Book-review: The Money Game by ‘Adam Smith’

A non-standard book about the investing game, its rules and why we play…

If you prefer to read the pdf version click here. (links may not work in pdf) I created the pdf from my mobile app, pls comment if not working/any issues.

I liked the book. Some chapter were Pretty good (why individuals are playing/in the markets) and other less so (charts/technicians) but overall I liked this non-standard book.

(as in my previous book review I focus more on my learnings/insights/personal summary vs writing style etc.)

The author reveals why there is not much written about how Wall Street really works and why he chose a pseudonym.

I liked the last passage about investing as a game:
‘The irony is that this is a money game and money is the way we keep score. But the real object of the game is not money, it is the playing of the game itself. For the true players, you could take all the trophies away and substitute (…) as long as there is a way to keep score, they will play.’

Like in Taleb’s book Fooled by Randomness, there were lots of references to philosophy and writers — much I did probably not understand.

(3) Knowing oneself is important.
Analysts and portfolio managers are different. Analysts want to be right (even more so than making money). They are good at finding stocks but not at timing their buys or sells.
Pf managers have the macro view and need to know what is going on in the market.

The crowd is difficult to understand. Individuals joining a crowd are less susceptible to doubt and usually think less than as an Individuum that is not part of a crowd. ‘The crowd (…) does not reason, it only thinks it reasons; what it does actually is to accept a series of images…’

Individual investors have different reasons to play the game. Some want to talk about the market and single stocks for a better social life. Others want to feel the pain, either if stocks going up because they did not buy enough, or when they go down because they own them. Others want to discover and own ‘their’ company. Others want to be part of ‘the future’ (think innovation, technology, other buzzwords and unproven business models and colorful presentations).
A family owning IBM stock for decades worth million, but living if they wouldn’t own it is insightful.
It is always important to remember that ‘The stock does not know that you own it’, so do not love a stock, since it will not love you back.

Real money is made by founders that bring their company public when earnings are capitalized with a high multiple at the IPO.

Small cap companies with compounding earnings is Smith’s liking.

Chapter 13 ‘But what do all the numbers mean’ is about the ‘quality of earnings‘ and the leeway management has to underreported or overreport ‘true earnings’. (by chance another book I just finished)
And it is about how financial markets (investment banks) are good at producing or offering what is in demand, be it conglomerates, or pure plays, or whatever, say, SPACs. Again, being part of the future and buying (into) some innovative new concept.

Little guys (14) can come up with a whole lot of reasons why their performance is what it is, if they know it at all, and why it should have been much better if not for that and this…
(I am not that much better because I merely use my excel file instead of a handy online service, and tax issues are not completely solved)

The pros chase performance by concentration and high turnover. Short term results can very much be liquidity driven.

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