A summary of the intelligent investor, a non-fiction book by Benjamin Graham

According to The Intelligent Investor by Benjamin Graham, an investor makes the very important consideration of choosing the right stocks (also known as shares,) and other securities such as bonds. The difficulty of choosing the right portfolio is to balance the stocks with the bonds in a ratio that is safe and yet not too safe. Fluctuation in an equity (with the exception being that of bonds, which do not fluctuate like a stock) indicates uncertainty in the investment community, not that the stock will perform badly in the long term, and so the trick is to buy a good stock whenever it is at a “bargain” price and to sell when it is high and right before the investment community loses interest in it. When the community has stopped second-guessing itself and the fluctuation stabilizes, usually because of injected uncertainty due to bad news, or a sudden surprise in earnings due to a revolutionary product, you can bet the stock’s fluctuation will attenuate to a more linear function. 

To analyze the probability of success of an investment opportunity, one must look at its history and how investors have reacted to the negative or positive reports, and from this point, the investor categorizes the stock into what may have long-term growth, short-term growth, or simply, bad and good possible outcomes. Analyzing the stock’s price-to-earnings ratio and this change over time, for instance, gives a clear indication of market-rational behavior, but does not predict the investment’s outcome. Analyze NVIDIA, for instance; the reason the price is valued highly by the investment community relies upon the company’s industry, the alleged supremacy of that company in the hardware industry catering to gamers and big businesses reliant on CUDA cores for parallel computing tasks pertinent to new trends in the computer software industry, e.g.: machine learning, a.i., deep learning, data analytics, and clustered relational databases requiring immediate readiness; but ultimately, the success of the stock depends on the faith and belief of the investment community that it will be successful in the long run. I don't think NVIDIA nor Advanced Micro Devices and Intel will retain all its market share in this narrow industry because the company has not invested in quantum computing as many large companies had, and this new technology will really hurt the market capitalization of currently popular growth companies that have not invested in research and development (r.&d.) in quantum computing, and just like the failure of the blue-chip stocks and the crash of the highly esteemed technology stocks in the early 2000's, a repeated correction will occur as soon as these other companies who have invested in quantum computing make them attainable by the masses, affordably and readily.

If a stock’s price-to-earnings ratio is extremely awful, which indicates an overvaluing by the community at large although not necessarily (because some of this is based on what the community thinks the company’s profits will be in the future,) it is extremely important in this case to know just how many times more expensive a stock is than its earnings and how much of it is speculation and how much of it is nearly guaranteed due to positive news, assuming it is truthful or dependent on politics. Price-to-earnings ratios can either be high or low, and they can give an indication as to community’s belief of a stock since if an attractive stock has a low p.e. ratio, than chances are it is undervalued by the market as a whole, but to outsmart the market requires an individual who can see things that are not there, and the investor can gain a kernel of truth by observing patterns of behavior in people: most importantly, the politics and the average trend in political thought while keeping a close eye on our representatives who are more powerful than any of us.  Analyzing voting trends might have a close correlation to how stocks in industries will operate, though not always. As a counterexample of when this is not the case, and Ben. Graham does not say this at all: Trump said that violent video games are the cause of violent shootings and all shooters are liberals. Not only is Trump's self-integrity inherently worthless so his word has no positive effect on the community, and his slimy thoughts about gun control are counter to what most people want for this country--gun control--the fact he is still in power has a negative effect on gun retailer and manufacturer securities, of which have soared. And people have bought more guns and thus increased peoples’ risk of death by guns, though he will claim it is due to him this number is lower, it is because of the resistance that have shouted out and abhorred violence, quite the opposite. Now, I predict that guns will eventually be outlawed in this country, and I’m not saying that we should invest in gun companies of which would be unethical, but like Ben. Graham, we believe politics matters in the outcome of securities in either stocks or bonds. 

Generally, a stock with a low p.e. ratio is considered safe, but safety and the ratio does not indicate the stock will grow again due to the dynamic nature of the investment community, since a security may lose equity due to the unpredictability of negative news e.g. scandals and fired C.E.O.'s or the loss of great C.E.O.'s. A leaderless company is as good as the intelligence of its employees, but the speculative nature of the investment community always reigns irrationally. The company’s investment in research or lack thereof, and the currently bad politics that affects it so, like the solar-panel industry, may not be wanted but it is the case nonetheless. The fact that an attractive stock is nothing other than what is in the eye of the beholder and that this is a problem and the investor can easily become skeptical of a really good bargain-priced stock; things that can cause this: the stock may be overlooked and this would imply that it is unpopular, but patience is key in this case because in the long run, people will generally listen to reason and to logical analysis of a stock’s long-run success probability when investing. If you have taken those steps in your stock analysis, then you are guaranteed to win. Generally, it is a good idea to invest in unpopular stocks (by volatility and p.e.) if you believe that it will become popular. If you look at a chart of p.e. relative to the value of the stock, you will see that there is a close correlation. Thus, if you buy a stock with the attitude that you think the company will make higher than expected earnings than what other people on wall-street think, then you may be on the right track assuming you did your research correctly.  Also, Benjamin Graham recommends to relying on your own opinion when faced with the facts rather than to accept whatever the broker recommends, since often the broker makes more money from hidden fees.

Regarding what Graham calls, “dollar-cost-averaging,” this is simply the exercise of depositing funds into your brokerage account every month or at some specific interval to invest into stocks.  Putting this money into your portfolio is a very thought intensive task since so many possibilities arise. To this, Ben. Graham suggests the avoidance of making formulas since a formula for success has historically only worked in hindsight, he does provide principles in investment regarding the constant paradigms of security investing: like balancing a portfolio on the bullish or bearish nature of a market in bonds or stocks more so one way or another, subject to change of course. Bonds are particularly safer because of their history in yielding better results during market crashes, but Ben. Graham writes that a bond-only portfolio would not have yielded as good of results than an index-fund portfolio of the D.J.I.A. during some decades. Ideally, you want to invest in security right before it has hit its high and to sell it before it has hit its low—determining this ideal difference since markets fluctuate by nature will reduce self-doubt and requires patience.  Graham considers the ideal bond-to-stock ratio to be purely dependent on market trends; I regard the investment in bonds unreachable, for me, so I invest in market funds (a mutual fund of various bonds that can be traded like a stock,) since bond investment requires a large personal capital to begin with, typically above $2.5k. For an individual of a low-income investor such as myself, investing in bonds may still be achieved by investing in mutual funds of the money market sort (funds with bonds) or a mixture fund of both stocks and bonds. Typically, bonds should have at least 25% of the portfolio pie, according to Benjamin Graham, and the rest in stocks according to Benjamin Graham who was recommended by Buffet as a highly influential and excellent author in financial investing. When the market is at a low—stocks have the greatest potential for ROI, and this is when you should have 75% of your portfolio in stocks and 25% in bonds. To take the contrapositive logically: if one were to allocate one’s funds to bonds, then an ideally desirable ratio is 25% to stocks. Of course, an in-between area from within this spectrum is entirely up to you. Remember to think about the market and to think about trends in industries and trends in people. What are people buying? What are they most worried about? And, most importantly, what do they believe is a worthwhile investment? 

Benjamin Graham categorizes investors into various “types:” a defensive investor whom does not have time to check his or her portfolio every day, and the aggressive investor who can invest daily and manage his or her portfolio; typically these investors are wealthier or simply have more money and time to play with, and they refuse to speculate and are open to conducting meaningful research about a company or a fund; though this notion that most investors share this wisdom should not be deduced by his advice, according to Ben. Graham, since he says investors continue to speculate and it is safe to assume that speculation will never cease. The defensive investor, on the other hand, invests in large cap. stocks, and the choices are picked typically by a broker after some dialogue, whom asks about your risk tolerance, always. One who invests in stocks with low p.e. ratios, small cap. stocks, and in the chosen preferred industry by meaningful research by the intelligent investor should be categorized as the aggressive investor, according to Ben. Graham. Growth stocks in already well-established though currently notorious companies which have a huge potential for a turnaround should be worth considering, as well. Ben. Graham categorizes this type of company, in the 70's mind you "willy nilly," by the market capitalization of it of which is in the billions of dollars. The intelligent investor, regardless of other types of entrepreneurial investors (who fail at escaping risky speculation,) he or she spends time analyzing companies as a “quasi-business.” He or she invests in small businesses that will do well, objectively and without bias.  This type of investor looks at small, unpopular, or large businesses “that are going through a time of trouble” in a prophetic way. This prophetic way is a lot like how NVIDIA stagnated and then grew considerably due to demand by gamers. The primary product of NVIDIA, their graphics cards, had not been considered to have more applications to machine learning, a.i., and other parallel computing tasks beyond what most people imagined--and this is what I call investment potential.

The intelligent investor is a lot like an inside trader when compared to the speculators, but without illegal data in company finances or necessarily an esoteric knowledge of how to make these products; to invest in computing, you do not need to be a computer scientist. As an intelligent investor, investing required intelligent guesswork and extrapolation of trends in a market but most importantly the rational, objective analysis of a security based on readily available research.  The decision to buy a security may feel like it is a mere hunch, but that is all that is required before buying a stock, like NVIDIA (which I bought,) and holding on to it without selling too early, since it had two-for-one split and skyrocketed to around $300 at its all-time high; my parents bought shares of it while for me while I was high school, a stock I chose luckily.  Do not sell early, even if you need to buy a car and have no means of transportation; If I held those stocks, I’d have hundreds of thousands of dollars (I sold them to pay for tuition at a university.)

Infinite death

The past is never out of scope in the day-to-day decisions--

The ideas of past's glories

Intoxicate our well-beings,

And the strong make weapons of words

To nurture their inner hawk better;

Time spent on ideas of considerable importance

escape from the cycle

and again do we forget

Of past cycle's ends that would go unhinge?

The sane insult while the insane take us to the fringe,

And we call the past the villain,

While it is misconstrued as sacrilegious rewritings

and while we beg for work,

we are denied the pointless high cars

that take us to an e’er higher status

off their high mountainous fluff to infinite depths.

In their day-to-day dealings, they thank themselves

For their job-well-dones,

While they pat themselves on their perfect backs,

Scratchless as though imperfect,

And we cannot look at themselves critically,

For the villains sing of our overlooked status’,

And my back is yet unrevealed,

So the master humbled had learned from our mistakes,

And he looked upon myself as a summoned ghost

A virus of uncanny resemblance to his deprecated past-times;

We relived the insane inconvenience of infinite deaths

And we laughed at our demons asking for another repeat,

So then they saw the future rain upon themselves again.

The end of this epoch forgotten, I distanced myself like they wanted—

The perfect universe they wanted—a desire burned upon our heads.

Yet they prepared us for our journey through time.

Retrogression

…and our dreams from which our realities are made,

After all, we should have listened to them;

We could have been of our own divining…

The layman is short but in his twenties, and

Long strands of black flow from his heart;

Two women sit in the shade, and they discuss it:

Who am I but everything he never wanted--

The person who makes ill-wills come true,

And, the bringer of misfortune and malintent.

I am the dreamer of men gone sane from obvious madness--

In the nightmares, our villainous are respected,

the heroes ignored, and the fiendishly frantic women

Submit to the surveyors who hide the rich's exact locations.

A man, called the May King, 

keeps track of those who be making out,

So that those who are closer to the truth never whisper in the ear,

And thus, he may continue to hide the true reality from humanity.

Years pass, and he sets in motion a plan that will make everyone feel well-accomplished,

even though no one has written a unique song, poem, or built something of high art in years,

so escaping the happiness offered from him to them,

a villainous intellectual who knows of his scheme to blind humanity hears.

He hears as his heart fills with want of escape his arms with rage, 

observing the women and men seeking ways of exploiting each other's lives

‘till earth itself gives no more and dies.

At the wrong time, the King of ignorance rises from his grave to power, 

and he wonders like a baby addicted to it's future death while in a guise.

He knows his opponents are villains of the New World;

after all, we have all met their manifested destinies and have achieved our fruitless happinesses;

No higher life exists according to him; 

Our mindsets were built on the sweats of pleasures and wars,

And we wouldn't be here for their courageous sacrifices.

But the May King would never say what he can say,

And the ignorant consign of a fantasy implies that truth is a complicit disease leading to further fruitlessness truthfully. 

The laymen women dine merrily at an exterior restaurant,

And I am at a balcony, listening to their melodies and musings:

The two women, particularly, serenade of the nuisances of their lives,

And the arrogance hated and the creepiness perceived by the May King.

They dialogue: I am your dark corridor in your delusional ignorance,

I cannot see him nor interfere,

And I cannot move to him or his city,

And illegally I cannot tie myself to him and say he did this

Of his own hands and rope.

But I do not love him, and I love myself,

in the dark, and in the silence;

I am the passive piercing music in the dark.

He sits in the rain and lacks everything I ever wanted,

for I was nothing itself, and he never said he loved me.

Eulogy - Grandpa Cook

Barney Cook, my grandpa on my mother's side (not-related directly,) passed away this morning, from natural causes. He served the armed forces in WW II, and he was a good man. He loved to sing, "I scream for ice cream," or its reverse meaning since he was a mathematician, when the time was right, and many other songs... When we were younger, he told us stories about his boy-scout years, but now I wish I asked more; the one story that I heard more than once was the day he couldn't solve a difficult calculus problem, in college, and then the night after he woke up--he had solved the problem in his sleep. He was a straight A student who went to the prestigious University of Chicago, and I think he was the top of his class. When I visited their Clear Lake cabin, he would give me math problems, and I would always learn something new, and he happily would answer my questions since math was his cup of tea. He had many great tastes in music--dixie chicks, Chopin, Mozart, Bach, but mostly whatever Grandma Laura liked. In my few years at Florida State University (he lived in Tallahassee,) he was exceptionally generous and he and Grandma Cook took care of me, helping me find work at various commercial locations. He loved my grandmother, his sisters, his kids, and us; but that was because he was an intelligent man; he was a nuclear physicist who invested in the Dogs of the Dow Jones Industrials, and in his last few years of his life, after his stroke, he liked to watch the news as much as possible, on T.V. He never liked the change of direction for this country and Trump. I visited my grandparents, often, and he not once became angry at me. I am almost certain that is what sucked the last mental energy from him, but he was 94. :(