|»5 Minute Wrap Up by Equitymaster|
On This Day - 15 SEPTEMBER 2012
The best book on investing ever written!
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In fact, Buffett argues that had it not been for Graham's work, he would have gone another 100 years still trying to figure out the stock market. And any particular work of Graham that stands out for Buffett? Yes, certainly. Buffett calls Graham's 'The Intelligent Investor' the best book on investing ever written. So smitten he is by the book that he terms the book's chapter 8 and chapter 20 as the two most important essays ever written on investing.
This is not all though. This book, through its simple and lucid style, attempts to guide the layman investor in the basics of investment philosophy. The book aims to enable readers to earn robust and sustainable returns on investments. And that too without resorting to complex mathematical calculations.
The book lays out investment principals based on logic and common sense and is well supported by detailed analytical examples of past performance. A long-term, sound investment strategy is essentially not a by-product of superior intelligence, high business acumen or access to insider information but rather dependant on emotional discipline. It is the cultivation of this emotional intelligence that Benjamin Graham talks about in detail through real-life examples.
Despite being among the earliest of books to be written on the subject, its principles are timeless and hold true even today. In fact the principles are more valid during intermittent periods of financial turmoil and uncertainty which presents the right opportunities for investment, as per the author. The book is a beginner's guide for first-time investors as it helps them develop the right investment temperament for sound long-term investments.
The consequence is a society that discourages curiosity, challenges commercialization and collaborative technology. Thus, China's lack of innovation stems from its cultural system. This is in stark contrast to the US' entrepreneurial setting where anyone can chase the American dream. The problems that China is facing are pervasive and may take years to resolve. In the cutting edge world of technology time is money. Thus, China's technological edge may forever lag its western rivals. And a similar story is unfortunately playing out in India as well. Change is needed from within. Else the Apples and Googles of the world will continue to be housed in the west.
For example US decided to keep its interest rates at near zero hoping that it would help increase inflation. But all it did was to create a flood of cheap money which found its way into developing economies and led to the creation of massive asset bubbles. The net result was that even though US did not really recover from its recession, the impact of bubbles bursting in the developing economies led them to go into a slowdown.
Instead, if central banks had really thought through the total impact of their actions they would have realized that their job is not just to keep inflation within control. It also includes preventing asset bubbles and keeping an eye on the growth of credit. But by the looks of it they completely forgot about these two. Actually not. They did remember about the growth of credit, just forgot to put in place any measure to keep a quality check on the people taking credit. Otherwise the list of defaults would not have been as long as it is.
According to a study conducted by Credit Suisse and Ernst & Young, family businesses are proving more resilient globally amid sagging economic conditions. Around 60% of them reported revenue growth of over 5% in the last one year. This is when other businesses are struggling to grow toplines. Not surprisingly, the performance of emerging market companies in the survey was even stronger. More than 25% reported that revenues grew by 15% or more in the last one year. One of the key reasons for this has been management style. Top honchos of family businesses have been running their operations from a long term horizon rather than be influenced by short term concerns. And this has certainly given them the edge over the rest of their peers.
Brazil and Hong Kong were amongst the top performing global markets, followed by Japan and Germany. The Chinese market however underperformed this week. The Indian markets performed well during the end of the week on the back of the government seemingly biting the bullet in terms of raising diesel prices. India's benchmark index, the BSE Sensex rose by 4.4% as compared to last Friday's closing levels.
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