Wednesday, October 12, 2016

Triumph of the Optimists

Triumph of the Optimists is one of the driest books I've ever read. It felt like a reference textbook, and with that asking price, I'm sure it was intended as such. (Amazing how this industry is able to charge whatever it wants for a book simply as a result of a book becoming required for a course as stipulated by a professor, who is sometimes the author!)

And yet its content is very interesting. The book goes through one hundred years of stock market returns in a number of countries, and documents the results in a large collection of tables, graphs, charts and text. To me, it provided a good hint of which countries have may be the most shareholder friendly. Perhaps the outperforming countries have some sort formula that increases shareholder value (rule of law, property rights, a culture of entrepreneurship etc.) and so these returns may serve as a relative guide going forward, or perhaps not.

I didn't find the authors' discussions to add much value, however. Their definition of risk is volatility, which made a lot of their conclusions meaningless to me. They also spend a lot of time trying to discover a single number to serve as an equity risk premium, which I view as a rather fruitless exercise. Finally, I'm almost a couple of decades late reading this thing, as the measurement period stops in the year 2000.

Overall, however, it's an informative read, if only for the investor to get a good idea of what real returns in the past have looked like for bonds and stocks, as they are perhaps the best guide to what one can expect going forward.

Enjoy!

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