Ban This Book

Ask any investor what one book they should read, and an immediate recommendation will be forthcoming. Warren Buffett recommends The Intelligent Investor, Elon Musk recommends The Hitchhiker’s Guide to the Galaxy, Mark Cuban recommends The Fountainhead, and some guy from Humble Dollar recommends Business Adventures.

Sometimes when everyone is trying to tell you what to do, it can be very useful to know what not to do. Therefore I recommend every investor not read MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins.

My wife gave me a copy for Christmas a few years back. She was a fan of Tony and really dug his energy and positive attitude. She inscribed it “Perhaps a new approach?” Not sure if I read all 664 pages, but do remember being a little underwhelmed.

Why should it be banned? Well, let me count the ways:

One

I was walking down the street the other day, found a nickel, and even though I believe in the efficient market theory I picked it up. I was elated that I was now 5.3 cents richer. How is that you ask? Well, a nickel contains a little over 5.3 cents of copper (75%) and zinc (25%).

This as an “investment” was specifically mentioned to Tony by “hedge fund guru” J. Kyle Bass who stated he had purchased $2 million in nickels, “enough to fill up a small room.” Mr. Bass further expounded that the secret to unlocking the value of his stash is the eventuality of the US Mint changing the composition of the nickel and therefore making all the old nickels worth more than a nickel on the open market.

It is now over seven years later, and the composition of a nickel is unchanged as is the value of this specific investment - which is actually good news for Mr. Bass as three years back the price of copper and nickel dropped so low as to make a nickel worth only 3 cents. Currently the upside of this arbitrage is 6% at best, which if possible to close out today would yield a <1% annual return, less storage, insurance, and shipping costs. Note: the Code of Federal Regulations makes the melting of nickels, as well as pennies, illegal.

It all sounds a little wacky even for a man who advocates a path to success that lies across a bed of red hot coals.

Two

Ray Dalio, another hedge fund billionaire friend of Tony advocates the All Season Portfolio, as there are four possible seasons in the financial world: inflation, deflation, rising economic growth, and declining economic growth . . . get it? The fund consists of 30% Stocks, 15% Intermediate Bonds, 40% Long Term Bonds, 7.5% Gold, and 7.5% Commodities. All re-balanced annually.

Robbins mentioned that after he had back-tested the portfolio “I was astonished” which made me suspect that it was manufactured by backtesting - data mining permutations of asset classes until one was found with “superior” risk and return numbers.

What if I came up with an All Flack Fund that significantly outperformed the S&P 500 since 1920 and consisted of 23% in stocks starting with the letter “F”, 17% AA bonds with a maturity of 6.2 - 8.88 years, 29% Palladium, and 34% betting on the National League to win the All-Star Game. Would you invest?

It’s all more akin to alchemy than investing.      

Both Robbins and Dalio tout the performance of the portfolio by sharing various risk and return numbers but include only one direct comparison vs. the S&P 500, when it states “From January 1, 2000 - February 2, 2015, the All Seasons portfolio destroyed the returns of the market (the S&P 500).” A number of figures were cited, which taken as a whole were rather underwhelming. You can find a detailed list of its shortcomings here.

Also, the boys don’t explain how to invest your 7.5% in commodities. Is it owning the physical stuff, like nickel(s), or the futures markets - like coal, wool, or the azuki bean?

Three

It is filled with famous quotes. Now I love including pithy quotes in my writing that attempt to show my knowledge of philosophy, military history, and classic movies. Unfortunately, Robbins includes hundreds of them, everything from the goofy, “Welcome to the Jungle . . .” (Gun N’ Roses) to the banal “Remember the golden rule: he who has the gold makes the rules” (thankfully Unknown) to the really banal “Boredom comes from a boring mind” (Metallica).

Four

He then includes his own bold-faced quotes, such god-awful chestnuts as, “Remember this: anticipation is the ultimate power,”, “$574,464,” “Compound interest is such a powerful tool that Albert Einstein once called it the most important invention in all of human history” (as overused as it is apocryphal), “Have you ever noticed that no matter how much you earn, you find a way to spend it,” and my favorite “You have to move from just working for money to a world where money works for you.” There are so many, it’s like shooting bold-faced fish in a barrel - and now I know why most style guides do everything they can to prevent it from happening.  

Five

There is either a craziness or smugness that causes an author to include quotes from great investors that directly contradict the premise of his book.  

- “In [Buffett’s] famous 2014 letter to shareholders, he explained that when he passes away, the money in trust for his wife should invested only in indexes so she minimizes cost and maximizes her upside.”

- “We try and encourage people to go into index funds . . . Then they have the lowest costs.” - Charles Schwab.

- “As Ray Dalio told me emphatically, ‘You’re not going to beat the market. No one does! Only a few gold medalists.’’’

Now I’m against banning books even though it has again become quite fashionable, but . . . there are only so many books that I can read in my lifetime, and I’m upset with myself for the time wasted reading this one. Not as upset as I was after reading The Da Vinci Code, but close.   

Note: The quote from the band Metallica that is mentioned above, from the song The Struggle Within, is not “Boredom comes from a boring mind” but “Boredom sets into the boring mind”. There is nothing worse than "people that get the words wrong."