Outsmarting the Smart Money

I read Cunningham's book based on the review in Barron's rounding up the best investment books of 2002. They were right. The book is a eye-opening intro to the psychology of investing, important to investors and market observers/regulators. (Cunningham's other books have more of the basics for investors--also very good books.)

Awesome. Cunningham dissects the woes besetting corporate American using lucid, concrete examples, with boundless energy and enthusiasm, endorsed properly on the back cover by those who take behavioralism seriously, including Gary Belsky, who wrote the top-seller "Why Smart People Make Big Money Mistakes" (which is about general habits, not investment philosophy of which Cunningham writes) and Robert Hagstrom, prolific author (who writes about investment philosophy, and sometimes behavioralism). What an astonishing record Cunningham has developed as a writer and expert in invesetment theory and practice! A better title for this book would be Rational Investing in a Hair Brained Environment; the one chosen is unduly flashy for the seriousness of Cunningham's pursuits (he's a professor of law and business!).

Makes you think. Straightforward points as to investing slip ups I've made and some I now know I better be on the look out for. The chapter on "Living with Emotions" is worth the price alone. It is the whole package--key points of dealing with our conflicting goals of (a) generating high returns and (b) sleeping well at night. I feel I'll be better able to do both, having read this delightful read.

Makes you think. Straightforward points as to investing slip ups I've made and some I now know I better be on the look out for. The chapter on "Living with Emotions" is worth the price alone. It is the whole package--key points of dealing with our conflicting goals of (a) generating high returns and (b) sleeping well at night. I feel I'll be better able to do both, thanks to perusing this delightful read.

What a great book! I am learning much. It is the starting point for understanding value investing. The section on the Austrian school of economics is big news. It places Hayek ("Road to Serfdom") in a historical context and shows the links between Hayek and the Austrians on the one hand and Graham and Fisher and their disciples on the other. Reading about the Austrian School and their theories of behavioral economics also shows links to current research into "complex adaptive systems" and "chaos theory" (subjects addressed in Cunningham's other books). None of these schools believes in the concept of "market equilibrium," which seems to be a pillar in the "efficient market theory"-- the price of a stock equals the value of a stock. The enormous implications of these points for investors-from selecting stocks to building a portfolio-round out this powerful book.