The Behavior Gap – Book Review

The Behavior Gap

I just finished reading The Behavior Gap from Carl Richards. There is no other way to put it, its a great book! The book is an easy read and Carl shares his insight working as a financial advisor/Certified Financial Planner and the observations he has made over the years of how people make the same mistakes over and over. This book is an ever-green read that will stand the test of time as it is generic enough to hold true now or a decade from now.

About the Author

Carl Richards is a certified financial planner and the director of investor education for the BAM ALLIANCE, a community of over 130 independent wealth management firms throughout the United States. He is the creator of the weekly Sketch Guy column in the The New York Times, and is a columnist for Morningstar Advisor.

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The Richest Man In Babylon – Book Review

I recently finished reading the book Richest Man in Babylon, a book by George S Clason. There were some interesting parts in the book, and I thought it was a decent read for someone who isnt aware of their personal finances and struggles with it. I realize that there are plenty of folks out there who struggle with grasping the concept of saving and investing and fall into the traps of overspending their hard earned money. However, I just couldn’t figure out why this book is so popular and recommended by one and all. Don’t get me wrong, I thought there was some value in the concepts outlined, but anyone who spends a little bit of time thinking about personal finance can figure these concepts out and there are plenty of other resources available in these days, that can educate starters more easily. The book is also elaborate with quasi-repetitive stories, which I thought was unnecessary and could’ve been wrapped in less than half the pages dedicated to the stories.

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Windfall – Book Review

Windfall from McKenzie Funk is a fantastic new book that I have been reading over the past couple of weeks – and it has been awe-inspiring and an eye-opener on a lot of subjects. This book is a must-read for all investors to understand the business of climate change. The book is unique in that Funk travels to dozens of countries following the money, exploring and reporting from the frontlines.
About the Author:
McKenzie Funk is an award-winning magazine writer and a founding member of the global journalism cooperative Deca. His stories appear in Harper’s, National Geographic, Rolling Stone, Outside, and The New York Times. Website: www.mckenziefunk.com

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Retire With Dividend Growth – Book Review

Retire With Dividend Growth: A Better Way is the second book from Dan Mac where he enlists the steps for the readers in order to ensure a good & comfortable retirement plan. Dan Mac runs the blog at Dividend Growth Stock Investing, and provides some great reading material on a regular basis.

Summary

The book starts off with presenting the case for dividend growth investing while pointing out some flaws in William Bengen’s 4% rule and why dividend growth investing is a better strategy. As readers of my blog know, I am a big fan of dividend growth stocks…maybe its confirmation bias, but I agree with the listings made by Dan Mac on why retiring on income produced by dividend growth stocks is better than other strategies. An excerpt from the book on the limitations:

• The biggest concern with the 4% rule is that you will run out of money when you most need it. You shouldn’t accept the possibility of running out of money when there is another strategy that can almost guarantee you never run out of money.

• Following the 4% rule requires you sell more of your investments when they are undervalued and sell less when they are overvalued. When investing, this is the exact opposite of what you want to be doing. There is a better way in which you will be making smarter investment decisions.

• If you want to leave an inheritance behind, the 4% rule reduces quite drastically the amount you will be able to pass on. Why work so hard your entire life creating a nest egg and then not be able to leave anything behind to your loved ones? There is another strategy that will have your family thanking the heavens that you were such a financially astute investor.

Why Read This Book?
Financial education and planning for your retirement is an important aspect of life that is missing from the education system. The onus is left on you, as an individual, to teach yourself on how to plan for the long term and build an investment portfolio to provide during the golden years of your lives. Books like the one in question are a great way for people to get introduced to the idea of long term planning and think about investments and take matter into their hands instead of hoping that the government would take care of their retirement via pensions.

This is an easy book to read and understand. The book also provides a chapter -by-chapter exercise to follow and work out the numbers for each reader’s case. The reader is walked-thru with the  whole planning process of determining estimates, creating shortlists of stocks and which metrics to use, account types, asset allocation with extra notes on a balanced portfolios, emergency funds, when to sell stocks etc. Dan Mac also importantly notes that the maintenance of the retirement plan involves minor adjustments as a life-long process. The book wraps up with steps to  take care of, when its time to retire – with a good discussion on tax planning for your sources of income; and managing the portfolio during retirement and passing on the fortune to your children.

Recommendation
For long term investors, I recommend this book as it provides with some good overview of investment strategies and things to keep in mind while building your portfolio. However, if you are a seasoned dividend growth investor, a lot of the information may come as something you are already familiar with. The book also takes a very education-oriented approach, so other dividend growth investors can learn a thing or two about how to educate others about dividend growth.

Retire With Dividend Growth: A Better Way is available on Amazon for $4.93. Click here to buy.

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The Truth About the Drug Companies – Book Review

The  Truth About the Drug Companies: How They Decieve Us and What to Do About it is a controversial book from Dr. Marcia Angell. The book tries to expose the big pharmaceutical companies by showing the reader how they generate massive profits.

Summary

During her two decades at The New England Journal of Medicine, Dr. Marcia Angell had a front-row seat on the appalling spectacle of the pharmaceutical industry. She watched drug companies stray from their original mission of discovering and manufacturing useful drugs and instead become vast marketing machines with unprecedented control over their own fortunes. She saw them gain nearly limitless influence over medical research, education, and how doctors do their jobs. She sympathized as the American public, particularly the elderly, struggled and increasingly failed to meet spiraling prescription drug prices. Now, in this bold, hard-hitting new book, Dr. Angell exposes the shocking truth of what the pharmaceutical industry has become–and argues for essential, long-overdue change.

Why Read This book?

Healthcare sector is one of the hottest sectors in the market and I am bullish on the sector going forward. The pharmaceutical subsector is one of the most, if not the most, profitable industry of the economy. The aging populations in the western world, increase in diseases in the populations across the world coupled with rise of newer diseases discovered provide this sector with a bright future. I picked up this book to get a better understanding of how Big Pharma works and generates its profits. This turned into a great read, albeit a bit repetitive where the author goes on case after case to illustrate the industry’s operations. Nevertheless, the book provides a rich resource with plenty of references to illustrate such points.

Takeaways From the Book

  • Big Pharma has HUGE margins. The author shows how a drug that is shown to cost $800M for development really turns out to be approximately $100M.
  • The same drug costs more in the US than other parts of the world because the market can support it.
  • So, why do you think drugs are expensive? Did you say R&D? The pharmaceutical industry spends enormous amounts of its money on marketing and “educating” the public – which is just another way of covering marketing and propaganda costs as R&D.
  • Most diseases follow this path: (1) Understanding the disease; (2) Discover and develop a promising chemical composition to cure it; and (3) Commercial development and marketing.
    1. Understanding the disease: Most research is performed by National Institute of Health (NIH) and the leading universities across the world. NIH is an agency of US Dept of Health and Human Services and is completely funded by the US taxpayers. Big Pharma enters into the picture after a disease is well understood which can take anywhere between a few years to a few decades.
    2. Discover/Develop a promising chemical composition: It is usually universities and small biotech firms that discover a chemical composition that sounds promising.
    3. Commercial development and licensing: Big Pharma signs up as licensed manufacturers and distributors taking over from the universities and small biotech firms.
    4. It is at this point that the Big Pharma patents the drug, runs clinical trials in multiple stages and pushes for FDA approval, commercial development and sale to the public.
  • Patents are a big part of the Big Pharma’s expense and source of revenue protection. It is an expenses because drugs usually have to be patented before running trials. Its difficult to keep the recipe a secret once its out in the public domain. Once a drug is successfully trialed, the companies push for fast approval from FDA as they have time limits for the exclusivity due to patents, after which generic drug companies can start releasing copy-cat drugs.
  • The me-too or copy-cat drugs need to only show that its effective against placebo not older drugs once patent has expired. Drugs coming off patents usually just remove or tweak the inactive ingredient and get a new patent. Then its just a matter of “educating” doctors and patients of the better drug.
  • Changing a disease condition can create or expand the market for drug manufacturers. The author lists how a new market was created by defining a pre-hypertension for people just under the threshold for the hypertension drugs. Similarly, the cut off for cholesterol has been lowered over the years to expand the market for cholesterol drugs.
  • The book also discloses extremely controversial and shocking testing conditions where the drug companies take up on the US governments offer of extending patents by 6 months when the study includes children. The drug companies have been reported to test drugs to combat conditions such as heartburn, premenstrual conditions etc which do not affect children in any way.
 

Recommendation

From an investor’s perspective, this book does not really provide any direct correlation for how or what drug companies to invest in, but provides a fantastic internal view of how the drug companies markup their products and have grown their influence. If you invest in the healthcare sector, this book is a must read. Even if you do not, it is a great read for a part of the economy and industry that directly affects our livelihood in one way or another. Granted that the book is written to be controversial to generate a buzz and increase sales, and most arguments presented are one-sided, I think its still worth the readers time and money.