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7/13/2006 8:06:57 PM http://www.dailyspeculations.com/reviews/books/how-to-be-rich-saad.html Daily Speculations The Web Site of Victor Niederhoffer and Laurel Kenner 20-May-2006 Hany Saad Reviews J. P. Getty's "How To Be Rich" After taking a nice beating in the markets, I decided to clear my mind by reading J. Paul Getty's book, How To Be Rich. I broke my vow to never buy a book that has the word "rich" in the title, but this book was recommended by people I happen to respect very much. I was pleasantly surprised to see so much wisdom in a book so naively titled. Notice that the title is "How to be Rich" not "how to get rich". Some argue that Getty meant that being rich is a state of mind. Others argue that his father, who was also in the oil business started him big enough to become a billionaire. At any rate, let's move on to some of the priceless nuggets from Getty. Getty, like any businessman shows humility and acknowledges the role of luck in his success in business: "The independent operator had to possess a certain amount of basic knowledge and skill. He also needed reliable, loyal and experienced men. But, beyond these things, the most important factor was just plain luck." He also mentions ever-changing cycles and how he adapted to them to survive and prosper: "We became flexible, adaptable and versatile -- adept at improvisation and innovation -- if for no other reason than because we had to in order to survive." He shows contrarianism and courage (very timely for today's markets and universal pessimism and yes, now it is turning into a quick meme) "The business situation can only get worse," they predicted. "The economy is going to disintegrate completely! I didn't see things that way at all. I was convinced the nation's economy was essentially sound-it would eventually bounce back, healthier than ever. I thought it was the time to buy-not sell. The business man who moves counter to the tide of prevailing opinion must expect to be obstructed, derided and damned." The chair's columns at money central and readers' reactions to them are a great example. On the economical way of thinking in today's cut throat competitive markets: "In an all out business battles to capture markets, it is necessary to reduce all costs wherever possible." Did you ever think how different your performance would be had you used limit orders in place of market orders? An acquaintance started his own trading business "in style" according to him. His overhead was incredible. He used the most expensive trading platform that exists before making any profits. Short of six months he went belly up. I can't tell you whether he would have survived had he been as economical as Getty or not, but it would have definitely helped. On risk and credit: "A business man must be willing to take risks - to risk his own capital and risk borrowed money as well when, in his opinion, the risks are justified" It always amazed me how supposedly educated people advise you against using borrowed money. I dismissed all Gann's mumbo jumbo even before reading about his fixed systems, pivots and retracement percentages blah blah after I read that one of his most important rules is to never use a margin account. How could a businessman with great ideas prosper without using the leverage of "borrowed money". On dealing with adversity: "The successful businessman is usually the one who is always relaxed-even in the face of adversity." "An occasional crisis is good for the businessman. There's no better exercise for him than to have a few messes to clean up every now and then" In a given day, it's very hard to tell if the best traders are up or down. They maintain their composure when down an never boast when making a killing. On propaganda: " The first failure of a businessman is his inability to distinguish between facts and opinions" In markets, the only fact I know is the price action. Anything else is opinion and noise. On incentive: "Unquestionably, financial reward is the principal motivation that causes people to work" It's very curious how this obvious idea is often overlooked in corporate America. A slight change in the compensation structure could affect productivity greatly. On contrarianism and the impossible: "All top businessmen I know have made their biggest strides up the success ladder because they were able to see the possible in what others rejected as the impossible." Not to tap myself on the shoulders since I know my limitations specially now after a long losing streak, but when I first immigrated to Canada at 22, the first thing I did was to drive around the country to explore my new home. I thought it was more important than to look for employment right away. I was always astounded by how vast Canada is , how much undeveloped land this country possess and how many more immigrants this country can admit. Of note, immigration to Canada requires one to have certain qualifications and bring a huge sum of money into the country. The more I drove and observed, the more I realized that the Canadian Banks must be great investments and should never be dealt with as value stocks but growth stocks as long as there is land for immigrants. They have to put their money into the Canadian Banks. They have to borrow to develop lands, buy homes and start businesses and as you know the banks make their money on the spreads as well as the foreign exchange differentials. My ideas were reinforced after I spoke with a broker who told me that the Banks are for widows who need the dividends. It is impossible their price is going anywhere. I couldn't see it. I looked at the charts of the financial sector of all immigration countries (Canada, Australia and New Zealand) and sure enough they all outperformed the S&P. Notice that Canada admits more immigrants during recession than booms. I also studied the numbers from their immigration sites. I made it a habit since to put some spare money into Canadian Banks regularly. One wonders if Stock Markets of immigration countries with vast lands outperform. This needs to be tested. A quick look at Triumph of the Optimist is in order. On culture: "They (Europeans) have learned that culture bestows many rewards and benefits - among them a better more satisfactory life, great inner satisfaction and mental and emotional refreshment and inspiration." And his very good advise on investing in antiques and fine art: "The astute art investor's experiences serve to underscore the fact that many tourists and people who travel on business often overlook chances to invest wisely in fine arts during their travels. They have a habit of shopping for gaudy and frequently costly souvenirs that have little or no value. They fail to realize they could acquire objects of considerable and permanent value-without expending any more effort or money than they spend in buying the trivial. They need to shop carefully and off the beaten track." I will skip Getty's stock market advise as it ranges from the mainstream too obvious to the too naive as in, "buy low and sell high," "buy good companies that pay dividends," etc. ======================================== |
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