The Hindu Business Line : Brave the markets with just one book

He has edited "Just One Thing," from Wiley (www.wiley.com), getting `Twelve of the World's Best Investors Reveal the One Strategy You Can't Overlook.'

Thus, Andy Kessler's `Signposts in the Fog' reminds that you can't make money standing in the sunshine. See things before others, says Kessler. "Most people get in the fog and panic; but the trick is to get in the fog and feel comfortable, let your imagination run wild, imagine what things might look like up ahead, make out vague outlines in the distance, and invest as if those outlines were real things."

Dennis Gartman, who is "up at 2 to 3 a.m. and writes a daily letter every morning by 6 a.m." lists a dozen rules, and caps with Rule #13 that sums up the rest: "Do more of that which is working and do less of that which is not."

He explains: "If our long positions are up, we look at which of those long positions is doing us the most good and we do more of that. If short positions are also up, we cut back on that which is doing us the most ill."

Mark T. Finn and Jonathan Finn speak about `the Triumph of Hope over Long-run Experience'. Hope is a good companion but a poor guide, they remind. Weight the allocation to your various managers by the inverse of their variance, the Finns advise, on what is called `volatility throttling'.

Find an important, nonconsensus and long-term investment theme and stick with it, counsels A. Gary Shilling in `The Long Bond'. Widespread and instantly available information makes the consensus view `fully reflected, or discounted, by security markets,' underlines Shilling.

`Risk is not a Knob,' writes Ed Easterling, author of the book `Unexpected Returns'. Higher risks can lead to higher losses unless addressed with the tools of risk management, he cautions. "Risk is not a knob to be turned for greater returns. Turning the knob invites more risk; it does not drive returns."

James Montier provides `An Investors' Guide to Thinking about Thinking,' by focussing on psychology. He lists ten biases as `the most common mental pitfalls that investors stumble into,' and suggests `fifteen rules' as antidote. Step back from the hurly burly of day-to-day market turbulence and apply the best mental practice, he advises.

Bill Bonner of Agora Publishing declares `The Means are the Ends'. The ends are beyond us, we never know what will happen, he writes. "All we have is the means. That is all we control. But if we use the means of civilised people - the economic means - to get what we want, we will not necessarily get what we want, but at least we will deserve it," he philosophises.

Rob Arnott, the editor of the Financial Analysts Journal, explains in a chapter titled `The 2 per cent Solution', the capital asset pricing model in plain English: "It means that a portfolio that holds the same assets as the total market, in the same proportions as the total market, cannot be outperformed at lower risk by any other portfolio; it's the ideal portfolio."

Ignore the outside noise and acquire fundamental knowledge about companies, exhorts George Gilder, editor of Gilder Technology Report. "DNA will trump the manifestations of matter. Cryptically coiled in the nuclei of companies, inside knowledge is harder to get under the new regime. But it remains irrepressible," he adds. For, "Skill and information are your remedies for the dismal economics of gamblers' ruin."

Author of `Automatic Wealth', Michael Masterson lays down `The Winner's Rule' thus: "If you want your marriage to last a long time, you must focus your energy on what you can do for your spouse, not what you can get from the marriage. The same is true in business. People who have trouble making long-term personal relationships are seldom able to develop long-term, appreciating businesses."

Richard Russell, 81 years old, and publishing Dow Theory Letters since 1958, mentions simple rules on investing, such as: Compounding works, don't lose money, wealthy people don't need the markets, and look for values.

"There is no substitute for action," he says, because `thinking is rehearsing'.

The last chapter titled `The Millennium Wave' is by Mauldin. Flexibility will be the order of the day, he forecasts. "The key talent in the future would be the ability to deal with the tremendous technological and cultural changes that are coming at an ever-increasing pace while developing an understanding of how those changes will evolve in the age-old patterns of life," he explains. Taking advantage of all these changes will demand "a nimbleness and an ability to make decisions, rather than passively investing in indexes."

Good choice if you're searching for just one book on the markets!

BookValue@TheHindu.co.in

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