Book Reviews
World Right Side Up

Investing Across Six Continents
By Christopher Mayer

This book reminds me of the Jim Rogers books I like so much. It is part history, part investing, and part travelogue, heck it’s an adventure. Chris Mayer has visited virtually every emerging market in the world you could think of. From Dubai to South Africa to Vietnam you name it he’s been there.

Mayer talks about investing and demographic trends happening all over the world. He even throws in very specific and fascinating investment ideas that are well worth additional research. I’m sure some of these investment nuggets will turn out to be gold.

This book is worthy of a second read and I hope maybe even a follow up someday by Mayer.

Buy it and learn.

Templeton's Way with Money

Strategies and Philosophy of the Legendary Investor
By Jonathan Davis & Alasdair Nairn

There have been many books written about the legendary John Templeton. Most deal with certain periods of his investment career or talk at length about his charitable activities, which were many.

This is the first book that deals specifically with his investment thought process and how it evolved over time. For instance Templeton’s investment record really didn’t shine until he moved to the Bahamas. He felt working in New York he was too close to other investment types and that Wall Street influenced his thinking. He built one of the most successful investment firms ever from a modest little office overlooking the palm trees.

Much of Templeton’s success was born out of his intellectual curiosity in the world around him. He was essentially the first to think of investing as a global and not merely a stateside endeavor.

This book gives some insights into his thinking although don’t look for any magic formulas or ratio’s. His thinking was eclectic and evolved greatly over time. His greatest attribute might well have been his ability to think for himself and not be influenced by the investment “crowd.” Sometimes the best thing you can do for your financial well being is the most difficult.

The Wizard of Lies

Bernie Madoff and the Death of Trust
By Diana B. Henriques


The Wizard of Lies is a fascinating look at the life of Bernie Madoff the master swindler who pulled off the largest Ponzi scheme in history. The author attempts to unravel the deceit and the cat and mouse game that Madoff so successfully pulled off for decades. While this book is quite enjoyable and reads like a financial thriller there are still many unanswered questions. Such as when did it start? Why were certain regulators so apathetic? As a financial person entrusted with other people’s money this tale makes me angry. It goes to show you that if something seems too good to be true it probably is. Certain investors figured that out why didn’t the federal government. Wizard of Lies is well worth the time for any level of investor.

Reckless Endangerment

By Gretchen Morgenson


Gretchen Morgenson is a top notch reporter for the New York Times who’s has a reputation for being tough and unbiased. Her book Reckless Endangerment is no different. Morgenson gives us a step by step account of how the mortgage bubble nearly brought down the U.S. economy and why we are where we are today.


Arrogance, greed, and corruption are all present by players who are still in the mainstream of government today. Why won’t these people just go away? The central player in this scheme that enriched so few and left so many with burdens beyond their means is Fannie Mae. Enablers in the background include Countrywide, The Fed, Congress, and high profile brokerage firms such as Goldman Sachs, and Merrill Lynch. The book will make you mad but it will also give you an overall understanding of why the financial crisis happened. And it does that better than any other book I have read to date.

There's Always Something To Do

The Peter Cundill Investment Approach
By Christopher Russo-Gill


In this wonderful book Chris Russo-Gill outlines the career and investment philosophy of Canadian investment manager Peter Cundill. Cundill is not well known among many investors but definitely should be. His track record spanned over 40 years and was enviable by any metric. Although Cundill is no longer with us he did keep a diary from 1963 to 2007 of all his investment picks and his insights and original thinking. This book summarizes many of them and is a terrific addition to any library on value investing. After reading this it makes one wish that more prominent investors would keep such a diary so we can pick their brains from afar.

The Big Short

Inside the doomsday machine
By Michael Lewis


From the author of Moneyball and Liar's Poker comes this short sweet book that gives us an inside view of the investors who foresaw the credit collapse of 2008. The book reminds us how clouded the views of institutions can become when everyone is making money. The collapse of the real estate market, the old west mentality that reigned in the CDS market, and the unbridled appetite for risk that was present at many well known companies was astonishing. Lewis takes us along for the ride with investors such as Steven Eisman and Dr. Michael Burry who made a fortune betting against the crowd but lost many of their clients along the way. I would highly recommend this book for anyone interested in investing or wanting to understand how the collapse of the mortgage market happened. Just like Lewis's other books this one reads very fast and hopefully serves as a reminder that markets and the big players who participate in them are not always correct.

The Most Important Thing

Uncommon sense for the thoughtful investor
By Howard Marks

 

For 40 years Howard Marks has been known for his insightful assessment of the stock market and risk. His client memos have been widely read by prominent investors including Warren Buffet. In his first book he deals with the psychology of the market and how to think about risk in investing. As a value investor it's very easy to get caught up in the analytics of valuation, but Marks reminds us that understanding the psychology of investing is equally important. This book is appropriate for both the novice and the experienced investor and should be reread every year or so.

The Death of Capital

How Creative Policy Can Restore Stability
By Michael Lewitt

I hadn't heard of Michael Lewitt until October of this year. I was attending the Value Investing Congress in New York where he gave a fascinating 45 minute presentation. So needless to say I went out and bought his book.

In Death of Capital Lewitt first lays out his thesis for how the financial markets and rampant speculation nearly brought the US economy to its knees. Lewitt is not a historian however, he is an analyst. And a very good one I might add. He has been pounding the table since 2005 in his HCM Market Letter that this day was coming. Nearly every thing that happened, the collapse of Lehman, Merrill Lynch, etc wasn't a shock it was in fact all quite predictable.

Lewitt goes on to challenge the spending of the current administration which in his view will have repercussions far into the future. The Fed can print all the money it wants the reality is there has to be demand for that money. He feels we are at a crucial turning point and policy must change very quickly.

The last few chapters are his recipes for getting us out of this mess. He cites 6 areas that must be addressed. Taxing speculation, creating meaningful regulation, improving capital adequacy of banks are all mentioned.

I have read 5 or 6 books on the financial crisis and this one is by far the best. The other thing I liked was Lewitt doesn't get political. After reading the book you will still not know his politics. And that's a sign of a good analyst.

If you read one book about the financial crisis this is it.

APPLIED VALUE INVESTING

By Joseph Calandro


I was a little apprehensive when I ordered this book. For one I had never heard of the author and I was a little skeptical whether there was anything to add beyond Professor Greenwald's value investing books. Boy was I wrong. Calandro does a magnificent job of taking the valuation techniques taught at Columbia and applying them in different ways. The first couple chapters cover the 3 continuums of valuation Net Asset Value, Earnings Power Value, and Growth value using real world examples. An extensive valuation of Sears is done at the time of Eddie Lampert's decision to purchase the company. Later in the book Calandro does a valuation of GEICO and General RE at the time of Buffett's purchase. He then uses the same techniques to explain insurance risks and catastrophe pricing. Having started with low expectations this book was a huge surprise. In fact it has catapulted into my top ten investing books. I would recommend for anyone interested in learning how to invest the RIGHT way.

Distress Investing

Principles and Technique

By Mary Whitman & Fernando Diaz

Mary Whitman is a legend to value investors everywhere. So when he speaks we all listen. His latest book is a window into how he thinks about distress situations. In the first half of Distress Investing Whitman lays the ground work for how companies become distressed in the first place and how the process works. What happens in Chapter 11, or bankruptcy liquidation is covered. The second half of the book concentrates on valuation and quantifying risks. He finishes with several fascinating case studies including Kmart and Home Products International.

The novice or casual investor will be overwhelmed here as the content is fairly technical. One needs an understanding of accounting to get the most out of the book. Sophisticated investors however will be thrilled since there has been very little written on restructuring valuation techniques. For these investors this book is a must for the library.

MORE MORTGAGE MELTDOWN: 6 WAYS TO PROFIT IN THESE BAD TIMES

By Whitney Tilson & Glenn Tongue


If you want to learn about the mortgage bubble, how it came to pass and how it will continue to play out over the next couple of years this is probably the best book to read. The first half of the book covers their research that began in early 2007 with a focus on the deflating subprime mortgage market. As their research continued they began to realize that this bubble was not just a subprime issue but a credit issue that was going to extend into others areas of the economy. They tell you not only what's happened but what is ahead. The second half of the book lays out a thesis for how to profit from this debacle.

The original presentation that ended up being this book was given in Los Angeles in May of 2007. I was present at that meeting and can tell you that pretty much everything that they covered back then has come to pass. In addition I can tell you that I have known Whitney for almost 3 years now and everything he does is top notch. Some of my investment friends joke that he is kind of like the Coca-Cola of value investors. Everything he touches tends to do well. Anyway highly recommend the book it is a great tool for learning.

WALT DISNEY: TRIUMPH OF THE AMERICAN IMAGINATION

By Neal Gabler

 

I read this book when it came out in 2007 and can say that it is one of the best biographies I have ever read. The author covers every aspect of Disney's life (so it is a rather lengthy book). He also captures Uncle Walt's genius and his demons. Many interesting facts are exposed that have never been approached before. For instance, Walt was financial pretty much illiterate, he had very little grasp on how much things cost or how to handle money. It was his brother Roy who kept the studio going and one step ahead of bankruptcy, especially in the early years. Another little factoid is that Walt was not the happiest man in the world. He went through periods of great depression and torment, not unlike other great geniuses.

If I had to rate this book I would have to say it's pretty close to a 10. Easy to read and with fascinating subject matter makes this one hard to put down. Spend $10 and read it.

The Snowball

By Alice Schroeder


This is the most complete biography of Buffett yet. Schroeder even delves into personal aspects of his life that no one else has dared to expose. (This could be why he's less than thrilled with the final manuscript) In my opinion this just portrays Warren as very much like the rest of us with many of the same fears, eccentricities, etc. The book also gives us a lot more information regarding his earlier investments such as the Berkshire Hathaway textile mill, Diversified Retailing, and Blue Chip Stamps. In fact, I will probably reread this part of the book since there are great similarities between the market in 1973 & 1974 and today. Scholars know that much of the seeds of his net worth were planted in those dismal years where the market fell over 60%. A must read for Buffett fans and very serious value investors.

CONFESSIONS OF A SUBPRIME LENDER

By Richard Bitner


Confessions is an entertaining quick read on what led to the financial mess we are in today. Bitner was an insider in the business who became disgusted and left in 2005. He relates his personal experiences in the business and how subprime lending grew and eventually morphed into a monster.

His explanations are the best I have read explaining how the business worked and how and why there were abuses. Some of his anecdotal experiences are humorous and quite shocking. He also lays out some of the problems that lie ahead and how ultimately we can fix the issue.

This book was a lot of fun to read and goes very quickly. I read it in 2 days. The topic is timely and I think Bitner gives us a good feel for what lies ahead. Something every investor is looking for.

VALUE INVESTING: FROM GRAHAM TO BUFFETT AND BEYOND

By Bruce Greenwald, Judd Kahn, Paul Sonkin, and Michael Van Biema


This book is an update to value investing principles that Ben Graham would be proud of. Professor Greenwald takes us through the basic concepts of valuation with very specific instructions and examples. The first few chapters takes us through the various ways to value an enterprise including reproduction value of the assets, earnings power, and the value of growth within a franchise. You also get a feel for how these concepts should be looked at together and how they interact.

Finding hidden assets, undervalued business segments and misunderstood subsidiaries are also covered. The most fascinating concept to me was the chapter of valuing growth within the franchise and specifically how to quantify that. No one to my knowledge has done better work in this area.

The book is actually used in Professor Greenwald's class on Value investing at the Columbia business school. In June I was honored to be a part of that class and can only say that it was one of the highlights of my life. Bruce and his staff (Erin Bellisimo) couldn't have been nicer to me. They sent me a syllabus of their fall classes so I could get the books and study on my own. Bruce has taught the value investing program at Columbia for almost 20 years now. Some of his students have went on to become investment legends including Joel Greenblatt, Glenn Greenberg, and others. In fact he is often referred to as the guru to the guru's.

The book is for the fairly knowledgeable to advanced investor but if you're very interested in investing, and doing it right, this is one of the 3 or 4 books I would require you to read. I think Mr. Buffett once said if you understand the concepts in his course that's really all you need to know.

I have had detailed cliff notes printed up for this book. I like to look back and reread some of the concepts. I would be happy to share them with anyone.

FOOLING SOME OF THE PEOPLE ALL OF THE TIME

By David Einhorn


David Einhorn is founder and President of Greenlight Capital a very successful hedge fund that was started with money from his friends and family. In 2002 David gave a speech on a company he had researched called Allied Capital. The gist of his speech was that Allied's accounting was very suspect and he proceeded to lay out his thesis to the audience as why. Because of the accounting issues David's fund was short the stock. What followed was a firestorm of controversy that seemed never ending.

This is a book not only about investing, but ethics, politics, and how the regulators who are there to protect investors often totally fail. Some parts of the book made me just shake my head. In return for his work David was vilified by the media and even investigated by the very people he was trying to get to help him.

If I taught an investment class this would be required reading. I would describe it as a forensic accounting thriller. Some of the accounting issues can be construed as complex but I don't think this fact takes away from the book. The quality of writing is excellent and it is fun to read. I finished it in a couple of days and I will probably read it again.

Postscript: Ironically David is in the spotlight again as he made public his concerns for Lehman Brothers accounting. And again, the media (particularly the New York Times) is slamming him and the regulators just look the other way. Personally I believe many of his pronouncements concerning Lehman are right on. They are not writing down impaired assets which could have a very adverse effect on the firm considering the high degree of leverage (37 to 1). Stay tuned.

Extraordinary Circumstances

By Cynthia Cooper


When Cynthia Cooper took a job with Worldcom, the high flying telecom firm, little did she know that she would be front and center of one of the largest corporate scandals to darken Wall Street in years. What makes this insider book so interesting is she is the one that actually caught the accounting fraud. You go on the day to day roller coaster ride with her as she tries to figure out what exactly is going on at the company.

I've been waiting for a long time for a good book about Worldcom and this fits the bill. Not only a blow by blow description of the events that took the company down, but you also get to know the insiders. Was Bernie Ebbers in on it? What kind of guy is he really like? Is Scott Sullivan really just a sham man?

Parts of this book drags, especially when she speaks at length of her childhood in Mississippi. But, I think this has to be done to establish the basis for her what kind of person she actually is. The fact that she had a good Christian background makes the pain of what she goes through even that much more intense.

If your interested in Worldcom and the how such a thing could happen this is a good read for you. You might even change your opinion of Bernie Ebbers. I know I did.

The Entrepreneurial Investor

By Paul Orfalea


Most people have never heard of Paul Orfalea but many are familiar with the company he founded. Paul (a dyslexic) started Kinkos from 1 tiny storefront and grew it into a multi-million dollar company. After selling his business Paul took the funds and started a little boutique investment firm called West Coast Asset Management. His investment team of Lance Helfert and Atticus Lowe look for stocks that have classic value characteristics. Margin of safety is critical but the team at West Coast loves companies that are driven by entrepreneurs just like Paul. The book makes some interesting points such as why they don't like companies with inventory etc. This is a very fun read that is light on technical and quantitative data but gets the point across in very plain terms. I think the book may some day be considered an investment classic. But it is written in such a manner that is easy to digest and relevant for a wide range of investors from novice to advanced.

Prince of Darkness

50 Years of Reporting in Washington

By Robert Novak


A tremendously entertaining book written by one of Washington D.C.s old warhorses. Novak has personally known practically every person of influence in the capitol city going back to the Eisenhower administration. His stories are entertaining and his insights fascinating as he skewers virtually everyone , including himself, in this 600 page memoir. For history nuts and political junkies this is one of those books you won't want to put down and when you do you can't wait to pick it up tomorrow to see what he's going to say next.

House of Mondavi

By Julia Siler


While not a must read, if you're interested in the wine industry this is a fascinating study. Siler takes us through the history of the Mondavi family. From the building of the dynasty to the family conflict that brought it all down. I enjoyed learning how the wine industry in Napa and Sonoma evolved from small family wineries to the multi billion dollar conglomerates that dominate the valley today. In fact I found this book more interesting from a historical perspective than as a business management book. I think we all know that having a dysfunctional family in charge of your business affairs will probably end badly for someone. So theirs really nothing new here. An easy and enjoyable read.

Its Earnings That Count

By Hewitt Heiserman, Jr.

In this book Heiserman shows us the adjustments that need to be made in order to find Quality Earnings. Using real life examples such as Wrigley, Enron, and Worldcom he shows us how to ascertain between earnings that are sustainable and earnings that are questionable. While we may not have been able to tell that Enron & Worldcom were frauds we could have detected that the quality of reported profits were eroding. I found this book a lot of fun and have incorporated his use of "adjusted" financial statements into my own practice. Not a beginner book, a general understanding of accounting is needed. Well worth the time for the serious investor.

The Dhando Investor

By Mohnish Pabrai

 

A short easy to read book that highlights superinvestor Mohnish Pabrai's methodology to investments. In a series of essays featuring the Patels of hotel fame, Mittal Steel, and his own personal investment decisions he tells us how he thinks about a potential investment as well as the math he uses to determine intrinsic value. Mohnish started his investment fund in 1997 and has returned an annualized 29% to his shareholders. I believe his comments and thoughts are well worth listening to. This is a must for a value investors library.


Note: You will find Mohnish pictured on our website with yours truly. This photo was taken at his annual shareholders meeting which he was kind enough to invite Laurie and I to.

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