1. Beating the Street - Peter Lynch
2. More Money than God - Sebastian Mallaby
3. Dark Pools - Scott Patterson

The first book I read was Beating The Street by Peter Lynch. It's well written and helped me get some confidence and the right mindset.

I've been reading "Beating the Street," by Peter Lynch. At many points in the book he notes how various experts were predicting the next depression throughout the 70s and 80s.

Hey Matt, I've heard the Warren Buffett argument many times but it's usually misrepresented. Warren Buffett has said multiple times that if one has the skill to evaluate companies than they should pick individual companies and not choose an index fund because they will do far, far better with picking individual stocks. The problem is the vast majority of people are not skilled in evaluating companies and that's why Warren Buffett suggests them to choose a low-cost index fund.

I think though the main point of my previous comment was that many people (including posts that suggest everyone invest in only low-cost index funds and bonds) tend to underestimate the vast potential of huge returns in investing if one truly is an expert in investing.

Also, I suggest reading Common Stocks, Uncommon Profits by Philip Fisher and also Beating the Street by Peter Lynch. Both books are from legendary investors and will shed light that is different than the index fund approach/philosophy.

> Analysts have no way of knowing if good R&D is still going on or if sales figures are getting inflated.

Analysts are paid a lot to get this right. There are a number of ways to figure this out. I read, for example, of analysts counting cars in store parking lots. Peter Lynch of Magellan Fund fame talks a lot about getting this information via proxies in his book "Beating The Street".

If you follow corporate earnings reports, you'll often see the stock drop on seeing a report of good earnings that exceeded expectations. This is because the analysts got a whiff of a stink coming from the company that their long term prospects weren't so good.

If the corporation is larger, there is a LOT of money (billions of dollars) riding on correctly predicting future performance, and analysts who can figure it out get paid accordingly.

It's just not plausible that CEOs can routinely and easily fool these guys.

I don't know your friend so I can't say why he's right/wrong 50% of the time. But I'd say that's pretty typical with analysts in the financial industry. It's really tough to blend quantitative and qualitative analysis together, but IMO this is a requirement to make consistently good investment choices. I think this is the secret behind Warren Buffett. Most of Wall Street though tends to focus on the quantitative (and only a few quarters out) and they tend to be highly influenced by each other, trends and sentiment.

Again, I generally agree with the advice of going with low-cost index funds for the vast majority of people. However, I do think that there are some people (albeit not many) with the right background, skills, training and commitment who can consistently beat the markets (ie., this was the thesis of Peter Lynch's book Beating the Street).

Fannie and Freddie bought a lot of subprime. I had friends that worked there and told me so and I've read about it. Over the long term Fannie made a lot of people rich. Read Beating the Street by Peter Lynch. He made a fortune off Fannie. Taxpayers will pay, unfortunately.

http://www.washingtonpost.com/wp-dyn/content/article/2008/08...

Without Fannie and Freddie and the backing by the US taxpayer Wall Street would not have taken as much risk.