Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations

Stock arbitrage involves making money from pricing differences from essentially the same thing. This book outlines some of the ways that Buffett had made money primarily by relying on differences in value over time. The goal is to minimize most of the risk, while still achieving significant upside. A lot of the items involve changes in companies. A large conglomerate my be priced as the company as a whole. If a section with a large upside is spun off, it could significantly increase in value. Buying the original company is a way to get it on the cheap. Similarly, an acquisition target can often be bought for less than the future acquisition price. A company switching to an MLP that will increase its dividend may be priced with the old dividend in mind.

These seem like fairly reasonable strategies. However, how applicable are they for a retail investor? The ideal time to pounce is when an action appears 100% certain to occur soon, yet has not been fully priced in the market. Are there many of these? Is there enough of a spread that a retail investor can profit with minimal risk? The book gives examples of Buffett's success in some of these, but there is no coverage of his failures. How valid are these today?

Einstein of Money

Benjamin Graham was patron saint of value investing. His book, The Intelligent Investor, still pops up on best seller lists, decades after he passed away. Other investors, such as Warren Buffett see him as a significant influence on their investing style. Graham's investing style puts the focus on long term value, regardless of short term market fluctuations. Depending on the dedication of the investor, they can employ screens to narrow down the the list of companies to consider. (Doing these screens were much more difficult a century ago when he started investing.)
Einstein of Money interleaves the story of Graham's life with details of his investing framework. The structure almost works. However, it is easy to get lost as it shifts gears. The writing style can also be very patronizing. The author revere's Graham, and is willing to brush aside his failures (especially with women and family.) He regularly talks about Graham's strong ethics, but does not spend much time in giving positive examples.
Graham was born into a fairly well-to-do Jewish family that had immigrated to the US. The temporary time in New York ended up becoming a permanent residence. The family was initially very well to do. However, they became impoverished as the family business failed and his father passed away. Ben learned to work and study hard and value money. He ended up attending Columbia on scholarship where he studied a multitude of subjects. He expected to go to law school, but ended up with a job on Wall Street. He had great success, eventually starting his own firm and weathering through the great depression. He eventually retired to California, where he taught a class at UCLA on investing. In his "spare time", he had many interests. He wrote plays, translated a book from Spanish, and proposed an economic alternative to the gold standard. He did have trouble keeping a marriage together, and was married multiple times, eventually living the waning days of his life with a mistress. He lived most of his life comfortably, and continued to influence many investors, including Warren Buffett whom he hoped would continue to work at his firm after her retired. Alas, the "Oracle of Omaha" decided he would much rather be back in Nebraska once Graham was retired.

The Snowball

Warren Buffet is a rich midwesterner who has been obsessed with money from a young age. He grew up in Omaha and spent some time in Washington D.C. when his dad was a congressman. In both places he was working to earn money and have that money compound through investments. He then created his own fund to invest other people's money. He followed the conservative investing principals of Ben Graham (and even talked himself into Columbia Business School so that he could learn from Graham himself.) He was most eager to work for himself, and liked to take large stakes in companies. One company he bought was a New Bedford textile company, Berkshire Hathaway. He initially did not want to buy it, but he felt wronged and eventually took over the company. He would later say that it was one of his worst mistakes. However, that company would become the holding company for many other organizations.
The book portrays Buffet as a "country boy" who does not mind hob-knobbing with elites, yet is reluctant to venture out of his comfort zone. (He'd prefer to eat a hamburger and fried rather than Asian food while in Asia.) He knows what he is good at and sticks to that. He seems overly obsessed with money. However, he also wants to make sure his children can live comfortable but do not get undue benefit from their winning the "ovarian lottery". He realizes he was able to make a fortune due to being in the right place and working hard. However, he is in favor of inheritance taxes and other similar programs to share the wealth. People should be able to work on things that they are good at, but shouldn't have a life of idleness simply because of their birth. (He seems to be unable to stop working, in spite of "retiring" a few times.)