January 09, 2006

For Investors, Plus Ca Change, Plus C'est la Meme Chose

I KNOW FROM my search-engine statistics, and the occasional comment, that lots of folks arrive at The Rant looking for information related to finances and investing. An alarming amount of these searches involve alpaca farming, the net worths of C-list celebrities, magical spells which aid in winning multi-state lotteries, complaints about brokerage firms, and hedge funds.

Clearly, we can deduce that lots of people out there need some serious guidance, and fast. Yet this itself poses a conundrum. For general advice -- that is, the type that doesn't require a legal notice -- books are obviously a good way to go. The trouble is, many business and finance books aren't written as well as one might like.

It seems to me the solution is to turn to the classics -- and perhaps the best of them is Fred Schwed Jr.'s Where are the Customers' Yachts? (or, A Good Hard Look at Wall Street)

Written in 1940, it still holds up today -- and is so good, in fact, that I'd almost make this the first book I'd give to a novice investor. Here's some of my favorite quotes from it:

(N.B. -- Here, Mr Schwed is in the process of explaining why margin trading is a bad idea. He tells the reader he knows of only one way to prove it conclusively: for the reader to try it himself.)

"In trying it, you must use real money. Making 'mind bets' won't do. Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. Art cannot convey to an inexperienced girl what it is to be a wife and mother. There are certain things that cannot be adequately explained to a virgin either by words or pictures. Nor can any description I offer here even approximate what it feels like to lose a real chunk of money that you used to own."

"Your average Wall Streeter, faced with nothing profitable to do, does nothing for only a brief time. Then, suddenly and hysterically, he does something which turns out to be extremely unprofitable. He is not a lazy man."

"I have observed businessmen whose chief preoccupation was to try to prove conclusively to their competitors that they themselves were smart and their competitors were damn fools -- an effort that gives a certain amount of mental satisfaction but no money at all."

"Are you quite sure that you would care to see all those people who had big money then have it again?"

"For the record, and if anyone cares, I will state that I have a sneaking fondness for that wretched old hag, the capitalistic system, after watching the performance of her tempermental younger rivals."

Posted by Benjamin Kepple at January 9, 2006 09:42 PM | TrackBack