Jackass Investing by Michael Dever is an interesting read. I was contacted recently by John Uebler of Ignite Publications who wondered if I could read Mr. Dever’s book and write a review. As I always enjoy a good investing book I was pleased to read a complimentary PDF copy of Jackass Investing. I want to mention right from the start that this book review of Jackass Investing is my opinion only. Every reader has different tastes and ideas about what they are looking for in a book. The author refers to his book as both controversial and groundbreaking but I didn’t find either in the book.
I think by now any regular reader of my site knows that I like an investing book that offers me strategies and concepts that have actual ongoing real examples which I can tweak and play with to determine how suitable they are for my trading style. I am basically looking for a book that will give me ideas on how I can add profit and income to my portfolio.
It doesn’t bother me to spend money on books, PDF files and spreadsheets of any kind that have actual strategies in it that I can then study and determine how I can apply them and change them to see if I can profit by them. That is what I am endeavoring to do with my website. I want to provide a mentoring type strategy filled website with actual trades to show investors how I apply a variety of strategies to profit from stocks as well as protect my capital. I then hope investors will pick apart those strategies, challenge them and formulate their own.
I like a book that really gets me thinking about investing strategies and how to invest better.
Jackass Investing sort of does this I guess. I should mention that Jackass Investing has also been released under a second title, Exploiting The Myths: Profiting From Wall Street’s Misguided Beliefs.
The secondary title or slogan of the book is Don’t Do It, Profit From It. The book is basically 20 so-called Investing Myths which the author goes about debunking. For an investor who believes in myths like Buy Low, Sell High or Stocks Provide An Intrinsic Return or my favorite, Buy and Hold Works Well For Long-Term Investors, I guess this is an interesting book as it challenges those myths, although I have some of my own opinions on some of the myths including Buy and Hold which actually did work well for a period of time.
It’s a nice read though and easy to get through. I find that it’s easy to debunk investing myths and there are a lot more than just 20, but it always seems harder for authors to give actual trade solutions that can profit most investors.
Jackass Investing Myth Versus Reality
Some of the myths the author “rips into” as he puts it, actually touch upon other myths themselves. I thought it was interesting how he accepts some myths as facts that I would disagree with. For example he accepts as fact, that true portfolio diversification will provide the highest returns over time. I wouldn’t agree with that being a fact. His myth number 18 which is Diversification Failed In The 08 Financial Crisis I would definitely accept as fact not myth for many investors. A lot of investors in the market crash of 2008 to 2009 watched their diversified portfolios including bonds, stocks, currencies and commodities collapse.
All asset classes saw enormous losses at various moments during the crisis. I recall buying Canadian Bank Stocks for values I hadn’t seen in more than 10 years and I was buying corporate bonds in telecommunications and even health care that were being dumped by panicking investors at enormous discounts to their face value. On many of these the returns were more than 18% within a few short months when I sold them as investors realized the end of the world had not yet come. Commodities like oil collapsed when it seemed like the world was entering a depression then rebounded back. Market panics are funny things and provide huge opportunities.
Personally I would say the people who really benefit from severe bear markets are those who keep some cash available for these types of events. That has always been my strategy and over the past 12 years it has repaid me handsomely. I have a number of investor friends who since 1994 no longer invest except during market panics or severe corrections. They are only in the stock market or bond market for a short period of time and have made excellent returns. Who would have thought such a strategy as that would pay big dividends.
As readers of my website know I am a very undiversified investor. At various times I have a bond ladder, a lot of cash and I use only a handful of stocks and combine them with options and technical analysis to pick points for entry and exit. Since I started investing in the early 1970’s I have never invested in any country other than the United States and Canada. I believe that many investors can probably get diversification of stocks simply through large cap multi-national corporations like Johnson and Johnson stock, Coca Cola Stock, PepsiCo Stock and dozens more.
Overall the gentleman who mentored me always recommended keeping 30% of my portfolio in cash for “those events” that would provide enormous opportunities. His approach was long before all the talk of black swan events. But coming from the 1930’s he had pretty well seen it all and he told me that his fortune had been made in the early 1930’s when no one wanted stocks. Since the 1970’s keeping cash for the handful of events like 2008 – 2009, has worked out very well and averaged double-digit annual returns on my cash portfolio. I am therefore not convinced that diversification will save an investor. I believe knowledge and knowing how to investing, when to invest and when to sell will save most investors.
So overall while 20 myths are debunked, I also found many other myths were being accepted by the author as fact.
Jackass Investing Summary
If you need to have investing myths debunked and not find your capital snared in any investing myths then this is a book worth reading. If however you are looking for investing ideas and strategies which you can apply to counter these 20 myths, then I didn’t find them in here.
The author provides a link to his site and he does explain in general terms his “Free Lunch” concept of a return driver based methodology to trade broadly diversified portfolios in the global currency, interest rate, stock index, metals, energy and agricultural cash, futures and options markets as he puts it. I think it is also worth mentioning that the author runs Brandywine Asset Management.
There is not much more I can write about this book. It is interesting for novice investors and those who like to read about myths of investing and why they can be hurt in their investing endeavors by believing these 20 myths. Overall I felt that the introduction to the book was the strongest part of the book. I felt the introduction was well crafted and touched upon themes that I believe mean more to all investors. When I read Jackass Investing a second time before writing this review, I was disappointed that the author spent so much energy debunking these 20 myths when the introduction did the same on all 20 in one swoop. Then the author could have spent 20 chapters explaining his investing concept which would have interested me as an investor a lot more than 20 myths being debunked.