You are previewing The Only Three Questions That Count: Investing by Knowing What Others Don't.
O'Reilly logo
The Only Three Questions That Count: Investing by Knowing What Others Don't

Book Description

The Only Three Questions That Count is the first book to show you how to think about investing for yourself and develop innovative ways to understand and profit from the markets. The only way to consistently beat the markets is by knowing something others don't know. This book will show you how to do just that by using three simple questions. You'll see why CNBC's Mad Money host and money manager James J. Cramer says, "I believe that reading his book may be the single best thing you could do this year to make yourself a better investor.

In The Only Three Questions That Count, Ken Fisher challenges the conventional wisdoms of investing, overturns glib theories with hard facts, and blows up complacent beliefs about money and the markets. Ultimately, he says, the key to successful investing is daring to challenge yourself and whatever you believe to be true. Packed with more than 100 visuals, usable tools, and a glossary, The Only Three Questions That Count is an entertaining and educational experience in the markets unlike any other, giving you an opportunity to reap the huge rewards that only the markets can offer.

Table of Contents

  1. Copyright
  2. ACKNOWLEDGMENTS
  3. FOREWORD
  4. PREFACE
    1. Who Am I to Tell You Something That Counts?
      1. Polling for Perfect Truth
      2. Investing by Knowing What Others Don't
    2. Idiots and Professionals: Oh, but I Repeat Myself
    3. Because Mr. Crafty, It's Not a Craft
    4. It's All Latin to Me—Starting to Think like a Scientist
    5. The Only Three Questions That Count
  5. 1. QUESTION ONE: WHAT DO YOU BELIEVE THAT IS ACTUALLY FALSE?
    1. 1.1. If You Knew It Was Wrong, You Wouldn't Believe It
      1. 1.1.1. Using Question One
      2. 1.1.2. Common Myths You Believe In Too
      3. 1.1.3. Let's Prove You're Either Right or Wrong (or Really, Really Wrong)
    2. 1.2. The Mythological Correlation
      1. 1.2.1. Why High P/Es Tell You Nothing at All
      2. 1.2.2. It's Hard to Figure Out
      3. 1.2.3. If Not Bad, Can They Be Good?
    3. 1.3. Always Look at It Differently
      1. 1.3.1. How Would Your Grandparents Think about It?
      2. 1.3.2. A Quick Preview of Question Three
      3. 1.3.3. Upside Down and Backwards If You Can
    4. 1.4. When You Are Really, Really Wrong
      1. 1.4.1. The Holiest of Holies—the Federal Budget Deficit Myth
      2. 1.4.2. Let's Kill the Blood Suckers
      3. 1.4.3. What about Those Other Deficits?
      4. 1.4.4. It's All Relatively Relative
      5. 1.4.5. Question Everything You Know
  6. 2. QUESTION TWO: WHAT CAN YOU FATHOM THAT OTHERS FIND UNFATHOMABLE?
    1. 2.1. Fathoming the Unfathomable
      1. 2.1.1. Wondering Is Wonderful
    2. 2.2. Ignore the Rock in the Bushes
    3. 2.3. Discounting the Media Machine and Advanced Fad Avoidance
      1. 2.3.1. Investment Professionals—Professional Discounters
      2. 2.3.2. Friends Don't Let Friends Be Contrarians
      3. 2.3.3. Patterns, Patterns Everywhere
    4. 2.4. The Shocking Truth about Yield Curves
      1. 2.4.1. The Interest Rate Brouhaha
      2. 2.4.2. Think Globally, Think Better
      3. 2.4.3. Inverted, Schminverted
    5. 2.5. What the Yield Curve Is Trying to Tell You
      1. 2.5.1. On the Flip Side, Let's Flip It
      2. 2.5.2. Flip It Again
    6. 2.6. The Presidential Term Cycle
      1. 2.6.1. Nobody Can Predict What a Genuine Phony Will Do
      2. 2.6.2. Reversing the Trend
      3. 2.6.3. Test and Test Again
  7. 3. QUESTION THREE: WHAT THE HECK IS MY BRAIN DOING TO BLINDSIDE ME NOW?
    1. 3.1. It's Not Your Fault—Blame Evolution
      1. 3.1.1. Behavioral Finance
      2. 3.1.2. The Great Humiliator
    2. 3.2. Cracking the Stone Age Code—Pride and Regret
      1. 3.2.1. Look! Me Kill Huge Beast! Me Very Skilled!
      2. 3.2.2. Throwing Spears—Overconfidence
        1. 3.2.2.1. The Tragedy of Enron
      3. 3.2.3. See! I Told You So—Confirmation Bias
      4. 3.2.4. Following a Trail—Pattern Recognition and Repetition
      5. 3.2.5. 20/20 Hindsight Bias and Order Preference
    3. 3.3. The Great Humiliator's Favorite Tricks
    4. 3.4. Get Your Head Out of the Cave
      1. 3.4.1. Another Flip—Accumulate Regret, Shun Pride
        1. 3.4.1.1. Less Can Be More
      2. 3.4.2. Genius? Or Lucky and Forgetful?
      3. 3.4.3. The Whole Versus the Sum of Its Parts
      4. 3.4.4. Bunnies or Elephants? Always Think in Terms of Scalability!
  8. 4. CAPITAL MARKETS TECHNOLOGY
    1. 4.1. Building and Putting Capital Markets Technology into Practice
      1. 4.1.1. History as a Research Lab
    2. 4.2. It's Good while It Lasts
      1. 4.2.1. Finding Earnings When There Were None
      2. 4.2.2. The Stock Market Is Not a Ballpeen Hammer—But It Can Hit You Hard
    3. 4.3. Forecast with Accuracy, Not Like a Professional
      1. 4.3.1. Wronger, Stronger, and Longer
      2. 4.3.2. Why Tell You Any of This?
    4. 4.4. Better Living through Global Benchmarking
      1. 4.4.1. Your Benchmark Is a Road Map for Your Long Journey
      2. 4.4.2. Pick an Index, Any Index (but Don't Believe More Volatility Gets You Higher Returns)
      3. 4.4.3. Risk versus Return?
      4. 4.4.4. Global Thinking Equals Better Thinking
      5. 4.4.5. Never Say Dow
      6. 4.4.6. The Two-Stock Index
      7. 4.4.7. Never Maximize Return
      8. 4.4.8. The Greatest Risk of All
      9. 4.4.9. You Too Can Beat the Market
      10. 4.4.10. Emerging Markets and the GDP Myth
  9. 5. WHEN THERE'S NO THERE, THERE!
    1. 5.1. Johns Hopkins, My Grampa, Life Lessons, and Pulling a Gertrude
      1. 5.1.1. The Six Investment Life Lessons of Gertrude Stein
        1. 5.1.1.1. The Number Six Most Important Gertrude Stein Life Lesson
        2. 5.1.1.2. The Number Five Most Important Gertrude Stein Life Lesson
        3. 5.1.1.3. The Number Four Most Important Gertrude Stein Life Lesson
        4. 5.1.1.4. The Number Three Most Important Gertrude Stein Life Lesson
        5. 5.1.1.5. The Number Two Most Important Gertrude Stein Life Lesson
        6. 5.1.1.6. The Number One—All Time Most Important Gertrude Stein Life Lesson
      2. 5.1.2. Skip Oakland—Think Bird Flu
    2. 5.2. In the Center Ring—Oil versus Stocks
      1. 5.2.1. We Just Don't Know
        1. 5.2.1.1. Colorado, Canada, and China Have it in Common—Not "C"
        2. 5.2.1.2. Pray for High Oil Prices—Not Low Ones
      2. 5.2.2. Believe the Stock Market—Not Me—Stocks and Oil Prices Don't Correlate
      3. 5.2.3. The 1 Percent Solution
      4. 5.2.4. I Can Confirm It's Confirmation Bias
      5. 5.2.5. The Gas-Pump Quiz
      6. 5.2.6. Anything the French Can Do We Can Do Better
    3. 5.3. Sell in May because the January Effect Will Dampen Your Santa Claus Rally Unless There Is a Witching Effect
      1. 5.3.1. Time for Some Homework
  10. 6. NO, IT'S JUST THE OPPOSITE
    1. 6.1. When You Are Wrong—Really, Really, Really Wrong
      1. 6.1.1. When Debt Is Good!
      2. 6.1.2. The Killer Question—What Is the Right Amount of Debt for a Society to Have?
        1. 6.1.2.1. I'm Saying It—Right Here—In the Next Sentence
      3. 6.1.3. Surprise!
      4. 6.1.4. Fun Times—Here and Now
    2. 6.2. Multiplier Effects and the Heroin-Addicted Apple iPod Borrower
      1. 6.2.1. Not the Dow Again! EEK!
      2. 6.2.2. Does Someone Need to Pay Back This Debt? No
      3. 6.2.3. The Dwindling Savings Rate and the Decline of Humanity
      4. 6.2.4. Too Weird and Whacky—Weird, Weird-II, Weird-III, Weird-IV
    3. 6.3. Let's Trade This Deficit for That One
      1. 6.3.1. Let's Play the "Which Country Do You Want to Be?" Game
      2. 6.3.2. Mercantilists Are Darned Near as Bad as Commies—And I Hate Commies!
    4. 6.4. The New Gold Standard
      1. 6.4.1. The Golden Hedge
      2. 6.4.2. Gold, Inflation, and 206 Years of the Long Bond
      3. 6.4.3. What Is It? What Isn't It?
  11. 7. SHOCKING BUT TRUE
    1. 7.1. Supply and Demand . . . and That's It
      1. 7.1.1. Cash, Stock, or Hybrid?
      2. 7.1.2. What Really Makes Stock Prices Move
      3. 7.1.3. The Three Drivers of Stock Demand
        1. 7.1.3.1. Economic Drivers
        2. 7.1.3.2. Political Drivers
        3. 7.1.3.3. Investor Sentiment
      4. 7.1.4. That Wall of Worry
      5. 7.1.5. Supply: How It Works
      6. 7.1.6. Merger Mania
      7. 7.1.7. No One Stock Style Is Always Better—Period!
    2. 7.2. Weak Dollar, Strong Dollar—What Does It Matter?
      1. 7.2.1. Five Myths and More Supply and Demand
        1. 7.2.1.1. Myth Number One—The Dollar Is Still Falling
        2. 7.2.1.2. Myth Number Two—The Budget Deficit Will Cause the U.S. Dollar to Fall
        3. 7.2.1.3. Myth Number Three—The Current Account Deficit Causes the Dollar to Fall
        4. 7.2.1.4. Myth Number Four—Currencies Are Determined by Trade Balances, Foreign Policy, International Popularity, and So On
        5. 7.2.1.5. Finally, Myth Number Five—A Weak Dollar Is Bad for Stocks
      2. 7.2.2. In Case You Forgot, Supply and Demand Determine Currency Prices
        1. 7.2.2.1. Currency Supply
        2. 7.2.2.2. Currency Demand
      3. 7.2.3. What Really Drives Currency Demand
      4. 7.2.4. Fear of a False Fact Is Bullish
  12. 8. THE GREAT HUMILIATOR AND YOUR STONE-AGE BRAIN
    1. 8.1. That Predictable Market
      1. 8.1.1. Direction, Not Magnitude
      2. 8.1.2. Look Out Below!
    2. 8.2. Anatomy of a Bubble
      1. 8.2.1. Bubble Trouble? What Bubble?—It's Always a New Paradigm
      2. 8.2.2. Sympathy Selling
    3. 8.3. Some Basic Bear Rules
      1. 8.3.1. When Bulls Cross-Dress
      2. 8.3.2. When Bears Cross-Dress
    4. 8.4. What Causes a Bear Market?
      1. 8.4.1. Osama Bin Laden, Katrina, and Foghorn Leghorn Walk into a Bar
        1. 8.4.1.1. What If They Destroyed a Major American City?
        2. 8.4.1.2. Remember Grampa Fisher?
  13. 9. PUTTING IT ALL TOGETHER
    1. 9.1. Stick with Your Strategy and Stick It to Him
      1. 9.1.1. Growth—Or Income—Or Both—That's It
        1. 9.1.1.1. Maximize Terminal Value against a Primary Purpose
        2. 9.1.1.2. Cash Flow
      2. 9.1.2. The Richest Have It Tough!
    2. 9.2. Four Rules That Count
      1. 9.2.1. Rule Number One—Select an Appropriate Benchmark
        1. 9.2.1.1. The First Determinant—Time Horizon
        2. 9.2.1.2. Stocks or Bonds? The 929 Percent Question
        3. 9.2.1.3. The Second Determinant—Cash Flow
        4. 9.2.1.4. Homegrown Dividends
        5. 9.2.1.5. The Third Determinant—Return Expectation
        6. 9.2.1.6. The Fourth Determinant—Individual Peculiarity
        7. 9.2.1.7. Heat Chasing—To Shift or Not to Shift
      2. 9.2.2. Rule Number Two—Analyze the Benchmark's Components, Assign Expected Risk and Return
      3. 9.2.3. Rule Number Three—Blend Noncorrelated or Negatively Correlated Securities to Moderate Risk Relative to Expected Return
        1. 9.2.3.1. The Magic of Diversification
      4. 9.2.4. Rule Number Four—Always Remember You Can Be Wrong, so Don't Stray from the First Three Rules
        1. 9.2.4.1. Core versus Counter Strategy
    3. 9.3. Finally! How to Pick Stocks That Only Win
      1. 9.3.1. Just Tell Me How to Pick Stocks Already!
    4. 9.4. When the Heck Do You Sell?
      1. 9.4.1.
        1. 9.4.1.1. Lock and Load
      2. 9.4.2. Togas, Puppy Strangling, and Other Profit Killers
  14. CONCLUSION
    1. Transformationalism
  15. A. U.S. Equity Total Returns 1830 to 1925
  16. B. S&P 500 Composite Returns
  17. C. Simulated Technology Returns
  18. D. Nasdaq Composite Returns
  19. E. U.K. Stock Market Total Returns
  20. F. U.K. Stock Market (FTSE All-Share) Total Returns
  21. G. Germany Stock Market Returns
  22. H. Germany Stock Market (DAX) Total Returns
  23. I. Japan Stock Market Total Returns
  24. J. Japan Stock Market (TOPIX) Total Returns
  25. K. Fisher Investments Global Total Return Performance
  26. L. Ten-Year History of the Forbes Report Card
    1. L.1. Disclosure
  27. M. The United Deficits: Data
  28. NOTES
  29. GLOSSARY