Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

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3/17/2005
Dr. Niederhoffer Visits the UPenn Bookstore

Had the opportunity to buy out the Penn Book store, one of best in the U.S., and came across one very good book, "Tech Stock Valuation," by Mark Hirschey of the University of Kansas. He makes the case that there was irrational exuberance for techs in 1999 and now there is irrational pessimism about them in 2005

"The Future for Investors" by Jeremy Siegel, is one of the worst books ever written, comparable to the derivatives expert's book about his struggles. The Siegel book reads like a aging paid consultant's report to the Sage to confirm his ideas for a board meeting. It contains almost every bias known to man, including using Compustat to prove once again that the lower the P/E of a stock the better, and fantastic naive stuff about the companies that made up the original S&P 100 in 1950 to prove that value like Exxon is better than growth like IBM.

Anecdotes to prove points galore, not one measure of uncertainty, not any consideration of stopping or starting points, multiple comparisons, or the irrrelevance of using the performance of the original S&P 100 companies versus those that were added during the period versus the spinoffs to prove that value beats growth, as if the new companies added were great growth vehicles.

Reminds me of some of Ben Graham's work in such books as "The Intelligent Investor" that seems to show the signs of old man's syndrome, and indeed a student verified that Professor Siegel was hardly ever in his office any more and that was my loss also as I would have liked to have him attend the lecture Collab and I gave so that we could educate each other.

Charles Pennington Responds:

The key to getting an investment book published, if it's not about technical analysis, is to include a lot of Buffettisms. In order to assist the aspiring author, I provide a partial scoring system. Each Buffetism is assigned a point value per reference. Point values are doubled if the item occurs more than 10 times. A good book will score over 300 points.

moat (1 pt)
shucks (1 pt, 3 pts if in title)
"core competence" (1 pt)
margin of safety (1 pt)
Cherry Coke (1 pt)
Tino D Angelis (1 pt)
salad oil (1 pt)
Gorat's (1 pt)
I'd prefer a lumpy 15% over a smooth 12%. (3 pts)
Omaha (1 pt)
same house AND Omaha (3 pts)
same house AND Omaha AND Keogh AND neighbor (5 pts)
same house AND Omaha AND Keogh AND neighbor AND could have bought that college (10 pts, 20 pts if in title)
favorite holding period is forever (3 pts)
Mr. Market (2 pts, 5 pts if in title)
See's Candies (2 pts)
Washington Post (2 pts)
"Dairy Queen" (2 pts, 5 pts if in title)
Katherine Graham (1 pt)
Kate (1 pt)
Charlie (1 pt)
( damn OR hell ) AND ( Charlie ) (3 pt, 10 pts if in title)
Ruth Blumfeld (1 pt)
Ruth Blumfeld AND age 90 something (3 pts)
Nebraska Furniture Mart (1 pt)
Borsheim's (1 pt)
don't understand technology (1 pt)
online bridge (1 pt)
online bridge AND only thing I know how to do on the computer (3 pts, 10 pts if in title)
Kitty Hawk AND shot down (3 pts, 10 pts if in title)
90% AND Graham AND 10% AND Fisher (3 pts, 10 pts if in title)
Schloss (1 pt)
Graham and Doddsville (1 pt)

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