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Editor's note: Below, you'll find the third entry in this week's series on the books that shaped the way we view businesses and the markets. As you'll see, it's a surprising choice... I'll Refer to This Book for the Rest of My LifeBy
Wednesday, May 2, 2012
It costs $0.10 at Amazon.com.
But it's the most valuable book they sell.
It was published in 1992.
But it's as relevant as any current book today.
I discovered it during the financial crisis in 2008. As the stock market collapsed and the banks failed, I'd been staying up all night trading the markets while watching the financial news channels. All that "noise" was sucking me into the television and turning me into a news junkie. I was beginning to lose my perspective on the big picture...
I needed a book that could explain to me what was going on... and center me. I needed a guidebook for the crisis.
Reading it for first time was like being elevated 20 yards off the ground on a busy street corner.
"With as much debt as there is today," the book explains in the third chapter, "the wave of bond and mortgage defaults would cascade through the economy. Loan defaults would wipe out banks, and foreclosure sales would depress prices and wipe out the net worth of individuals."
The book goes on to explain exactly why the crisis happened, where it would lead, and how the authorities would respond. It was like an instruction manual for my money. And it was such a relief after CNBC's blather.
The book I'm talking about is Crisis Investing for the Rest of the '90s by Doug Casey.
First of all, you should ignore the book's title. This book is an education in money, markets, and philosophy. I'd estimate that 95% of the information in this book is timeless and will benefit you forever. But the remaining 5% of the material – the "time-specific" stuff – is still relevant, even today.
In case you haven't heard of the author, Doug is a famous philosopher and speculator, and a longtime friend to DailyWealth readers. You can read a few of the pieces we've published from him here, here, and here.
As well as making a fortune, traveling the world, and giving entertaining speeches, Doug has also written four books, which have all become cult classics: International Man, Crisis Investing, Strategic Investing, and Crisis Investing for the Rest of the '90s. I'd recommend them all, but Crisis Investing for the Rest of the '90s is by far the best one.
It's been a close companion of mine since 2008... and I'll probably refer to it for the rest of my life.
Doug composed the book in three sections. He titled the first section "What's going on and why?" In this part, he explains the basics... how money works, how politicians manipulate money, and how their manipulations always lead to bank runs and credit crunches.
Except for the timing, his forecast of the 2008 crisis was so accurate, it was eerie.
In the second section, Doug introduces the investment strategy he recommends to profit from these trends. He calls it the "Ten Times Ten Approach." The gist is, you divide your portfolio into 10 unrelated areas, making sure each has the potential to increase tenfold in value.
This way, you have the potential to make a fortune, but at the same time, you've spread your risk out. Even if only one of your 10 speculations pays off, you're still a winner.
Then, he discusses almost every investment you can think of – from Japanese real estate to biotech stocks to agricultural commodities to convertible bonds. And he explains how to profit in each of them.
It's the ultimate reference guide to all the different investments you have available to you, written by a professional speculator. And with the possible exception of his call to bet against the Japanese stock market (which was a great call at the time), his recommendations are still relevant today.
But the final section is my favorite. It's where the book blossoms into a work of total genius.
Here, Doug forecasts the big trends in warfare, science, and society. He explains his philosophy on religion, environmentalism, and politics. I won't spoil the ending, but he comes to some radical conclusions.
The hardcover version of Crisis Investing for the Rest of the '90s is on sale at Amazon for $0.10. If you can ignore the reference to the '90s in the title, it'll be the best $0.10 you ever spent.
Good investing,
Tom
Further Reading:
See more of Tom's recommended reading here...
"Public property should be seized or homesteaded by the workers or by people with the strongest interest in it, and then put on the open market," authors Morris and Linda Tannehill write. If that sounds crazy or chaotic, you might change your mind after reading their case...
Richard Maybury's easy-to-read books offer some of the best education on history, liberty, personal responsibility, and the idea of America that you can find anywhere, for any price. Porter Stansberry calls this series a must-read, especially if you have children who you'd like to see grow up right.
Market NotesASIA UP, THE WEST NOT SO MUCH: TRAVEL EDITION We're going on vacation for this week's second installment of "Asia up, the West not so much."
This idea is all about the gradual increase of Asian economic power... and the gradual decrease of old European economic power. Many European countries have declining population growth and onerous business regulations. This creates a headwind against the region's stock and real estate prices. Many Asian countries have healthy population growth and are embracing free markets. This creates a tailwind behind the region's stock and real estate prices.
Yesterday, we displayed this idea by looking at the performance of a basket of Singaporean stocks versus Italian stocks. Today, we look at two popular vacation destinations: One is Thailand (representing Asia)... the other is Spain (representing Europe). Both countries are extremely popular travel spots. But today's chart shows they have substantial differences...
Below is a three-year chart that plots the performance of the popular Thailand investment fund (aka TTF, the black line, up 209%) versus the popular Spain investment fund (aka EWP, the blue line, down 9%). As you can see, asset prices in the popular Asian spot are much healthier than the popular European spot.
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