Global Asset Allocation Book Review: Comparing 12+ Expert Model Portfolios

gaafaberI am a regular reader of Meb Faber’s online writings, and volunteered to received a free review copy of his new book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies. It is a rather short book and would probably be around 100 pages if printed, but it condensed a lot of information into that small package.

First off, you are shown how any individual asset class contains its own risks, from cash to stocks. The only “free lunch” out there is diversification, meaning that you should hold a portfolio of different, non-correlated asset classes. For the purposes of this book, the major asset classes are broken down into:

  • US Large Cap Stocks
  • US Small Cap Stocks
  • Foreign Developed Markets Stocks
  • Foreign Emerging Markets Stocks
  • US Corporate Bonds
  • US T-Bills
  • US 10-Year Treasury Bonds
  • US 30-Year Treasury Bonds
  • 10-Year Foreign Gov’t Bonds
  • TIPS (US Inflation-linked Treasuries)
  • Commodities (GSCI)
  • Gold (GFD)
  • REITs (NAREIT)

So, what mix of these “ingredients” is best? Faber discusses and compares model asset allocations from various experts and sources. I will only include the name and brief description below, but the book expands on the portfolios a little more. Don’t expect a comprehensive review of each model and its underpinnings, however.

  • Classic 60/40 – the benchmark portfolio, 60% stocks (S&P 500) and 40% bonds (10-year US Treasuries).
  • Global 60/40 – stocks split 50/50 US/foreign, bonds also split 50/50 US/foreign.
  • Ray Dalio All Seasons – proposed by well-known hedge fund manager in Master The Money Game book.
  • Harry Browne Permanent Portfolio – 25% stocks/25% cash/25% Long-term Treasuries/25% Gold.
  • Global Market Portfolio – Based on the estimated market-weighted composition of asset classes worldwide.
  • Rob Arnott Portfolio – Well-known proponent of fundamental indexing and “smart beta”.
  • Marc Faber Portfolio – Author of the “Gloom, Boom, and Doom” newsletter.
  • David Swensen Portfolio – Yale Endowment manager, from his book Unconventional Success.
  • Mohamad El-Erian Portfolio – Former Harvard Endowment manager, from his book When Markets Collide.
  • Warren Buffett Portfolio – As directed to Buffett’s trust for his wife’s benefit upon his passing.
  • Andrew Tobias Portfolio – 1/3rd each of: US Large, Foreign Developed, US 10-Year Treasuries.
  • Talmud Portfolio – “Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.”
  • 7Twelve Portfolio – From the book 7Twelve by Craig Israelsen.
  • William Bernstein Portfolio – From his book The Intelligent Asset Allocator.
  • Larry Swedroe Portfolio – Specifically, his “Eliminate Fat Tails” portfolio.

Faber collected and calculated the average annualized returns, volatility, Sharpe ratio, and Max Drawdown percentage (peak-to-trough drop in value) of all these model asset allocations from 1973-2013. So what were his conclusions? Here some excerpts from the book:

If you exclude the Permanent Portfolio, all of the allocations are within one percentage point.

What if someone was able to predict the best-performing strategy in 1973 and then decided to implement it via the average mutual fund? We also looked at the effect if someone decided to use a financial advisor who then invested client assets in the average mutual fund. Predicting the best asset allocation, but implementing it via the average mutual fund would push returns down to roughly even with the Permanent Portfolio. If you added advisory fees on top of that, it had the effect of transforming the BEST performing asset allocation into lower than the WORST.

Think about that for a second. Fees are far more important than your asset allocation decision! Now what do you spend most of your time thinking about? Probably the asset allocation decision and not fees! This is the main point we are trying to drive home in this book – if you are going to allocate to a buy and hold portfolio you want to be paying as little as possible in total fees and costs.

So after collecting the best strategies from the smartest gurus out there, all with very different allocations, the difference in past performance between the 12+ portfolios was less than 1% a year (besides the permanent portfolio, which had performance roughly another 1% lower but also the smallest max drawdown). Now, there were some differences in Sharpe ratio, volatility, and max drawdown which was addressed a little but wasn’t explored in much detail. There was no “winner” that was crowned, but for the curious the Arnott portfolio had the highest Sharpe ratio by a little bit and the Permanent portfolio had the smallest max drawdown by a little bit.

Instead of trying to predict future performance, it would appear much more reliable to focus on fees and taxes. I would also add that all of these portfolio backtests looked pretty good, but they were all theoretical returns based on strict application of the model asset allocation. If you are going to use a buy-and-hold portfolio and get these sort of returns, you have to keep buying and keep holding through both the good times and bad.

Although I don’t believe it is explicitly mentioned in this book, Faber’s company has a new ETF that just happens to help you do these things. The Cambria Global Asset Allocation ETF (GAA) is an “all-in-one” ETF that includes 29 underlying funds with an approximate allocation of 40% stocks, 40% bonds, and 20% real assets. The total expense ratio is 0.29% which includes the expenses of the underlying funds with no separate management fee. The ETF holdings have a big chunk of various Vanguard index funds, but it also holds about 9% in Cambria ETFs managed by Faber.

Since it is an all-in-one fund, theoretically you can’t fiddle around with the asset allocation. That’s pretty much how automated advisors like Wealthfront and Betterment work as well. If you have more money to invest, you just hand it over and it will be invested for you, including regular rebalancing. The same idea has also been around for a while through the under-rated Vanguard Target Retirement Funds, which are also all-in-one but stick with simplicity rather than trying to capture possible higher returns though value, momentum, and real asset strategies. The Vanguard Target funds are cheaper though, at around 0.18% expense ratio.

Well, my portfolio already very low in costs. So my own takeaway is that I should… do nothing! :)

Alpha Architect also has a review of this book.

My One-Page Financial Plan: Why Is Money Important To Me?

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onepage0I’ve already shared two nuggets from the book The One-Page Financial Plan by Carl Richards – the importance of getting started and the true value of a human advisor. But what about the title itself?

Before even reading the book, I was impatient and tried to make a one-page financial plan but it didn’t sound right. Even after reading it all the way through, I got a bit lost as besides “one-page plans”, it also tried to cover other big topics like budgeting, investing, and insurance. It took a few re-reads before things finally settled down in my mind. Here are the parts that helped the most:

Your one-page plan simply represents the three to four things that are the most important to you: some action items that need to get done along with a reminder of why you’re doing them.

Having done this with hundreds of my clients, I’ve found no more efficient strategy for solving the problem of how to handle our finances than asking “Why is money important to you?” […] If you’re doing this with a spouse, it’s important that each partner answer the question separately.

The reason I ask my clients this question is because it helps us understand their values. Often, the process of asking “Why?”—“Why is money important to me?” or “Why have I been so anxious about money lately?” or “Just why do I work so hard anyway?”—uncovers deep desires and fears that we are often too busy or too scared to think about. While the process can be uncomfortable, recognizing what really matters to you is the first step toward making financial decisions that are in sync with your values.

Recently, the author shared his own plan on his website – What Does a One-Page Plan Look Like?:

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There are many reasons why my plan (at the top of this post) will be different from the author’s and yours. Our current situation is different, our priorities will be different, our goals will be different.

Why is money important to me?

  1. I greatly value security, sometimes so much that it is irrational. I don’t want to have to rely on anyone else for money or favors. We cut back on work hours to spend more time with kids, but we still want to make more than we spend. It’s not time to touch that nest egg yet!
  2. I greatly value spending time with my family, both on a day-to-day basis and for extended vacations in new and strange places. I have to work hard to avoid getting into a rut where the days and weeks all start melding together. Even if it means lugging multiple car seats and strollers everywhere, I still want to stay curious, make some mistakes, have some adventures.
  3. I want to someday shift my activities such that they more directly give back to my community or some other greater good. I don’t like the idea of just writing checks though, so I need to find a more active and satisfying role. If I could make some money while doing this, that would be great, but otherwise I need to put enough aside that my investments will support me.

The overall point of both this exercise and the book is that improving your financial life doesn’t have to be done perfectly. Just by getting started and putting down your best guess down on paper, you’ll already be better than most. If you see something wrong when comparing your values and your actual behavior, then make some changes. Having done them, I recommend both doing this exercise and reading the book. If your library participates with Overdrive.com, it is available to borrow as a Kindle eBook.

The Opposite of Spoiled Book Review: Kids and Money

spoiled160Here’s my one-sentence review of the book The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber. If you have kids and feel it is important to teach them about money, then you need to read this book. Why? Simply put, money is still taboo and I don’t know of any other well-organized discussion of the topic. Your school won’t probably won’t teach them. Consider the point of view of teachers addressing why some families make less money while and others make significantly more:

If teachers answer them by talking about government and taxes and policy, the responses can start to sound political (and boring). If they respond by addressing individual behavior and ambition, the answers start to seem like moral judgments.

Other parents feel sensitive about it themselves. This is what Lieber himself was told when he was asked to talk about money at a private school:

[…] could I please keep in mind that some of the families with more money than average were starting to feel demonized and those with less were feeling like their noses were being rubbed in everyone else’s affluence?

I know there are textbooks and stuff related to “financial literacy education” out there, but studies have shown that financial literacy classes don’t work.

The book is basically an attempt to compile the best practices for parents in the areas of allowances, chore-setting, cell phones, clothing, cars, part-time jobs, and paying for college, along with teaching the skills of saving, investing, and charitable giving. I may not necessarily agree with every idea in the book, but at least it allows provides good exploration of these topics and may uncover small things you might not have considered.

As you may have guessed from the book cover image, one recommendation for giving allowances is to split it up into three jars: savings, giving, and spending. As I wrote about in my teaching money skills without actual money post, these three jars each have a special purpose:

  • forced saving jar = patience, delayed gratification
  • forced giving jar = generosity and empathy, responsibility to help community and others
  • forced spending jar = trade-offs and thrift

Throughout the book, I definitely felt that the content was aimed at relatively wealthy parents and thus their relatively wealthy kids. Lieber recognizes this:

We may not be in the same category of wealth, but many of us have enough to give our kids everything they need and much of what they want. And even if we have less than many people we know in our communities, we have more than most in our country and our world. We know this, but our kids probably don’t quite yet. So how do we make them aware of just how good they have it, without preaching to them or making them pity others who have less? And how do we remove them from their life of relative ease every so often and expose them to people and places that are not like the ones in their everyday lives?

I guess kids just don’t do much these days besides try to get into college and travel on sports teams:

The Stanford expert on adolescence, William Damon, writes matter-of-factly of the many children “who have privileges that were once reserved for royalty.” […] So start the job in the home, where we can help our kids act on […] a drive for competence. “They avidly seek real responsibility and are gratified when adults give it to them,” he wrote in Greater Expectations, his book about how far our expectations for our children have sunk in recent decades. Indeed, in many urban and suburban families, the chores that we assign them don’t add up to much.

Getting our own children to do more, and earlier, in the way of preparing, cooking, and cleaning up after meals isn’t easy. It takes practice and persistence, in the same way we may need to hover over them during the first months of music lessons as they whine and complain when things don’t come out quite right. Still, failure should not be an option. Every child is capable of contributing to meals in a significant way, and we shouldn’t need to pay them to set the table, boil the pasta, or clean it up. It’s not as if we lack leverage: We control dessert, first and foremost. But playdates, screen time, and car privileges are all tools we can use if our kids need more than a gentle nudge to finish their regular work around the house and in the kitchen.

I’m making the case for a broad-based “Lands’ End Line.” If we adopt it, that means we’d pay whatever Lands’ End (my definition of a suitably mid-priced merchant that sells quality clothing) would charge for any clothing needs, even if an item comes from some other designer or shop. Anything with a price to the right of the Lands’ End Line would be a want. And if our daughter craved that item, she could pay, out of her Spend or Save containers, the difference between its price and the price of a similar item at Lands’ End.

Yikes, I think Land’s End stuff is pretty darn nice. That would mean my allowance-receiving kid is going to use her extra money to buy North Face or Patagonia stuff. We’ve been trying to buy most of our clothes second-hand up until now… I wonder how long that will last.

In any case, I liked the book and will refer back to it for various ways to financially educate my kids. Teaching them good core value and character traits are more important than 401k matches, Roth IRA contribution limits, or finding the lowest mortgage rate. I really hope they can learn that money isn’t everything:

If you want to feel rich, just count all the gifts you have that money can’t buy.

But money and stuff aren’t the only ways to define rich. Ask kids if they have any other ideas for what the word means to them, or try some prompts if they’re not sure. Perfect health? Living grandparents? Tons of cousins? Friends within walking distance? An amazing park nearby? Teachers and administrators who care deeply about helping the kids in their school? A god that they believe in?

Finally, my favorite quote from the book:

There’s no shame in having more or having less, as long as you’re grateful for what you have, share it generously with others, and spend it wisely on the things that make you happiest. It’s true for our kids, but it’s true for us, too.

Disclosures: I borrowed this book for free from the library in Kindle format. I will probably buy a physical copy to keep in the future. If you buy a copy through my Amazon link, I will earn a small commission.

How To Cook Everything Fast, Reviewed By a Slow Cook

cookfastAs part of my ongoing effort to Cook It Yourself in 2015, I’ve been trying out new cookbooks. (So far I’ve managed to lose over 20 pounds by cooking at home and eating less of what I cook at home. 😉 ) I bought How to Cook Everything Fast: A Better Way to Cook Great Food because Mark Bittman has been a long-time advocate of cooking at home and it received positive reviews including a 4.4/5 average rating on Amazon.

This cookbook is the size of a large phone book (for those of you young enough to remember phone books). At over 1,000 pages and 2,000 recipes (including suggested variations) crammed inside, you probably won’t be bringing this to the grocery store with you. It cost me $21 shipped from Amazon, so if you measured cookbook value by recipes per dollar or pounds per dollar, you’d be a happy frugal camper. But don’t expect nice pictures, as color pages are expensive.

cookfast2

There are some good techniques to streamline your home cooking. Here are some general observations on how this cookbook tries to differentiate itself from the many other cookbooks out there.

  • Clearly indicate whether it will take 45, 30, or 15 minutes to make.
  • Every recipe is laid out so you can see the entire thing with the book open on a stand (see image below)
  • Streamline recipes down to critical ingredients, or substituting easier ingredients when possible.
  • Do things in the right order, like preheating oven, preheating pans, or boiling water first.
  • Use techniques like grating or slicing things so they cook faster, using the food processor, or mincing multiple ingredients all at once.
  • Assign specific prep work to be done during natural downtimes in cooking.

cookfast3

For the most part, these techniques work and you start looking for ways to apply them to your other recipes. But sometimes doing the prepwork while something cooks doesn’t work out if you are slow with your knife skills. It took me closer to 10 minutes to do the slicing and mincing that I was given 5 minutes to do, and meanwhile the meat got overcooked. You can turn down the heat, but that doesn’t always work and you might not realize in time either. Many times I found myself wishing for a slower pace and less stress rather than save 5 or 10 minutes.

Sample recipes. Here are some YouTube videos which include recipes from this book. These are definitely some of the better recipes and makes the food come alive much more than the blue and black text in the cookbook.

Overall impressions. In the end, this book certainly delivers as a large reference book on “how to cook everything fast”. It covers everything. It is fast. Now, in many of his videos, Bittman somehow manages to come off as both slightly goofy and a bit condescending. (You may notice this in his videos above.) In the book, everything is much more subdued. There just wasn’t much personality in reading the recipes – I’d even prefer arrogance over blandness.

For me, having a bajillion recipes on hand was not a benefit. If I wanted access to 10,000 recipes, I could just run a search on AllRecipes. I now realize that what I want are the best recipes, dishes with a little flare that a home cook (not restaurant chef!) has made hundreds of times and ideally passed down through at least two generations. With any book with 1,000+ recipes, I would expect some great, some okay, and some disappointing. That’s exactly what I found with this book.

The best part of the book was learning a few techniques to optimize other recipes. If you are more of a visual learner like me, I would start by watching his YouTube videos as they are usually “The Best Of” his recipes before diving into the book.

Disclosures: I bought this book with my own money at Amazon.com for $21. If you buy this book using my Amazon link above, I will receive a small commission.

Bogle on Mutual Funds, An Investment Classic Book Review #TBT

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Whenever I feel overwhelmed by the amount of noise coming at me through my computer screens, I read a book. When the new books on my desk don’t impress, I find an old book. That is how I came to buy a used, first edition of Bogle on Mutual Funds last year from Amazon for a penny + $3.99 shipping. John Bogle is best known as the founder of Vanguard who brought index funds to retail investors and changed the entire industry. Since most people just know him as the Index Fund Guy, I feel that he is under constant pressure to stay “on message” and only promote buy-and-hold passive investing.

But you know what? Even though many would prefer the world to be black and white, it isn’t. For a very long time, Bogle also ran and owned low-cost actively-managed funds like the Vanguard Wellington and Wellesley funds. To this day, a big chunk of Vanguard assets are actively-managed. Even recently, he has expressed skepticism about the trend towards holding more non-US international stocks.

When you read the circa-1993 material in Bogle on Mutual Funds, I feel like you get more of the “grey” Bogle. There is advice on how to pick a good stock mutual fund, even amongst actively-managed funds. There are some practical considerations for picking amongst asset classes. Of course, the main takeaways are still there:

  • Index funds are a great invention for long-term investors.
  • Low costs are very, very important.
  • Low portfolio turnover and minimizing taxes are very important.

But the book also includes a lot of little nuggets like comparing dividend yield relative to interest rates. First, here is a chart from the book showing how S&P 500 dividends have grown steadily with inflation. Meanwhile, the yield from a bond may start out higher, but would remain be constant until maturity.

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Unfortunately, defining what constitutes too high a price for dividends is a fallible exercise, one that must take into account not only the average historical valuations for stocks but the current valuations for other investment alternatives as well. History suggests that stocks are relatively expensive when the price paid for $1 of dividends is above $30 (i.e., a yield of 3.3%) and relatively cheap when the price paid is less than $20 (a yield of 5%). However, stocks may well be attractive at a yield of, say, 3.5% if there are compelling reasons to assume that their dividends will increase rapidly or if yields on other classes of financial assets are relatively unattractive.

In the example shown in Figure 2-5, buying a portfolio of stocks at a 3% yield rather than a bond at a 7% yield might not be a sensible investment, especially considering the incremental risk incurred in holding stocks. When stocks yield 4.5% and bonds yield 6%, that may be quite another story.

As of mid-2015, the S&P 500 dividend yield is ~2% and 30-year Treasury bonds are ~3%. The relative difference between the stock yield and the bond yield only 1%, even less than the 1.5% gap that he calls “quite another story”. This would suggest that (long-term) the S&P 500 is expensive historically, but still attractive relatively when compared to bonds at this point.

Anyhow, I bring this up is because Bogle on Mutual funds has just been republished as part of the “Wiley Investment Classics” series. (#TBT = Throwback Thursday.) It’s a great book and you could buy it to have it in Kindle format or to support Bogle, but you can also buy a used, 1st edition hardcover for $4 shipped. (Or borrow it from a library, but this is going in my permanent collection.) Unfortunately it is not a “revised” edition where the charts are updated or there is new investment commentary based on current market conditions. The only difference that I could find between my 1993 version and my 2015 review copy is a new 17-page introduction which mostly talks about the history of the book itself.

If you’re going to buy something new, I’d recommend their other Bogle classic – John Bogle on Investing: The First 50 Years – which is a compilation of his best speeches over the years going back all the way to his 1951 undergraduate senior thesis. I haven’t read that one yet, but I really enjoyed a similar compilation of Charlie Munger speeches.

The Affluent Investor by Phil DeMuth – Book for $100,000+ Club

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This week I’ve been trying to catch up on my book reviews (you should see my “to read” shelf!), and after a good beginner book I thought I’d write about a good intermediate-to-advanced book. You’ve probably noticed there are a lot of starter books out there for novice investors but not as many with more advanced advice ($$$… the potential audience is a fraction of the size). Addressing this deficiency is the goal of The Affluent Investor by Phil DeMuth.

In terms of the title, the industry classifies you as “mass affluent” if you have investable assets between $100,000 and $999,999. From $1 million to $10 million you are “high net worth”. This definition excludes some possibly important stuff – your income, the value of your personal residence, pensions, etc. But in real world terms, I would say this book is for anyone who isn’t living from paycheck-to-paycheck. If you have a $10,000 portfolio and have a surplus each month, sooner or later you will reach $100,000. If instead you have a credit card balance and it just keeps inching up, then you need something closer to a Dave Ramsey book.

The overall tone of the book is that of a close friend who is smart and into finances. DeMuth is already a financial advisor to rich folks so the last part is expected. What I mean is that he will be blunt and isn’t afraid to make stereotypical assumptions in order to rattle off all his tips. At only 200 pages, most things are only touched upon in a concise manner. Here’s a rough outline of the topics covered:

  • Big picture rules. Get and stay married. Make sure you can afford your children. Avoid debt. Save early and invest it. Diversify. Plan ahead.
  • Financial advice based on life stage. He puts you in the basic “affluent” mold of 20-35s have a kid buy a house, 35-55 working hard at professional career making most of your money, 55-65 protect assets and prepare for retirement, and 65+ retire and spend down money.
  • Financial advice based on job. Has special advice for doctors, lawyers, small business owners, and corporate executives.
  • General investing advice and “Can you do better?” investing advice. General investing advice is keep costs low and buy index funds that closely approximate the global market portfolio. “Can you do better?” advice touches on things like value stocks, small-cap stocks, dividend stocks, momentum, low-beta, etc.
  • Asset protection. Being affluent means you have money, and other people will want it. Insurance, buying real estate with LLCs, homestead exemptions, and similar topics are are very complex but his take is condensed into less than a page each.
  • Tax minimization. IRAs, 401ks, Solo Pensions, 529 plans, Health Savings Accounts, etc.

Here are things you might expect from a “book for rich folks” but won’t find inside:

  • You won’t get in-depth, hand-holding walkthroughs of anything. Consider the book as a push in the right direction for researching ideas.
  • You won’t find his secret list of the best hedge fund managers.
  • You won’t find tips on how to get rich with real estate.
  • You won’t find advice on how to pick individual stocks like Warren Buffett.
  • You won’t find him selling his own personal advisory services.

A general problem with all books of this type is that the advice is pretty short and to the point, but it doesn’t provide very much supporting evidence. You’ll either have to do your own due diligence, or blindly decide to trust the author. I’ve read books where the author might sound convincing but their advice is horrible. In my opinion, I think for the most part the advice in this book is good. But I’m just another person on the internet, so again do your own research.

In conclusion, I think this book covers a lot of questions that are commonly asked by the intermediate individual investor. It’s not too long and not too short. Some of the advice won’t fit your own situation, but at this level if you just find one solid actionable idea that makes the entire $18 book worth it. I’m personally going to look into the solo defined-beneift plan idea again, although I may still be too young to take full advantage.

Book Review: The New New Thing: A Silicon Valley Story by Michael Lewis

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Somehow I picked up a copy of The New New Thing: A Silicon Valley Story, which is a Michael Lewis bestseller published back in 1999 about the internet boom. The central character is Jim Clark, founder of Silicon Graphics (SGI), Netscape, and Healtheon/WebMD. That means Clark started three separate companies in three different industries that were all worth at least hundred of millions of dollars to over a billion dollars. Although Silicon Graphics has since filed for bankruptcy and younger folks probably don’t even know the same, for a while it was one of the most prestigious places for computer engineers to work.

It’s been over 15 years since the dot-com boom, and reading it actually felt nostalgic to this 36-year-old, but as with any Michael Lewis book it was at least a good story. It was light on practical finance-related material, but as always I like to record my notes.

  • The 1990s were a turning point where a young person with strong technology skills could get stupid rich. Before that, it seemed that you needed to work somewhere on Wall Street after showing off your Ivy League credentials. Even today, the smartest people want to be tech entrepreneurs. Geeks are cool and nerds can be treated like rock stars.
  • Clark grew up poor and had a chip on his shoulder. He grew up poor in a small town in Texas with an abusive father. Now on one of his rare returns “home”, he buzzes the town in his private jet, has lunch with his mom, and then jets off again the same day.
  • Jim Clark’s personality was perfect for this era. He had the smarts and street cred of a techie, but also the visionary skills and lack of self-doubt that made him a leader of other techies. Netscape was a web browser without a plan to make money (this was pre-Google!), yet it made Clark a billionaire. I liked this quote:

    Most people don’t enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do. And that is what Jim Clark did. From the moment Netscape made him a billionaire […] half the engineers in the Valley wanted to work for whatever company he started

  • Rich men have a thing for big boats. Since Michael Lewis spent a lot of time following Jim Clark around and Clark was obsessed with his big-ass sailboat (which would barely fit under the Golden Gate Bridge), a lot of the book is somewhat boring stuff about trying to make a computerized sailboat called Hyperion. Then he commissioned an even bigger boat, Athena. Now go check out Steve Jobs’ super-yacht that cost over $100 million: Venus. Shrug.
  • “If money is how your measure yourself, you’ll never have enough” is a recent quote that I came across, source unknown. But that’s pretty much Clark (and probably a lot of other billionaires to be fair). Before founding his first big company SGI, he said he just wanted $10 million. After becoming a multimillionaire, he wanted $100 million. After his Netscape shares hit $600 million, he wanted a billion. After the Healtheon IPO made him an after-tax billionaire, he wanted more than Larry Ellison ($13B at the time).
  • The book ends with Jim Clark starting another business called myCFO, which was supposed to cater to all those new internet millionaires and help them manage their money without having to go with one of those stuffy, established institutions like Merrill Lynch or Goldman Sachs. myCFO ended up being sold off for “only” $30 million, but I think it was a precursor to modern non-traditional advisors like Wealthfront which also specifically targets Silicon Valley engineers.
  • Jim Clark’s more recent ventures since the publishing of this book have much been less exciting. The only one I hard heard of is Shutterfly, and he was really only involved with the funding. It appears that now he’s just enjoying life with his big boats and family.

The Elements of Investing – Book Review (Updated Edition)

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There are two major types of investing books for beginner investors: “Instructional to-do list” books basically tell you what you should do. “Inspirational big-picture” focus more on the philosophical reasons why you should do those things. Both can be equally important and useful.

The Elements of Investing: Easy Lessons for Every Investor by Burton G. Malkiel and Charles D. Ellis falls more into the former “list” category. Malkiel is a noted academic and wrote the classic bestseller A Random Walk Down Wall Street. Ellis is a former director of Vanguard Group and wrote the classic bestseller Winning the Loser’s Game.

Basically, two pillars of the investment world got together and tried to whittle down their 80 years of experience into 200 pages and roughly 2-3 hours of reading time. The pages aren’t even big, as the hardcover version is only 7 inches tall. You could read the entire thing in an afternoon or in snippets before going to bed within a week.

In opinion, they did a pretty good job. Topics are covered in a brief, straighforward manner. If you’ve read your share of personal finance material, none of it will be new to you, but they remain critically important. The key takeaways are clearly laid out and repeated over and over to drill them into your head. Things like:

  • Save regularly and never take on credit card debt (most important).
  • Utilize any available tax-advantaged plans like IRAs, 401ks, 403bs.
  • Keep a safe, liquid emergency fund.
  • Diversification, rebalancing, dollar-cost averaging, and low-cost indexing are the keys to investing success.

There are also a lot of little nuggets of wisdom in the book. My two favorite quotes:

The real purpose of saving is to empower you to keep your priorities—not to make you sacrifice. Your goal in saving is not to “squeeze orange juice from a turnip” or to make you feel deprived. Not at all! Your goal is to enable you to feel better and better about your life and the way you are living it by making your own best-for-you choices. Savings can give you an opportunity to take advantage of attractive future opportunities that are important to you.

As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes.

The updated 2013 edition of the book (original edition was 2009) includes some interesting (controversial?) suggestions for dealing with the current low-interest environment for bonds. Since the current yield for US Treasury bonds is so low, and thus the future expected return just as low, they offer up tax-exempt municipal bonds, emerging markets bonds, and even blue-chip dividend stocks.

It was sort of weird to be told “stay the course!” and then in the next chapter be told “here’s how to change course!”. I actually appreciate that they express their honest opinions, even if it appears to contradict passive-investing dogma. Jack Bogle himself does it from time to time. (I personally choose to hold muni bonds instead of US Treasuries as well.)

Bottom line: This investing primer would make a very good gift for a recent college graduate or young worker if they are ready to start getting serious about investing. If they aren’t, the book may be a bit dry. I will be adding it to my recommended books list, once I get around to updating it…

Amazon.com Coupon: 25% Off Any Book

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Updated, good until 12/14. Similar to their Black Friday promo, take an extra 25% off any book at Amazon.com with promo code BOOKDEAL25. Print books only, max $10 off, must by sold and shipped by Amazon.com. Valid until December 14, 2014 at 11:59pm PST.

Here are some recommendations for those looking to give or receive some financial inspiration:

Here are all my book reviews in reverse-chronological order.

I would have to say my favorite book of the year was Dinner A Love Story. It has some inspirational material to help you cook for yourself and your family, along with the best compilation of weeknight dinner recipes I’ve read in a cookbook. They taste special enough (not bland or boring), but they also take 30 minutes. I just used it again last night.

I bought the new Tony Robbins book MONEY Master the Game: 7 Simple Steps to Financial Freedom. I’m skeptical, but I think I have to read it. What other informercial guru could get book blurbs from Jack Bogle, Bill Clinton, Ray Dalio, and T. Boone Pickens?

Dinner: The Playbook Book Review – Preplanning is Critical For Success

dinnerplaybookWe hit consecutive 10 weeks of cooking at home x 5 times a week! (Now we’re going on vacation so the streak must end.) Some days are fun, some days you just want to get it on the table.

Since I liked the first book by Jenny Rosenstrach so much, I also bought her second book Dinner: The Playbook – A 30-Day Plan for Mastering the Art of the Family Meal. While the first book was more autobiographical, this one is more focused on what you need to make home-cooked dinners happen. First, you need the right recipes:

I can’t stress this enough: You will cook more regularly if you choose simple recipes. By choosing simple recipes, you will get dinner on the table more efficiently and you will not end up with a pile of dirty dishes that makes you want to chug a bottle of beta-blockers. By minimizing the prep work and the cleanup (and the beta-blockers), you will be far more likely to do it again the next night. And that is the goal. Sustainable routines. Pleasant tableside experiences. Success. Which for our purposes right now will be defined as “a fifteen-minute period of time during which food is consumed without drama.” In short: The best home cooks choose the easiest recipes.

The book contains over 80 such recipes. But even with a dead-simple recipe, if I am faced with another trip to the grocery store after work, I’m going straight to the frozen lasagna (or worse, my kid’s chicken nugget stash!). You’ll also need to incorporate some structure and pre-planning for success.

The best tip that I learned from Jenny Rosenstrach’s books was to plan every week’s dinner out in advance. I plan for 5 nights cooking, 1 dinner-from-a-box (frozen dumplings, lasagna, premade burritos, etc.), and one dining out each week. Every Saturday night or Sunday morning, I pick out 5 recipes that I want to try. (Usually three come from a Rosenstrach book or blog!) I scan the recipes and (1) make sure that it really is doable with my limited culinary skills and (2) note what ingredients I need. Once you get better, you can pick the ones that share ingredients to save money, but I wouldn’t worry about that in the beginning. Just pick whatever sounds both tasty and easy.

My older kid wakes up at 6 am every single day, so on Sunday morning at 7am we hit the grocery store and Farmer’s market (in the same complex, sweet!). The world is still quiet, the man at the farmer’s market stand with the good salad mix always gives her a free banana, and I never have to go decide if I want to go to the store at 6pm on a Wednesday just for one ingredient.

Why is this important? See my flowchart. If you get arrive home from work and you don’t have all the raw materials in front of you and a plan to make into a meal, you will fail. Remove all roadblocks! Fail to plan, and you plan to fail! Insert other cliche here!

In addition, try to do whatever prep work you can each morning. My thing is just to double-check that I have all the ingredients, like making sure the spice containers aren’t nearly empty or the herbs aren’t yellow or rotten.

Finally, you need a 30-day challenge to get you going. By committing to 30 days and 30 dinners, you will hopefully be able to break out of your current rut and have enough momentum to make homemade dinners a regular habit. I suggest taking her option of backing this off to 20 dinners in a month, making each week 5 days on and 2 days off.

Bottom line: Good book, similar ideas to first book but less about her and more clear on purpose. I bought it mostly for the additional simple recipes. Cooking at home saves us so much money each month, this book easily pays for itself.

Dinner: A Love Story Book Review – An Ode to Family Dinners

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Every since completing the Dinner Boot Camp over 8 weeks ago, we have cooked dinner at home at least 5 times every single week (heating up frozen lasagna doesn’t count). Two months! That has never happened before… The weeklong boot camp (see if still online) was done by Jenny Rosenstrach to promote her new book, but I always like starting at the beginning so I read her first book Dinner: A Love Story: It all begins at the family table. Both books were inspired by her popular blog at DinnerALoveStory.com.

The book itself is probably 50% non-fiction story about her journey and 50% recipes. The author felt strongly about the importance of family dinners and kept a journal of every single dinner she cooked for several years. I think the two excerpts below do a good job of encapsulating her views.

It’s for mothers and fathers—working, staying home, single, divorced, any kind—who crave more quality time with their children and have a sneaking suspicion that the answer may lie in the ritual of family dinner, in the ritual of sitting down together at the end of the day to slow down and listen to each other. […]

…no matter how different and harried family dinner looked during this new baby phase of our lives, it still served its main purpose: It was our day’s deadline. Even when we were in a house in the suburbs with two kids under two and the evening hours between six o’clock and eight thirty felt like we were trapped in a high-speed game of playground dodge-ball, even when the girls got a little older and we’d try and fail and try and fail to get them to eat the same dinner as us at the same time, even though each of us would have our share of late nights at the office, and even though we’d regress to our frozen veggie burger nights more often than I care to admit, the ritual of sitting down together at the end of the day remained our default mode, our time to be together. And a decade later, dinner has happened regularly enough for me to feel I’ve stayed true to my vow.

It helped that we identified with her situation as we also have two kids under two and often felt like the time between 6 and 8 pm every night was like running the last few miles of a marathon. Most recipes in the book are for a family of four. However, having two tiny ones meant we were really just cooking for two adults. So the book works equally well for couples without kids (if you don’t mind eating leftovers for lunch).

Throughout the book, you can definitely tell that she has professional experience as a magazine writer and editor. The writing is approachable and she uses a friendly, self-deprecating tone that doesn’t scare you off.

The best part about her recipes also comes from her editing skill. These are recipes explicitly honed for the tired, busy, working home cook. The recipes avoid being one-dimensional with simple ingredients like vinegar to make it salty and acidic, or honey to make things sweet and salty. There will usually be a texture component (crunchy, crusty, chewy) and at least one fresh herb. There are no added ingredients just for showing off, but if you leave something out you’ll miss it. As Albert Einstein is credited with saying:

Everything should be made as simple as possible, but not simpler.

There are many recipes in the book that are not on the blog. These are recipes from this book that I actually made and I could find links for. Of course some recipes we liked better than others, but that is mostly due to personal taste and none of them were bombs.

Bottom line: If you can’t spend all day in the kitchen but the idea of making minimally-processed meals appeals to you, this book includes both a nice personal story and many practical recipes for quick after-work meals. Recipe books are often about style, and I really connected with her style and taste. I would say at least half my cooking for the last 8 weeks has come from this book or the blog. If this speaks to you, I encourage you to try out the Dinner Boot Camp or the sample recipes above.

The Big Flavor Grill Cookbook: No Marinade, No Hassle Recipes (Book Review)

bigflavorbookAnother thing I’ve been getting into this summer is grilling over 100% natural hardwood charcoal. My gateway drug was Alton Brown’s Steak on Coals recipe. The smell and flavor brings me back to my childhood, even though technically that was a pile of Kingsford with tons of lighter fluid…

So I agreed to a free review copy of a new cookbook called The Big-Flavor Grill: No-Marinade, No-Hassle Recipes, written by chef Chris Schlesinger and Cook’s Illustrated executive editor John Willoughby.

The basic premise of this book is to save you time and energy by avoiding marinades, brines, or complicated sauces. Instead, while your grill is heating up you smear on a pre-rub, and after the food is cooked you add on a flavorful sauce. You do all the prep in the 30 minutes or so that it takes your charcoal to heat up (preferably with a cheap chimney starter to avoid lighter fluid). Here are some sample recipe names, unfortunately I couldn’t find a sample full recipe online:

  • Five-Spice Steak Tips with Grilled Pineapple and Sweet-Sour Sauce
  • Coriander-Crusted Pork Skewers with Maple-Mustard Barbecue Sauce
  • Chicken Breasts with Maple-Soy Glaze and Peanut-Ginger Relish
  • Spicy Curry-Rubbed Lamb Kebabs with Grilled Peaches
  • Cumin Seed–Crusted Shrimp with Charred Corn Vinaigrette
  • Fish Steaks with Sriracha-Basil Butter

Did the pre-rub + sauce work? Well, yes and no. I didn’t have to marinate or brine. The food tasted good. Can some citrus and herbs brighten things up easily in a pinch? Yes. But I still had to make a special trip to the store to get all the ingredients for my exotic sauces, so that took time. Marinating is basically just doing the same amount of work ahead of time and letting it sit there overnight. Yes, planning ahead is harder but so is shopping for all those ingredients. Is that extra convenience worth the decrease in taste, tenderness, or juiciness from no marinating or brining? I’m not sure.

I found the true benefit of this book is that it reminded me that simple grilled food is great all by itself. For every section, they have something called “Super-Basic” XXX, where XXX is everything from steak to shrimp to corn to cherry tomatoes. And you know what? I liked the grilled shrimp straight-up off the grill more than the shrimp plus ginger/lime/sesame sauce because the sauce made everything a bit soggy. Grilled blistered tomatoes, grilled mushrooms, grilled asparagus… all great with just some olive oil and salt. Grilled peaches, grilled avocados, smokey and awesome right off the grill. I guess I’m a simple guy.

The cookbook itself looks great in hardcover, with good photography inside and the pages are thick and feel high quality. It would make a good gift for the busy grilling enthusiast. I don’t think it’ll be a timeless classic, but I will definitely keep this book around for the Super Basic XXX recipes to provide inspiration on Friday nights when I am short on time and want to cook outdoors.

In the end, just grill baby! It feels special but costs very little extra. I use a simple $30 Weber Smokey Joe grill and real charcoal can be surprisingly cheap too. After reading Omnivore’s Dilemmna by Pollan I think cooking from scratch at home is overall better for both my wallet and health.

I received a review copy of this book for free from Blogging for Books. If you are a blogger, check them out for some free review books in your niche.