Ken Fisher explains what the competition doesn't know
From investment expert and long-time Forbes columnist Ken Fisher comes the Second Edition of The Only Three Questions That Count. Most investors know the only way to consistently beat the markets is by knowing things others don't. But how can investors consistently find unique information in an increasingly interconnected world?
In this book, Ken Fisher shows investors how they can find more usable information and improve their investing success rate—by answering just three questions.
Packed with more than 100 visuals and practical advice, The Only Three Questions That Count is an entertaining and educational guide to the markets. But it also provides a useable framework investors can use now and for the rest of their investing careers.
- CNBC's Mad Money host and money manager James J. Cramer says the book "may be the single best thing you could do this year to make yourself a better investor"
- Steve Forbes says, "Investors will find this brilliant book an eye-opening, capital-gains producing experience"
The key to improving investing results is daring to challenge yourself and whatever you believe to be true, and Ken Fisher explains how in his own inimitable style.
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About the Author
Ken Fisher is best known for his prestigious "Portfolio Strategy" column in Forbes magazine, where his over 27-year tenure of high-profile calls makes him the fourth longest-running columnist in Forbes's 90-plus year history. He is the founder, Chairman and CEO of Fisher Investments, an independent money management firm managing tens of billions for individuals and institutions globally. Fisher is ranked #263 on the 2011 Forbes 400 list of richest Americans and #736 on the 2011 Forbes Global Billionaire list. In 2010, Investment Advisor magazine named him among the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the award-winning "Cognitive Biases in Market Forecasting." He has also published eight previous books, including bestsellers The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget (But People Do), all published by Wiley. Fisher has been published, interviewed and/or written about in many major American, British and German finance or business periodicals. He has a weekly column in Focus Money, Germany's leading weekly finance and business magazine.
Lara Hoffmans is a content manager at Fisher Investments, managing editor of MarketMinder.com, a regular contributor to Forbes.com and coauthor of the bestsellers The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget (But People Do).
Jennifer Chou graduated from the University of California with a BS in finance. She was a research analyst of global capital markets and macroeconomics at Fisher Investments.
Table of Contents
1 Question One: What Do You Believe That Is Actually False? 1
If You Knew It Was Wrong, You Wouldn’t Believe It 1
The Mythological Correlation 8
Always Look at It Differently 15
When You Are Really, Really Wrong 21
2 Question Two: What Can You Fathom That Others Find Unfathomable? 31
Fathoming the Unfathomable 31
Ignore the Rock in the Bushes 32
Discounting the Media Machine and Advanced Fad Avoidance 33
The Shocking Truth About Yield Curves 38
What the Yield Curve Is Trying to Tell You 49
The Presidential Term Cycle 57
3 Question Three: What the Heck Is My Brain Doing to Blindside Me Now? 67
It’s Not Your Fault—Blame Evolution 67
Cracking the Stone Age Code—Pride and Regret 72
The Great Humiliator’s Favorite Tricks 85
Get Your Head Out of the Cave 87
4 Capital Markets Technology 95
Building and Putting Capital Markets Technology Into Practice 95
It’s Good While It Lasts 100
Forecast With Accuracy, Not Like a Professional 105
Better Living Through Global Benchmarking 113
5 When There’s No There, There! 131
Johns Hopkins, My Grampa, Life Lessons and Pulling a Gertrude 131
In the Center Ring—Oil Versus Stocks 136
Sell in May Because the January Effect Will Dampen Your Santa Claus Rally Unless There Is a Witching Effect 148
6 No, It’s Just The Opposite 155
When You Are Wrong—Really, Really, Really Wrong 155
Multiplier Effects and the Heroin-Addicted iPod Borrower 163
Let’s Trade This Defi cit for That One 170
The New Gold Standard 175
7 Shocking But True 185
Supply and Demand . . . and That’s It 185
Weak Dollar, Strong Dollar—What Does It Matter? 200
8 The Great Humiliator and Your Stone Age Brain 213
That Predictable Market 213
Anatomy of a Bubble 221
Some Basic Bear Rules 229
What Causes a Bear Market? 244
9 Putting It All Together 251
Stick With Your Strategy and Stick It to Him 251
Four Rules That Count 257
Finally! How to Pick Stocks That Only Win 274
When the Heck Do You Sell? 281
Conclusion: Time to Say Goodbye 289
Appendix A: Causal Correlations and the Correlation Coefficient 295
Appendix B: News You Can’t Use 299
Appendix C: Greater Fools 301
Appendix D: I Hate Funds 303
Appendix E: Annualized Versus Average 307
Appendix F: The Wizard of Oz and an OZ of Gold 309
Appendix G: 1980 Revisited 313
Appendix H: Popular But Problematic 317
Appendix I: Covered Calls—Covering What? 321
About the Authors 329
1. The Only Three Questions That Count really resonated with investors when it first published. What made you decide to update?
As I wrote in my 2011 book, Markets Never Forget, particularly following big bear markets, investors tend think "now" is different somehow. That problems we face are unique and insurmountable somehow. But folks always think that, and they're always wrongwe just forget.
Following the 2008 credit crisis and bear market and the huge 2009-2010 boom off the bottom, I thought I could revisit the questions to show, first, details change, but human behavior doesn'tnot fast enough. And second, to show that if you have a good strategy aimed at knowing what others don't, that can work no matter what the market environment, what just happened or how much people think the world has changed. Nothing works 100% of the time, and things that worked once stop working then start working again later. But if you have a good, scientific method aimed at knowing what others don'tthat should serve you well, always. And in updating the book, it was amazing how well the questions and all the examples I used held up.
2. The financial world has changed quite a bit since 2007new laws and new regulations. How do the three questions still matter in the new financial landscape?
I'd argue the financial world is always changing. Sometimes new regulations are big, sometimes small. There are new innovations constantly. The three questions hold up because they aren't static. They don't rely on rules of thumb that maybe worked a long time ago but now are worthless. They are flexible and form a scientific method helping you see the world more clearly, no matter how much regulations change or new innovations are introduced.
3. Why would someone who bought the original book need this updated edition?
I've updated nearly every chart and table in the book and most all the data. Plus, there's some updated commentary based on the most recent market cycle that obviously wasn't in the first edition. I've edited it to be a tighter read and a better tool, so readers of the first edition might find something more useful or more powerful in this one.
4. What do you mean when you say that the only way to beat the market is by knowing what others don't know?
I mean exactly what finance theory says is true, and what is taught in every classroom and in every professional internship but most people seem to forget when faced with the real world. The only way to bet and win more often than not is knowing something others don't. If you don't know something others don't and make a market bet, you might be lucky sometimes and right but probably more often unlucky and wrong. That's not a strategy for long-term investing success.
5. The world is more interconnected now than ever before. How has this changed the way people approach investment decisions?
In my mind, this is part of a long innovation evolution and in many ways is good. It means there's more information moving faster, which can add to transparency.
But for many investors, the non-stop interconnectedness results in nonstop noisemost of it nonsense. But much of the nonsensical noise looks to many like wisdomit can be hard for folks to weed through the nonsense to find something useful. If you can do thatignore the noisethere's so much more you can know now that others don't. But ignoring the noise is a hard skill and most don't try developing it.
My sense is if most folks ignored their TVs and computers for a solid year, they'd have much better investing results than they would have otherwise. They'd be less tempted to make investing moves just for the sake of moving, and that alone can improve results.