The Only Three Questions That Still Count

Ken Fisher explains what the competition doesn't know

From investment expert and long-time Forbes columnist Ken Fisher comes the Second Edition of The Only Three Questions That Count. Most investors know the only way to consistently beat the markets is by knowing things others don't. But how can investors consistently find unique information in an increasingly interconnected world?

In this book, Ken Fisher shows investors how they can find more usable information and improve their investing success rate—by answering just three questions.

Packed with more than 100 visuals and practical advice, The Only Three Questions That Count is an entertaining and educational guide to the markets. But it also provides a useable framework investors can use now and for the rest of their investing careers.

• CNBC's Mad Money host and money manager James J. Cramer says the book "may be the single best thing you could do this year to make yourself a better investor"
• Steve Forbes says, "Investors will find this brilliant book an eye-opening, capital-gains producing experience"

The key to improving investing results is daring to challenge yourself and whatever you believe to be true, and Ken Fisher explains how in his own inimitable style.

Preface ix

Acknowledgments xix

1 Question One: What Do You Believe That Is Actually False? 1

If You Knew It Was Wrong, You Wouldn’t Believe It 1

The Mythological Correlation 8

Always Look at It Differently 15

When You Are Really, Really Wrong 21

2 Question Two: What Can You Fathom That Others Find Unfathomable? 31

Fathoming the Unfathomable 31

Ignore the Rock in the Bushes 32

Discounting the Media Machine and Advanced Fad Avoidance 33

The Shocking Truth About Yield Curves 38

What the Yield Curve Is Trying to Tell You 49

The Presidential Term Cycle 57

3 Question Three: What the Heck Is My Brain Doing to Blindside Me Now? 67

It’s Not Your Fault—Blame Evolution 67

Cracking the Stone Age Code—Pride and Regret 72

The Great Humiliator’s Favorite Tricks 85

Get Your Head Out of the Cave 87

4 Capital Markets Technology 95

Building and Putting Capital Markets Technology Into Practice 95

It’s Good While It Lasts 100

Forecast With Accuracy, Not Like a Professional 105

Better Living Through Global Benchmarking 113

5 When There’s No There, There! 131

Johns Hopkins, My Grampa, Life Lessons and Pulling a Gertrude 131

In the Center Ring—Oil Versus Stocks 136

Sell in May Because the January Effect Will Dampen Your Santa Claus Rally Unless There Is a Witching Effect 148

6 No, It’s Just The Opposite 155

When You Are Wrong—Really, Really, Really Wrong 155

Multiplier Effects and the Heroin-Addicted iPod Borrower 163

Let’s Trade This Defi cit for That One 170

The New Gold Standard 175

7 Shocking But True 185

Supply and Demand . . . and That’s It 185

Weak Dollar, Strong Dollar—What Does It Matter? 200

8 The Great Humiliator and Your Stone Age Brain 213

That Predictable Market 213

Anatomy of a Bubble 221

Some Basic Bear Rules 229

What Causes a Bear Market? 244

9 Putting It All Together 251

Stick With Your Strategy and Stick It to Him 251

Four Rules That Count 257

Finally! How to Pick Stocks That Only Win 274

When the Heck Do You Sell? 281

Conclusion: Time to Say Goodbye 289

Transformationalism 290

Appendix A: Causal Correlations and the Correlation Coefficient 295

Appendix B: News You Can’t Use 299

Appendix C: Greater Fools 301

Appendix D: I Hate Funds 303

Appendix E: Annualized Versus Average 307

Appendix F: The Wizard of Oz and an OZ of Gold 309

Appendix G: 1980 Revisited 313

Appendix H: Popular But Problematic 317

Appendix I: Covered Calls—Covering What? 321

Notes 323

About the Authors 329

Index 331

Ken Fisher is best known for his prestigious "Portfolio Strategy" column in Forbes magazine, where his over 27-year tenure of high-profile calls makes him the fourth longest-running columnist in Forbes's 90-plus year history. He is the founder, Chairman and CEO of Fisher Investments, an independent money management firm managing tens of billions for individuals and institutions globally. Fisher is ranked #263 on the 2011 Forbes 400 list of richest Americans and #736 on the 2011 Forbes Global Billionaire list. In 2010, Investment Advisor magazine named him among the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the award-winning "Cognitive Biases in Market Forecasting." He has also published eight previous books, including bestsellers The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget (But People Do), all published by Wiley. Fisher has been published, interviewed and/or written about in many major American, British and German finance or business periodicals. He has a weekly column in Focus Money, Germany's leading weekly finance and business magazine.

Lara Hoffmans is a content manager at Fisher Investments, managing editor of MarketMinder.com, a regular contributor to Forbes.com and coauthor of the bestsellers The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget (But People Do).

Jennifer Chou graduated from the University of California with a BS in finance. She was a research analyst of global capital markets and macroeconomics at Fisher Investments.

In his groundbreaking bestseller, The Only Three Questions That Count, investment expert and longtime Forbes columnist Ken Fisher taught investors to question traditional investing wisdom, interrogate long-held market beliefs and, most importantly, to challenge themselves. And now, in The Only Three Questions That Still Count, he's back demonstrating that the path to better investment results remains knowing what others don't.

Most investors know the only way to consistently achieve investing success is by knowing things that others don't. Yet many investors believe they don't or can't know what others don't—so they continue making market bets based on "conventional wisdom." In the updated edition of The Only Three Questions That Count, Fisher debunks the conventional market myths that many investment decisions are based upon. And he reveals a methodology that allows investors to discover unknown or underappreciated information—information that can form the basis of a market bet.

And the methodology is as easy as asking three questions. The first helps you see things as they really are. The second question helps you see things other investors often miss. And the third will help you keep your unruly brain in line. Investing is a non-stop query session—this book hands you tools that should serve you the rest of your investing career.

Thoroughly revised and updated, this new edition features new content and updated graphs and data. Packed with images, practical advice and anecdotes that show Fisher's ideas in action, the book helps you question how you think about the market, its component parts and even individual stocks. Taken together, Fisher's three questions can help you make better investment decisions by identifying what you—and you alone—can know and how you can profit from it.

The key to better investment returns is daring to challenge yourself and what you believe to be true, and in The Only Three Questions That Still Count, Ken Fisher explains how, in his own inimitable style—giving you the tools you need to outthink the market.

Learn the three simple questions that can help improve your investing success

Most investors understand that the best way to improve investing success is by knowing things others don't. But how can you consistently find new and unique information in an increasingly interconnected world? In The Only Three Questions That Still Count, the revised and updated new edition of Ken Fisher's investment bestseller, he teaches you a methodology you can use right away to find unique information—and the basis for a market bet. Fisher's methodology is simple—a set of three questions you can use to avoid common errors, find information others miss and gain control of your brain. Filled with images, anecdotes and practical advice to help you every step of the way, The Only Three Questions That Still Count is essential investment reading from a true expert and the ultimate guide to gaining the edge to leave your competition in the dust.