#TheIntelligentInvestor #BookReport Again and again I am surprised how Benjamin Graham's book remain

• 08/21/21

#TheIntelligentInvestor #BookReport Again and again I am surprised how Benjamin Graham's book remains timeless despite being as old as it it. His way of thinking seems to have stood up to the test of time and again I see a lot of parallels between his cautions and Crypto, IPOs, and purchasing stocks at all time highs. This one will be on Chapter 6 - "Portfolio Policy for the Enterprising Investor: Negative Approach." He starts off the chapter w/ why "second grade" bonds aka "junk" bonds aren't worth the risk and then segues into why foreign bonds are just as bad. It was only when he started talking about "New Issues Generally" that it started to peak my interest as I saw some parallels to Crypto and influencers w/ Alt Coins for pump and dump schemes. "Our one recommendation is that all investors should be wary of new issues - which means, simply, that these should be subjected to careful examination and unusually severe tests before they are purchased. There are two reasons for this double caveat. The first is that new issues have special salesmanship behind them, which calls therefore for a special degree of sales resistance. The second is that most new issues are sold under 'favorable market conditions' - which means favorable for the seller and consquently less favorable for the buyer." (Rev Ed p 139) The next section was also equally on point w/ "New Common-Stock Offering" which is essentially about IPOs. And wild to see that history does in fact repeat itself ... over and over and over again. "Bull-market periods are usually characterized by the transformation of a large number of privately owned businesses into companies with quoted shares. This was the case in 1945-46 and again beginning in 1960. The process then reached extraordindary proportions until brought to a catastrophic close in May 1962. After the usual 'swearing-off' period of several years the whole tragicomedy was repeated, step by step, in 1967-1969." (Rev Ed p 140). "As the market rise continues, this brand of financing grows more frequent; the quality of the companies becomes steadily poorer; the prices asked and obtained verge on exorbitant. One fairly dependable sign of the approaching end of a bull swing is the fact that new common stocks of small and nondescript companies are offered at prices somewhat higher than the current level for many medium-sized companies with a long market history. The heedlessness of the public and the willingness of selling organizations to sell whatever may be profitably sold can have only one result - price collapse. In many cases the new issues lose 75% and more of their offering price." (Rev Ed p142). So when I first joined Public there seemed to be a huge demand for $DNUT from a lot of investors that probably had never been to a Krispy Kreme before. This excitement for a company was even more curious when I found out that this was their second IPO after converting back to private after their first one. Seeing all the people that then got burned on $DNUT 's volatility was sad to see. Unless you can lock in the pre-IPO share price ... I think IPOs early on are probably a terrible investment on average. This sentiment was supported by the commentary chapter for 6 under "The early bird gets wormed." I think between 2020 and now 2021 the IPO craze has gotten a little out of control and does have me concerned that this is an indirect signal that the bull run is coming to an end. The commentary also still managed to be relevant when talking about "Dying a Trader's Death" even in the day and age of no trade fees. "As we've already seen in Chapter 1, day trading - holding stocks for a few hours at a time - is one of the best weapons ever invented for committing financial suicide. Some of your trades might make money, most of your trades will lose money, but your broker will always make money." (Rev Ed 148) Even in the day and age of "no trade fees" there is always a way for a brokerage account to make money from you or off of you. Case in point is Robinhood or $HOOD as it came to light that the product being sold was the retail investor and their trades. See the article quote and link below. "Robinhood, which was founded by Vlad Tenev and Baiju Bhatt, has long had a mission of democratizing finance. It grew by attracting investors — especially younger ones — with its no-fee trading. But the company has faced questions about whether it encouraged overly risky trading with its lack of fees and features such as behavioral nudges and push notifications that critics said created a gambling-like atmosphere" - https://www.nytimes.com/2021/06/30/technology/robinhood-fined-misleading-customers.html P.S.: Sorry this one was long and that your weekend was boring enough that you made it to the end of this post 😜. Hope the few that did make it to the finish got something from it. #BookClub #TheMoreYouKnow #DefensiveInvestor

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