Tuesday, June 27, 2017

Ken Fisher's Forward to Gerald Loeb's "The Battle For Investment Survival"

Back in 2010 we noted the diamond anniversary of Mr. Loeb's book with a series of posts,
Here is the first of those:

Happy 75th Anniversary to one of the few MUST READ Investing Books: Gerald M. Loeb's "The Battle for Investment Survival"

I have three copies, including one of the Simon & Schuster 1935 printings.
The short little original was updated and expanded in the 'sixties and printed again in 2007, this time by Wiley with a forward by Ken Fisher who is currently managing $35 billion at Fisher Investments.

If you haven't read the book this is the edition you should have.
For the rest of the month I am going to excerpt snippets from this timeless classic.
The book is written as a series of three and four page chapters, almost in the form of notes from a friend.

Today, the Fisher forward and part of the introduction:
"To a 1935 reader...nothing was more terrifying than the prospect of buy-and-hold..."

"Loeb's preferred strategy of continual in-and-out, concentrated, 'speculation' seemed radical, fresh and far safer than buy-and-hold."

"Loeb recommended swapping...eerily like churning...he specifically recommended against letting money ride in the market."
"That may not be sound advice today"
Remember, the forward was written in mid-2007, as it turned out selling your losers on single-digit percentage drops was the only way to save yourself, if long, from October 2007 through March 2009.
Buy-and-hold meant dead-and-gone.
"Long before the Efficient Market Hypothesis Loeb argued that markets were pretty efficient"
An earner who earns more than he can spend is automatically an investor. Storing present purchasing power for use in the future is investing, no matter in what form it's put away.
Money itself, government bonds, bank deposits, real estate, commodities, diamonds, gold.

In fact, attempting to offset inflation, the rising cost of living or the devaluation of the dollar, however it's labled, has become the number one investment consideration...
...Diversification is necessary for the beginner, on the other hand the really great fortunes were made by concentration.
You see why the book is timeless. Those lines could have been written yesterday.

Loeb was very focused on preserving purchasing power which could again become the paramount issue facing investors.

He was also a pro's pro, at the market professionally from 1921 and at age 30 was made partner at E.F. Hutton.
He became vice-Chairman when the partnership incorporated in 1962.

Loeb was also accused by the SEC, on New Years Day 1938, of rigging Auburn Automobile Co. stock in cahoots with another Hutton partner and an NYSE floor broker.

He resigned from Hutton, the SEC dropped the charges, he came back to Hutton and went on to become what Forbes mag. called "The most quoted man on Wall Street.
[I bet you won't find that story at Wikipedia -ed]

The contemporaneous Time magazine article is a pretty good read. For example:
...Gerald Loeb is a reasonably rich man with a farm in Redding, Conn., and a mind far more liberal and articulate than most of his fellow brokers. In Wall Street he is noted because he writes E. F. Hutton & Co.'s market letters and because he espouses an unorthodox theory whose kernel is that investment as generally practiced is not as safe as intelligent speculation. This conception is unlikely to endear him to SEC interrogators but thus far has pleased his clients. In hectic September, 1929, just before ''the crash," Broker Loeb's market letter declared: "We see no reason to do anything but stand on the sidelines."...
Tomorrow we'll have the rest of the intro. and some snips from the first few chapters....