barron’s.

Now, you know that if you had bought many of these 21 stocks, you would have probably been a millionaire.

If you didn’t do that – or haven’t had a chance to – these chapters demonstrate how thoroughly you should research something before finally making a buy.

After all, the length of this section proves this.

For Lynch, the most natural place to start is to look for stocks in the retail sector, since people will always eat and, consequently, shop there.

Next, you should conduct a research on the depressed industries, since there you’ll find the most undervalued stocks on the market.

Lynch proves this by showing how digging deeper into the problems of the real estate market of the early 1990s revealed that there was no problem at all and that it was a minor hiccup: the inherent value of some companies promised big in the long run.

A well-run company in a depressed industry may emerge stronger and victorious in more than one sense, using the circumstances to swallow some of its competitors.

When the economy is stagnating, Lynch goes on, “the professional money manager begins to think about investing in the cyclicals.”

Some industries – “aluminums, steels, paper producers, auto manufacturers, chemicals, and airlines” – are always stuck in cycles, following a pattern of boom and recession and then boom again.

These are called cyclicals, and Lynch explains how you can profit from this, concluding his book with a recommendation that you need to do a reevaluation of your investment strategies every six months – since a healthy portfolio – just like a healthy man – requires a regular checkup.

Key Lessons from “Beating the Street”

1.      Know What You Buy: There’s No Other Formula
2.      Peter’s 21 Principles
3.      Peter’s 25 Golden Rules

Know What You Buy: There’s No Other Formula

I have no pat formulas to offer,” writes Peter Lynch at the end of the “introduction” to “Beating the Street.”

So, why should you bother reading this book?

Well, because the best way to learn where and how to invest is by reading.

And because even though “there are no bells that ring when you’ve bought the right stock, and no matter how much you know about a company you can never be certain that it will reward you for investing in it,” you can improve your odds if you know the factors that make a bank or a retailer or an automaker profitable or unprofitable.

“Beating the Street” certainly lays out these factors.

Peter’s 21 Principles

Throughout this book, at various places, Peter Lynch presents his 21 principles (both funny and enlightening) – things he learned from his experience, which, as he says is always the most expensive teacher.

So, you owe him.

And because we’ve handpicked the best of them – you owe us also, by proxy:

#2. Gentlemen who prefer bonds don’t know what they’re missing.
#6. As long as you’re picking a fund, you might as well pick a good one.
#8. When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds.
#11. The best stock to buy may be the one you already own.
#14. If you like the store, chances are you’ll love the stock.
#15. When insiders are buying, it’s a good sign—unless they happen to be New England bankers.
#16. In business, competition is never as healthy as total domination.
#17. All else being equal, invest in the company with the fewest color photographs in the annual report.
#18. When even the analysts are bored, it’s time to start buying.
#19. Unless you’re a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.

Peter’s 25 Golden Rules (Or 8, If You’d Like)

The last chapter of “Beating the Street” is titled 25 Golden Rules – and it summarizes the most important lessons Peter Lynch has learned during his illustrious career.

In a checklist he distributes to young investors, Lynch has further trimmed these 25 golden rules to eight.

And here they are:

#1. Know what you own.
#2. It’s futile to predict the economy and interest rates.
#3. You have plenty of time to identify and recognize exceptional companies.
#4. Avoid long shots.
#5. Good management is very important – buy good businesses.
#6. Be flexible and humble, and learn from mistakes.
#7. Before you make a purchase, you should be able to explain why you’re buying.
#8. There’s always something to worry about.

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“Beating the Street Quotes”

This is one of the keys to successful investing: focus on the companies, not on the stocks. Click To Tweet

The popular theory that small growth stocks were the major factor in Magellan’s success falls wide of the mark. Click To Tweet

Corporations, like people, change their names for one of two reasons: either they’ve gotten married, or they’ve been involved in some fiasco that they hope the public will forget. Click To Tweet

The extravagance of any corporate office is directly proportional to management’s reluctance to reward the shareholders. Click To Tweet

In business, competition is never as healthy as total domination. Click To Tweet

Our Critical Review

In our opinion, “Beating the Street” is one of the “Top Finance and Investing Books” ever written. Which, in other words, means that you can’t afford not to read it – especially not if you are planning to become a successful investor.

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Titan PDF Summary – Ron Chernow

Titan PDF Ron ChernowThe Life of John D. Rockefeller, Sr.

In many languages, the surname “Rockefeller” has basically become synonymous with the phrase “fabulously rich.”

The man responsible for that?

John D. Rockefeller, Sr., quite possibly the richest person in modern history and most certainly the wealthiest American of all time.

And Ron Chernow’s “Titan” is the essential 800-page-long biography of this extraordinary man, rightly called “the Jekyll-and-Hyde of American capitalism.”

Who Should Read “Titan”? And Why?

Just like most biographies of great men, “Titan” is a fascinating and endlessly enthralling read, which should certainly get the attention of most people.

The fact that the great man this biography is about is such a controversial figure makes “Titan” an even more alluring book since it should appeal to both the advocates and the detractors of capitalism.

It’s also a book from which entrepreneurs can find some inspiration, and in which social critics who don’t believe the world needs people like John D. Rockefeller, Sr. will find enough arguments in their favor.

A treat for all!

Ron ChernowAbout Ron Chernow

Ron Chernow is an American historian and biographer, author of numerous bestselling and award-winning books on the life and times of important historical figures.

In 1990, he published his debut book, “The House of Morgan” which traced four generations of the J. P. Morgan empire and which was honored with the National Book Award for Nonfiction. He followed this up with “The Warburgs” which won him the 1993 George S. Eccles Prize for Excellence in Economic Writing.

The critically acclaimed “Titan” was published in 1998 and was nominated for the National Book Critics Circle Award, just like his 2004 biography of Alexander Hamilton, which was subsequently turned into the highly successful Lin-Manuel Miranda rap-musical from 2015, “Hamilton.”

In 2011, Chernow won both the American History Book Prize and the Pulitzer Prize for Biography for “Washington: A Life.”

His last book, the 2017 “Grant,” is a 1,000-page biography of Ulysses S. Grant, America’s 18th President, and was once again met with overwhelmingly positive reviews.

“Titan PDF Summary”

John D. Rockefeller was born on July 8, 1839, in Richford, New York, as the second of six children and the eldest son of William Avery “Bill” Rockefeller and Eliza Davison.

His father was a con artist, a traveling salesman and a “botanic physician” who practiced bigamy and ended up living a double life under an alias.

His mother, on the other hand, was a devout Baptist who put up with her husband’s promiscuity and taught John the value of saving money.

When JDR was ten years old, his father – who, by that time, had managed to father two children with his housekeeper Nancy Brown as well – was indicted for a rape which supposedly occurred at gunpoint and which drove William to sell the Rockefeller’s house and move the family to Oswego, New York, in a potential attempt to avoid trial.

He was never convicted for the rape, but soon enough he left his family for good, assuming the identity Dr. William Levingston and marrying a certain Margaret Allen in Ontario, Canada (even though he was still legally married to Eliza as well).

Before that, Bill moved the Rockefellers once again close to Cleveland, Ohio, where John attended the Cleveland’s Central High School, one of the first free public high schools in the United States.

Even though John was a good student – excelling especially in math and oratory – he couldn’t afford to go to college, especially since he was burdened with the self-assigned role of a surrogate father.

So, instead, he enrolled in a business school and got a job as an assistant bookkeeper.

It was here that he got his “first look at a banknote of any size”:

I was clerking at the time down on the Flats here. One day my employer received a note from a down-State bank for $4,000. He showed it to me in the course of the day’s business, and then put it in the safe. As soon as he was gone, I unlocked the safe, and taking out that note, stared at it with open eyes and mouth, and then replaced it and double-locked the safe. It seemed like an awfully large sum to me, an unheard-of amount, and many times during the day did I open that safe to gaze longingly at the note.

In 1859, JDR teamed up with his partner Maurice B. Clark – with whom he also shares a rags-to-riches story – and, at the tender age of 20, opened his first business.

It will grow in the largest modern history had seen by pure accident.

Namely, “Clark and Rockefeller” was a buying-and-selling venture which provided both friends a good income for some time, before they were convinced by Samuel Andrews, a chemist and a friend of Clark’s, into becoming stockholders in his new enterprise.

The enterprise was a small Cleveland oil refinery.

The result?

Instant success – thanks especially to Andrews’ “mechanical genius” (as Ida M. Tarbell had described it) and his pioneering work with fractional distillation.

However, success also means jealously and soured bonds, so it’s no surprise that by 1865, the relationship between Rockefeller and Clark (as well as Clark’s two brothers who also owned parts of the joint ventured) deteriorated to the point of no return.

The partners auctioned the business between themselves and, in the end, JDR bought the Clarks’ shares for $72,500 (about $1 million in today’s money).

Speaking to William O. Inglis, Rockefeller later noted:

It was the day that determined my career. I felt the bigness of it, but I was as calm as I am talking to you now.

At 25, JDR became the owner of one of the world’s largest oil facilities. The very same year he married his high-school sweetheart, Laura Spelman Rockefeller.

The couple will end up having four children, only one of them a boy, JDR’s namesake, John D. Rockefeller Jr.

It was all uphill from here!

In 1870, JDR abolished his partnership with Andrews, and in less than four months in 1872 – in what would later be known as “The Cleveland Massacre” – his new-formed “Standard Oil” 22 of its 26 Cleveland competitors.

Titan Summary Ron ChernowThis will inspire some admiration and a ton of hate, resulting in cartoons such as “The Anaconda” seen here on the left, parodying JDR as a snake swallowing its Cleveland competitors.

In 1874, “Standard Oil” will buy 27 more refineries – this time major and nationwide.

Still in his 30s, JDR “became the sole master of American oil refining,” controlling almost 90% of all oil in the United States.

By this time, he was also deeply convinced in his messiah-like role, believing that God gave him so much money so that he could help the world and provide cheap kerosene and light to the poor people of the world.

Even though he did do that, not many bought his side of the story, so Rockefeller was forced by the U.S. Supreme Court to dismantle Standard Oil into 34 “Baby Standards,” some of which you know by the names of ExxonMobil, Chevron, etc.

The end result?

JDR was even richer than before, owning a fortune worth nearly 2% of the nation’s GDP, or $400 billion in today’s money.

Fortunately, he spent a large – or small, depends on who you ask – part of it to basically create modern philanthropy.

Key Lessons from “Titan”

1.      The Growth of a Large Business Is Merely a Survival of the Fittest
2.      All the Fortune That I Have Made Has Not Served to Compensate Me for the Anxiety of That Period
3.      Gain All You Can, Save All You Can, And Give All You Can

The Growth of a Large Business Is Merely a Survival of the Fittest

The story of John D. Rockefeller, Sr. is an almost novel-like rags-to-riches story: he was the son of a con artist who, as a teenager, begged the principal of his free, public school to find a home for his family, but will be remembered as modern history’s richest men.

How he did it?

Mainly – because he never backed down and decided to survive through it all.

All the Fortune That I Have Made Has Not Served to Compensate Me for the Anxiety of That Period

As JDR was earning money and swallowing his opponents one by one, he was becoming so influential that newspapers started claiming that it was he who was actually running the country.

Even though he was rich and could afford everything, he was actually deeply depressed and couldn’t even fall asleep for most of the nights.

Gain All You Can, Save All You Can, And Give All You Can

The dictum from this title was originally John Wesley’s but became JDR’s.

It sums up his life in a sentence and easily shows why he was both so admired and so hated by the public.

JDR, the real Dr. Jekyll and Mr. Hyde of American capitalism.

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“Titan Quotes”

From the outset JDR’s plans had a wide streak of megalomania. Click To Tweet

No threat to his empire was too small for Rockefeller to overlook. Click To Tweet

JDR retained his mystic faith that God had given him money for mankind’s benefit. Click To Tweet

JDR was convinced that the Almighty had buried the oil in the earth for a purpose. Click To Tweet

The impression was gaining ground with me that it was a good thing to let the money be my slave and not make myself a slave to money. Click To Tweet

Our Critical Review

Basically, each of the books Ron Chernow has so far authored have received acclaim of the sort few books ever do.

“Titan” is no exception: it was listed as one of 1998’s ten best books by both “The New York Times” and “Time,” the latter of which described it as one of the great American biographies.

Even before we had the time to write its summary, we didn’t hesitate for a moment to include it in our list of the 15 best business books in history.

Balanced and neutral, revelatory and beautifully written, “Titan” is certainly a titan of a book!

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The Great Inflation Mystery PDF Summary

The Great Inflation Mystery PDFDo you know what is inflation?

Before you say “a sustained increase in price level of goods and services in an economy over a period of time” – allow us to interrupt you:

Just like that definition, everything you know about inflation is mere theory.

It’s different in practice.

And this is what Peter Coy tries to demonstrate in his widely read article for Bloomberg, “The Great Mystery Inflation.”

Who Should Read “The Great Inflation Mystery”? And Why?

If you are a student in economics and you want to learn something more about inflation – this article may not help you.

Since it basically claims that we know nothing about inflation.

But that’s exactly why you should read it.

Peter CoyAbout Peter Coy

Peter Coy is a senior writer and the economics editor for Bloomberg BusinessWeek.

After receiving a BA in history from Cornell, Coy started his journalistic career in 1980 at the “Associated Press” as an editor in the Albany bureau.

After that, he worked for some time as a correspondent at the AP Rochester bureau. In 1985, he was transferred to New York, where he worked as a business writer for the next seven years.

In 1989, Coy went to Bloomberg BusinessWeek and worked as telecommunications editor before becoming a technology editor three years later.

He has appeared on numerous TV shows on – among others – CNN, MSNBC, and the Fox News Channel.

“The Great Inflation Mystery PDF Summary”

Quick:

What’s the one thing the Antikythera mechanism and inflation have in common?

Ready?

No one knows how they work.

Really!

Last year, Daniel Tarullo, who was a member of the Board of Governors of the United States Federal Reserve Board between January 2009 and his resignation in April 2017, in a tell-all address at the Brookings Institution, said:

We do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policymaking.

Now, that’s not something you don’t ever like to hear!

Especially if, just half a year later, the Fed decides to increase the federal funds rate target from 1.5% to 1.75% in anticipation of inflation!

Wait a minute, you say!

Someone on the inside says that basically no one can predict the causes of inflation and its effects and that not a single person knows how to move it up or down or how low (or high) it should be – and, yet, the Fed is trying to sustain it!

But, how?

You can’t fight an enemy you don’t know!

That’s the first rule of war.

Well, apparently you can if you are the Federal Reserve and if you ignore history.

Because it – the history – apparently shows that five out of seven times since the 1970s, the Fed went too far in raising interest rates, which resulted in “choked growth and ended in recession.”

They may be doing the same now – or they may be doing just the right thing.

Who knows?

As Coy says, “without understanding more about inflation, it’s hard to know if the Fed is tightening too quickly, not quickly enough, or at about the right pace.”

There’s one serious problem with inflation: “the prices don’t rise or fall in unison.”

In the original article, Peter Coy includes a graphic from which one can see that while the prices of financial services and insurance rose by an average of 4.4% per year between 2009 and 2017, those of gasoline and other energy goods rose by a bit more than half, i.e., 2.6%.

On the other side of the spectrum, the prices for furnishings and appliances fell by as much (2.6%), and the prices of recreational goods and vehicles fell by twice as much: 5.4%.

It’s only normal that there are discrepancies of this sort, since these prices “change for a variety of reasons, including technology, consumer preferences, and the cost of imports.”

To make matters even more complicated, inflation doesn’t hit everybody the same: the large families, the old, and the poor are usually hit hardest.

In addition, between 2014 and 2017, inflation grew differently for products bought online as compared to the same products bought at B&M stores: the inflation of the former ran 1.3% lower.

Another variance exists between the increases in prices for services versus the prices for goods.

The change in the price index for personal consumption expenditures” is, according to Peter Coy, “the Fed’s favorite measure of inflation.

Well, since the end of the last recession, it has averaged 1.5%.

However, when broken into the above mentioned two categories (goods vs. services), it shows a significant discrepancy.

Namely, while services inflation clocked in at 2.2%, goods inflation has come in at merely 0.3%.

“The average of landing at two airports is called a crash,” not-so-jokingly comments Brian Barnier, head of analytics at ValueBridge Advisors LLC in New York.

However, Peter Coy notes, that

The Fed’s challenge with inflation isn’t just a lack of knowledge; it’s also a lack of power.

In other words, Milton Friedman was probably very wrong when in 1963 he claimed that “inflation is always and everywhere a monetary phenomenon,” or, in other words, that the Federal Government can easily contain inflation by adjusting the supply of base money.

But, Friedman’s simple equation – no additional money = no price rises – has been proven wrong by practice, because the opportunity for inflation seems to increase even if the Fed does nothing, but banks start making more loans and money starts circulating faster.

Matt Busigin, a software engineer, and a portfolio manager, goes a step further.

After running tests on “20 years’ worth of data,” he found out that there’s, in fact, a negative correlation between future inflation and the increases in the Fed’s base money.

Patrick Harker, a former engineer and the president of the Federal Reserve Bank of Philadelphia, thinks this data-driven approach is the best way we can tackle the mystery of inflation, so he is keen on introducing machine learning into the art of macroeconomic predictions.

But until that time, the best thing we can do is just admit that there’s a problem and that we can’t predict inflation – instead of just pretending that we know everything about it.

Key Lessons from “The Great Inflation Mystery”

1.      We Know Nothing About Inflation
2.      Inflation Is a Complex Phenomenon – Not Just Monetary
3.      Data-Driven Approach to Understanding Inflation May Be Our Best Bet

We Know Nothing About Inflation

Even though the Fed is trying to contain inflation by raising interest rates, the fact is that, just like everybody, they are merely shooting in the dark.

No one knows anything about inflation, including “what causes it; what effects it has; what to count in measuring it (stock prices?); how low, or high, it should be; and how to move it up and down.”

Inflation Is a Complex Phenomenon – Not Just Monetary

In 1963, Milton Friedman claimed that “inflation is always and everywhere a monetary phenomenon.”

In his opinion, in theory, the Fed should be able to exert near-total control over inflation, since prices shouldn’t rise unless the Fed prints more money.

However, in practice they sometimes do rise even if the Fed does nothing – and serious statistical studies show that, if anything, printing money may have a negative correlation to future inflations.

Why?

Simply put, because inflation is more than a monetary phenomenon.

It depends on just too many factors for us to understand it straightforwardly.

Data-Driven Approach to Understanding Inflation May Be Our Best Bet

In Peter Coy’s opinion, at the moment, the best thing we can do is simply admit that there’s a problem.

And try to find a solution for it.

Our best bet may be using data-driven approaches – as such studies done by Matt Busigin reach counter-intuitive conclusions.

Unsurprisingly, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, plans to use machine learning to predict macroeconomic trends.

Who knows?

In the future, everybody may have to do it.

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“The Great Inflation Mystery Quotes”

As Federal Reserve Chairman Jerome Powell and his colleagues raise interest rates to keep the U.S. economy from overheating, there’s a lot they don’t know about the foe they’re trying to contain: inflation. Click To Tweet

Here are some of the things about inflation the Fed and other central banks are uncertain of: what causes it; what effects it has; what to count in measuring it (stock prices?); how low, or high, it should be; and how to move it up and… Click To Tweet

Prices change for a variety of reasons, including technology, consumer preferences, and the cost of imports. Click To Tweet

The Fed’s challenge with inflation isn’t just a lack of knowledge; it’s also a lack of power. Click To Tweet

Neo-Fisherian ideas may have an important impact on our thinking about monetary policy in the future. (via James Bullard) Click To Tweet

Our Critical Review

The bottom line of “The Great Inflation Mystery” is fairly simple.

In Coy’s words: “The Fed has a preferred way of measuring inflation, but it’s an open question whether the institution has the right tools to act on prices—and hence growth.”

This is such an important claim that, whether you agree with it or not, it’s exceptionally important that you read this article.

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Black Edge PDF Summary – Sheelah Kolhatkar

Black Edge PDFInside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street

Black Edge” tells the story of Steven A. Cohen, a guy you may know by the moniker “hedge fund king” and a fat cat whose net worth is currently estimated to be in the region of $14 billion. In other words, he is one of the richest people in America.

But how much of his wealth did he earn fair and square?

Well, according to Sheelah Kolhatkar, not much.

Who Should Read “Black Edge”? And Why?

Covering the largest insider trading investigation in the history of the United States, “Black Edge” should be another nail in the coffin of Wall Street.

It is a new chapter in the “How-Greedy-Can-Men-Get?” novel which Wall Street has been writing for a while now.

So, if you’ve enjoyed books such as “The Big Short” or “Den of Thieves” – or films such as “The Wolf of Wall Street” and, well, “The Big Short” – “Black Edge” is certainly the book for you.

But, to quote David Grann, the author of the equally disturbing “Killers of the Flower Moon,” “everyone should read this book,” since it’s “an essential exposé of our times—a work that reveals the deep rot in our financial system.”

Sheelah KolhatkarAbout Sheelah Kolhatkar

Sheelah Kolhatkar is a New York-based staff writer for “The New Yorker” on topics such as Wall Street, Silicon Valley, and economics.

She earned an undergraduate degree from New York University and an M. A. from Stanford before becoming a risk arbitrage analyst at two different hedge funds in New York. After several years, she started a successful career as a journalist.

One of the best books of the year according to both “The Economist” and “The New York Times,” “Black Edge” is Kolhatkar’s debut book.

“Black Edge PDF Summary”

In 2008, as the world was struggling to get out of the most serious financial crisis since the Great Depression, US federal agents were struggling to put Raj Rajaratnam behind bars.

A Sri Lankan-American hedge fund manager, Rajaratnam was a Wall Street titan worth almost $2 billion at the time, so it’s not like he was a small fish in the pond.

However, what federal agents discovered while investigating Rajaratnam’s Galleon Group for insider trading, was something intriguing.

Namely, that there was an even bigger fish in the same pond.

Steve A. Cohen, one of the 30 richest people in the United States.

Born in 1956 and fascinated with finance ever since an early age, Cohen was a talented poker player and an avid “Wall Street Journal” reader even as a student at the Wharton School of the University of Philadelphia, one of the best business programs in the United States, and the world.

In 1978, at the age of 21, Cohen landed a job at a New York brokerage firm and very soon gained a reputation of a whiz kid, a genius trader.

However, just seven years later, the SEC revealed that Cohen was probably using some insider information when investing in electronics company RCA’s shares before its imminent takeover by General Electric.

The criminal case was dropped, and Cohen went about the usual business.

In 1992, at the age of 36, he founded his own investment firm, SAC Capital Advisors, with an initial investment of $23 million.

Just seven years later, the company boasted $1 billion in assets!

So, how did Steve Cohen and SAC did it?

Obviously – by aggressively hunting and hiring connected people, who were then able to give Cohen the necessary insider information.

But that wasn’t the only tactic.

SAC was also not beyond spreading false news and reports about companies, thus causing their stock prices to drop and profit hugely from betting against them.

Biovail and Fairfax – two Canadian companies – were the first to notice this practice and to blame SAC as the mastermind behind it.

And, to the surprise of no one, in 2006, SAC was accused of manipulating stock prices – another investigation which amounted to nothing.

But, then in 2008, SAC’s greediness went even further, when they earned $276 billion by short-selling the stocks of two pharmaceutical companies – Elan and Wyeth – who tried unsuccessfully to develop a cure for Alzheimer’s just seconds prior to the announcement of the results.

The SEC and the FBI took notice.

Unfortunately, on November 19, 2010, the “Wall Street Journal” published a story about SEC’s and FBI’s investigations into the matter and this resulted in the traders setting about on an operation to destroy their hard drives and all possible evidence.

However, few months later the authorities realized that there must be some kind of a connection between the Elan and Wyeth short-sale and the fact that Dr. Sidney Gilman, the chair of Elan’s safety monitoring committee, and Matthew Mortoma, a SAC trader, were talking a lot on the phone during the previous few months.

In late 2012, Matthew Mortoma – real name Ajai Thomas – was arrested, after Gilman finally agreed to cooperate.

The authorities knew that Cohen was the chief culprit, but for some reason, Mortoma didn’t implicate him, even though this could have reduced his potential sentence.

We still don’t know why he did that, for he remained quite even after being sentenced to nine years in prison in the fall of 2014.

In the meantime, SAC agreed to pay two record fines to settle the cases of insider trading, fearing that the situation may get worse.

Fortunately for Cohen, it didn’t.

On the contrary: he walked away free, rebranded SAC Capital as Point72 Asset Management and earned even more money than before.

The moral of the story.

There is none:

The hedge fund industry created unprecedented fortunes for a new generation of Wall Street traders whose primary innovation was to find ways to make more aggressive bets in the stock market. Cohen was a pioneer, the creator of a trading empire designed to gain an edge over less sophisticated investors. Years later, after paying the largest fines in the history of financial crime—and seeing a dozen of his employees implicated in insider trading—Cohen emerged from the crisis that engulfed his company as one of the world’s wealthiest men. In the end, the evidence against him that the government spent nearly ten years assembling was never presented to a jury. All that was left was for Cohen to spend his billions and to plan for his return.

Key Lessons from “Black Edge”

1.      Steve Cohen Was a Gifted Investor…
2.      …But He Chose to Earn Money the Illegal Way
3.      The Financial System Is Rotten: And Hedge Funds Prove This

Steve Cohen Was a Gifted Investor…

Steve Cohen was a success story.

He was interested in the world of finance ever since very early age. He was a brilliant poker player in high school. He studied at the prestigious Wharton School of the University of Philadelphia.

In 1978, at the tender age of 21, Cohen was already working at a New York brokerage firm and had a reputation of a whiz kid.

In fact, he was so skilled that during the very same year, he once earned $4,000 in a single day, which is more than $15,000 in today’s money.

…But He Chose to Earn Money the Illegal Way

By 1992, Cohen had amassed a fortune of more than $20 million.

But it wasn’t enough.

He founded a firm, SAC Capital, which will become a $15 empire in a matter of years!

The whizz kid at it again?

No, not this time.

The FBI and SEC found out that the “hedge fund king” built a business model around illegal insider trading schemes. And even though they still know this to be true, there’s just not enough evidence to put Cohen behind bars.

The Financial System Is Rotten: And Hedge Funds Prove This

Hedge funds are now estimated to manage almost $3 trillion in assets!

And that’s scary.

Because these are not people who have built factories or laid railroads to compete among themselves for such a disgustingly huge amount of money.

No – these are people who merely place bets on the market.

And they are not beyond using illegal ways to discover information which might gain them the edge.

The black edge.

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“Black Edge Quotes”

Listening to the wires was generally considered a crappy job, but Kang didn’t see it that way. He understood it as a matter of patience; if you put in the work, it eventually paid off. Click To Tweet

Kang had thought carefully about his first line. He wanted Martoma to know that he had done his research. By this point, he knew everything about Martoma and his life, things his wife probably wasn’t even aware of. Click To Tweet

Cohen was acting like a man who was celebrating, while the government was far from finished with its investigation. The $616 million he paid the SEC was nothing, Cohen seemed to be saying. He could find that in the cushions of his Maybach. Click To Tweet

The government had made its best effort to bring one of the wealthiest men in the world to justice and left him largely in the same condition he had been in before. Click To Tweet

Cohen was a survivor, a symbol of his time in history in more ways than he would likely want to acknowledge. Click To Tweet

Our Critical Review

“Black Edge” is basically “Dan of Thieves” a few decades later – the only thing that’s changed is the name of the main protagonist.

If that sentence doesn’t sound scary to you – believe us – it should.

Because it basically means that numerous people are still earning money through speculation and insider trading, i.e., through cheating, without having any skin in the game.

“A tour de force of groundbreaking reporting and brilliant storytelling,” “Black Edge” documents a scandal of astronomic proportions.

Take it seriously.

Very seriously.

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Charlie Munger Summary

Charlie Munger SummaryThe Complete Investor

You want to be the best? Then learn from the best. Because, after all, “learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.”

No wonder the guy who said that is one of the best: Mr. Charlie Munger, Warren Buffett’s personal partner. And, Tren Griffin’s book is all about him and his worldview!

Who Should Read “Charlie Munger”? And Why?

If we presented you with a summary of a biography of Michael Jordan, then obviously it would have been a book we’d recommend to future basketball players and current sports buffs.

Consequently, a book about Charlie Munger is, most obviously, a book about wannabe investors. But, it may be also interesting to students of investments strategies. As well as to those who are curious to learn how one can earn so much money by simply investing.

About Tren Griffin

Tren GriffinTren Griffin is a senior director at Microsoft. Before that, he was a partner at Eagle River, a private equity firm which invests in tech and telecommunications startups.

Griffin is and the author of few well-received books, such as “The Global Negotiator”, a book dedicated on building strong international business relationships, and “A Dozen Lessons for Entrepreneurs.”

He also writes for https://25iq.com/.

“Charlie Munger Summary”

Charlie Munger is the vice president of Berkshire Hathaway – which, if it doesn’t ring a bell straight away, is Warren Buffutt’s multibillion conglomerate.

In other words:  Charlie Munger has a lot of money. To be more exact: he’s one of the 2,000 or so living billionaires, with a current net worth of almost 2 billion dollars!

Now, that’s a lot!

And if you want to learn the secrets behind his success – this is the book for you!

Unassumingly titled “Charlie Munger,” Tren Griffin’s 200-page analysis of Charlie Munger investment strategies boils down to something painfully simple: if you aren’t investing into something you know, your story of success is nothing more but a story of luck!

So, invest in the things you know best!

Now, how can you do that?

First of all – by reading. And reading a lot! Both Munger and his partner Warren Buffett spend about four fifths of each of their working days reading almost anything they find interesting. Just like possibly every great person you hear about, they weren’t born geniuses. They became such – by absorbing information, by fact-checking it, and by thirsting for some more all the time!

But, what interests you more is probably not how they got to be so smart, but how they got to be so rich.

Interestingly enough, the answer is, if not the same, pretty much related. Because Munger and Buffett were reading so that they can know where to invest. And because, when it comes to investing, they are intelligent investors.

Namely, firm believers in security analyses and value investing.

As Charlie Munger explains, the logic is fairly simple. You invest only in what you know. That’s why he has three baskets of investment opportunities: In, Out, and Too Tough.

The first one is for the opportunities they know enough about to invest in; the second about those they know nothing about; the third – about those that seem good on the face of it but are yet too tough for them.

That’s what we call reality-check. And what you lack if you want fast stocks and fast money. A lesson from the best: there’s no such thing.

What there is are four rather simple ideas Munger shares with Warren Buffett.

First of all, you must treat a share in a business as if you’d treat the whole business. Buy it – only if you’d buy and run the company. Value it as much as you’d value the company itself.

Secondly, buy shares as you buy chocolate: on discount. This will give you a margin of safety, i.e., you probably won’t lose money, even if you don’t win it in the end.

Thirdly, always stay on the safe side. Or, in other words, disregard the behavior of that bipolar creature, Mr. Market. Don’t try to beat him. And the best way to do this is by not challenging him at all!

Which brings us to the final advice: if Mr. Market is irrational, you don’t need to be. So, stay as cold as ice. Choose investment opportunities with your head – not with your emotions!

And in order to do this, cultivate traits such as patients and courage. “Don’t just sit there: do something!” is a completely wrong philosophy when it comes to investing. The point is, quite contrary, to site and wait.

And even go boldly against the herd mentality – you know, where no man has ever gone before!

Key Lessons from “Charlie Munger”

1.      Meet Berkshire Hathaway: It’s a Giant!
2.      Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4
3.      Be an Intelligent Investor: Read as Much as You Can!

Meet Berkshire Hathaway: It’s a Giant!

Do you know that Berkshire Hathaway was, in fact, a textile manufacturing company? And that Warren Buffett bought it when its business was declining, so that he can fire a guy who undercut the initial offer to buy his shares? In fact, buying the company was Buffett’s worst trade!

Sixty years later, the company is the third largest public company in the world! It owns GEICO, the fast food restaurant chain “Dairy Queen,” “Fruit of the Loom,” “NetJets”… – you name it! And it has shares in “American Express,” “Coca-Cola” and “Apple”!

The guys who did that: Warren Buffett and Charlie Munger.

Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4

Both Buffett and Munger are considered sages of investing. However, they claim that they owe everything they have to worldly wisdom and a fairly simple investment strategy: Benjamin Graham’s value investing.

It’s based on a simple premise: only buy what you know. And it’s built around four principles.

First of all, there’s no difference between buying a share and buying a whole company. Secondly, when you buy – buy at a discount. Thirdly, stay on the safe side. And finally, be rational.

Or, in other words, don’t buy Berkshire Hathaway to fire a guy! Warren Buffett says that you would have earned 200 million dollars more otherwise!

Be an Intelligent Investor: Read as Much as You Can!

Benjamin Graham’s most famous book is called “The Intelligent Investor.” And Charlie Munger has taken this quite literally. To him, reading is everything: he reads about 80 percent of the day. That’s exactly how he knows where to invest. And even more: how to differentiate between herd mentality and a Giffen good.

Oh, you don’t know what that is?

Well, educate yourself a bit!

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“Charlie Munger” Quotes

I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart. Click To Tweet Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley? Click To Tweet Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day. Click To Tweet If you want to get rich, you’ll need a few decent ideas where you really know what you’re doing. Then you’ve got to have the courage to stick with them and take the ups and downs. Not very complicated, and it’s very old-fashioned. Click To Tweet If something is too hard, we move on to something else. What could be simpler than that? Click To Tweet

Our Critical Review

“Charlie Munger is, arguably, the world’s best investor. His ‘worldly wisdom’―a latticework of understanding separate disciplines―is a powerful way to achieve superior investment results. Without it, success in the market―or anywhere else―is a short-lived fluke.”

You know who wrote that?

Robert G. Hagstrom, the author of one of the best books on Charlie Munger’s partner, Warren Buffet.

So, a book which unifies and neatly structures Charlie Munger’s investment philosophy should be a delight for all those interested in finance, right?

It is. Of course it is.

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