Personal Finance Books: The Good, the Bad, and the Worse
Two years after the Dow Jones industrial average rolled over, the nation's publishers are pushing loads of books on how to survive recession and bear markets. I can safely state that, year after year, most personal investing books aren't worth much, and packaging them around fears of financial insecurity hasn't changed that sad fact. Just the same, opportunities lurk in unlikely places. I found lots of good stuff amid the new books that are not decorated with plunging stock charts or feral bear claws.
My favorite title this season surprised me-- since I didn't buy the bullish argument at the heart of James Glassman's (and co-author Kevin A. Hassett's) last book, Dow 36,000. Glassman's latest, The Secret Code of the Superior Investor (Crown Business, $25), lays out a 47-step recipe for your portfolio. A fellow at the American Enterprise Institute, Glassman has absorbed the fundamental lessons of such great investors as Warren Buffett and Sir John Templeton, and he restates them here in easy-to-digest portions: Don't bother shorting stocks. Don't try to time the market. Keep an eye on your expenses. Avoid trading. He also applies the lessons to today's markets. Glassman likes the odds offered by Treasury inflation-indexed securities, he's bullish on drug stocks, and he makes a reasonable case why, if you could buy only one stock, it should be General Electric. Glassman succeeds in his ambition to be to intelligent investing what Julia Child has been to French cooking: one who makes the difficult thing doable without sacrificing its essence.
Another very good choice is Magic Numbers: The 33 Key Ratios That Every Investor Should Know (Wiley, $29.95) by Peter Temple, a British financial writer and former investment analyst. In just a few pages, each written and laid out with admirable clarity, Temple walks us through how such financial measures as "net tangible asset value" and "free cash flow" are built, where in financial statements they may be found, and what they mean. Temple mixes in real-world cases, and he fluently translates the jargony terms that can differ from country to country. I wish I had had this book years ago. (Alert: The publisher swears that small computational errors in a couple of the tables will be fixed in a fresh printing, due by March.)
Investing Bible (Hungry Minds, $34.99) by Lynn O'Shaughnessy and CNBC Guide to Money & Markets (Wiley, $16.95) by Jeff Wuorio are two more fair bets. The first is thick (570 oversize pages), comprehensive, and easy to dip into for the basics on everything from annuities to zero-coupon bonds. The CNBC guide is not so encyclopedic, but it struck me as the better value. A trim volume, it gets to the point and boasts a good glossary.
The imperative to be a skeptical investor is a lesson most of us learn the hard way. That's why you might do a favor for any friends who still use a stockbroker by giving them Brokerage Fraud: What Wall Street Doesn't Want You to Know (Dearborn, $24.95). The authors, Tracy Pride Stoneman, a lawyer specializing in securities-fraud cases, and Douglas Schulz, a former broker at Merrill Lynch who now acts as an expert witness in arbitrations, battle stockbrokers for a living. In fact, their brief--that the industry is so riddled with conflicts of interest and rules tilted in its favor that many clients can't help but be suckered--may be read as an elaborate advertisement for their services. Yet they make enough of a case to get even very trusting investors to (wisely) think thrice about any broker's advice.
The quintessential market skeptic--a man who reveled in bull and bear markets, notably the 1929 crash--was Jesse Livermore. Most current investors who know of Livermore met him through the thinly veiled character Larry Livingstone in the 1923 book Reminiscences of a Stock Operator, since reissued (Wiley, $19.95). That still remains worthwhile, but now writer and trader Richard Smitten has produced Jesse Livermore: World's Greatest Stock Trader (Wiley, $19.95). Where the earlier book tells its story in the first person, Smitten steps back as an omniscient narrator to add much new material. This ranges from Livermore's youth on a Massachusetts farm to his suicide in the cloakroom of Manhattan's Sherry Netherland Hotel. Some of the imagined dialogue is hokey, and it all initially struck me as akin to the "colorization" of a classic black-and-white movie. But Smitten has contributed more, extending Livermore's account and making his market smarts newly accessible.
Naturally, some books surprise by disappointing, including The New Rules of Personal Investing (Times Books, $25), by eight New York Times financial writers. After Floyd Norris' cautionary overture, his colleagues weigh in with generally more enthusiastic discussions of stocks, funds, bonds, foreign equities, and so on. Most of the advice they give is unobjectionable but tedious, suffering from a product-by-product approach. An exception is Gretchen Morgenson's take on traps, scams, and myths, with a keen dissection of how inadequate brokerage-account insurance from the industry's Securities Investor Protection Corp. truly is.
Two of the field's most heavily marketed names--Ric Edelman and Suze Orman--won't do much for more experienced investors. Financial Security in Troubled Times (HarperBusiness, $14.95) is the latest from Edelman. He began this one on Sept. 28, with an eye to calming fears after the terrorist attacks sent stocks plunging. A weekend later, he was done, and in a few weeks the book hit stores--my local Barnes & Noble had it propped right behind the cashier. This slim item is a Cliffs Notes to Edelman's earlier books. It provides much advice you probably don't need, such as how to endorse a check properly. Moreover, if you were curious what portfolio moves Edelman suggests after September 11, forget it--he makes none.
The Queen of Personal Finance, Suze Orman, is in no danger of being toppled as she adeptly extends herself from being just your checkbook's Oprah Winfrey to a cross between Confucius and Martha Stewart. Her Money Cards: Words That Lead to Wealth (Hay House, $15.95) bear epigrams--"The courage to be rich has to do with vision"--on decorous 3.75-inch-square cards that could double as coasters. Less experienced investors who may be attracted to Edelman or Orman would do much better with the latest edition of Andrew Tobias' venerable The Only Investment Guide You'll Ever Need (Harcourt, $14), with new parts on college-saving plans, inflation-indexed bonds, and estate plans.
Tobias has long counseled against trusting anyone but yourself with your money. If you, like me, wonder how Enron's former CEO, Kenneth Lay, could advise employees that the company was in good shape just weeks before its shares crashed, then I have one final recommendation. The Rise of Mr. Ponzi (Inkwell, $25) is infamous financial schemer Charles Ponzi's republished memoir, which he wrote in 1937 after his deportation to Italy. It offers curiosities--he called his scam the Securities Exchange Company, or SEC. And it illuminates, showing how the chief of a rapidly failing enterprise thinks. "We all crave easy money," Ponzi wrote. "And plenty of it." Knowing that, and knowing to guard against it, is perhaps the best survival tip you can get.
By Robert Barker