Part one begins on page twenty-five. The first note I made about this book was on page twenty-six. It only took one page. The note you may wonder “bare-assed apes”. Yes, you read that right. The quote itself is striking considering we’re just starting to read a book about finance. Throughout my course work readings were NEVER even close to expressing this type of language.
I have a feeling this simple example will set the tone for the entire book. The first few pages seem more like meeting an old friend you haven’t seen in a while at a bar over a beer. It’s simple and relaxed before diving into some history about major bubbles. You may have already heard of them, like Tulip Mania, and the East India company.
In fact, he goes on in part one that the book is specifically intended “for the financial layperson and offers practical, tested investment advice. You need no prior knowledge to follow it. All you need is the interest and the desire to have your investments work for you.”
The Firm Foundation Theory
The Firm Foundation Theory is one of the most important Investment Theories. It postulates that any financial asset has an intrinsic value.
Question: How do YOU calculate the value of financial assets?
Question: Do you think the market is predictable?
The Castle-In-The-Air Theory delves into another aspect of investor behavior: psychology. This theory attempts to unravel and explain the psychic value and behaviors of groups of investors.
Question: Do you build “castles in the air” when choosing investment options?
Question: Do YOU invest with the thought that our investments maintain our real purchasing power?
This book seems like an easy enough read. The first few pages cover a lot of main topics and points that may be further researched to fully understand. The two main points covered here explain investor behavior, and decision making which I think should play into any kind of investment strategy. For instance “safety in numbers” comes to mind.
What are your thoughts?