Whenever I feel overwhelmed by the amount of noise coming at me through my computer screens, I read a book. When the new books on my desk don’t impress, I find an old book. That is how I came to buy a used, first edition of Bogle on Mutual Funds last year from Amazon for a penny + $3.99 shipping. John Bogle is best known as the founder of Vanguard who brought index funds to retail investors and changed the entire industry. Since most people just know him as the Index Fund Guy, I feel that he is under constant pressure to stay “on message” and only promote buy-and-hold passive investing.

But you know what? Even though many would prefer the world to be black and white, it isn’t. For a very long time, Bogle also ran and owned low-cost actively-managed funds like the Vanguard Wellington and Wellesley funds. To this day, a big chunk of Vanguard assets are actively-managed. Even recently, he has expressed skepticism about the trend towards holding more non-US international stocks.

When you read the circa-1993 material in Bogle on Mutual Funds, I feel like you get more of the “grey” Bogle. There is advice on how to pick a good stock mutual fund, even amongst actively-managed funds. There are some practical considerations for picking amongst asset classes. Of course, the main takeaways are still there:

• Index funds are a great invention for long-term investors.
• Low costs are very, very important.
• Low portfolio turnover and minimizing taxes are very important.

But the book also includes a lot of little nuggets like comparing dividend yield relative to interest rates. First, here is a chart from the book showing how S&P 500 dividends have grown steadily with inflation. Meanwhile, the yield from a bond may start out higher, but would remain be constant until maturity.

Unfortunately, defining what constitutes too high a price for dividends is a fallible exercise, one that must take into account not only the average historical valuations for stocks but the current valuations for other investment alternatives as well. History suggests that stocks are relatively expensive when the price paid for $1 of dividends is above $30 (i.e., a yield of 3.3%) and relatively cheap when the price paid is less than $20 (a yield of 5%). However, stocks may well be attractive at a yield of, say, 3.5% if there are compelling reasons to assume that their dividends will increase rapidly or if yields on other classes of financial assets are relatively unattractive.

In the example shown in Figure 2-5, buying a portfolio of stocks at a 3% yield rather than a bond at a 7% yield might not be a sensible investment, especially considering the incremental risk incurred in holding stocks. When stocks yield 4.5% and bonds yield 6%, that may be quite another story.

As of mid-2015, the S&P 500 dividend yield is ~2% and 30-year Treasury bonds are ~3%. The relative difference between the stock yield and the bond yield only 1%, even less than the 1.5% gap that he calls “quite another story”. This would suggest that (long-term) the S&P 500 is expensive historically, but still attractive relatively when compared to bonds at this point.

Anyhow, I bring this up is because Bogle on Mutual funds has just been republished as part of the “Wiley Investment Classics” series. (#TBT = Throwback Thursday.) It’s a great book and you could buy it to have it in Kindle format or to support Bogle, but you can also buy a used, 1st edition hardcover for $4 shipped. (Or borrow it from a library, but this is going in my permanent collection.) Unfortunately it is not a “revised” edition where the charts are updated or there is new investment commentary based on current market conditions. The only difference that I could find between my 1993 version and my 2015 review copy is a new 17-page introduction which mostly talks about the history of the book itself.

If you’re going to buy something new, I’d recommend their other Bogle classic – John Bogle on Investing: The First 50 Years – which is a compilation of his best speeches over the years going back all the way to his 1951 undergraduate senior thesis. I haven’t read that one yet, but I really enjoyed a similar compilation of Charlie Munger speeches.

Somehow I picked up a copy of The New New Thing: A Silicon Valley Story, which is a Michael Lewis bestseller published back in 1999 about the internet boom. The central character is Jim Clark, founder of Silicon Graphics (SGI), Netscape, and Healtheon/WebMD. That means Clark started three separate companies in three different industries that were all worth at least hundred of millions of dollars to over a billion dollars. Although Silicon Graphics has since filed for bankruptcy and younger folks probably don’t even know the same, for a while it was one of the most prestigious places for computer engineers to work.

It’s been over 15 years since the dot-com boom, and reading it actually felt nostalgic to this 36-year-old, but as with any Michael Lewis book it was at least a good story. It was light on practical finance-related material, but as always I like to record my notes.

• The 1990s were a turning point where a young person with strong technology skills could get stupid rich. Before that, it seemed that you needed to work somewhere on Wall Street after showing off your Ivy League credentials. Even today, the smartest people want to be tech entrepreneurs. Geeks are cool and nerds can be treated like rock stars.
• Clark grew up poor and had a chip on his shoulder. He grew up poor in a small town in Texas with an abusive father. Now on one of his rare returns “home”, he buzzes the town in his private jet, has lunch with his mom, and then jets off again the same day.
• Jim Clark’s personality was perfect for this era. He had the smarts and street cred of a techie, but also the visionary skills and lack of self-doubt that made him a leader of other techies. Netscape was a web browser without a plan to make money (this was pre-Google!), yet it made Clark a billionaire. I liked this quote:
  

  Most people don’t enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do. And that is what Jim Clark did. From the moment Netscape made him a billionaire […] half the engineers in the Valley wanted to work for whatever company he started

• Rich men have a thing for big boats. Since Michael Lewis spent a lot of time following Jim Clark around and Clark was obsessed with his big-ass sailboat (which would barely fit under the Golden Gate Bridge), a lot of the book is somewhat boring stuff about trying to make a computerized sailboat called Hyperion. Then he commissioned an even bigger boat, Athena. Now go check out Steve Jobs’ super-yacht that cost over $100 million: Venus. Shrug.
• “If money is how your measure yourself, you’ll never have enough” is a recent quote that I came across, source unknown. But that’s pretty much Clark (and probably a lot of other billionaires to be fair). Before founding his first big company SGI, he said he just wanted $10 million. After becoming a multimillionaire, he wanted $100 million. After his Netscape shares hit $600 million, he wanted a billion. After the Healtheon IPO made him an after-tax billionaire, he wanted more than Larry Ellison ($13B at the time).
• The book ends with Jim Clark starting another business called myCFO, which was supposed to cater to all those new internet millionaires and help them manage their money without having to go with one of those stuffy, established institutions like Merrill Lynch or Goldman Sachs. myCFO ended up being sold off for “only” $30 million, but I think it was a precursor to modern non-traditional advisors like Wealthfront which also specifically targets Silicon Valley engineers.
• Jim Clark’s more recent ventures since the publishing of this book have much been less exciting. The only one I hard heard of is Shutterfly, and he was really only involved with the funding. It appears that now he’s just enjoying life with his big boats and family.

Another thing I’ve been getting into this summer is grilling over 100% natural hardwood charcoal. My gateway drug was Alton Brown’s Steak on Coals recipe. The smell and flavor brings me back to my childhood, even though technically that was a pile of Kingsford with tons of lighter fluid…

So I agreed to a free review copy of a new cookbook called The Big-Flavor Grill: No-Marinade, No-Hassle Recipes, written by chef Chris Schlesinger and Cook’s Illustrated executive editor John Willoughby.

The basic premise of this book is to save you time and energy by avoiding marinades, brines, or complicated sauces. Instead, while your grill is heating up you smear on a pre-rub, and after the food is cooked you add on a flavorful sauce. You do all the prep in the 30 minutes or so that it takes your charcoal to heat up (preferably with a cheap chimney starter to avoid lighter fluid). Here are some sample recipe names, unfortunately I couldn’t find a sample full recipe online:

• Five-Spice Steak Tips with Grilled Pineapple and Sweet-Sour Sauce
• Coriander-Crusted Pork Skewers with Maple-Mustard Barbecue Sauce
• Chicken Breasts with Maple-Soy Glaze and Peanut-Ginger Relish
• Spicy Curry-Rubbed Lamb Kebabs with Grilled Peaches
• Cumin Seed–Crusted Shrimp with Charred Corn Vinaigrette
• Fish Steaks with Sriracha-Basil Butter

Did the pre-rub + sauce work? Well, yes and no. I didn’t have to marinate or brine. The food tasted good. Can some citrus and herbs brighten things up easily in a pinch? Yes. But I still had to make a special trip to the store to get all the ingredients for my exotic sauces, so that took time. Marinating is basically just doing the same amount of work ahead of time and letting it sit there overnight. Yes, planning ahead is harder but so is shopping for all those ingredients. Is that extra convenience worth the decrease in taste, tenderness, or juiciness from no marinating or brining? I’m not sure.

I found the true benefit of this book is that it reminded me that simple grilled food is great all by itself. For every section, they have something called “Super-Basic” XXX, where XXX is everything from steak to shrimp to corn to cherry tomatoes. And you know what? I liked the grilled shrimp straight-up off the grill more than the shrimp plus ginger/lime/sesame sauce because the sauce made everything a bit soggy. Grilled blistered tomatoes, grilled mushrooms, grilled asparagus… all great with just some olive oil and salt. Grilled peaches, grilled avocados, smokey and awesome right off the grill. I guess I’m a simple guy.

The cookbook itself looks great in hardcover, with good photography inside and the pages are thick and feel high quality. It would make a good gift for the busy grilling enthusiast. I don’t think it’ll be a timeless classic, but I will definitely keep this book around for the Super Basic XXX recipes to provide inspiration on Friday nights when I am short on time and want to cook outdoors.

In the end, just grill baby! It feels special but costs very little extra. I use a simple $30 Weber Smokey Joe grill and real charcoal can be surprisingly cheap too. After reading Omnivore’s Dilemmna by Pollan I think cooking from scratch at home is overall better for both my wallet and health.

I received a review copy of this book for free from Blogging for Books. If you are a blogger, check them out for some free review books in your niche.

Update: Yanking this one from waaaay back in the archives! Today (6/4) only, the Kindle eBook version of The Four Pillars of Investing is only $1.99. I read this book nearly 10 years ago, and I still have my hardcover copy sitting on my bookshelf. One of my favorites.

My original review published on December 26, 2004:

While A Random Walk Down Wall Street was more of a primer on investing in general, The Four Pillars of Investing by William Bernstein focuses on forming your portfolio. The four pillars are investment theory, history, psychology, and finally investment business.

The book uses statistics and research to support it’s conclusions, which are (briefly and in my opinion) that:

1. Markets go up and down, but timing it is hard if not impossible, and any success one may have is basically luck.
2. As risk increases, so does the return. (Ex. Small-cap stocks vs. Large-cap stocks.)
3. Yes, many actively-managed mutuals fund beat the market every year, but there is no way that you could pick them ahead of time. This year’s winners are just as likely to be next year’s losers. Stick with index funds with the risk-return profile that you desire.
4. Brokerage firms and stock brokers make their money on commissions and spreads. Most mutual fund companies are similar in that they make their money from fees, without actually being very good at market-beating returns.
5. Proper diversification in low-expense ratio products can bring you the best chance to keep your money and make it grow.

The book is pretty easy to read, with minimal math. I also briefly browsed Bernstein’s previous book, The Intelligent Asset Allocator, which has a similar focus but is very heavy in the math department. I’d read this book first and see if you thirst for the mathematical underpinnings. I didn’t.