Book Review: A Fool and His Money by John Rothchild

After reading a few less than satisfying books, I turned to a list of classics. Classics are classics for a reason: because they are good! I read over the long weekend A Fool and His Money by John Rothchild.

This book was published 20 years ago in 1988. If there were blogs back then, it would’ve been on a blog. The author John Rothchild was a journalist. In 1986, during a big bull market, he decided to take a year off, see for himself how he could make money with money, and then write a book about it. The subtitle of this book is The Odyssey of an Average Investor. With $16,500 from his book advance and the sale of a used car (equivalent to about $30k today), he went to banks, financial planners, and brokers. He attended investor conferences and met money celebrities. He visited the stock exchange in New York and spoke to traders, sell-side and buy-side analysts, and portfolio managers. He consulted an astrologer who gave him a profitable trade on S&P 100 options. He attended training classes for new stockbrokers. He played with stocks, futures, and options. Along the way, he chronicled his encounters and learned lessons in good humor (remember, he was a journalist). Let me just give you one excerpt. After learning there are Chartists who use stock chart patterns and Fundamentalists who screen financial ratios, he concluded:

If brokers favor any side of this debate, it’s Fundamentalism. Apparently, it’s easier to be a Fundamentalist when explaining losses. Those grievous events are more troublesome to Chartists, who must admit either that their charts were wrong or else that they misinterpreted the wiggles, both of which sound like mistakes. On the other hand, a Fundamentalist broker can simply say, “Your  stock went down because its fundamental value is not yet recognized by the marketplace.”

Throughout the book, Mr. Rothchild created a number of small tips for himself. Here’s Useful Tip Number 12:

“The more befuddled the investor, the more absolute certainty he’ll demand from his advisor.”

The book’s ending isn’t surprising, because you all know what they say about a fool and his money.

I enjoyed this book very much. It’s not a guide book per se, but you will learn after you laugh. Although I can’t write nearly as well, I’ve also been there and done that. I can relate to most of the experience he described in the book. I have account statements to prove it.

Perhaps Mr. Rothchild’s talent for writing on the financial subject was discovered after he wrote this book. He went on and became the co-author for Peter Lynch, the famous Fidelity fund manager. They wrote several books together, including the popular One Up On Wall Street.

Rating: ***** (Excellent). Placed on my recommended reading list in the “fun read” category.

The new paperback at Amazon is a little pricey at $22. If you can’t get it from your library, buy a used hardcover from third-party sellers for under $5 delivered. The laughs and lessons are well worth $5.

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Comments

  1. Frank Curmudgeon says

    A good review of a true classic. I think it’s a great time for us all to remind ourselves that there’s nothing really new under the Wall Street sun.

    If you liked A Fool and His Money, you’ll also like another classic reprinted in the same series, Where are the Customers’ Yachts? by Fred Schwed, (1940). It’s also as illuminating as it is funny and halfway through you’ll realize it’s not as dated as you at first thought.

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