Comments on: Learn How Markets Really Work from Ken Fisher

By: Strategic Planning Techniques

Strategic Planning Techniques — Wed, 02 Sep 2009 10:44:09 +0000

[...] go in a different direction. Collective wisdom is a poor predictor. For more on this score, read Ken Fisher’s The Only Three Questions that Count. Even if you’re not an investor, you will benefit immensely from Fisher’s insights [...]

By: Fisher Outreach

Fisher Outreach — Thu, 23 Jul 2009 07:32:44 +0000

Interesting article. I’m with Fisher Investments, and for more information on Ken Fisher or Fisher Investments, you can check out the careers site. There’s a full biography outlining Ken’s work as a columnist for Forbes magazine, as well as a timeline of the founding of Fisher Investments to today.

By: Ben J

Ben J — Wed, 13 May 2009 22:30:02 +0000

Great article with Ken Fisher. I work for Fisher Investments, and if you’re interested in more of how the Fisher Investments Research dept is looking at today’s market news, you should visit the site MarketMinder.com. Here’s a sample article from last week on the banking stress tests: http://www.marketminder.com/a/fisher-investments-us-economy/9dd12733-1b88-49d3-97e8-60aa5b398e25.aspx

By: How to invest in stocks

How to invest in stocks — Tue, 20 May 2008 09:04:59 +0000

This is really good information. Thanks for taking the time to make this post.

By: Andrew Heaton

Andrew Heaton — Fri, 16 May 2008 21:19:56 +0000

Hi again, Brad.

It sounds like an interesting read. It doesn’t do any harm to read books which challenge your assumptions every now and then.

I wonder if the correlation between government debt and market performance holds for other markets in other parts of the world as well.

Cheers

Andrew

By: Brad Shorr

Brad Shorr — Fri, 16 May 2008 13:41:45 +0000

Hi Andrew, thanks for sharing your ideas here. I could not do justice to Fisher’s arguments in defense of budget deficits, but he is very big on supporting his conclusions with fairly straightforward statistical correlations. To my surprise, U.S. markets (and I believe this holds true in other countries), market returns are stronger when deficits are high, over a long period of time. Fisher’s ultimate point, I think, is to show us how to think for ourselves when it comes to finance and the economy by asking the right questions. Whether or not you agree with his conclusions, he definitely forces you to do your homework to refute them.

By: Andrew Heaton

Andrew Heaton — Fri, 16 May 2008 12:46:48 +0000

Back when I was 17 and more interested in trying to make millions from my $50 per week part time job than I was in my schoolwork, I remember trying to read the business press and understand all about the economy and stock markets.

It was a most frustrating process, primarily due to business journalists targeting a financial literate audience.

Personally I became somewhat financially literate via my year 12 Economics text book.

I would not personally believe that a high price-earnings multiple is necessarily a bad thing. A stock price is determined by (amongst other things) expected future profits and dividends, the perceived riskiness of the company and interest rates. The ‘earnings’ part of the price/earnings ratio represents current earnings.

Higher price earnings ratios mean that the stock is ‘expensive’ relative to it’s current profits. A company with a high P/E ratio will have to perform significantly better in the future than company’s with low P/E ratios in order to be a good investment.
But there is a flip-side. Often, company’s attract high P/E ratios because investors are confident about their future prospects. Companies in high growth industries, or those which have a strong track record often have higher than average P/E ratios – you have to pay for quality.

So, by paying more, you may be buying shares in a higher quality company.

I would be interested in the assertion that reducing national debt is bad for the markets. This is perhaps a little technical, but I would have thought that by reducing their debt level, the government would be helping to keep interest rates low. (which in turn helps to demand for shares as it becomes cheaper to obtain finance)

The cost of anything (including credit) is determined by the demand and supply. By reducing their debt level, the government, I would have thought, would be helping to reduce the level of national demand for credit, thereby helping to reduce the price of credit – i.e. interest rates, thereby stimulating demand for shares.

Anyhow, no doubt Mr. Fischer’s book will make an interesting read.

Cheers

Andrew