ISBN 978-0-307-98607-8
Lewis, Michael. Street Smarts: Adventures On the Road and In the Markets. Crown, 2013.
Representative Quotes
"Work experience in one's youth offers quantifiable benefits. While teaching the value of money, it also helps you develop an identity; in learning to manage finances, you gain a tangible measure of autonomy.... A Columbia business school dean, citing a university study, told me that the single most important predictor of a happy life in adulthood was having a paying job as a teenager." (p. 9)"[The senior partner at Dominick and Dominick] said, '[Business school] will teach you nothing useful there. Come down here and sell soybeans short, once, and you will learn much more about markets than you will wasting two years with them." (p. 12)
"The current bull market in commodities began in 1999. We are fourteen years into it, at the time of this writing. Like all bull markets, it will end in a bubble. When, at cocktail parties, people are telling you how much money they made in soybeans, it will be time to get out." (p. 28)
"The study of philosophy and history were indispensable to me as an investor. You must know yourself better if you want to accomplish anything in life - you must learn to think at a deeper, more profound level if you want to understand the truth.... Studying philosophy helped me to think for myself, to think outside the established framework. It taught me to examine things independently, to examine every concept and every 'fact.' It taught me to think around corners, to see what is missing. So many people today are caught up in conventional thinking because it is easier and safer to echo perceived wisdom, to echo the opinion of the majority, with one's intellectual processes circumscribed by such concepts as state, culture, or religion. To think differently from others is difficult. Philosophy teaches you to think, and in doing so it teaches you to doubt.
"If history teaches us nothing else, it teaches us this: what appears undisputed today will look very different tomorrow. The most stable and predictable societies have undergone major upheavals. The Austro-Hungarian empire, the glittering jewel of central Europe, was a vast, international center of wealth in 1914. The Vienna stock exchange at the time had something like four thousand members. Within four years the Austro-Hungarian empire disappeared. Pick any year you want, and then move forward ten or fifteen years. Take 1925, when again widespread peace, prosperity, and stability prevailed. How did things look in 1935? In 1940? Pick the first year of any decade in the past fifty years, 1960, 1970, all the way through to the millennium. The conventional wisdom that existed at the start of each decade was shattered over the following ten or fifteen years." (pp. 29-30)
"The beauty, the excitement of Wall Street, is that things are always changing.... Every day you come to work and find that they have moved the pieces on you - somebody dies, there is a strike or a war, weather conditions have shifted. Things change, no matter what. Investing lacks the rhythm of other endeavors, and therefore never stops testing you: if you design a car, there is a predictable period of time in which you produce the car and sell it, and the market will either accept it or reject it, but at least the project has a life span. With investing, nothing stops moving, and that makes it a continual, ongoing challenge... a game, a battle." (p. 35)
"To succeed on Wall Street, you have to be extremely curious. Who knows, when you pick up a rock, what might crawl out and where it will lead? Furthermore, you have to be skeptical. Most of the things you are told, after turning over that rock, are going to be inaccurate, reflecting a lack of knowledge or a distortion of information, whether on the part of a government, a company, or an individual. You cannot take anybody's word for anything. You have to research everything yourself, prove everything yourself. You have to tap every source. A hundred people can walk into a room and hear the same information at the same time, but only 3 or 4 percent of them are going to come out of there and make the right judgment." (pp. 36-37)
"When I started on Wall Street, very few people invested in stocks. As late as the 1960's, individual and institutional investors, such as pension plans and endowments, invested chiefly in bonds. (Currencies and commodities? Few people on Wall Street could even spell those words.)... It is inconceivable to today's MBAs that common stocks were an uncommon investment only a few decades ago. But not until the bull market started in the 1980s did things change in a big way." (p. 37)
"I remember getting out of the army in 1968, talking about investing in things like the Danish krone, and the people around me not having a clue as to what I was going on about. All those smart, experienced older guys were just dumbfounded. It seemed as though they did not know where Denmark was, much less that it presented an opportunity." (p. 39)
"Before asking how much you are going to get paid for a job, first decide whether it is the right job, whether it is the right place for you, because if it is the right place and you do the job right, the money will come.... The money should be the least of your questions." (p. 42)
"I went to see the chairman of Helmerich & Payne.... He said, 'Listen, this is a terrible business. I just want to alert you. I am here, this is my family company, and obviously I am not going to leave, but you really should not be investing in this business....' He had explained the downturn in business as something beyond the company's control - there had been a long decline in the number of drilling rigs because drilling for gas or oil had not been profitable. And that just excited me more. Everywhere I went I could see that supplies were drying up. We went out and invested in all of it." (p. 45)
"Do not worry about failure. Do not worry about making mistakes in life. It is good to lose money, to go broke at least once, and preferably twice. But if you are going to do it, do it early in your career. It is better to go bust when you are talking about $20,000 than when you are talking about $20 million. Do it early, and it is not the end of the world.
"Losing everything can be a beneficial experience, because it teaches you how much you do not know. And if you can come back from a failure or two, chances are that you care going to be more successful in the long run." (p. 55)
"After ten years you have made ten times your money. And then you decide to sell. Now, that is a very dangerous time. It is dangerous because that is when you think you are really smart, when you think you are really hot. It is the time when you think you know that this investing thing is an easy game. It is the time you should open your curtains, look out the window, go to the beach, do anything but think about investing. Because now is when you are most vulnerable. You think: I have to find something else. I have to do it again. This is wonderful. This is so easy....
"Most successful investors do nothing most of the time. Do not confuse movement with action. Know when to sit and wait.... Warren Buffett rarely changes his holdings. I do not change my positions a lot since I invest in secular trends, which by definition last many years." (pp. 58-9)
"Why get up at 8:00 A.M. to drag yourself to Spanish class three days a week when you can learn more efficiently and on your own schedule via computer? Does America need thirty thousand expensive, tenured Spanish professors? Is the Spanish professor at Princeton going to teach you Spanish better than anybody else? You can learn Spanish a lot faster, probably better, and certainly for a lot less money, by going online. Likewise with accounting, physics, and calculus." (p. 79)
"The black market is indispensable to one's insight into a country. Right away you know if there is a black market, and if so, whether the currency carries a big premium..... You do not know what is wrong if there is a black market, but it gives you the first hint. And if there is a big premium in the market - a large discrepancy between the official rate and the black market rate - you know something is seriously wrong." (p. 88)
"Today America is borrowing money to pay for military hardware that sits and rusts in the sun. The man who manufactures the hardware makes money, but after that, there is no beneficiary. The investment does not represent an ongoing source of production, the way a canal or a railroad does. Today we spent our borrowed money on transfer payments (over 60 percent of government spending and more than all government revenue), and then people who get the payments certainly have a wonderful time, but such payments do nothing for future productivity. If, as a nation, you are just consuming, instead of investing and saving, the borrowed money does you little good.
"What is worse, the people we have entrusted with the responsibility for addressing the problem - too much consumption, too much debt - have decided that the solution lies in yet more consumption and more debt." (p. 118)
"I was short Citibank, all the investment banks, the homebuilders, and Fannie Mae [in 2008]. The incompetence in Washington and on Wall Street was in fact good to people like me. While countless Americans were watching their life savings evaporate, the skeptical investor enjoyed significant gains." (p. 119)
"In the early 1990s, Japan experienced a big bubble in real estate and stocks. When I was traveling through the country by motorcycle on my first trip around the world, the price of a country club membership in Japan exceeded the price of a house. It was awe inspiring what people in Japan were willing to pay to play golf. The bubble was just peaking. The bubble eventually popped, and everything collapsed.... When I passed through Japan on my second trip around the world, ten years later, its suicide rate was higher than that of any developed country. Everyone was despondent, looking for security. Government jobs were highly sought after. The Japanese were referring to the 1990s as 'the lost decade.'
"And now the lost decade has become two. Today, more than twenty years after the crash, the Japanese stock market is 75 percent below where it was in 1990." (p. 132)
"People get greedy... bankers, clergymen, academics, politicians... especially when times are exceptionally good. People cut corners, do things they might not do under normal conditions, because there is so much prosperity, they are not held to account. Stocks go up. Investments pay off. The corners that are cut actually make people a lot of money. No one questions, or even cares, what happened - they are so happy with all the money they have made.
"Manias cover over a multitude of sins.
" 'You only find out who is swimming naked when the tide goes out,' says Warren Buffett." (pp. 136-7)
"The spark igniting the activity is not necessarily political so much as it is economic: surging inflation, high unemployment, and an escalating cost of living, most significantly a rise in food prices. These are the things that make people deeply angry. (The Tiananmen Square protests in Beijing in the spring of 1989 started out as protests against inflation and rising prices. Not until the Western press showed up did students start shouting words like "democracy.") (p. 209)
" 'Let not him who is houseless pull down the house of another,' said Abraham Lincoln, 'but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built." (p. 211)
"North Korea is about to open up. And when it does, it will be a formidable player on the world stage. The Chinese are already pouring in. Up in the northwest, they are building new bridges connecting the two countries. There are new trade zones up there. So change is happening.
"Everywhere we went we could see propaganda posers calling for one country, two systems - which was the prevailing mantra in the late 1990s when Hong Kong went back to China. If the propaganda is to be believed, the country, despite what you read in the United States, is keen for unification. A unified Korea would be an economic powerhouse." (pp. 228-9)
"The successful countries of the world do not tax savings and investment. They encourage their citizens to save and invest. They tax consumption. In America we do the opposite; we encourage consumption. Any interest we pay is tax-deductible....
"The tax system has grown so byzantine that Americans, according to the IRS, spend an estimated 6.6 billion hours a year filling out tax forms. The annual cost of compliance to individuals, corporations, and nonprofits... is between three and four hundred billion dollars....
"Change the tax system, change the education system, institute health-care and litigation reform, and bring the troops home... is that going to happen? The way the world has evolved, most governments, including our own, are dominated and controlled by special interests. And numerous interests, including their lobbyists, have become entrenched around the system already in place. None of these changes can happen the way the government works today.
"In 1789 when the government was established, there were no telephones, the mail was slow, and videoconferencing was unimaginable. So we set up government in one place, Washington, where our representatives could meet. If we were setting up government in 2015, we would probably do it over the Internet. There is no reason for everyone to travel to Washington, especially given what has evolved since the nation was founded, which is a gigantic bureaucracy surrounded and controlled by lobbyists." (pp. 240-1)
SAT Vocabulary Words
Coxswain: the steersman of a ship's boat, lifeboat, racing boat, or other boat.
"competed as a coxswain on the crew" (p. 9)
Picaresque: relating to an episodic style of fiction dealing with the adventures of a rough and dishonest but appealing hero.
"As a boy I had loved reading Dickens's The Pickwick Papers, and the gentlemen of the Pickwick Club and their picaresque adventures may have played some part in the development of my wanderlust." (p. 10)
Scion: a descendant of a notable family.
Venerable: accorded a great deal of respect, especially because of age, wisdom, or character.
"Richard Whitney, president of the New York Stock Exchange, scion of the venerable family for which the Whitney Museum is named" (p. 137)
Caliphate: the rule or reign of a caliph or chief Muslim ruler.
"an Islamic caliphate that flourished for a hundred years" (p. 171)
Habeas corpus: a writ requiring a person under arrest to be brought before a judge or into court, especially to secure the person's release unless lawful grounds are shown for their detention.
"What has changed is not that the government has overstepped its authority - Abraham Lincoln went so far as to suspend habeas corpus - but that the government's doing so has become acceptable, celebrated in some cases." (p. 176)
Dopey: idiotic.
"in walks this dopey little guy wanting to open up a Swiss account with the equivalent of pocket change" (p. 193)
Imam: the person who leads prayers in a mosque.
"People who have tried to outmaneuver the marketplace have never succeeded. No pope, no imam, has the power the negate the laws of supply and demand." (p. 206)
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