Full of Bull-- Stephen T. McClellan-- Review

Here is the author on Fox News talking about "Full of Bull". It is almost a pun.

Full of Bull Do What Wall Street Does Not What It Says To Make Money In The Market by Stephen T. McClellan is an overview of how wall street misleads the individual investor. McClellan worked as a stock analyst for 32 years, including being a vice president at Salomon Brothers and a first vice president at Merrill Lynch.

While the overall theme of the book, that wall street was misleading you with how analysts portrayed stocks, the interesting part was the small insights into the market which he gave throughout the book. He suggests that if you are looking for a list of stocks to pick from, try to choose from a hedge fund, not a mutual fund, hedge fund managers make their money by taking a percentage of the money they earn from the fund.

A few other insights were that the New York Stock Exchange was an investors market, and the Nasdaq market was primarily a trader and speculators market.

His viewpoint on analysis is that you should use the analysis from the stock market for the information it contains, statistics and financial information mainly. However, you should not necessarily follow the recommendations on which stocks to buy and sell. Analysts are biased towards making recommendations to buy stocks, any indication other than buy is a sell signal for most stocks. McClellan points out that analysts are too close to the companies they cover and often to get coverage, they have to take perks like golf trips, dinners, vacations, and go to conferences. Their job is not to rock the boat, but keep the market steady so people will continue buying stocks.

He further points out that analysts are over focused on large capitalization stocks which mutual funds and banks hold. He claims that it is better to invest in small capital value stocks because they have room to grow over the long term.

He also points out things like it is easier for an analyst to simply stop covering a stock than give a negative rating to stock. When an analyst stops covering a stock it is a bad sign.

There is an interesting section on executive qualities to look for both good and bad. For example he likes confidence, creativity, lack of yes men, and working very long hours. He dislikes bad health, messy relationships, lavish offices and perks, and a fixation on stock price. There is quite a bit on how to spot when an executive or company is misleading the public.

Mr. McClellan's viewpoint from retirement is that his profession is becoming corrupted by historical forces like the 1990's internet bubble and should require greater certification and oversight. He believes every analyst should be a CFA certified financial analyst and have an MBA masters in Business Administration.

I think this book gives quite a bit of insight into how the market really works. It appears to be focused on how to manage your investments in a long term safe manner while avoiding the pitfalls and hype of Wall Street. There is a glossary of financial terms and an index. His writing style often includes anecdotes about the authors experiences covering companies like EDS, Cisco, and other computer companies.

A Few Books And Comments On Money

US Silver Certificate Dollar

Money is one of those things which bloggers seem to talk about a lot. These are a few book recommendations on investing. The first four books are currently part of the Wiley Investment Classics series. The first book is one which most stock brokers claim they have read at one point or other, Security Analysis by Benjamin Graham and David L. Dodd. Benjaimin Graham is considered to be one of the fathers of value investing. The next book is called Common Stocks and Uncommon Profits by Philip Fisher. Philip Fisher is considered to be the person who came up with idea on how to invest in growth stocks.

The other two books are about the condition of wall street. They show how little has changed in the way people act around stocks and money. The first book is Where Are All The Customers Yachts: A Good Hard Look At Wall Street by Fred Schwed. This book is quite fun to read. Confessions of A Stock Operator by Edwin Lefevre is equally entertaining.

The best book which I have ever read on the concept of value is an art book, surprisingly. The book is called Boggs: A Comedy of Values by Lawrence Weschler. J.S.G. Boggs is an artist who draws money. He draws single sided bills. These are variations of different types of money with fantastical elements, like flowers and pictures of children, or odd colors. He then tries to use the bills to buy things from stores. He tells the people he is attempting to buy the things from that it is not real money but art, and if they want the art, they should give him some change and a receipt for the thing he has bought. Watching the process is fascinating. This link has an interview and a video of him. http://www.pbs.org/wnet/egg/217/boggs

Please don't ask me about stock tips. I'm not great at this.. Two of my recent investments were near total disasters. I invested in HOKU Scientific, a fuel cell company which recently was forced to switch from being a fuel cell manufacturer to a solar cell manufacturer. HOKU lost its contracts for fuel cells which are basically pie in the sky in most cases and was forced to invest in a form of more realistic energy, solar energy.

I also am invested in Finavera, a company that recently had another total disaster. At the beginning of November, the wave energy generation buoy which they were working on failed its commercialization test. The buoy went from a commercial value of over $4 million dollars to being written down to $1. The wave energy generator proved to be commercially unviable. Luckily, the company didn't go out of business completely because they were heavily invested in wind energy, a more traditional form of alternative energy. They received financing to stay in business.

Now is not the best time for alternative energy in the United States. Also investing in the stock market is risky. I used etrade to make my trades. One day, because Citigroup investment analysts downgraded it, the stock fell 58% in value. I pulled all of my trading money out of there quickly. In the beginning, it looked to be an online stock trading company failure. Luckily, someone bailed them out. If Etrade had gone under, it would have had incredible impact on the market. http://www.boston.com/business/globe/articles/2007/11/13/etrade_stock_falls_58_after_forecast/

Things in the stock market are very scary right now.