Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too Hardcover – Nov 8 2011
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Most investors have no idea how much is being skimmed off the top of their mutual fund accounts by the investment advisors.
Then Mr. Camillo introduces his approach to investing. It can best be described as information arbitrage - only invest when you have knowledge which Wall Street does not have or refuses to accept. For the most part this would limit your investment to smaller companies. But Apple was one of the examples cited where the market - the people on main street - where warmly embracing the iPhone but Wall Street was not.
Information arbitrage requires a keen sense of observation - something lacking in most people. You must look at what is happening around, what people are doing and then deduce what that information means to the market place. I know many people who in 2006 - 07 "knew" the real estate market had gotten way overheated. But few if any could connect the dots and use that knowledge to make a profitable investment decision.
So while the approach is very interesting, having the discipline and insight to carry it off is going to be difficult for most people.
The first half of the book is very interesting, easy to read and quite insightful when the author is presenting his theory and how to use it. He also gives some solid information about how to use the online chat rooms - what to look out for and what to expect. It has been some time since I had visited any financial chat rooms so the reminder and the information I found quite helpful.
When the author started discussing put and call options, I found the tenor of the book slowed down quite a bit. I think the average reader could skip those chapters and not miss that much.
If you are looking for a solid approach AND if you are willing to invest the time and energy in becoming an astute observer of what is happening on Main Street and then confirming what that will do to the price of a particular stock, this could be an extremely valuable book. If you are looking for a quick and easy way to investment riches, look elsewhere. The approach advanced by the author is very slow, find an information arbitrage, confirm it and be patient.
While I totally believe his claims about the money he made, I am not so certain that very many people will be able to follow his pattern.
I rarely give 5-stars for books unless it simply blows me away and appeals to me in every sense. This book is 4-stars for its ingenuity, down-to-earth explanations/good use of analogies, and captivating narration.
The author narrates how he amassed ~$2M in three years, not by studying technical indicators or financial fundamentals or having an MBA or going to an Ivy League school, but by reading tabloids/watching tv, shopping, and making use of social networks online.
Essentially, he describes how he uses the concept of 'Information Arbitrage' to decide which stocks to research and potentially invest in.
The author's explanations are excellent and simple to understand. For example, he uses the analogy of pretending that your family is a publicly traded company and goes on to explain the side effects of known and unforseen events. When you are able to associate to something, it really helps to understand more technical concepts.
Also, he provides examples we can all relate to (like seeing Avatar in 3D at IMax or all those people in UGG boots) and how their respective stock prices soared and why. The book is inspiring because you and I were witness to the same things, yet we didn't see them as investment opportunities. In my own personal experience, many members of my family wanted a Keurig machine and coffee packets around Christmas-time and I had heard others talk about it. WELL, only much later did I find out how much Keurig stock had soared. If I had read this book last year, I would probably have profitted on Keurig, amongst many other "in-your-face" examples we see everyday.
The author uses a very thorough example of crazy Christmas shopping volume at Coach stores during the recent recession. While reading this, I pondered what the outcome would be in my head, yet I was proved wrong, however, it reinforced what the author is describing on validating your research and hypotheses in real-life scenarios - things that your standard Pro on Wall Street likely does not do. (ie. Does the average Wall Street Pro talk to Coach employees or shoppers before adding that stock to their mutual funds? Definitely not...This is one of many great validating points the author makes against current Wall Street Pro mentality.)
Overall, the concepts are quite convincing and definitely inspiring; I think back to recent events and I see how having the 'investor glasses' the book preaches about would have been quite profitable for me.....if I had only read the book earlier.
Minor areas for improvement:
1. Though this is an easy read and I only read it once, the timeline gets a little confusing. The back of the book talks about turning $20k into $2 million, but it talks about him being a 35-year old retiree with $130k in his old company 401K, the day he told his boss that he was going to quit. So did he only start with $20k or did he start with $130k ?
Furthermore, at the end of the book, he talks about how he did all this by only starting with $300 and tripling it in 7 days...well in the beginning of the book, he mentions starting with $300 and tripling it in only a few days, but later it talks about how he doubled his first stock pick to $1k total.
So now, did he start with $300 or $500 (doubling it to make $1k) or did he start with $20k or $130k?? << A very nit-picky observation, but it dilutes the credibility of what he is saying slightly.
2. Related to the above, most of us read the back cover of the book to see what the book offers. As a pet peeve of mine - if there is a bulleted list, then your book should cover it and not create any feeling of being misled. The carefully worded bullet item "How $1000 invested consecutively in Uggs, True Religion jeans, and Crocs over 5 years grew to $750k" Well the truth to that is, it has nothing to do with his book, nor is he saying *HE* achieved that, he is just saying..had you done that..you would have $750k in 5 years. So if it not an achievement of his then it should NOT be one of four bullet items summarizing his book. That bullet item is re-described in the book in 1 sentence Anyone could say, in hindsight, yea, if I had bought Avis or Ford when they both dipped under $2 only 3 years ago, I would have 15x that today and if I then put that money into Apple, I would then have xx... (see what I mean?).
3. At the very end of the book is a chapter called "Success Stories" which is slightly misleading - yes, they are success stories, but not success stories as a result of this book. Typically when you read 'Success Stories' for example, it is usually a bunch of testimonials by people who listened to Dave Ramsey and are now debt free by following his actual concepts that he lectures. The last chapter is really examples of others that beat Wall Street Pros with their own form of 'investor glasses' not because of the Author's preaching that led to their success... It 'feels' like the book is portraying their success as an effect of the book.
4. And lastly, towards the end there are two chapters on buying/selling stock and options. I feel the book loses part of its identity when you reach those two chapters. Is this a book for beginners who have never dabbled in the market and don't even know what buying or selling stocks are? Or...is this a narrative of how an amateur investor like you and I beat Wall Street and describes how to have 'investor glasses' and presents a thorough explanation of 'information arbitrage' and how to apply it? This book needs to establish a clear audience by answering --- Who's going to pick this book up?
I think the type of person that picks this book up has already dabbled in the market and became frustrated and is overwhelmed by all of the books talking about candlesticks, technical indicators, fibonacci ratios, financial fundamentals, EPS, P/E, written by seasoned pros with MBAs from Harvard. The people that pick this book up are well beyond needing chapters that describe what buying a stock is and understanding option calls and puts (which I don't think can be adequately covered in 1 chapter) - they are looking for some fresh ideas and new ways of thinking that this book offers.
A healthy 4-star book with some interesting new insights and perspectives on how to pick, research, and verify great stock potential.
I also think his methods for motivating younger investors might just click with many of them.
Like many of the other reviewers, I noticed that Mr. Camillo has read the Peter Lynch books. I found my own dusty copies that I've had since the 1990's (Beating The Street, and One Up On Wall Street, each with a $2.99 sticker on the front) and looked through them for comparison purposes. Both Lynch and Camillo like to make observations at the mall, noting that high traffic stores could be attached to companies that are returning large profits. These are potential stock picks, but only after investigating further, using due diligence. I was impressed with Mr. Camillo's rejection of Coach after he investigated further. He really shines when it comes to due diligence and apparently he has made good decisions based on his investigations -- buying some stocks, rejecting others. Where Lynch and Camillo part company, though, is that Lynch buys the actual stock, and Camillo favors options. He explicity tells how to buy options in "Chapter 9: Fake It 'Til You Make It!"
In the chapter titled, "See It, Believe It!" Camillo points out that as a self-directed investor, he has gathered (and since discarded) two decades of investment books and "how-to-invest" articles, that have been written by well-intentioned "experts," but that "suspiciously," these experts never "published or offered access to their own audited multi-year investment returns as proof of their claims of being able to substantially outperform either the stock market at large or the performance of a randomly assembled portfolio."
He writes: "Whenever I meet people dishing out investment advice, I always ask them to disclose their personal investment returns for the prior three-year period. If I ran a financial and investing television network, I would institute a "Why Should I Listen to You?" meter, which would prominently display on-screen the three-year investment returns of every guest pundit during the full length of their on-air interview." (67)
After reading this, my expectations were high, and I thought, "If this author details his actual stock picks, dates, and amounts invested, earned and re-invested 'in only three years,' printed on the back cover) to earn $2 million from his original $20K investment this book will receive a high review." Although detailed information was not forthcoming in this book, there is a post on his website from an independent accounting firm in Texas. A statement from CPAs shows that on September 1, 2006 the initial balance was $83,752 and on April 30, 2010, the balance was $2,337,559 for a yield of 774.22% (Average Annual Rate Of Return). A 774% rate of return, while not impossible, is a rare achievement and an incredible accomplishment.
I would have liked to have seen more detailed information in "Laughing At Wall Street," though: a rough outline of his portfolio during the "three years" it took him to realized substantial gains detailing his bigger trades and generalizing his smaller ones, (including specific dates, or even chunks of time).
He stated that he did purchase Activision, the maker of Guitar Hero (page 97) and in less personal terms, he wrote: "As little as $1,000 invested in Ugg's parent company, Decker in late 2002...parlayed into True Religion stock in early 2004, and again parlayed into the stock of Crocs shortly after the company's IPO in February of 2006, would have grown to $750,000 by 2007. That's 750 times your money in just five years." (97-98) Other stocks he MAY have purchased would have been: IMAX, Netflix, Salesforce and Cerner. He also mentioned Apple, but did HE invest in it when the investing was good? Did HE invest in Decker, True Religion, and Crocs? Inquiring minds want to know.
Overall, "Laughing at Wall Street" is motivational, easy to read and outlines how to save money on fees (anywhere from 1% to 3%) by being a self-directed investor.
The author warns investors about avoiding mutual funds for investing due to their high fees and lack of performance of the majority of them compared to their benchmark indexes. I agree with him, stick with stock index funds in your main investment retirement accounts. Mutual funds are a pretty lousy deal, they lose 20% of your money in a bear market year but still take their 2% management fee. You take all the risk, they get paid regardless of your returns. Stick with index funds or index ETFs for investment accounts and I would advise adding a trend following method to get better returns than mutual funds.
The author made his millions by investing in stocks using what he considered "information arbitrage". The wealthy upper class predominantly male money managers on Wall Street miss the early beginnings of crazes like Crox shoes, they know nothing about the latest popular kids television show, and your teenagers may let you be the first one to know about the hottest new teen store or video game. These early ideas many times lead to huge earnings for the stocks of the companies that create them. These are the great investments the author recommends after due diligence.
While these insights are not new (I have heard the same suggestions from Peter Lynch and Jim Cramer) what is different is that Chris Camillo kept swinging until he hit the consecutive home runs that made him a millionaire.
What enabled him to accomplish this in such a short period of time was a concentrated investment strategy like the Nicolas Darvas system, he held concentrated positions of 25% or 50% of his portfolio in one stock, this is not diversification it is putting your eggs in one basket and watching the basket very closely. Even that level of concentration was not enough, he would hold his positions with one strike in the money stock options 6 to 9 months until expiration for supercharged returns of sometimes 500% returns.
He was able to acquire his original stake of trading capital through basic frugality with the only purpose of the money being to go for it with big returns on concentrated leveraged bets on stocks he had researched. The author says he was only able to find and research one or two big plays a year, to research he uses calls to stores, visits to malls, investor message boards, his friends on social networking sites, and a keen look out through his "investors glasses" for break out hot trends. Chris Camillo also worked in consumer research so I have no doubt that taught him a thing or two about trends.
This book just shows for a fact with a lot of study and years of hard work,(and I am guessing many failures) it is possible to become a stock picking millionaire.
Great book, it is really that simple and that hard at the same time. You must have the guts to lose if you want to win. You have to do the work to find the picks. You have to learn how to let the winners run as far as they will. You must persevere if you want to win.
This book shows you how one guy did it. My only suggestion is that I wished he would have told the story of his detailed trades instead of the principles of how he did it. I would have loved to read a Nicolas Darvas style book about his personal trading journey step by step.
Essentially Mr. Camillo examines the events and trends happening around him. To see if these events and trends are significant Mr. Camillo creates a series of questions about the events or trends to help him learn more about the significance of the event or trend that has caught his interest.
First, if a event appears to be significant he will ask others in his various networks (social, work, Facebook etc) if they are seeing the same events he is.
Second, if their answers come back affirmative then he uses the internet (websites, blogs, forums, facebook) to increase his comprehension of the trend or event.
Third, only after he has an understanding of the event or trend does Mr Camillo investigate the financial position of the company that has a good chance of benefiting from the trend or event.
Forth, he will make an investment in the company.
Why does this technique work? Because Mr. Camillo is doing a different type of research than most investors. He is looking at the "leading indicators" of a company's performance. Examining a company's past performance - income statements and balance sheets is not in most cases a leading indicator of future performance. However, a reason why sales and earning will increase is in most cases a leading indicator of future performance. Hence the reason for Chris Camillo's success.
If you have read Peter Lynch or Avner Mandelman this will sound very familiar. The technique works, therefore, read, understand and implement!
You will also benefit by reading:
One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
Beating the Street
The Sleuth Investor: Uncover the Best Stocks Before They make Their Move