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Weekend reading: We interrupt your scheduled programming…

Weekend reading

Some good reads from around the Web.

Faithful Monevator readers (hello mum!) might have noticed we’ve been a little slow on articles over the past couple of weeks.

Like an evil genius whose wayward robot has lain waste to Manhattan, I can only point to ‘technical difficulties’.

The site gummed up last week, to the extent that it actually fell over on Monday. I’ve therefore spent a couple of days fiddling behind the scenes to fix your favourite blog about money and investing (or at least the only one to draw parallels between Star Wars and saving).

Having bored myself to tears with this technical faff, I won’t do the same to you by explaining how you’ll now benefit from a faster, more reliable Monevator.

I would ask you though to please point out any bugs you see, as doubtless I’ve forgotten some legacy issues. (On that note, I know a test post was emailed out yesterday. Apologies!)

My read of the week

You might fill the void we left in your recent reading schedule by ploughing through the latest letter from my favourite down-to-earth hedge fund manager, Jeremy Grantham (it’s a PDF).

His latest quarterly update to shareholders is sometimes a heavy-going read, but it’s worth persevering with for insights into stock market volatility and the money management business.

Grantham writes:

The central truth of the investment business is that investment behavior is driven by career risk

In the professional investment business we are all agents, managing other peoples’ money.

The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing.

The great majority “go with the flow,” either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price. There are many other inefficiencies in market pricing, but this is by far the largest.

It explains the discrepancy between a remarkably volatile stock market and a remarkably stable GDP growth, together with an equally stable growth in “fair value” for the stock market.

This difference is massive – two-thirds of the time annual GDP growth and annual change in the fair value of the market is within plus or minus a tiny 1% of its long-term trend.

While I’ve long admired Grantham’s writing, I don’t have any particular view on his funds. Passive investing in simple index-tracking portfolios will do the job for most of us.

Unlike certain Monevator readers, however, I am not so scathing about the insights offered by the better active fund managers – especially if, like me, you do a bit of stock picking yourself.

Many of these people are extremely smart. However they find it hard to get an edge on their equally smart competitors, and so after fees they fail to beat index trackers.

As Grantham explains, if fund management is your job then it’s better not to even try to be best, if it’s at the risk of being worse than average.

As for us, normal service resumes next week. (We’re shooting for “pretty good, all things considered”).

From the money blogs

Book of the week: Have we caused a run on Smarter Investing by Tim Hale? It’s still our best suggested read for UK passive-orientated investors, but did the paperback version really always cost £17.49? Time to get cracking on Monevator: The Novel.

Mainstream media money

  • Feeling peaky: The impact of high oil prices – The Economist
  • UBS uses iPad to help clients play quants [not April 1st?]Bloomberg
  • How to earn dividends from a forest – The Motley Fool
  • US charges British twins over $1.2 billion ‘stock robot’ fraud – BBC
  • Barclays unveils mini stick-on credit card – BBC
  • Cockney ATMs spread ahead of Olympics – BBC
  • More than 70% of high-earners paid the 50% tax rate – BBC
  • Warning over peer-to-peer payouts – FT
  • The danger of bypassing the usual financial suspects – FT
  • NS&I says new index-linked certificates ‘highly unlikely’ – Telegraph
  • More banks are hiking mortgage rates – Telegraph
  • High petrol prices increase appeal of green cars – Independent

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{ 8 comments… add one and remember nothing here is personal advice }
  • 1 Macs April 21, 2012, 12:17 pm

    Good to see service resumed, but if it’s any consolation I didn’t notice the falling over because my own PC also got ‘gummed up’ and fell over on Monday, too. I’m now limping along on something from the Ark whilst hoping desperately the geeky friend-of-a-friend who has my hard drive can retrieve the data – which includes the password I need to read that interesting looking FT article you’ve linked. Sigh… I guess there’ll be a few other passwords I need to recover along the way.

  • 2 gadgetmind April 21, 2012, 1:58 pm

    Being a Yorkshireman, I tend to buy most of my books 2nd hand. which I’m sure I did with Smarter Investing, but I can’t even spot a decent used copy right now.

  • 3 The Investor April 21, 2012, 2:16 pm

    A good tip with FT articles is to Google the headline. They’ll usually let you read it then. (My text isn’t always the same as the headline but you should see it greyed out behind the FT pay wall if it’s not letting you read).

  • 4 Sarah April 21, 2012, 2:29 pm

    Re – Hale book – public library anyone! Your particular local service may not have a copy but they can inter library loan it for free or small charge. That was how I read it – not in my local service but got a copy from a London service.

  • 5 Dave April 21, 2012, 6:37 pm

    I managed to get Smarter Investing from my local library. There is quite a range available – David Swensen’s book and also Jack Brennan’s Straight Talk on Investing from the “Passive Investing School”. My library seems to have lots of books on investing from get rich quick guides, BTL, running a B&B, market timing, naked investor books, FT guides, etc. Libraries also have Which and Which Money.

    Who needs Amazon?

  • 6 The Investor April 21, 2012, 7:11 pm

    Hah! I guess once you’ve Got Rich Quickly you can afford to donate the books to the library for others… 😉

  • 7 ermine April 24, 2012, 11:03 am

    It had been going slower and slower for the last week or so, good to see it fixed. I’d put it down to routeing problems between your ISP and mine. Looks all sorted now, thanks!

  • 8 The Investor April 24, 2012, 11:49 am

    Thanks for the feedback Ermine. It should hopefully have sped up from about Thursday afternoon, so your “the last week or so” comment is a tad worrying. 😉 It’s working well for me since then, though (and indeed from a day or two before that, when a different technical fix was implemented). It was really the week before that it was grinding along.

    If/as Monevator continues to grow in popularity, I’ll eventually have to pony up for a beefier tech platform. I really like my hosts, by the way (Webfaction — great support!) so I’d probably look to keep doing it via them.

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