Sunday, June 24, 2018

My Amazon Review of Michael Batnick's "Big Mistakes: The Best Investors and their Worst Investments"


Learning from the Mistakes of Others

Michael Batnick, the research director at Ritholtz Wealth Management, is teaching us that it is important to learn from the mistakes from some of the most successful investors of all-time. This is not an original concept, but nonetheless it as an important one. Nevertheless my problem with his book is not with Batnick, but with his editors or his lack of editors. There are typos, math errors and outright mistakes (e.g. calling “Supermoney” author Jerry Goodman, Jerry Goodwyn.) Further it would have been very helpful to have stock charts where they would have been relevant.

That said he points out the most common of errors all of us have, even the great ones, in that we are victims of hubris/overconfidence, we get sucked in by the allure of leverage and out of frustration we invest outside of our circle of competence. His many examples include, Jack Bogle, Michael Steinhardt,  Stanley Druckenmiller, John Paulson, the Sequoia Fund, Long Term Capital Management, Bill Ackman and yes, Warren Buffett. In Buffett’s case Batnick believes Buffett became overconfident based on his prior experience in investing in the shoe business with his purchase of Dexter Shoe in the early 1990s. He compounded his mistake by paying in stock that would become more valuable over time only to see the business ravaged by foreign competition.

In cases of Paulson, Druckenmiller and Steinhardt we see them investing beyond their core competencies and the case of Bill Ackman we his very big ego get in the way with his giant short position in Herbalife. Of course leverage and hubris brings down Long Term Capital Management. These are all wonderful vignettes and there is much to learn, but I wish Batnick had a sharp penciled editor.






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