The Stock Market Book That Gave Me Nightmares for 8 Weeks

Several years ago, I read the non-fiction autobiography called The Wolf of Wall Street by Jordan Belfort. At the time, I was doing a lot of reviews of a lot of books, but I held off on this one because the book gave me nightmares for eight weeks (especially one of the hospital scenes). I didn't want anyone else to get nightmares at the time. But now that the book is going to be made into a movie directed by Martin Scorsese and starring Leonardo DiCaprio, I think it's OK to tell others about this book and let them have eight weeks of nightmares, if they choose to read it. Be forewarned! (BTW, I actually enjoyed the book in spite of my nightmares. More about that shortly.)

This is probably the most disturbing book I've ever read, not just of investment books but of all books. So what could be so disturbing about a guy who was involved with investments and the stock market? The book is about a guy who started up a pump-and-dump stock brokerage firm, whereby he would buy up a bunch of low priced and penny stocks and have the brokers foist the stocks on the unsuspecting public at much higher prices. He ended up making multi-millions of dollars and became very wealthy. Sound boring? Let me give you a Twitter style version of what it's really about (without doing too many spoilers):

huge amounts of cocaine

four prostitutes with one guy

excessive adultery, of course

taping large wads of cash to a girl's body so it can get through customs to be laundered

throwing little people through the office

walking through the halls of a hospital with a hypodermic hanging out of buttocks (this was not the hospital scene that gave me nightmares)

pushing a guy out a window from a very high building

extreme sex

the yacht that almost sank

expensive cars and private jets

enormous amounts of money

extremely powerful Quaaludes

helicopter crashes

So the above is a list of the reasons why you might want to read it.

I did like reading the book for a couple reasons. First, it gave an extremely close-up view of the inside world of the pump-and-dump brokerage industry and the people involved in it. Second, many parts of the book were very humorous.

The one drawback I found about the book was the in the first chapter, Belfort starts out being "lower than pond scum." In the next chapter, he is wealthy and successful with his own helicopter and pilot. I would like to have seen more on how he made it from the bottom to the top. Maybe he is saving that for another book.

Anyway, if you are offended by lots of dirty words, then don't read The Wolf of Wall Street. If you are offended by any of the items on the list above, don't read The Wolf of Wall Street. Otherwise, if you want an eye-opener on the seamy seedy side of Wall Street, then read The Wolf of Wall Street.

Subliminal: How Your Unconscious Mind Rules Your Behavior

Did you know that investors prefer IPO stocks with pronounceable company names as opposed to unpronounceable names? They even prefer the pronounceable stocks even over a long term basis of six months or a year. You may not realize it but your investment decisions are controlled more by your unconscious than the conscious part of your brain.

Leonard Mlodinow's latest book, Subliminal: How Your Unconscious Mind Rules Your Behavior, covers this and a lot more information about how our subliminal mind controls us. Just take a look at the book's cover. In almost clear ink, which can't be seen unless you tilt the book in the right direction under a light, it says "Pssst... Hey There. Yes, you sexy. Buy this book now. You know you want it."

In addition to his humor, the book contains extensive intellectually insightful yet easy to understand material on how you make decisions, whether for investing, making a business decision, or your personal decisions. If you read The Drunkard's Walk, his previous book, you will certainly enjoy this one.

Did you know that very sunny days in New York City can affect stock market, in addition to very cloudy days? The weather affects the unconscious mind of stock traders which affects their stock trading behavior. There are lots of interesting anecdotes that are backed by extensive research, which he covers quite well.

The chapter called Self is fascinating. It is about over confidence, business execs who think their business will be more successful and competitors, investors who believe they can pick stocks better than they actually can, etc.

If you wan't an intellectually stimulating book, read Subliminal: How Your Unconscious Mind Rules Your Behavior.

How to Get James Altucher's Latest Book for Free

James Altucher, in case you didn't know, was the founder of Stockpickr.com, which he started for almost no money and sold around a year later for about $10,000,000. He also has an extremely popular blog, JamesAltucher.com. His latest book, Choose Yourself!, was recently published, and is unlike any other success-oriented book you have read. The subtitle says it all: Be Happy, Make Millions, Live the Dream.

Altucher has very radical ideas about college (a waste of money and time), employment (it's all over unless you have your own business), retirement (forget about it), and government (read the book). It is very informative and an enjoyable read. He describes how to choose yourself from a physical, mental, emotional, and spiritual standpoint. These are his own opinions of course, and what has worked for him.

However, if his book doesn't help you (or even if it does), you can't beat the price ... free. Here is how it works. You can buy the book, either the paperback edition or the Kindle edition. Then you get a copy of the receipt along with secondary verification that you read the book (such as taking a picture of yourself reading the book), and email it to him at the email address on page iv of the book (that's the page number on the printed edition, the Kindle will have it in the very first section). Then he refunds your money.

Basically he is paying you to read his book. A very innovative way of getting your book distributed.

Absence of Ownership

Guest Article: Absence of Ownership
By Robert A.G. Monks, Author of Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream

We have a problem with absentee owners. Remember several years ago when, under the Clinton Administration, there was pressure on absentee fathers to bear responsibility for caring for their children? We have the same problem with corporations. But in this case there are no parents at all. No oversight and no one making sure that corporations and management act sanely and responsibly.

When corporations were owned by flesh and blood individuals the experience was, generally speaking, that flesh and blood individuals acted the same way with respect to their corporations they acted in their own life, and that they had concerns for the externalities of the corporation and they had concerns for its long-term implications.

Ownership has become more diffuse and corporations now have only a nominal accountability to any identifiable ownership. By identifiable owner I mean a shareholder or a group of shareholders who are willing to accept the responsibility of being stewards and monitoring the functioning of the corporation. It's a case where the word "owner" communicates an incorrect and even harmful impression. Traditionally, the shareholder register consisted of a group of the names of individuals who owned stock in that corporation. As a practical matter today, it's almost beyond belief that you would find the name of an individual on a shareholder register.

In fact, more than 70% of all publicly traded shares in the top U.S. corporations are held by institutional owners and managed by trustees -- legal creatures with the obligation to responsibly manage trust property in the interests of and for the exclusive benefit of plan participants and beneficiaries.

Most of us who have ownership in corporations these days -- many of us through retirement plans, 401 (k) plans, IRAs, mutual funds and things like that -- don't really "own" stock in the sense we own things like our house or car. There are many different types of shareholders and the interests of the different parties are not compatible. Ira Millstein came up with a very appropriate metaphor describing share owners as being like the animals in a zoo. Yes, they're all animals but my goodness, they are more different than they are alike.

So, without traditional owners who run the company we must rely on large managing shareholders like pension plans or trustees of funds and endowments to take on the role of owners. But they haven't. These are the absentee owners. And without owners, corporations run amok -- like children without a chaperone. There's no accountability and decisions are made without regard for consequences. That's why in my new book, Citizens DisUnited: Passive Investors, Drone CEOs and the Capture of the American Dream, I call these ownerless entities corporate drones:

They are analogous to the military vehicles that have enormous power and capacity for good and ill. They insulate operators from risk while casting vast externalities and costs onto society.

Want an example? Look at the large banking institutions in the mortgage bubble and financial crisis. We don't even know who owns them but we can certainly name the CEOs. Nearly all of them came out of the crisis quickly, made profits and gave bonuses to upper management while the rest of society is still struggling with underwater mortgages and unemployment. Who bailed the banks out? We did. Their problem. Their fault. Our responsibility.

This is externalizing at its core: putting the problems and responsibilities of corporate operations off onto society while keeping the benefits and profits for themselves. I think this raises the question as to the appropriateness of corporations that do not have an identifiable owner. It has become increasingly clear to me that it's very dangerous to have these ownerless corporations -- drone corporations -- and that there needs to be a way of dealing with the problem of the risks that they present. The author Chrystia Freeland said that U.S., "has created a system of capitalism without capitalists, of private sector companies whose owners have abdicated responsibility for the companies that belong to them." Someone has to take the wheel.

So, about now you're asking who can do this. Who has enough shares, enough clout and enough status to lead the charge? This is what I lay out in the book: foundations and university endowments have particular missions to improve the lot of human beings on earth -- and I believe this implies that they also have responsibility to be stewards of the companies they own. The large foundations like the Gates Foundation, Ford Foundation, Packard Foundation and the university endowments like Harvard, Yale, and Stanford have enough shares and enough standing to be leaders. Along with the large pension funds and mutual funds, these are the groups that manage a vast percentage of our nation's wealth.

CalPers over $220b under mgmt (public pension fund).1
Harvard with $30+ billion and Yale with $16.7 billion (university endowments).2
Gates Foundation with $34.6 billion and Ford Foundation with $10.9 billion (Large foundations and private charities).3
Vanguard with $1.6 trillion under management and State Street Corporation with $23 trillion (Large Mutual Funds).4

At the end of the day, we don't need everybody in all categories of ownership to join in. We just need a few of these organizations to work together so that every corporation has at least one group of effective functional motivated owners to act as stewards and provide that element of accountability that is essential for corporations to exist harmoniously in a democratic society. As Warren Buffett has said, "If you had the top five institutional investors, and when they saw something outrageous the five of them spoke together . . . the world would change."5

1. Tomio Geron, "CalPERS Returns 1% for Fiscal Year," Forbes, July 16, 2012.
2. Rob Kozlowksi, "Endowment execs top pay list for tax-exempt institutions," Pensions & Investments, November 7, 2011.
3. "Top Funders: Top 100 U.S. Foundations by Asset Size," Foundation Center, April 17, 2013.
4. "Vanguard Group Is Increasing Its Positions In These Stocks," SeekingAlpha.com, February 3, 2012, and "State Street Corporation at Goldman Sachs Financial Service Conference Transcript," AlacraStore.com, (accessed January 11, 2013).
5. Nell Minow,"An Interview With Warren Buffett," GMIRatings video on YouTube, part six of nine, September 2010, (accessed January 11, 2013).

© 2013 Robert A.G. Monks, author of Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream. Reprinted with permission of the publicist.

Author Bio
Robert A.G. Monks, author of Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream and 8 other books, is a pioneering shareholder activist and corporate governance adviser. He has written widely about shareholder rights & responsibility, corporate impact on society and global corporate issues.

What Black Swan's Nassim Taleb Hates: Antifragile Review Part 2

When I did my book review last month on Antifragile, by Nassim Taleb, I did the book a disservice since I had read only partway through it. I have just completed the book, and I can say that (with the possible exception of Finnegans Wake), this is the most unusual book I have ever read.

For those of you who don't know, Taleb was the one who predicted the financial collapse a few years ago, and has the money to prove it. He was the author who caused the phrase The Black Swan to become popular due to his book of the same name.

After making his fortune, he has now become more of a philosopher and researcher. As a matter of fact, Antifragile is more about philosophy from a practical standpoint.

First let me tell you what Taleb detests:
economists (he even names names)
doctors
pharmaceutical companies
politicians
large corporations (with the exception of Apple)
executives of large corporations (with the exception of Steve Jobs)
Harvard professors
Coke and Pepsi (both the drinks and the corporations)
marketing and marketers
bankers!
the cavier left
rating agencies
postdictors
non-risk takers
over-technologizing
excessive use of specific products
government research spending
lobbyists
and the list goes on and on...

And he doesn't just say he dislikes these things (or people); he spends whole sections on them. But this is only a small portion of the book. In essence, the book is about how anything or anyone that benefits from stress or change, will survive, and if not, then it or they won't survive.

Here is a tip about reading the book. It you come to the sections that say that you can skip them because they go into a lot of technical detail, you should read them because those sections are actually easier to read than other parts of the book and they contain very important concepts. (I wonder if Taleb did this as a trick?)

If you want to read a book that isn't anything like any other book, I recommend Antifragile.

Book Review of Nudge: Excellent

Here is a book that hasn't received much publicity, but has amazing information. Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein, was rated a Best Book of the Year by The Economist.

The book covers all kinds of decision making concepts, such as intuitive thinking. Here's an example. If a bat and ball costs $1.10 and the bat costs $1.00 more than the ball, how much did the ball cost? If you guess 10 cents, which is what most people choose, you would be wrong.

Investors will find Chapter 7, Naive Investing, a great read. Decision making about portfolio diversification, market timing, stocks versus bonds, and the risks of investing in your employer's stock, are all covered.

Chapter 6, Save More Tomorrow talks about how amazing it is that the number of people that don't take advantage of matching 401k plans is substantial, as the matching money is basically free. What is really amazing was a British study of companies that offered a free retirement plan fully funded by the employer with no contributions from the employee, and all the employee had to do was sign up. Yet amazingly only 51% signed up. The book discusses what employers can do to 'nudge' employees to take more advantage of retirement plans.

Shopping for mortgages and loans is covered in the chapter on Credit Markets. Of course, the sub-prime mortgage issued are covered in detail.

Even the Bonus Chapter on Twenty New Nudges was fascinating, especially the one on Make-believe Speed Bumps, a few of which I've seen in several parking lots.

If you ever make decisions in your life, you need to read Nudge.

One of my Favorite Stock Trading Resources

If you have never owned the Stock Trader's Almanac by Jeff Hirsch, you should reward yourself for next year, or at the very least, buy it for a stock trading friend as a holiday gift.

This is the most fascinating books on stock trading that revolves around the calendar for the year. The historical market cycle analysis covered by the book is very, very extensive. Just the information on trading patterns is worth more than the price of the book. Sections include market probability calendars, 10-year daily point changes, monthly cash flows into stocks, best days, weeks, and months by point and percent, and much, much more.

The calendar has lots of trading ideas throughout the year. Every other page has an interesting article or useful prognosticating tool.

If there is ever a book that a trader needs, it is the 2013 Edition of Stock Trader's Almanac. You still have time to order it and have it before year end.

The 4-Hour Chef Book Released

The book, The 4-Hour Chef: The Simple Path to Cooking Like a Pro, Learning Anything, and Living the Good Life by Timothy Ferriss has just been released and is available for purchase.

Ferriss is the noted best-selling author of The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich (Expanded and Updated) and The 4-Hour Body: An Uncommon Guide to Rapid Fat-Loss, Incredible Sex, and Becoming Superhuman.

Ferriss's latest book is not just about cooking. It is also about the art and science of learning, and becoming the best at whatever endeavors you choose. I highly recommend The 4-Hour Chef.

Trust Me, I'm Lying

Last week, in an article about clothing and apparel companies, I mentioned that I would shortly be doing a review of the book Trust Me, I'm Lying: Confessions of a Media Manipulator, by Ryan Holiday. Here it is.

I had said that this is a must read for anyone who reads news or blogs on the Internet, which is almost everybody. The book pulls up the "news rock" and shows all the dirty little secrets underneath. Holiday explains how the news can be, and always is manipulated, and how much of what you read is false, even if you read it in the major news publications.

He provides real life examples of how he "tricked" small blogs to run articles, and how those articles were picked up by larger bloggers, and finally published by newspapers. The manipulation of news is really unbelievable.

From a marketing standpoint, this is a great guide on how to get a product or service promoted. Holiday describes how even negative news can create lots of great publicity. As a matter of fact, negative publicity can create greater demand and news coverage for your product than positive publicity. He showed how he did that with American Apparel (APP) through the use of "leaking" provocative company ads.

He also used this technique to promote Tucker Max's movie, I Hope They Serve Beer in Hell, by vandalizing billboards promoting the movie, taking picture of the vandalization, and then forwarding the pictures to two Los Angeles related web site along with a complaint about how disturbing the movie is. Eventually all the hubbub got picked up by the major news sites, and even television networks.

One of the key points about the book is that news sites and blogs don't really bother to do the research to determine if a news story is true, and they don't even care, as long as it brings in page views. If it is pointed out that the article was incorrect, the bloggers and publishers turn their so-called retractions int more news, meaning more page views.

If you don't know that you are being duped by what you read on the Internet, you need to read this book. If you thought everything on average was true on news sites, you need to read this book. If you really want to know how the news media works, you need to read Trust Me, I'm Lying.

Market Sense and Nonsense

The book, Market Sense and Nonsense: How the Markets Really Work (and How They Don't) by Jack D. Schwager, is a great compilation of very useful and eye-opening information relating to investments and the stock market.

Using humor and extensive statistics, he debunks numerous myths about stocks and returns. For example, you would think that investment newsletters overall would if not beat stock market returns, then at least meet those returns. Unfortunately, Schwager's book shows that newsletters overall do worse than random investing (what he refers to as a "chimpanzee throwing darts at the stock market quote page").

Chapter 2, The Deficient Market Hypothesis, has a fascinating article about the Palm and 3Com Episode. Back in 2000, Palm was trading for $95 dollars a share, yet you could have bought 3Com for only $82 per share, which represented 1.5 shares of Palm (3Com owned 95% of Palm at the time). Plus you would own a bunch of other assets that 3Com had. So excluding Palm, 3Com was being valued at more than a NEGATIVE $60 a share. The author shares lots and lots of great stories like this.

The chapters cover risk, past returns, volatility, track records, and my favorite chapter on correlation. Did you know that there is a direct correlation between the number of hedge funds and wine consumption in the United States? Do you think the wine consumption caused the hedge fund growth or vice versa? No matter which one you choose, you would be surprised at the answer (you have to read that chapter to find out).

There are also several chapters on hedge funds and diversification. Anyone who invests should be aware of the issues covered in this book, whether you are a small investor who just wants to put money in a mutual fund, or a mid-size stock trader, to a large investor interested in finding a top-performing hedge fund. Market Sense and Nonsense will give you exactly what you need to watch out for to help you become a better investor.

By Stockerblog.com