Lawrence Light, who has won many journalism awards, is a noted financial editor.
He was a Deputy Editor for Personal Finance at the Wall Street Journal. Previously, he was the Senior Editor in charge of money and investing for Forbes magazine and an editor at Business Week.
Today, he is a partner in an important new financial website. He will serve as Editor in Chief of the site which will launch in the fall of 2011.
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Under his supervision, reporters have uncovered hosts of Wall Street abuses, in particular mutual fund shenanigans.
As a reporter for Business Week, Newsday and Congressional Quarterly, he has delved into all manner of financial skullduggery and made a few high-powered enemies who to this day wish him ill.
Lawrence just came out with a new book titled; Taming the Beast: Wall Street’s Imperfect Answers to Making Money (Wiley, June 2011)
Can you tell us a little about your background? I am a financial journalist who also writes mystery novels. I have always been fascinated by investing, and I have long read mysteries. In fact, I am head of Mystery Writers of America.
Who are some of the big name enemies you have made? Donald Trump does not like me very much. When I was at Business Week, I wrote stories about his financial distress at the time. He since has restored his fortune, but still hates me.
Can you tell us about this new financial website being launched, or is it a secret? It still is a secret, although it should launch in a couple of months and, I hope, the whole world will know.
What made you decide to write this book? There never has been a book, to my knowledge, that delved into the history of investing styles. I always wanted to read one and, since none existed, decided to write it.
What is the general thesis of the book? There is no one answer to investing success. You need to know about the strengths and weaknesses of the different approaches and use them all when needed.
What do you think is the most important lesson readers should take from reading your new book? Investors should be knowledgeable about the different investing styles, so they can best use them.
What are some of the main weakness of value investing? Not everything that is cheap is good. Some folks invested in financial stocks in 2008 because they were inexpensive, only to see them collapse.
You talk about behavioral finance. Isn’t this a strength for value investing as people overreact when things seem too gloomy and drive valuations to very low levels? Yes, value is by its nature a contrarian philosophy. At its best, it requires investors to really study cheap, promising stocks.
David Dreman gave a very positive review of your book. What does he think about your criticisms of value investing? David is an open-minded fellow, so I suspect that he’ll acknowledge the weaknesses and argue that value nonetheless is the best approach of them all long-term.
You talk a lot about famous investors and thinkers; Jeremy Seigel, David Dreman, Bill Miller, Walter Schloss among others. Do you think any of them have nailed the right approach towards investing? They all think their way is the one and only. In that, they re wrong. Sometimes growth investing – something the above folks are dubious about – has its place. It was foolish to stay out of tech in the late 1990s (although not all dot-coms were winners, and thus best avoided).
Financials (07-09) are cited as an example of value traps, but wasn’t this a one-time thing? Does this negate the whole style of investing? No, it simply shows that you have to keep your wits about you and not be blindly married to one style. Bill Miller stayed loyal to financial in 2008 when he clearly should have bailed out of them.
‘You mention that Benjamin Graham is not the father of value investing but rather Warren Buffett is, why? Well, Graham is the father – he originated value. But Buffett has modernized it and is much more rich and famous than Graham (now dead) ever was.
What about Warren Buffett who fared pretty well during the financial crisis and was able to find many bargains; like Goldman Sachs preferreds and warrants? Buffett gets presented deals that ordinary people never get — even ordinary wealthy investors and hedge funds. He has so much capital and such a golden name that Goldman, and lately Bank of America, craved his investing in them.
You talk about international investing and problems with fraud. Do you think this is only limited to China and maybe a few other countries? What are other problems with investing internationally? Transparency. China and many other emerging nations have too many companies that cook the books. Plus, it’s tough to find out a lot about too many of them; disclosure is minimal, and often what is presented is hyped or untrue.
You point out the flaws in value investing, indexing, and every type of investing; what do you recommend for the average investor? Be informed about all of them and partake of each as the situation warrants.
What type of reader is the book intended for? Two types: the experienced investor who wants to know more, and the novice who wants the basics presented in a palatable, readable fashion.
To purchase the book on Amazon.com, click on the following link- Taming the Beast: Wall Street’s Imperfect Answers to Making Money