(Part 2) Best products from r/SecurityAnalysis

>I personally believe (opinion) long term investing is dead

What do you mean by long term investing? To a day trader, even a week can be a long term? Did you mean 1 month, 6 months, 1 year, 3 years, 5 years or 50 years? Can you also provide some data to support your opinion or is it just a hunch?

>Such a competition would lead to a winner that is not smart or perfect, but instead lucky.

Yes, I agree that one can have a winner who is just lucky ( although I don't know why you would would need a winner to be "perfect" ) but participating in the stock markets involve a degree of luck. Skill is definitely needed but one cannot ignore the role of luck. I would suggest that you read "Fooled by Randomness" by Taleb and also read michael Mauboussin's excellent article "Untangling Skill and Luck"

One way to reduce the role of luck ( one can never eliminate it completely) is to accept entries for the competition which clearly states the thesis and backs it up with data.

It's OK to put in 1% as a learning experience.

A professional investor would typically put in a somewhat larger amount if there is a real edge.

One approach is the Kelly criterion, which says that if you want to maximize the growth rate of your portfolio over the long run, the amount to invest is edge/odds. In other words, if you have a big edge you invest more, if the risk/volatility around that edge is high you invest less.

However, even assuming you actually know the edge and odds accurately, the Kelly criterion position size takes a LOT of risk and volatility to maximize your growth rate. In general you would have an x% chance of losing 1-x% of your entire stack at some point in the future, ie a 50% chance of losing 50%, a 10% chance of losing 90%. Nevertheless, if you lived forever, that's the risk you would want to take to maximize your growth rate.

On the one hand, the Kelly Criterion, the long run persistence of an edge in equities in the form of the equity risk premium, and an understanding of human psychology all suggest that people don't really take enough risk.

There are 2 very good and a few not-so-good reasons to take less than the Kelly-optimal risk.

The first is you don't live forever, and it's perfectly rational to give up a big chunk of the growth rate for a MUCH lower risk of blowing up and impacting your lifestyle and opportunities of your loved ones.

The second, which is most important, is that you never really know the edge and the odds, best you have is a guesstimate. And if you take even a little more risk than Kelly-optimal, you will fall prey to the gambler's curse. Consider what happens if I give you a coin-flip where I give you 5x on your money when you win. If you bet all your money on each flip, you are guaranteed to go broke. Bet even a little too much, and you magically turn a huge edge into a guaranteed big money-loser.

But most people never even approach Kelly-optimal betting. They are risk-averse, and extremely loss-averse. Pro money managers could never tolerate the swings involved.

Warren Buffett put something like 40% of his portfolio into American Express in 1963. His view of value investing is to invest as if you have a lifetime 20-hole punch card. Every decade-ish long market cycle, you will have a few really great opportunities. Invest so at the end of your lifetime investing career, you'll have accumulated 20-odd meaningful positions in really great companies.

It's worth pointing out that EVERY time Buffett has underperformed, there has been a litany of articles about how he has lost his touch. Partly it's because it makes interesting copy, and people love to build heroes up and tear them down. But partly it's because the game involves taking risk and sometimes pain in the short run. And non-investors don't get that. You're an idiot if you underperform in the short run. Value investing works in the long run because it's hard and inflicts pain in the short run.

For the apprentice investor, it's even harder. So it's important to keep bets no larger than your personality can comfortably withstand. If 1% is it, that's what it is. Don't look for approval from anywhere else. It's good that you are erring on the low side...a lot of people get overconfident and then blow up, or blow out a good position because they can't stand the pain when they are down.

Over time, you want to get more comfortable trading closer to a Kelly-optimal size, without going over the edge of your personal pain threshold. As a small investor, you have some disadvantages in information flow, resources to apply to investing, but you have a big edge: the only person you need to please is yourself. You don't need to do a goddamn thing if you don't want to, you can be opportunistic and you can take as much or as little risk as you like. Personally, playing poker helped me a lot ... you get an intuitive feel for how often you're going to lose when you have the edge, and get comfortable betting big when you have that edge, because you know in the long run it's going to work out.

Also recommend William Poundstone's Fortune's Formula, which is an awesome read on Bell Labs' Kelly and Shannon, who invented information theory, and applied it to investing along with MIT colleague Ed Thorp, who invented blackjack card-counting and started one of the first, most successful hedge funds, and the occasional mafioso and degenerate gambler.

And you won't go wrong reading all of Buffett's essays and letters.

http://www.amazon.com/Fortunes-Formula-Scientific-Betting-Casinos/dp/0809045990/

http://www8.gsb.columbia.edu/rtfiles/cbs/hermes/Buffett1984.pdf

http://www.amazon.com/The-Essays-Warren-Buffett-Corporate/dp/0966446119

[TL; DR] Bet small while you're learning. Get comfortable with taking risk when you really know what you're doing and have an edge. Learn the Kelly Criterion. Read Warren Buffett. Play some poker.

I think it will be difficult to find something that is exactly like what you want. By themselves, the things you mention aren't interesting so no-one has written books about them.

So there is a general history of interest rates mentioned below. On this topic more generally, I would look at histories of central banks (BOE, Capie/Fed, Meltzer/going further back, Friedman).

In terms of regional economic history (which will cover some but not all of what you are interested in...but will likely provide many further references), there is the Cambridge Economic History series (https://www.amazon.co.uk/Cambridge-Economic-History-Modern-Britain/dp/1107631432). There is similar for Europe and US (and most other regions), these are the standard introductory books used at universities. Eichengreen also has a post-1945 history of Europe, it isn't as widely used...but it is good.

More generally, Eichengreen has several general books about modern economic history (there are many, pretty much all of them are definitive). There is an official history of the IMF (I think the past two volumes are available for free on their website), this is very useful for the more recent EM crises. Flandreau is maybe useful if you are looking for more detail on pre-WW2. Hellenier is an interesting start point for the post-WW2 financial system at large. There are probably a million others but the best idea is to start going through one or two of those and picking up references.

There are, of course, numerous books on all the crashes. One that you will probably find particularly useful, if you are reading with investing in mind, is Anatomy of the Bear...this is the only book I am aware of that looks at a historical period from the POV of an investor.

Edit: also kindleberger on modern European financial history, chandler on us industrial history (if you are interested in equities, this is invaluable).

So for instance, I don't have a huge tech background but I'm interested in playing the secular trend of increased internet usage. So companies like Ciena and Infinera seem potentially intriguing to me in the long term. Today I am picking up "Tube: A Journey to the Center of the Internet" so that I can become familiar with internet infrastructure.

I also think payments companies have interesting opportunities for growth globally: MasterCard & eBay (through paypal) in particular. Thomas Russo, a prominent value investor, like MasterCard. So I go and watch long interviews with their CEO, Ajay Banga: http://www.youtube.com/watch?v=APofFnWcfZY
Or this one with eBay's James Donahoe:
http://insider.thomsonreuters.com/link.html?cn=share&cid=1090116&shareToken=MzplNWQxNDNhOC04NDE1LTQ2YjctYTA0OS04NzhkOTNkZDIyMTA%3D
I'm also going to read "The End of Money" for further depth/color:
http://www.amazon.com/The-End-Money-Counterfeiters-Dreamers--/dp/0306818833/ref=sr_1_1?ie=UTF8&qid=1371759157&sr=8-1&keywords=the+end+of+cash

Might all of this be a waste of time? Depends on how you look at it. I am probably not going to finish reading these things and then know where I should invest. However, over the long term, I will be more knowledgeable opportunities that arise and more likely to understand them. If I keep doing this day after day and being patient and apply value investing principles, over the course of decades I think I should be able to grow my savings substantially.

No websites do fundamental analysis for you.

At best, sites like Morningstar, TREFIS, and others present information in interesting ways to help you begin your analysis. At worst, websites peddle fast food valuations. Ready in minutes, but pale compared to the real thing. There is no substitute for reading reams of 10-Ks, 10-Qs, proxies, press releases, industry magazines, and blogs as well as doing your own primary research.

Vuru and Forcastix are ridiculously mechanical one trick ponies that oversimplify fundamental analysis. By focusing only on financial statement analysis, qualitative factors like management quality, competitive forces, and industry strategy are ignored. Additionally, other quantitative factors like unit economics and implied expectations go without mention.

Vuru's treatment of Earnings Power Value (EPV) valuation is plain wrong. There is zero chance that INTC is 66% overvalued if EPV valuation is performed as described in Greenwald's Value Investing: From Graham, to Buffett, and Beyond. Such a large and obvious error brings into question the assumptions they use in their mechanical DCFs.

It sound like I'm bashing these sites, because I am. I feel they are a disservice to people like yourself who genuinely want to learn how to value companies. There are plenty of resources on the sidebar that you can use to improve your valuation skills. Professor Damodaran of NYU's valuation class is an excellent treatment of valuation for you to use if you have a semester to practice. There are also a list of many books that will help you learn fundamental analysis as well. You will pick up these services' mechanical errors by comparing your valuations to theirs. You risk strictly using past results to predict future performance if you perform valuations like Vuru and Forcastix.

• The Intelligent Investor - Benjamin Graham
  
  
• Security Analysis - Benjamin Graham
  
  
• The Interpretation of Financial Statements - Benjamin Graham
  
  
• Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports - Howard Schilit
  
  
• Applied Value Investing - Joseph Calandro
  
  
• Analysis for Financial Management - Robert Higgins
  
  
• Margin of Safety - Seth Klarman
  
  
• Common Stocks and Uncommon Profits and Other Writings - Philip Fisher
  
  
• One Up On Wall Street - Peter Lynch
  
  
• Beating The Street - Peter Lynch
  
  
• The Essays of Warren Buffett - Warren Buffett
  
  
• Snowball: Warren Buffett and The Business of Life - Alice Schroeder
  
  
• Buffett Beyond Value - Prem Jain
  
  
• Value Investing: From Graham to Buffett and Beyond - Bruce Greenwald
  
  
• You Can Be A Stock Market Genius - Joel Greenblatt
  
  
• The Little Book That Beats The Market - Joel Greenblatt
  
  
• The Big Secret for the Small Investor: A New Route to Long-Term Investment Success - Joel Greenblatt
  
  
• Reminiscences of a Stock Operator - Edwin Leferve
  
  
• Fooled By Randomness - Nassim Taleb
  
  
• The Black Swan - Nassim Taleb
  
  
• Poor Charlie's Almanack - Charlie Munger
  
  
• Rediscovered Benjamin Graham - Janet Lowe
  
  
• The Theory of Investment Value - John Burr Williams
  
  
• Seeking Wisdom: From Darwin to Munger - Peter Bevelin
  
  
• Security Analysis and Business Valuation on Wall Street - Jeffrey Hooke
  
  
• Value Investing: Tools and Techniques for Intelligent Investment - James Montier
  
  
• Investment Valuation: Tools and Techniques for Determining the Value of Any Asset - Aswath Damodaran
  
  
• The Dark Side of Valuation - Aswath Damodaran
  
  
• Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports - Thomas Ittelson
  
  
• Buyout - Rick Rickertsen
  
  
• Influence: The Psychology of Persuasion - Robert Cialdini
  
  
• Why Smart People Make Big Money Mistakes: Lessons from the New Science of Behavioral Economics - Gary Belsky
  
  
• The Warren Buffett Way - Robert Hagstrom
  
  
• The Most Important Thing - Howard Marks
  
  
• Competition Demystified - Bruce Greenwald
  
  
• Accounting For Value - Stephen Penman
  
  
• Distressed Debt Analysis - Stephen Moyer
  
  
• Bankruptcy Investing - Ben Branch
  
  
• The Vulture Investors - Hilary Rosenberg
  
  
• Creating Value Through Corporate Restructuring - Stuart Gilson
  
  
• Distress Investing - Martin J Whitman
  
  
• The Aggressive Conservative Investor - Martin J Whitman

I'm reading this book https://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071

Still early in the book. One thing that stood out was too good to believe revenue growth as compared to similar companies during a set time period. e.g Enron

ROC is important, but so is earnings yield. You may get a kick out of this book, it goes in to this in depth.

https://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159

http://www.amazon.com/You-Can-Stock-Market-Genius/dp/0684840073/ref=tmm_pap_title_0?ie=UTF8&qid=1368761138&sr=8-1

Not exactly accounting per sé, but check out Financial Shenanigans.