Cocktail Economics: Discovering Investment Truths from Everyday Conversations
“Successful investors are those who can pick the right investments for different economic conditions. It’s like matching wine with food. In this book, Victor Canto is both your star chef and sommelier. Don’t be afraid to put Cocktail Economics to work today. You’ll find that two-star investing has become a four-star endeavor.”
–Charlie Parker, financial maven and former Chief Financial Officer of Continental Insurance
“Victor Canto’s insight and uber-rational approach will forever change the way you look at risk and return. Perhaps equally important, he’ll make you a better economic and political thinker. No one has a greater understanding of how marginal changes in world economics and politics impact portfolio holdings.”
–Neil Rose, CFA, CIO Cadinha & Co.
“I count Victor Canto among today’s best and smartest investment advisors. He has made money in both the good times and bad for many a satisfied client. With this book, he has now done all investors, including myself, an important service: He has written a widely accessible book about the marriage of economics and investing, and the crucial ties that bind the two. It’s the story of how big ideas make the investment world go round.”
–From the Foreword by Dr. John Rutledge, Chairman, Rutledge Capital, LLC
What can moonshine, mountain climbers, power plants, salmon, football players, and well-known celebrities teach you about investing? More than you ever imagined!
Through entertaining, easy-to-understand anecdotes, analogies, and examples, Canto reveals why the most successful investment strategies reflect a balance of active and passive approaches. You’ll learn how to “read” economic cycles, identifying the specific asset classes most likely to outperform in tomorrow’s business environment.
Construct and optimize your winning investment plan, step-by-step, from start to finish!
MAKE HAY WHILE THE SUN SHINES
The case for predicting, forecasting, and timing
PASSIVE INVESTING? ACTIVE INVESTING? NO.BOTH.
Why you need to take both sides in the never-ending debate
ELASTICITY: CATCH IT IF YOU CAN
Putting industry behavior to work for you
CALIFORNIA, FRANCE, AND THE “LOCATION EFFECT”
Investing internationally in the age of globalization
TURN “SMOKE” INTO “SIGNALS”
Making the most of publicly available price data
YOUR PORTFOLIO VS. THE GOVERNMENT
Anticipating and responding to regulations and taxation
TILT TOWARD SUCCESS, ONE STEP AT A TIME
Build your benchmark portfolio, then optimize it for changing environments
Victor Canto reveals exactly how the economy affects markets and how to “read” business cycles so you can profit from every shift in the business cycle. Among the topics covered: investing internationally in the age of globalization; transforming price data into usable market “signals”; anticipating the impact of regulations and taxation; and more. From start to finish, Canto’s focus is practical, and his focus is simple: outstanding investment results.
Introduction: The Above-Average Opportunity xxi
Chapter 1: The Buy-and-Hold Connection: Investing Fundamentals, Courtesy of the American Homeowner, the American Dream–or Reality? 1
Chapter 2: Leaping the Transaction-Cost Hurdle: Sometimes It’s Easy, Other Times It’s Not 19
Chapter 3: Dressing Appropriately for the Stock Market: The Potential Payoffs of a Switching Strategy 31
Chapter 4: Catch Elasticity If You Can: An Introduction to Industry Behavior 47
Chapter 5: Putting High-Beta to Work: Industry-Based Portfolio Strategies 67
Chapter 6: California Is a Country: An Introduction to the Location Effect 83
Chapter 7: …And France Is a State: How to Invest Internationally in the Age of Globalization 99
Chapter 8: Pipelines to Our Investment Returns: How We Get What We Want, in the Amount We Want, and When We Want It 113
Chapter 9: Who Are You? Investor Profiles and the Case for Asset Allocation 131
Chapter 10: Your Benchmark Portfolio. . .and Beyond 145
Chapter 11: Turning Smoke into Signals: How to Make the Most Out of Price Data 157
Chapter 12: Making Hay While the Sun Shines: The Case for Predicting, Forecasting, and Timing 173
Chapter 13: The Fight Is On: How to Invest Properly Relative to Regulations, Inflation, and Taxation 195
Chapter 14: Ending the Never-Ending Debate: Active vs. Passive Investing and Why You Can Take Both Sides 217
Chapter 15: A Rational Walk Down Wall Street: Darting Between Passive and Active When the Odds Are in Your Favor 233
Chapter 16: Alpha Bets: The Case for Hedge Funds and a Greek Letter You’ll Want in Your Portfolio 247
Chapter 17: Tilting Toward Success: A Step-by-Step Guide to Above-Average Asset Allocation 265
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Leaping the TransactionCost
Dressing Appropriately for
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