- “Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay (only the first two chapters – the title is worth the price of admission!)
- “The Crowd: A Study of the Popular Mind by Gustave Le Bon
- “Buffett: The Making of an American Capitalist by Roger Lowenstein
- “The Money Masters by John Train
- “The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham
- “The Templeton Touch by William Proctor
- “The Alchemy of Finance by George Soros”
- “Sir John Templeton said something to me and it stuck in my mind…Graham also talks about [it]; ‘always change a winning game.’ I didn’t do it because I was on a roll then and I wasn’t flexible enough. There is no investment rule that remains immutable except the margin of safety. There are always breaks and the trick is to begin to anticipate, if you can, where the break points will be and shift. Not the disciplines and not the framework but the tactics that are involved.”
James Montier
“As tempting as it may be to be a ‘man of action,’ it often makes more sense to act only at the extremes. But the discipline required to ‘do nothing’ for long periods of time is not often seen.” – James Montier[174]
“Leverage can’t make a bad investment good, but it can make a good investment bad!” – James Montier[175]
“Finance has turned the art of transforming the simple into the complex into an industry. Nowhere (at least outside of academia) is overly complex structure and elegant (but not robust) mathematics so beloved. The reason for this obsession with needless complexity is clear: it is far easier to charge higher fees for things that sound complex.” – James Montier [176]
“In general, critical thinking is an underappreciated asset in the world of investment. As George Santayana observed, ‘Scepticism is the chastity of the intellect, and it is shameful to surrender it too soon or to the first comer: there is nobility in preserving it coolly and proudly.’ Scepticism is one of the key traits that many of the best investors seem to share. They ask themselves, ‘Why should I own this investment?’ This is a different question from the average [investor], who asks, ‘Why shouldn’t I own this investment?’ In effect, investors should consider themselves to be in the rejection game. Investment ideas shouldn’t be accepted automatically, but rather we should seek to pull them apart. In effect, investors would be well-served if they lived by the Royal Society’s motto: Nullius in Verba (for which a loose modern translation would be, ‘Take no one’s word for it.’).” – James Montier[177]
“All too often, so-called financial innovation is revealed to be little more than thinly veiled leverage.” – James Montier
“One of my clients has only one Bloomberg terminal in his office, sitting in the corner, and people get ridiculed when they use it too often. His point is that they don’t need it – their business is investing and they should work out the value before seeing if there is a sufficient margin of safety to invest at the current price. If there isn’t, the work hasn’t been wasted because there one day might be.” – James Montier
“‘What else am I going to do?’ is not the most compelling reason for doing something. If there’s nothing to do, do nothing. It’s not that difficult. Absolute standards of valuation get you away from the idea that you have to be doing something, which goes all the way back to Ben Graham. He was looking at all elements of the capital structure in a very unconstrained fashion, but was fully prepared to hold cash when there were no opportunities.” – James Montier[178]
“I’m amazed at how common the relative valuation argument is. [Speaking about the environment at the time] But you shouldn’t forget that all that argument may be telling you is that bonds suck, not that equities are great. It’s like going to Cinderella’s house and meeting the two ugly stepsisters and being told you should be happy to date one of them. Personally, I’d rather wait for Cinderella.” – James Montier[179]
[On avoiding the temptation to get caught up in the day-to-day turmoil of volatile markets] “Just turning off the screens is usually a good start. It’s the bias of the information age that people feel isolated when they’re not in touch with what’s going on. To me it’s a good discipline to often say, “I don’t really care what goes on in the market today.” When you do that you can actually get something useful done. Even something simple like saying you’ll only answer e-mails in the morning, at lunch and at the end of the day sometimes can go a long way toward avoiding unhelpful distractions that tend to arise. We’re very big on what we call battle plans, in which we map out how we’ll behave at various price points in the market. John Templeton used to talk often
about taking that kind of pre-commitment down to the level of individual securities. Because you’ve already decided what you should be doing, it allows you to focus your attention in a very useful way when the market is falling to pieces.” – James