Review of “Wall Street’s Just Not That Into You” by Roger C. Davis

Wall Street’s Just Not That Into You is an enjoyable, short read, but it’s another brick in the wall of finance books that foolishly suggest you can beat the market. I was sucked into the promise of increasing the returns on my investment but eventually thought better of it. Beware this advice; be suspicious of those who peddle it. Remember the timeless advise of two great investment thinkers.

First, remember Benjamin Graham and his definition of investment. “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” Despite being the “dean of security analysis,” Graham’s definition left readers wanting more — a fact he confessed years later when he wrote The Intelligent Investor (1949). “While we have clung tenaciously to this definition,” said Graham, “it is worthwhile noting the radical changes that have occurred in the use of the term ‘investor’ during this period.”

Next, consider the advice of Eugene Fama, of the University of Chicago, who pioneered the efficient market hypothesis and won a Noble prize for the idea. Fama demonstrated in several ways the ways that markets take into account all available information in prices. If markets are efficient, then the advice to time the market is advice to speculate.

Davis does not address the efficient (or inefficient) market hypothesis. So what’s the opposing argument? In a nutshell, many of these books stroke your ego, and suggest that you can succeed where others have failed. The list of those individuals who have successfully beaten the market over a period of years (not months) is short indeed.

When we dream of wild success as an investor, most think of one person, Warren Buffett. I do not want to detract from Buffett’s investment successes; Berkshire Hathaway is one of the greatest successes in investment history. The resources that Buffett has at his disposal entirely dwarf the capability of any one investor. He and his team search for value investing opportunities with a rebirth few can match, and can invest massive subs if money to maximize profits. For me, the needle in a haystack approach to investment is not worth the trouble. Furthermore, Buffett is capable of purchasing mismanaged companies, and using his considerable management skill to increase their value. I have neither the time nor interest to try to out think Warren Buffett and the teams of individuals who work in finance full time. I would rather go on hikes.

Consider the benefits of investing in, say, a low cost ETF tracking the S&P 500. For one, you never have to think about your money, and historically you will earn returns of 8 percent a year after inflation. Now consider the value of all the time you won’t be thinking of your money. You can live your life, and your money will grow while you sleep. That’s what investing is about. It’s a return on your money, and although it’s not guaranteed, it’s free of intense research. If you spend 10 hours a week to generate an additional 4 percent a year, calculate your hourly rate of return, and recognize you’d be better off with a second job. In general, you will do much better in the long run.

That’s the problem with Wall Street’s Just Not That Into You. Davis breezes past the idea that you can avoid most of Wall Street commissions, fees, and other short comings without intense effort. You don’t have to lose years off your life due to stress to make money on Wall Street. Screw eTrade, go out with your friends. Markets, at the end of the day, are efficient enough. Let them do your work for you. It’s division of labor; if you want to beat the market, invest in Berkshire Hathaway and let Warren Buffett worry about it.