Table of Contents
Acknowledgments xi
Introduction xiii
Chapter 1 Investing Is a Science 1
Apollo's Arrow Shot Crooked 2
Dionysus—More Than Just a Good Vintner 3
Use the Method, Not the Dogma 5
Careful with Categories 13
Could Math Be Wrong? 15
Reduction: Why You Can't Quantify Everything 19
Chapter 2 Investing Is a Discipline 27
Discipline, Discipline, Discipline 29
Sagacity: Seeing Isn't Believing 41
Understanding and Being Curious 48
Chapter 3 Human Behavior 51
Brain Basics 53
Brains on the Market 64
My, What a Terrible Memory You Have! 71
Bad Behavioral Finance 76
Behavioral Miscellany 79
Chapter 4 Sentiment and the Media 83
Sentiment Basics 85
News and the Media 90
What's Their Motive? 98
Tips and Tricks to Navigate the Media 100
Metaphors We Invest by 106
Chapter 5 How Stock Markets Really Work 113
Capitalism by Any Other Name 114
It's Complicated . . . A Crash Course in CEAS 118
The New Golden Rule 130
Oldest and Still the Best: Supply and Demand 139
Chapter 6 Forecasting, Part 1—The Principle of Probability 147
Forecasting Is Strange Alchemy 148
Types of Predictions 150
Probability Theory, or How Markets Are Nothing Like Coin Tosses 154
The Biggest Problem of Them All 163
Investing Lessons from Probability 165
Looking Ahead . . . 170
Chapter 7 Forecasting, Part 2 —Recognizing Patterns 173
A Pattern by Any Other Name 174
Stock Market Patterns 175
Patterns Through the Noise 179
It's a Game of Relative Expectations 181
Back to the Future: Using History to Find Patterns 187
Three Big Drivers 191
An Optimistic Note on Future Patterns 195
Chapter 8 Practical Portfolio Management 197
The Virtues of Heuristics 198
Goal Setting 199
Personal Goals 201
Portfolio Goals 205
The Top-Down Philosophy 210
Miscellaneous Heuristics 223
Chapter 9 The Nature of Risk and Navigating Markets in Troubled Times 229
Risk and Uncertainty 231
Financial Risk, or What Happens When You Assume 233
In Troubled Times 239
Parting Thoughts 253
Notes 255
Selected Bibliography and Further Reading 259
About the Author 269
Index 271
