Readers reviews of MASTERS OF THE MARKET Second edition

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The updated edition has two new features. The first is three new interviews. Each of the new people have different approaches to investing in the market. The second feature is the updates with most of the original people interviewed in the book. The update covers a period when the Australian market has been in a sustained bull run. Some of these struggled to keep up with the 75% return delivered by the market in the period between the publication of the first and second editions of this book.

Two years is a short investment horizon so it can only be expected that some of these masters would under perform the raging bull market. Most invest on a five to ten year view so they will perform despite these short term hurdles. It makes for interesting reading. Losing money in a bull market is not a skill most of us which to emulate.

Review of the first edition
With a mixture of personal background, reminiscences of specific investments and a broad outline of investment strategies, this is an interesting book. For the first time readers have a good insight into how the more successful funds and funds management industry operates in Australia. Some of the people interviewed are well known, while others are only recognised within the industry. The techniques used range from an aggressive trading approach and corporate raids as part of an investment strategy, to long term bets on industry sectors and traditional American derived investment strategies.

The interviews reveal the links in the tightly knit Australian funds management industry. Australia is a relatively small market and it is easier to make large waves with modest amounts of capital under management. Deep liquidity becomes a very significant factor in decisions. Good contacts with company management and other personal industry links play a significant role in the investment decisions.

The interviews show how the industry makes decisions and how these funds use fundamental investment criteria to make investment decisions. There is very little room for technical analysis approaches in these funds, and perhaps coincidentally, very little discussion of risk control. When asked what it takes to make them sell an investment most answers revolve around taking profits rather than stemming losses. Only the most active trader of all the interviewees, Brian Price, highlights risk and risk management techniques. Anton Tagliaferro is the only interviewee who notes the difference between speculation and an investment which generates a steady income.

On one level, this book is interesting reading for what it reveals about the personality of these managers and the methods they use. Traders and investors are always interested in how others tackle the problems of the market.

On another level, the book delivers useful insights into investing models and portfolio management at a fund level. Readers cannot really look the emulate these tactics. In general the investment approaches are interesting, but their relative size in the Australian market, their deep pockets, and their impact on market behaviour makes it virtually impossible for private investors to emulate these tactics.

There are few Warren Buffet style tips here and the general impression created is that without the industry contacts and the professional knowledge gained from years of experience that it is almost impossible for an individual to do well in the market. The people interviewed in the book have the runs on the board but for most readers these people are running in a completely different ball game. The not altogether surprising conclusion is that mums and dads should leave it to the fund managers to invest their money.

The book is useful on a final level. By understanding the motivation, behaviour and operation of these successful fund managers we are in a better position to identify their activity in the market. For investors who want to ride on the coattails of good fund managers, this is very useful information. It is also useful information for traders because it sets a background against which their trading takes place. When funds are involved in a stock it lends a different character to the price behaviour. This creates different sets of opportunities, and modifies the risk in these trades. Trading success depends on better understanding of the market and this book makes a very useful contribution to an area that is little explored in Australia.

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