With Amazon’s Kindle eBook reader spreading as rampantly as a greedy European rodent in a New World ecosystem, more and more books and magazines are being adapted and republished in Kindle editions.

These include plenty of Kindle books about money and investing, although there are still lots of frustrating omissions. UK passive investors might mourn the absence of a Tim Hale’s Smarter Investing in Kindle format, for example.

But let’s consider the good news story…

You’re eBooked

Amazon says Kindle – which the cyber book peddler produces itself – is now its best-selling product. Going on all the Kindles I see on the Underground here in London, I quite believe it.

The latest generation of Kindle solves almost all the problems of the old Kindles, and are really priced to sell:

• The Kindle 3G costs £152, and as its name suggests it enables you to connect to the 3G network as well as Wi-Fi to download data. (For free, amazingly).

• The standard Kindle costs £111, and is identical to the 3G model except for the absence of that 3G connectivity. Instead, you must use a Wi-Fi network.

For anyone with a home Wi-Fi network, the cheaper Kindle is a fine option; realistically you won’t want to download ebooks on-the-go much. One sneaky benefit of the Kindle 3G though is that you can use its rudimentary web browser on the 3G network for free, which may be handy, particularly if you’re traveling in Europe and want to avoid data charges on your phone.

Either way, the clarity of text on Kindle is amazing, the ability to add notes is fantastic, and carrying all your books with you wherever you go is something you don’t appreciate until you can do it. About the only downside is the bland typography, which upsets old print lovers like myself.

When Kindles first arrived I wondered if they were a tax on reading, but now I’m sold. I love paper books, but Kindle has the edge once you toss the romance of paper overboard. I don’t think there’s much if any money saved from going digital, but I do hate clutter and having too much ‘stuff’ and Kindle deals with that. Perhaps it will save me ponying up for an extra bedroom cum library in my future house purchasing!

A dozen Kindle books about money and investing

To the money shot! I’ve dug into the Kindle Store to hunt out the following publications (they’re not all books!) that you could consider for your Kindle.

1. The Snowball: Warren Buffett and the Business of Life

One of the best books you’ll ever read about investing, dressed up as a biography of a more bizarre individual than you probably imagine. I admire the man and the detail here – but Buffett was apparently so miffed by its candor that he no longer speaks to the author. More details from Amazon.

2. The Intelligent Investor

In-between speaking fluent Latin, writing his own plays, studying the classics and seducing the women of Manhattan, Ben Graham invented all the basic tenets of value investing. The Intelligent Investor is his classic introduction, and the 60-year old book will retain its popularity on in the eBook era. More details.

3. Common Stocks and Uncommon Profits

If Ben Graham is the father of value investing and Warren Buffett his most successful pupil, then Philip Fisher is the father of growth investing – and the author Buffett read as he started sneaking off the one true path laid down by Graham. Another timeless classic that’s essential reading for anyone whose heart is set on the dangerous game of stock picking. More details.

4. Enough: True Measures of Money, Business and Life

Not many people in the UK have read this brilliant book by Jack Bogle, the father of passive investing. It’s not really a how-to guide for passive investors (you can read our articles instead!) or even a case doing so – Bogle has made that argument many times. Rather it’s a thorough review of how the financial services industry repeatedly does wrong by its customers, culminating in the recent financial crisis. More details.

5. The Big Short

The Accumulator has recounted the lessons from The Big Short on Monevator, but this isn’t a book I’d just read to learn from. Like most of author Michael Lewis’ writings, it features an incredibly compelling collection of characters, too – you soon forget you’re essentially reading about maths geeks staring at spreadsheets most of the day. More details.

6. Anyone Can Do It

As I said when I reviewed it donkey’s years ago, Duncan Bannatyne’s best-selling biography is not beautiful writing. The entrepreneur’s story isn’t half as sexy as Richard Branson’s, either, with the (seemingly) surly Scot not getting going until his 30s, and beginning to make his fortune with an ice cream van. What it is though is fabulously readable and packed with practical insights into the mind of a down-to-earth rainmaker we can all learn from. More details.

7. Free Capital

I was surprised to find Free Capital on the Kindle store. A clearly written collection of profiles of 12 private investors who’ve made at least a million from the markets – several by ‘simply’ stock picking for their ISAs – the book is another to file under Inspiration, and is rare for its British focus. The fact that it’s on Kindle shows how the device is becoming ubiquitous. More details.

8. Eat that Frog!

This book isn’t about money or investing, but it is one of the best books on effectiveness and time management I’ve ever read. Mainly because it’s one of the shortest. Where most time management books drone on for hundreds of pages, Eat That Frog! steals their best ideas and repeats them in two. It’ll make you more efficient, and pays out that most precious commodity: time. More details.

9. The Financial Times

You can now get the Financial Times on Kindle, and as I write it’s priced at just under £18 a month – a decent discount to the paper edition. There’s a free 14-day trial, too. It all updates seamlessly and reveals the future of newspapers is surely digital, but the text layout isn’t perfect. In my opinion it’s the best business paper in the world, but then I don’t read German or Japanese! More details.

10. The Economist

Sticking with periodicals, The Economist is my favourite big picture read (although I also like Prospect for its wider cultural coverage) and a frequent edition to Monevator‘s Weekend Reading slots. The Kindle edition is fine, but a bit expensive compared to the other subscription options. More details.

11. The Greatest Trade Ever

If The Big Short doesn’t satisfy your cravings for a heady mix of credit crunch shenanigans and buccaneering moneymaking on the back of it, then this recap of how hedge fund manager John Paulson made $20 billion out of thin air surely will. More details.

12. More Money Than God

I confess, I’m fascinated by hedge funds, although I’ve never invested in one as a private individual – I think in practice retail investors are unlikely to do better long-term than if we simply buy an index tracker and save some cash, due to the high fees universally charged by hedge funds and the rarity of (and difficulty selecting) enduring out-performers. But in my daydreams I’d love to run one, and until then I aspire to manage a portion of my active portfolio like a hedge fund. More Money Than God recounts the most innovative hedge funds’ market-smashing capers. More details.

Have I missed one of your favourite Kindle books about money and investing? Let us know in the comments below – particularly if it’s a book targeted at the UK market, since most I know about and like aren’t on Kindle yet.

Further reading:

1. Weekend reading: Is Kindle a tax on reading?
2. Oblivious Investing
3. Download a free guide to investing today

Not many finance books read like a thriller. Yet The Big Short, Michael Lewis’ account of the US sub-prime mortgage implosion – the trigger for the credit crunch – contains enough conspiracy, paranoia, and intrigue to keep you up at night, wondering why the perpetrators aren’t in jail.

Penetrating the black heart of Wall Street, Lewis portrays an unholy cabal of mortgage lenders, big banks, rating agencies and money managers that almost destroyed the world’s financial system.

They played a trillion dollar game of pass-the-parcel with sticks of dynamite marked Collateralised Debt Obligations (CDOs). Each player took their cut of the profits and bet that they could offload the incendiaries onto someone else before it all blew up.

(Click to enlarge the horror: A little bit)

Looming disaster

The story of The Big Short unfolds as a tale of outsiders (a misfit group of hedge fund managers) who come to realise the game is rigged to explode.

They fight the system the hedge fund manger way – not by taking out the bad guys, but by shorting them. It’s a giant bet that stands to make them rich but which they come to see as a bet against the entire financial system and ultimately society itself.

Just like Titanic, the story isn’t spoiled by knowing the ending, because The Big Short is really about how it all began. Uncovering the origins of the disaster that ended in the massive destruction of wealth, huge job losses, and colossal debts that we’re burdened with now.

How they got away with it

This book takes you into the black box and reveals the inner workings of CDOs and credit default swaps in language a mere mortal can understand.

Yet Lewis’ finest achievement is to humanise the event. He transforms it from an unstoppable chain reaction of market forces into a more comprehensible study of human immorality and greed.

And that’s when you become angry at Wall Street. When you realise how obscene, avoidable and unjust the credit crunch and its consequences were.

The perpetrators of the crisis became very rich. They banked fat profits while ignoring the tottering pile of risk that was building. And when it all came crashing down, the billions in losses had to be absorbed by using the livelihoods of ordinary people as crash bags.

But there’s no point getting mad, our only duty is to get even. And that means learning the lessons The Big Short has to teach us about the people at the heart of the financial system.

Lesson one: Trust no-one

According to Michael Lewis, the Wall Street banks tricked the rating agencies into approving assets that should have been slapped with a health warning. The rating agencies played dumb because they were scared of losing business from the banks. In other words, conflicts of interest are rife.

Few financial players will prioritise the interests of the small investor. As The Governor of the Bank of England Mervyn King has remarked, many in financial services believe:

If it’s possible to make money out of gullible or unsuspecting customers, that’s perfectly acceptable.

It’s buyer beware out there. Stay sceptical about everything and everyone.

Lesson Two: Know thy enemy

The smart advice is to avoid stock picking if you’re a private investor. While you might do weights once in a while, you’re walking into a bar-fight with the financial SAS. Your opponents’ access to data and computing power is the equivalent of pitting a chain-gun and airstrikes against your flick-knife. Let’s just say, you’re hoping for a lucky shot.

But it’s all easy to ignore that advice. We never look our investing opponents in the eyes. How hard can they be? Lewis puts together a compelling photo-fit of the ruthless, immoral, workholic hombres you’re up against.

Investing is a zero sum game. We lose, they win. So tread warily. Better still, don’t play the game – invest in index trackers.

Lesson Three: No one cares about you, except you

The list of the culpable in The Big Short is shocking. Wall Street’s greed may not be so surprising but the lack of due diligence by pension funds certainly is.

Many didn’t properly vet the sub-prime assets they bought into. They also hired asset managers who scooped up piles of toxic CDOs because they were paid according to the scale of Assets Under Management, not by quality of results.

In a world where everybody is out for number one, the only way to protect yourself is to do it yourself.

Lesson Four: Understand what you’re buying

People were making a killing from sub-prime before the crisis hit. Bond traders, banks, insurance companies, hedge funds and pension funds all piled in for a piece of the action.

Most had no idea what they were really buying and how dangerous it was. That’s why so many lost billions when the market turned against them.

If you don’t understand an investment then run a mile. If it seems willfully confusing then that’s almost certainly because it contains some unpleasant side-effect that the seller would prefer you not to know about.

It’s easy for small investors to ignore the warning signals. Many don’t bother to unravel complexity or just think they’re being slow on the uptake. We assume protection that doesn’t exist. An investment is probably okay, or else why would it be allowed?

The industrial-scale concealment and blundering witnessed in The Big Short puts paid to that kind of innocent thinking.

Lesson Five: It’s hard to swim against the tide

The handful of hedge-fund managers who bet against the sub-prime market set themselves up for life. But they had to endure years of doubt and ridicule from the mainstream before their bet paid off. They looked like prize chumps when everyone else was riding the sub-prime rocket ship to the stars.

It’s hard not to get swept along when everyone else is charging in the same direction. Ultimately, the heroes of The Big Short show that winning is about setting your own course and then having the mental courage to believe in yourself.

Take it steady,

The Accumulator

Further reading:

1. Video: The short simple history of the credit crisis
2. Liar’s Poker author Michael Lewis on the end of Wall Street’s boom
3. Naked short selling: All shout, no trousers

Attention all readers! Bargain alert!

Mike Piper, the author of the excellent blog and book about passive investing, Oblivious Investing, has decided to release his latest 100-page book as a free download.

Quite why Mike is doing us writers out of a job/hobby by releasing such great material for free is another matter, but from your point of view, who cares?

• Simply click here to download Investing Made Simple as a PDF, for free.

UK readers might get confused with Chapter Two, which is about American tax saving plans. Just substitute Mike’s talk about Roths and 401Ks for our ISAs and pensions — the main point (sheltering from tax is good) is true here too.

Don’t delay, because Mike plans to remove the free option when the book goes on sale in Amazon next month on 1st October.

Further reading:

1. Weekend reading: Free your mind and your future with Free Capital
2. Oblivious Investing
3. Weekend reading: A quick guide to Monevator

It’s fair to say Mike Piper has made oblivious investing his own over on his Oblivious Investor blog.

Having coined the phrase, he had a head start, of course!

And with the publication of his new book Oblivious Investing: Building Wealth by Ignoring the Noise – available in all good bookshops called Amazon.com today – Mike can rightfully boast he wrote the book on the subject, too.

Of course, you might wonder whether you need a book on oblivious investing.

After all, the oblivious investing strategy can be neatly summed up as:

1. Buy the stock market, cheaply and regularly
2. Ignore your investment
3. (Three decades or more later) enjoy your returns

Sure, you can also ask things like how do you best buy the market, or how should you invest a lump sum, and Mike covers some such queries in these pages.

But simplicity is the second best thing about the passive investing strategy — the first being results! Even this short book doesn’t need 100 pages to explain it.

Why oblivious investing is a bit like monogamy

No, the practical difficulty with Oblivious Investing is that it’s easy to explain and sign up to, but it requires dedication and effort to stay the course for 30 years or more.

• If you’re an experienced investor, you can accept all the evidence that shows passive index investing produces the best returns for most people. But you’ll probably still fiddle and fret, at least around the edges of your portfolio.

• If you’ve never invested before, you’ll have a hard time believing that the best investment strategy for most people is also the easiest and the cheapest. It is one of the great ironies of money management.

There’s an entire industry dedicated to making investing more complicated than it needs to be, not to mention the financial media — and even, arguably, this very blog!

Set against these forces of complication, a few books like Oblivious Investing or The Bogleheads Guide to Investing are like rare and plucky freedom fighters.

And just like guerrilla fighters, what such writers have to do with their books is win hearts and minds.

You don’t need a book to explain how to go about passive investing — it’s easy to do — but rather it takes a book to fully explain why you can safely ignore everything else.

You have to believe something so simple will eventually work if you’re to commit to it year in and year out, especially in the bad years.

The greater portion of Oblivious Investing is therefore dedicated to tackling the misleading ideology that says expense, worry, complication and confusion are necessary by-products of successful investing.

The book’s pagination illustrates this:

• Part One: The Plan – 37 pages
• Part Two: Ignoring the Noise – 82 pages

More than twice as much of Mike’s writing is devoted to what oblivious investing isn’t! Such is the task of taking on the status quo.

Oblivious Investing in a nutshell

This early passage sums up exactly what Mike’s Oblivious Investing book is about:

Some investors check their portfolio values online every day. Other investors feel that it’s necessary to read or watch the financial news each morning to see how the market performed the day before. Still others—obsessing endlessly over piles of data—constantly move their money around between various stocks or mutual funds in an effort to outperform the market.

What do all of these activities have in common?

• They’re attempts to exert control over something that we simply cannot control (the stock market).
• They arise from an abundance of worry and a lack of confidence.
• They’re a complete waste of time.

Oblivious Investing sits at the opposite end of the spectrum. Oblivious Investing is about creating an investment plan and sticking with it, staying (or at least acting) oblivious to the daily whims of the financial markets.

That’s about a page of your 137 page book I’ve quoted there, incidentally. Mike Piper is the Ernest Hemingway of investment writing, and he uses words like he’s being charged commission for them.

I mean that as a compliment – this is far from the longest book you’ll ever read (or as Mike would say, “a short book”) but as a result anyone can read it, digest it, and then decide how to put its principles into practice.

Learning to be an Oblivious Investor

Having mentioned Hemingway, now would be a good time to say that much of Oblivious Investing is recounted as a story featuring Shannon, a 25-year old at the start of her investing career, and Toby, her obliviously investing uncle who is about to retire well ahead of schedule.

In a similar style to books like Rich Dad, Poor Dad and The Richest Man in Babylon, we see Toby answering  Shannon’s questions by asking her in turn simpler questions that she can answer for herself.

By page 29 she’s on board with stocks versus bonds for long term savings, and by page 38 she’s into index funds and away.

It’s very impressive how Mike is able to return to first principles in these pages — he barely assumes his audience can read a graph.

Yet despite this need for simplicity, the pages fly by, since Mike has the knack of explaining in five words what some writers (*cough* *cough*) would require 1,000 words to get through.

You can therefore safely give this book to anybody, and they’ll be able to read it in an hour and end up better informed about investing than 99% of the population.

Admittedly, things do get a little more complicated in the second part of the book – tackling the noise; not even Mike can get stuck into the active fund industry or the folly of stock picking without a few unfamiliar words.

But he still does a great job of arguing against everything from market timing and choosing hot funds to chasing growth and reading websites like Monevator.

(Please! Come back! He’s not infallible!)

Seriously, I may strongly suggest people invest the bulk of their money via an index tracking fund, but I also hold individual stocks and I follow the market’s ups and downs for sport. Compared to Mike and his Oblivious Investors, I’m barely two steps removed from Jim Cramer or even Nick Leeson.

What about you? Should you buy the book if you’re a reader of Monevator, and so are interested enough in money and investing to be reading a 1,000 word book review about a 20-word investing strategy?

I think so, yes. All I can say is I really enjoyed Oblivious Investing, and while much of the material was familiar, it’s very rare to see it laid out so clearly.

If you stumbled across my review while Googling your first steps in investing — or if you know somebody else who is getting started — then the recommendation is even easier to make.

Oblivious Investing is a must-read for novice investors. Buy a copy now.

Note for British readers: Since many Monevator readers are from the UK, I should mention Oblivious Investing is an American book, quoting American stats as well as mentioning a few strange things like CDs that have nothing to do with pop music (they’re like our fixed rate savings bonds). Also, the characters have odd American names like Cindy and Lauren. None of this takes anything away from the book, however, since the principle is the same for UK investors, and the stats broadly similar. And you can always edit the names in your copy with a pencil. You will have to buy it from Amazon.com, however.

Further reading:

1. Download a free guide to investing today
2. Kindle books about money and investing

I have already read a couple of books by panelists from Dragon’s Den, the BBC TV show that puts would-be entrepreneurs in front of self-made millionaires for their money or their ridicule.

On Saturday I picked up another — Theo Paphitis’ Enter the Dragon — in a Waterstones’ 3-for-2 offer.

Perhaps I’ve become a Dragon’s Den groupie? I’m certainly not reading these books for their literary qualities.

100 Secret Strategies for Successful Investing by Richard Farleigh is like the brain dump of a share bulletin board poster with verbal diarrhea. There wasn’t much takeaway value, though Farleigh’s rags-to-riches tale was heartening.

Duncan Bannatyne meanwhile took time off from snarling at the inventors of dog treadmills and revolutionary shower caps to write Anyone Can Do It.

Bannatyne wasn’t promising much more than a pep talk, but his book worked better than Farleigh’s, perhaps because Duncan made his initial money selling ice creams, whereas Fairleigh earned his wodge investing other people’s billions — not really an option for most of us.

So what about Theo Paphitis? The Dragons are famously competitive: Does Theo measure up?

Enter The Dragon: How I Transformed My Life and You Can Too is at least snappier to read than its title.

However as both a business book and an autobiography, it’s pretty mediocre, and it doesn’t live up to its billing. Enter the Dragon would only transform your life if you were short of kindling on a freezing mountain side and you tore it up to get a fire going.

That’s not to say there aren’t laughs and insights. Paphitis’ best quality is his lack of pretension, and it shines through here.

It’s impossible not to warm to a man who admits he got one O-Level in ‘colouring maps’, and who spends a page of his book recounting with clear delight the time he brought his pimped-out truck to the Dragon’s Den set to drown out Peter Jones’ Ferrari.

However even more than Bannatyne and Farleigh, you get the impression that Paphitis is a born wheeler-dealer who can’t teach us mere mortals much except by example.

A committed family man, Paphitis was married before he was 20 (which doesn’t make for a salacious biography) and he’d had a swathe of sales-orientated jobs and roles by 30. Along the way he’d gone solo and back more times than a member of Take That. (Well, two or three times, but Theo wouldn’t let the facts get in the way of a gag!)

Indeed, one of the best sections is when Paphitis is ousted from the listed company he’d battled to save, Astra, in the late 1980s. He describes a feeling of listlessness that I found very true from when I left my own start-up company with rather mixed feelings.

Theo finds himself lolling about on a boat, his paper millions gone to the wind and with just £100,000 or so stashed away to “get back in the game”. That might sound a lot, but for a man who had worked 17 hour days since his late teenage years, it was a flimsy reward.

Paphitis bounces back, of course. He buys a media advertising company, and then turns around stationer Rymans and fancy pants chain La Senza with a combination of canny deal-making and inspiring leadership, and the rest is history — especially if you’re his bank manager.

Success in business means listening

Theo Paphitis puts his success down to his focus on his staff.

As a first-generation immigrant who started penniless and who recognised (but doesn’t bemoan) certain prejudices when he started working, Theo has an empathy with the front-line men and women ordering the stock and ringing the tills.

He clearly understands what real inspiring leadership is all about: not grandiose claims, but being there for his people. And he’s not full of airy-fairy nonsense. He motivates his best workers with weekly targets and holidays to the Caribbean.

For Paphitis, the key to making more money in business is discovering what is going wrong and then fixing it. This can be pretty simple stuff — he reinvigorated the shop floor at failing lingerie chain Contessa by putting microwaves and fridges into the staff room.

As he writes:

You don’t need to bring in consultants to find out what is wrong with a business — just ask the staff. They’ll know the answers. That’s all consultants do.

There is a great moment in the book where his usual appeal to staff gambit fails him, though.

Standing on a chair and addressing La Senza employees, Theo writes:

I finished my speech with my usual call for everyone to buy into my dreams and ambitions. I told them I wanted them to be flowers in my garden. “Anyone who doesn’t want to be a flower in my garden, and wants to be a flower in somebody else’s garden, well, I’ll shake your hand, we’ll have a leaving drink, and we’ll part as friends. If you don’t want to be part of the future, you can go right now.

I was just about to go on to my next bit when half a dozen people picked up their coats and left.

It’s a sign of Paphitis’ confidence that he includes such a moment in the book.

Enter the Dragon at your own risk

The trouble with Enter the Dragon is there’s plenty of sweet little asides but not much of a roar.

I read it cover to cover in a couple of hours, but it was only in the way my girlfriend would read Does My Bum Look Big In This? (free tip — the answer is always no).

Paphitis story is an entertaining romp, but it’s hardly an essential business read. There’s a boring bit about football that might appeal if you’re particularly interested in the fortunes of the Millwall F.C. from a few years ago. There’s also the inevitable Dragon’s Den tips.

Finally, as if realizing he hasn’t really given readers any idea how they can ‘transform their lives’, there’s a chapter of 12 golden tips bolted on to the end. These are fair enough (I’ll run through them later this week), but Tom Peters they ain’t.

It’s all very vague stuff, capping a book that talks about clever business deals and property portfolios and banking shenanigans but gives us very real little insight into any of it. You’re left feeling a bit like you’ve overheard Paphitis chatting up a would-be client in a pub, rather than getting much advice on being in business.

Ultimately, if you’re only going to buy one Dragon book I’d have to suggest you go for Bannatyne’s. He does a much better job of banging away at the essentials and firing you up.

In contrast I finished Enter the Dragon marveling more at how Paphitis managed to make so much out of nothing, both in terms of his business opportunities and his pleasant but uneventful private life.

More happens to Richard Branson in Losing My Virginity in a page than happens to Theo in whole chapters of Enter The Dragon.

Still, if you’re a glutton for entrepreneurial insights, or if your girlfriend is deep into Do My Breasts Look Saucy In This? (or your boyfriend is reading sci-fi!) and you want some escapism, then Enter the Dragon is a nice enough diversion.

Further reading:

1. Rich friends, poor friends
2. Anyone can do it: Duncan Bannatyne’s story
3. Monevator share write-ups review

I have just finished the The Snowball, the first biography Warren Buffett has cooperated with. It’s full of surprises, such as how Buffett had three leading ladies for two decades, and how his 1960s home was an accidental outpost of the counterculture.

But I’m more interested in how Buffett made his money. And while there’s few new facts about Buffett’s deals in The Snowball, the biographical format does put them into context. You get to see what makes him tick.

Here are seven interesting things I learned about Warren Buffett from The Snowball, and some ideas on how they can help your investing:

1. Buffett set goals young. (He really started, really young)

Buffet began obsessing over numbers as a child. He raced marbles with a stopwatch and calculated the lifespan of hymn composers when six-years old. He sold chewing gum at seven and Coca Cola when he was eight: the same year he began wearing a money-changer on his belt.

• His dad was a stockbroker. This gave him an early view of the markets
• At ten he was chalking stock prices at a local broker’s office
• The same year he visited the New York Stock Exchange, and was asked for a tip by senior Goldman Sachs partner Sidney Weinberg – an experience he never forgot
• His favourite childhood book was One Thousand Ways to Make $1,000
• At 11 he announced he was going to be a millionaire at 35, a seemingly crazy goal in 1941 (when a million really was a million)
• He filed his first tax return aged 14, having already made $1,000 (equivalent to around $12,500 in today’s money)

The takeaway: The power of compound interest takes years to work its magic. None of us has a time machine, so the main lesson is not to delay a day when investing for the future.

2. Buffett bought his first stock when he was 12-years old

Warren put everything his schemes had earned him into a stock, Cities Service Preferred, when he was 12. He also enrolled his sister, Doris.

Buffet was already learning how to hold shares through a slump

He paid $114.75 dollars for three shares, and watched the stock price fall from $38.25 to $27 a share. His sister Doris was not happy. When Cities Service went back up to $40, he sold. He made $5 a share profit, and got Doris off his back. After he sold, the stock rose to $202 a share.

Takeaway: We all learn the same lessons. Buffett’s business partner Charlie Munger says that because Warren started thinking about odds, stocks, and goals before he was a teenager, he’s years ahead of the rest of us.

I used to watch share prices rise and fall on the Teletext TV service when I was 11 or 12. At the same age Buffett was learning real-world lessons on holding shares through a slump and selling too soon.

You’ll only discover whether you have the stomach to invest through a bear market or whether you’ll be sucked up by the next property bubble by being an active investor. Start with small sums, sure, but don’t delay that start.

3. Buffet lied, shoplifted, and played truant as a kid

This one was a real surprise. As a teenager Buffett revealed a wild streak. He says:

“We’d steal stuff for which we had no use. We’d steal golf bags and golf clubs. I walked out of the lower level where the sporting goods were, up the stairway to the street, carrying a golf bag and golf clubs, and the club was stolen and so were the bags. I stole hundreds of golf balls.

“I made up this crazy story for my parents – I told them I had this friend, and his father had died. He kept finding more of these golf balls that his father had bought. Who knows what my parents talked about at night.”

Takeaway: Even Buffett had to learn to be Buffett. I don’t know about you, but I found this heartening to read. Together with discovering that Buffett was a shy child who enrolled himself in Dale Carnegie’s public speaking course, it made him seem more human.

It’s easy to feel you haven’t got what it takes to make money. Some are born special, you might conclude. But Buffett’s history shows that even the world’s richest and most admired investor had to iron out his kinks.

Buffett’s history also makes me proud to be an outsider. Many of my college classmates entered the city or became management consultants, and have earned six-figure salaries for a decade. When property prices were booming, I’d sometimes wonder if I’d made the wrong decision by deciding to go it alone – even though I know that working a nine-to-five in an office and answering to some buffoon of a manager would kill me.

Discovering Buffett made being his own boss a top priority puts me in good company. I also suspect the unusual structure of Berkshire Hathaway grew out of Buffett’s non-confirming mentality.

4. Buffett is a businessman first, investor second

You’ll often read that Buffett evaluates stocks as if he’s buying the whole business. What I realised after reading The Snowball was Buffett doesn’t do this because he’s an investor who thinks like a businessman. Buffett is a businessman who is also an investor.

• Buffett ran multiple businesses while still a student: He sold refurbished golf balls, peddled stamps to collectors, ran a network of pinball machines when he was 17, owned a tenanted farm, and managed a 50-strong paperboy route
• He dealt hands-on with strikes and turf wars at newspapers from The Washington Post to the Omaha Sun
• Buffett didn’t just buy, hold and drink Coca-Cola – he engineered the replacement of its CEO
• With all the new businesses, from See’s Candies to GEICO, he added everything from their stock level reports to weekly sales projections to his endless daily reading
• Berkshire Hathaway is far from a simple holding pen for Buffett’s investments. He’s used his business acumen to produce an intricate money-making machine which takes cash from its subsidiaries and the float from its insurance businesses and reinvests it at higher rates of return, multiplying his returns

Takeway: Buffett’s success will never boil down to filters or ratios. Investors who try to ape him simply by reducing his methods to dubious cashflow projections or buying any old listed household name when its stock price falls 20 per cent will never replicate Buffett’s success. (Okay, rounding down roughly nobody is ever going to replicate Buffett’s success, but you know what I mean).

Buffett’s record suggests investors should spend as much time reading about business and management as they do calculating P/E ratios. The trouble is, all manner of financial ratios are available at a touch of a button. Buffett’s sense of business value is far harder to emulate.

5. Buffet makes mistakes

He really does! I was even more heartened by Buffett’s stinkers than by his golf ball robbery.

Some classic Buffett cock-ups include:

• Him and his friends spending $25,000 in 1957 on four-cent Blue Eagle stamps that the US government was about to take out of circulation. By securing and controlling the supply, they destroyed any chance of the stamps becoming valuable. His partners in the caper were still mailing him with postage paid for by sheets of the stamps decades later.
• He bought The Buffalo Evening News in 1977 and had lost $10 million within three years by becoming embroiled in a price war and a fight with the unions (though it later became very profitable)
• Buffett’s firm Berkshire Hathaway is living testament to his biggest mistake – spending millions to gain control of a doomed textile manufacturer
• Buying into Salomon Brothers in 1987 for $700 million eventually plunged him neck-deep into the Wall Street culture he so despised, when its rogue traders and poor management threatened his reputation and fortune

Takeaway: Mistakes happen even to the best of us. Sadly, having read The Snowball cover-to-cover I haven’t found a Buffett blunder to rank with my own worst investment (an iffy company called Homebuy that went bust overnight). But I saw plenty of examples where Buffett dusted himself down after an investment misfired and tried to learn from what went wrong.

Virtually all Buffett’s purchases of major insurance companies seem to have gone awry in the early years, for instance, and yet it’s by reinvesting all the cash thrown off by these companies that Buffett has maintained Berkshire Hathaway’s incredible growth rate.

The moral is to not despair when an investment turns out badly, but try to figure out what you can takeaway from it, as well as what you can salvage the situation.

6. Buffett considered quitting investing in his early 30s

In 1969 Buffett wrote to his investors that he was going to close their partnerships:

“I know I don’t want to be totally occupied with outpacing an investment rabbit all my life. The only way to slow down is to stop. I am not attuned to this market environment, and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.

“I do know that when I am sixty, I should be attempting to achieve different personals goals than those which had priority at twenty.”

Takeaway: What can anyone learn from this but humility? I already knew before reading The Snowball that Buffett wound down his partnerships in 1970 because he thought the market too over-valued to deliver an adequate return for his investors. That move alone would seal Buffett’s place in history among value investors, even if he had retired.

Of course, Buffett didn’t retire. He is still compounding his investments at an average rate of over 20% a year, nearly four decades later.

7. Buffett treats becoming the world’s richest man as a game

I couldn’t even begin to quote examples from The Snowball showing how Warren Buffett is in it for the scorecard, not for the payday: the entire biography is a testament to it.

No sports cars or private islands for Warren Buffett – even when he eventually bought a corporate jet he called it ‘The Indefensible’. For decades he bought suits from the everyman outfitter nearest his office, and his biography frequently mentions (and has photographic evidence of) his favourite threadbare jumper. And famously, his main residence is the first house he bought in 1961.

From setting that goal aged 11 of becoming a millionaire by 35, Buffett seems to treat investing as an intellectual challenge. He probably learned this from his great mentor Benjaman Graham, who seemed more bothered by being right than being rich, and for whom investing was just one of several high-end hobbies.

Buffett’s ‘inner scorecard’ helped him save and reinvest his money early on

Unlike Graham, however, Buffett really cares about every penny. From ‘Buffetting’ a few cents off the price he paid for stocks to demanding his friends sell him shares they’d bought in companies he was interested in, right up to his close personal friendship with his rival for the title of world’s richest man, Bill Gates, Buffett really wants to have the biggest snowball.

If you were to say there’s something rather peculiar about chasing money as a means to an end, I could certainly see your point. But when the recipient chooses to leave virtually all $62 billion of his winnings to charity, it’s hard to complain. I’d rather have Buffett as the world’s richest man than the Salomon traders who almost destroyed his reputation.

Takeaway: Spend less than you earn and reinvest the difference in the stock market. Buffett may have lived a remarkable life, but that central practice is something we can all aspire to.

Beyond that, I don’t want to get too moral. I’m happy to live below my means, but can I honestly say I’d be happy with Cherry Coke and a steak from the local shop if my means were sufficient to buy up The Maldives or launch me into space? Unfortunately I’m not qualified to comment.

I do think my attitude is closer to Buffett’s than to the more visible of the cityboys I’ve seen in London over the past few years, for whom cash is flash. Also, Buffett’s self-containment from materialism – he calls it his ‘inner scorecard’ – undoubtedly helped him save and reinvest his money early on, and got his investing career off to a flying start in his 20s. You have to accumulate before you can speculate. Good luck rolling your own snowball.

I can’t recommend The Snowball enough for anyone interested in business and investing. Obviously, anyone interested in Warren Buffett should buy it too, but I imagine you’ve all got two copies already (one for your library and one for your bathroom). The book is seemingly always discounted at Amazon (click through for the latest price at Amazon US or at Amazon UK) so there’s no excuse. Except, perhaps, it weighs a tonne, so you might put your back out while reading it.

Further reading:

1. The Warren Buffett hedge fund that wasn’t
2. How did Warren Buffett get rich?
3. 5 ways to invest like Warren Buffett (from the man himself)

You know Duncan Bannatyne. Okay, not the name perhaps, but you know the man. The accent.

Come on, you remember – the scary one on BBC2′s Dragon’s Den? The bloke who sounds moments away from thumping the next entrant who wants £100,000 for a 10% stake in their snake charming business?

The great triumph of Bannatyne’s Anyone Can Do It, the new paperback edition of which I’ve just read cover to cover, is that it transforms its subject from a man you’d avoid outside a pub to a man you’d love to share a pint with.

Bannatyne – perhaps we should call him Duncan, which sounds more human, less like an enforcement robot out of Robocop, and so suits the person in this book better – is certainly not the first Scot from a dark corner of Glasgow to be hastily judged by his consonant dropping speech-cum-warcry. Hell, to sensitive English ears even the posher denizens of Edinburgh can sound like they’re giving you ten seconds to run for it.

But in Bannatyne (Duncan’s) case, first impressions couldn’t be more misleading, as this revelation of a book makes clear.

This is a man who has built up successful businesses based around caring for people (first the elderly, then the visitors to his gyms), and who is seemingly loved by his family and staff (many of whom stay with him for decades). A man worth north of £180 million who divides his personal time between heartbreaking trips to improve the lives of Romanian orphans, and curiously concerted efforts to get on the telly (drunk on the idea of a second career as an actor, he even enrolled at RADA, pretending to other students he was kipping on a mate’s sofa when in reality he was by night sneaking back to a five-star hotel).

Riding the waves

That’s not the Bannatyne you recognise from the Den, eh? Even more surprising is how late in life he began to make his fortune. After all, most of us have sat on a beach and decided to make a success of our lives.

Duncan did it at 30, when he was a long-haired surfer who’d been hanging out in Jersey for years. And then he went and succeeded. Over the course of his life he also got himself thrown out of the Navy for attempting to chuck an officer overboard, and he toured the country for years fixing mechanical equipment. So haphazard it all seems, you sometimes feel that rather than looking for his vocation, Bannatyne was waiting for the spirit of entrepreneurship to stumble into him.

The empire finally gets going with… an ice cream van. Duncan’s Super Ices is to Bannatyne what Virgin Records is to Richard Branson, and the comparison is as charming as it is faintly silly. (But don’t go patronising Bannatyne – he now hobnobs with Branson at the latter’s parties for UK entrepreneurs). Duncan’s Super Ices sums up the appeal of Anyone Can Do It. Whereas Branson’s biography like some immortal Greek hero remade for the Home Counties, Bannatyne comes across as very much a flesh-and-blood man who raises his head to the horizon and consciously decides to steal fire from the gods of fortune.

He barely remarks on it in the book, but like most self-made men he works all hours. Profits generated go into buying more ice-cream vans and investments in bedsits. Rival cone moguls are shouted down and crowded out. The cash begins piling up.

Care fares

Next Bannatyne spots an opportunity created by changes in Government legislation to provide decent care homes for the elderly. He does the sums, and realises he can improve their standard of living (and so secure customers) while enjoying a guaranteed Government income. It works, and within months he’s building more care homes and is at loggerheads with the banks.

Actually, here Bannatyne does share a similarity with Branson – both are seemingly fearless when it comes to debt. Branson’s Losing My Virginity is full of battles with the banks, with the nascent billionaire shunting money left and right across his companies to keep the financial wheels spinning. Bannatyne’s mathematics are simpler – he works out the return on money employed per square foot of a building, and borrows accordingly – but it’s still hard not to think that if you were in his shoes you’d slow down and take a breather.

But few of us are in his shoes – something Bannatyne himself is amazed at. “People ask me where I get my drive from,” he says at one point. “I want to know why other people haven’t got it.” Opportunities seem obvious to him.

Perhaps a few are to all of us, but what he underplays in Anyone Can Do It is his boldness in actually taking them on. It’s fear that kills businesses before they’re even born, and Bannatyne has none of it. Maybe the knowledge that he was happy when the surf was up on that Jersey beach means he’s not daunted by the thought of risking losing it all, and going back there?

After the care homes we learn about Bannatyne Gyms, via a detour into child care facilities and a few other diversions on the way. The book does get a little repetitive, and it’s certainly not one that will be quoted by Business Studies lecturers. There’s no clash of the moguls here. Rather, Duncan sets up entire business over just a few pages, somewhere recounting an anecdote that inspires the business maxims that head up each chapter – homilies like ‘You should never let it get personal’ and ‘Why wouldn’t you want to buy something that made you money’. Why indeed.

If you’re ordering Anyone Can Do It for the chapter and verse on setting up and running your own enterprise, you’ll be disappointed. Indeed, it’s sign of Bannatyne’s mastery that he makes it all sound easy – the very definition of an expert, but not an ideal trait in a business mentor.

Despite this, Bannatyne is inspiring where Branson, say, is merely awe-inspiring, and I mean that as a compliment. Few people will imagine buying Necker Island on a whim in their twenties like the Virgin boss did, but most of us can picture buying a van or investing in property. Bannatyne’s success is conceivable, even if enjoying the great wealth he got for it isn’t.

Buy Bannatyne!

This isn’t a book to blow you away. Far from it. Rather, it’s like a dutiful trip to a distant, elderly relative that turns out to be the best use of a Sunday afternoon for months.

There are business messages buried within the unsexy prose of Anyone Can Do It, but the most inspiring is there on the cover. Duncan Bannatyne started in poverty, grew up boxing and failing to get qualifications, decided to become rich, went for it, got it, and seemingly remained a thoroughly nice guy at the end of it. In a world still as full of ‘phonies’ as in Holden Caulfied’s day, it’s a pleasure to read such a satisfying account of an unpromising boy made good, in every sense of the word.

Bottom line: Dragon’s Den will never be the same again, and quite possibly neither will you. Anyone Can Do It is highly recommended.

Further reading:

1. Theo Paphitis: Enter the Dragon review

“Do as I do, not as I say” is a useful maxim in life. It’s one instinctively understood by children (“But daddy, you ate three packets of crisps and YOU never clean YOUR room – it’s unfair!”) and politicians (“But you, Snouty and Fatcat already have knighthoods – it’s unfair!”).

But can mimicking the wealthy really make you rich?

Richard Templar thinks so. In his The Rules of Wealth: A Personal Code for Prosperity, a neatly packaged book that will doubtless make him millions, the best-selling author says:

“The simple truth is that wealthy people tend to understand and do things the rest of us don’t. From mindsets to actual actions, they follow behavioural rules when it comes to their wealth and these rules are what separate them from everybody else.”

Everybody else except, potentially, purchasers of The Rules of Wealth, because within its pages Templar sets out what he claims are 100 behaviours you can copy to make yourself wealthy, too.

It’s seductive: steal from the rich and you’ll become rich yourself. And it’s laudable in that Templar’s 100 Rules are often so common sensical and all-encompassing that it’s hard to argue with them. Work hard, save your money, shun debt – hear, hear, we say.

The only tricky bit is working out what’s an enriching action, and what’s a byproduct of previous money-making behaviour.

Consider an Olympic athlete. If you simply copied his six hours a day training regime without realising he’d built up his stamina to such punishing levels over a lifetime, or that he ate like a horse (or maybe ate a horse) for breakfast, you’d find yourself flat on your back, calling for emergency cream cakes and an ambulance.

Similarly, choose only the obvious but unhelpful parts of the being rich equation – say the shopping on Bond Street, investing in hedge funds, and recycling-your-wife elements – and you’ll soon be back to Amazon investigating an entirely different range of rather less ambitious self-help books.

Templar realises this, and so he allocates the first 18 of his Rules to covering concepts about money. You have to think rich before you get rich.

Here’s a few of my favourites from this section:

Rule 2: Decide on your definition of wealth
Rule 6: Understand your money beliefs and where they come from
Rule 10: Understand that wealth is a consequence, not a reward
Rule 17: Don’t envy what others have

If you don’t believe you have a right to money or were brought up thinking it is inherently corrupting, you’ll struggle to get rich except by luck. And even if you are incredibly lucky with gambling or marriage, say, you’ll likely drink/drive/drown it all away.

Consider the Lottery millionaires who end up back where they started after an expensive ride behaving as they wrongly presume the loaded gentry do. If on the first day of their newly wealthy lives they actually thought like self-made millionaires, they’d realise that £1million won’t buy you much more than a £35,000 to £40,000 inflation proof income for life. A life-changing sum for most of us, sure, but not one that can fund yachts and champagne forever.

Perhaps these overnight winners believe the mundane business of budgeting is something best left to the poor. Whereas in reality, many of the self-made rich watch every penny until they’re truly wealthy, and after that round up to the nearest pound.

That’s a generalisation, of course – we’ve all met wealthy spendthrifts (or their spouses…). But just as when reading Stanley and Danko’s intriguing yet logically flawed The Millionaire Next Door, Templar’s book inevitably outlines a one size fits all approach. Real-life is more complicated.

For instance, most of us have friends who already follow the rather dubious Rule 22 (‘Only by looking wealthy can you become wealthy’) but who remain up to their eyeballs in store card debt. Equally, plenty of the rich ignore Rule 50 (‘Only buy shares (or anything) you can understand’), as evidenced by the ostrich farms, offshore scams and pyramid schemes some regularly lose money to.

Even Rule 43 (“Don’t rent, buy”), which has made older generations rich and is certainly a good general rule for funding your home, isn’t quite straightforward to follow at the time of writing – after years of rampant house price inflation, buying instead of renting currently makes no financial sense.

What’s more, to anyone with an ongoing interest in investment, many of the later rules will seem too obvious. For instance, Rule 45 says ‘Build a lot of capital, then invest it wisely’. True, but equally, ‘Duh!’. The nods towards entrepreneurship are even less satisfying; two pages of rather large print on why should should probably set up your own business (Rule 33) hardly gives you a glimpse inside the mind of a Richard Branson.

As such, I can’t really recommend the book to experienced Monevator readers, even though I agree with nearly all its Rules. (One I’d contest is Rule 32, which argues against forsaking your daily triple cappuccino. Most people have no business spending the £500-a-year in Starbucks the habit costs, and I say that as a fan of occasional caramel macchiatos. The key word is ‘occasional’!)

The Rules of Wealth is just too lightweight for anyone with a few good books on money already, although it makes a handy crib sheet. I probably wouldn’t buy it, but I won’t throw it away now I own it.

If you’re new to money writing though, or are still at a stage where you need to be told being in debt is bad, savings are good, and multiple income streams are best of all – and we all have to start somewhere, so there’s no shame in it – then The Rules of Wealth could be a perfect initial investment.

It’d also make a decent Christmas present for a relative or close friend who’s strayed from the path to prosperity. But don’t preach too much about money if you want to stay close to them. Rule 4, ‘Keep it under your hat’, is perhaps the most subtle one of all.

Further reading:

1. My 10 rules to stay sexy and save money
2. Walter Schloss: His rules that beat the market
3. Wealth preservation strategies of the rich

Richard Farleigh has made a lot of money via the markets – tens of millions, maybe hundreds. This book doesn’t give a precise number, though we do learn that the Australian investor’s first ambition was to be a bushranger like Ned Kelly. (Think highwayman Dick Turpin with a bucket on his head. Not so far removed from some institutional investors, a cynic might suggest…)

Farleigh has also had two recent doses of TV fame – briefly as a moneyman from Monaco in Trouble at the Top, a business show that focused on the Home House members’ club in London he helped set up, and via a stint on the thinking man’s X Factor, BBC2′s Dragon’s Den.

In the modern world, of course, the TV outings outweigh self-made millions as a reason to get a book deal; Ant and Dec could probably release a best-selling book on money, if they weren’t so busy making it. And for his part, Farleigh has the boyish looks and the charm to give the boys from Byker’s Grove a run for their money.

With its cover length shot of the smiling author and a slightly dumbed-down title (it was originally released as Taming the Lion in 2005), it’s hard to not to open Farleigh’s 100 Secret Strategies for Successful Investing expecting day-glo stickers and a My First Investment wallchart to fall out.

But that’d be unfair, and not only because Farleigh was by far the nicest investor ever to grace the Den.

Unlike the other dragons, who too often affect the air of being engaged in a trifling game of poker with some disagreeable nephew, Farleigh approached each would-be entrepreneur on Dragon’s Den with respect for their efforts and their dreams. His experience as a serial tech investor in the late ’90s surely helped him there.

Similarly, it’s hard not to be won over whilst reading 100 Secret Strategies, which has been informed by his time as an investor. Won over by Farleigh, that is, rather than be convinced by his so-called secret strategies.

The trend is your friend

For starters, there aren’t 100 strategies – it feels more like ’100 Rather Random Sub Sections’. And as for secrets, Farleigh’s can be crudely boiled down to ‘buy what’s been going up for a while, especially if you’re feeling bullish as it’ll probably go up so more’. Hardly a secret technique, and too often a mug punter’s mantra.

In essence, Farleigh argues:

1. Markets are usually efficient, so it’s best to assume the price of an asset is correct rather than seeking ‘cheap’ shares
2. Instead, buy an asset when its price is rising
3. Do (2) even if prices rise for ages, as you’ll be surprised how long an upturn can go on for (a fact easily agreed upon by anyone who has followed the British housing market)
4. The best assets to own are ones which will benefit from prevailing economic conditions
5. Sell if the upwards price ‘trend’ changes direction, or if the economic fundamentals change for the worst

Believing the market is usually right about the price it gives to things (anything, from shares to commodities to houses), Farleigh suggests a better route to fortune is to look for ‘big picture’ changes in the fundamentals that will move those prices more than the market currently expects. (Yes, that is a contradiction – his, not mine).

Examples from the past might include structural changes in interest rates, the coming of the Internet, or more recently the arrival of China as the world’s sweat(/er) shop. You survey the economic landscape using a simple checklist method, and assuming that’s positive you look for investment opportunities where prices have already started rising, and buy.

We’re into momentum investing territory here, or ‘trend trading’ in Farleigh’s parlance. Key to this method is the idea that trends are more likely to continue than to break (55% versus 45%, according to this book), and Farleigh claims to provide both evidence and a rationale for why this should be true.

He cautions though that if a trend reverses on you by more than a few per cent, you should sell:

“The way I trade, I will never have the satisfaction of getting the best price or the biggest possible profit. I always use this technique: if the fundamentals remain the same, wait for the trend to turn, before getting out of a winning position.”

Sounds reasonable, doesn’t it? The trouble is that shares and other assets don’t go up smoothly to a peak, before then gently sliding steadily back down again, enabling you to sacrifice 5% with a “ho hum” but getting rid of them before they really plunge.

Rather, prices jump all over the place, constantly forcing the active momentum trader to decide if the trend has broken, if he’s just looking at ‘noise’, or if he should instead go back to Benjamin Graham’s classic The Intelligent Investor for an alternative method and a good night’s sleep.

Temporary price falls look like reversals, and vice-versa

To see how hard it is to spot changes in trends, consider the FTSE 100 mining company Anglo American, which I chose simply because it was near the top alphabetically when I loaded my share screener.

An excellent choice for anyone who foresaw the boom in commodities over the past few years, since 2004 Anglo American’s share price has nearly tripled. It looks like a perfect Farleigh fundamental-meets-trend play, except that there have been several times when anyone jumping out when the trend turned downwards more than 5% or even 10% would have missed out on subsequent huge gains.

Even in the past six months, selling out when the trend turned downwards would have meant forgoing big profits when the shares rose again, as this graph from Digital Look makes clear:

It looks easy to avoid the dips when you see what happened next, but imagine you were a momentum trader in late July. Look at the drop from 3300p to around 2500p. You’d surely have sold, and missed out on the subsequent rebound.

I could have picked almost any share to prove the same point: it sounds very simple to say ‘get in while the price is going up, and be sure to get out before it really goes down’ but actually doing so consistently is about as easy as getting the BBC’s Dragons to back your pet hamster rental scheme.

Self-evidently, virtually all trends will switch direction eventually, with widespread reversals often resulting in blowouts like the dotcom bust of the late ’90s. That was the last era in which momentum trading really caught the share punting public’s imagination, and it’s interesting to consider whether a return to ‘buy because the price is rising’ investing is imminent, marking perhaps the late stages of the bull market.

Of course, there’s a huge difference between buying profitless dotcoms as opposed to today’s cash-rich miners on reasonable price/earning ratios, which (a) suggests this particular big picture probably isn’t overbought yet, and (b) trend trading might be less prone to blow-ups if combined with a look at the share’s valuation.

Alas, Farleigh’s position is that it’s extremely hard to out-analyse the analysts, and he barely discusses conventional share investing ratios, although he does claim the high PE ratios of late ’90s tech shares were a sell signal he recognised.

And maybe he did – he didn’t get to be a multi-millionaire by reviewing investment books, after all. But this humble reviewer would submit that if trend trading is more than luck (i.e. not simply 50% of people trying it roughly ending up positive and proclaiming its virtues, and the other 50% losing money and moaning), then the difference probably can’t be spelled out in a book. Momentum traders are likely born rather than made – or else they happen to be in the right place at the right time (i.e. they’re lucky).

To his credit, Farleigh stresses that market efficiencies mean any obvious strategies will quickly be sniffed out and arbitraged away:

“As I look back [...], it’s clear that a lot of the ways our trading room made money have simply disappeared. The markets have become relentlessly more sophisticated as the changes that started in the early ’80s have continued. Nowadays, everyone is extremely well qualified, there are computer programs everywhere and there are instant communications. The market has evolved, like bacteria against antibiotics, to beat out opportunities. This has happened as people have spotted opportunities and exploited them until they no longer exist.”

In light of this, Farleigh is surely right not to give readers some spurious technical rule about when to sell shares, say, although one suspects that’s what many readers will be expecting.

Rather, if you try to trade trends, you’ll have to develop a knack for it. You’ll soon find out if you’ve not got the nose (and precious few have) by the red all over your portfolio. Not for nothing is momentum investing ironically termed a Buy High and Sell Low strategy by wittier investment folk.

I think it’s also fair to point out that as best I can tell from this account, Farleigh hasn’t made his money by investing his savings in the markets. A professional fund manager typically skims off a few percent of any gains as his recompense for being right and/or lucky. If you’re managing tens or hundreds of millions, say, when you decide interest rates are going to fall, as Farleigh did in the ’80s, then you’re going to find it a lot easier to make huge sums than you or I would making the same call with a £7,000 ISA allowance.

The same could be said of any investment strategy, of course, but a Warren Buffet or Peter Lynch approach to buying good, cheap-looking companies and holding them for the long term, or at least until they’re either not looking good or cheap anymore, seems intellectually like a more practical and consistent way for a small investor to make money through investing, as opposed to surfing price trends like a holiday-starved hedge fund manager on the slopes at Courcheval.

Aussie rules

All that said, 100 Secret Strategies… is a sort of enjoyable book. Away from the silly title and its implicit promises, there’s plenty of good stuff here on diversification and negotiation, for instance, and particularly strong passages on evaluating the management of small companies.

Another standout section discusses the interaction of interest rates, inflation, and economic growth, which could be very pertinent as the ‘China effect’ wears off.

Trend setter: Richard Farleigh

Farleigh is at his very best when talking about his experiences, rather than trying to draw too much evidence from them. If you like reading how a super rich man brought himself up from very humble beginnings via a fascination with the markets that you probably share yourself, then you’ll be entertained and mildly educated by 100 Secret Strategies for Successful Investing. But buy it for secrets, or indeed strategies, and you may feel rather burned.

Further reading:

1. The secret to investing when stock markets are falling
2. Investing for 100-year olds
3. Strategies for investing in bear markets

Don’t smirk: Settling down with a good book on investment can be oddly soothing. As the light dawns over your financial blackspots, panic is replaced by calm. Before long you’re scanning the Financial Times with aplomb, and even reading the small print. (Well, not all the time: I’m currently enjoying Harry Potter and the Deathly Hallows).

With that in mind, I’m going to recommend a few favourite books that I think will at the very least make (or save) you more money than they cost.

First up is The Armchair Economist by Stephen E. Landsburg.

In the mid-1990s I visited a friend who’d moved to New York to work on Wall Street. He was involved in arcane research far from the trading action, but despite this he seemed to have plugged into a new understanding of money, and how it made everything in the economy tick. He’d be grabbing cabs between the main and pudding courses at restaurants to take his clothes to the dry cleaners, and explaining over his shoulder that it saved him approximately 23% compared to his hourly wage rate to do this, or some such nonsense.

It was clearly ridiculous, but also a rather impressive way to think. He went further too. He would walk past shops and predict which special offers would work, and which wouldn’t, and explain why. And he knew why popcorn was sold for $5 at the cinema, despite costing $0.50 from the corner shop outside.

I put his money obsession down to the ‘big swinging dicks’ that he was hanging out with on Wall Street. Actually, it later transpired he hated his job and was launching a secret career during snack breaks, and reading The Armchair Economist while waiting for his research results to compile. I only found out the source of his newfound financial nous after he airmailed this paperbook book to me when he left New York.

I devoured The Armchair Economist over a weekend (it’s a very easy read) and proceeded to plague my friends with talk of it like it were a new girlfriend – just like my friend had with me – for a fortnight. Although I did keep to doing my own laundry…

After this dizzying spell, the book quietly drifted into the background, and ever since I’ve taken everything it taught me for granted (just like, alas, a not-so-new girlfriend…)

In short: To understand how economics can help explain every facet of society and many of our subconscious everyday decisions – in a fun way – I firmly recommend The Armchair Economist (which you can buy now from Amazon). You’ll be nutty for a week or two after reading it, but wiser for life!

Further reading:

1. Weekend reading: The Economist does pensions