The Price of Everything: Investing Through The Looking Glass. A book review by Ian Orton

Over the years Tim Price has amused, bemused and enlightened readers of thewealthnet, Money Week and The Spectator with his commentaries on the idiosyncrasies (or should it be idiocies?) of contemporary financial markets. He has also provided signposts for investors intent on preserving and growing their wealth to navigate safely the pitfalls that seem to be an endemic feature of financial markets.

A chief investment officer at three different wealth management firms who now runs his own firm, Price Value Partners, Mr Price has distilled his views about financial markets along with his investment philosophy in a new book called “Investing Through The Looking Glass: A Practical Guide To Irrational Financial Markets” .

In essence the book consists of two parts.

The first provides a sort of Socratic dialogue outlining the the problems faced by anyone attempting to successfully navigate financial financial markets without seeing their wealth evaporate. The second, and much shorter part, provides solutions to the problems
identified.

Long-term readers of Mr Price will recognise both the problems (banks, central banks, economists and financial theorists, fund managers and financial journalists) as well as the solutions (adherence to a classic Benjamin Graham value investing strategy coupled with allocations to trend following funds and gold within a diversified portfolio). Indeed, they may even recognise some of the text.

As always Mr Price writes beautifully and is always provocative and insightful. And just in case readers don’t have the stamina to complete the book Mr Price helpfully provides a 71 point Modern Investor’s Manifesto that encapsulates its essence.

Although it often feels that as a result of the actions of economic policy makers, and especially central bankers, it is much more difficult for investors to keep heads above water, the reality can be different.

Unconstrained by index-based benchmarks private investors are much better placed to grow their wealth, while maintaining its integrity, than their institutional peers. “Investing Through The Looking Glass” shows how this can be achieved.

The road to success may not be straightforward, however, especially if the investor follows Mr Price’s advice of following a value investing approach. Patience, and a long term perspective, are the essential attributes necessary to secure success. And these can be problematic for many investors as Mr Price acknowledges.

“Value investing sometimes requires patience for the market to wake up to the inherent value of listed businesses with the appropriate characteristics,” he writes. “This can be a problem for impatient investors, a point highlighted by the Canadian value investor Peter Cundill, who remarked that, “The most important attribute for success in value investing is patience, patience and more patience. THE MAJORITY OF INVESTORS DO NOT POSSESS THIS CHARACTERISTIC.”

Patience may also be required when it comes to using trend following funds (always assuming, of course, that one can access them in the first place). Some of the world’s most successful investors may have adopted a systematic trend following approach, as Mr Price helpfully points out. But the returns associated with this approach, though often significant, seem to have a habit, at least in recent years, of occurring over relatively short time frames.

The basic problem of using a value-based investment strategy, or indeed any approach that requires patience, is that the expected returns may not materialise within the investor’s time horizon, something anyone that has a pension fund and is close to retirement will realise all too well.

The corollary of adopting Mr Price’s approach to investing is that it must form part of a properly structured portfolio irrespective of whether or not markets are rational, something “Investing Through The Looking Glass” overlooks.

But for anyone that does have a long term perspective “Investing Through The Looking Glass” provides a roadmap for growing, as well as preserving, wealth.