The Deipnosophist

Where the science of investing becomes an art of living

My Photo
Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

16 August 2009

Reading Minds and Markets - a review

I begin with the end: Reading Minds and Markets, by Jack Ablin (with Suzanne McGee), is worthy of your time and money; for it, unlike many investment books, captures especially ably the dynamic nature of the investment markets.

From his view "30,000 feet from the ground," Jack Albin shares his insights re investing and investments. Rather than provide a simple list of investment rules, Jack takes his readers on a schematicized journey through his investment career; along the way, he subtly disabuses this or that methodology, fundamental, technical analysis, valuation, and Nassim Taleb's Black Swan included. What worked, what did not work, what methodologies he disposed of and why, and which methodologies he retains to this day.

Jack's investment methodology is atypical of most investment managers, due to its humility...

"Your edge [as investor] lies, ironically, in your willingness to acknowledge that as an individual investor you're at a big disadvantage when it comes to unearthing not only the stock market's buried gems but even the most straightforward and solid investment strategy. Firms like Fidelity Investments... can well afford to pay six-digit salaries to each of their 150 or so in-house research analysts in the hope that each of them will find at least one brilliant idea amid the thousands of global businesses..."
The passage above reminds me of Peter Lynch ("Buy all the stocks in a sector, if you like the sector." Etc.), which Jack confides one page later.

A few quibbles, despite this book's overall excellence. The author confuses:
• "May" for the correct might;
• "Like" for the correct such as;
• Subjunctive tense (or mood);
• The plural form of index (indices, not "indexes");

• Attempts, not altogether successfully, a Warren Buffet-ish folksy manner.

But those quibbles are just that, quibbles. More important is his confusion re the Super Bowl indicator. In fact, it is the dichotomy between the original NFL vs AFL, not the re-configured NFC vs AFC. But of no matter, for it is a silly indicator.

Jack admits he has little use for fundamental, valuation, or technical analysis. Why should he if he buys entire groups and sectors, even asset classes? It is beyond the scope of this review to
defend any of these methods of analysis, but I have always wondered why otherwise intelligent people recoil at the mere mention of technical analysis.

I believe I finally understand, though. Technical analysis places crowd behavior (which it measures and quantifies) to be superior to the insights and actions of a single investor. While possibly smarter than anybody, he or she is not smarter than everybody -- and thus offers no tangible differential advantage -- and which I suspect galls intelligent people. "I am intelligent, so I must stand apart from the crowd." The oddity for Jack Albin is that fully 80% of his primary methodology is technical analysis.

Despite this quirk, I end where I began: You will not regret your decision to buy and read Reading Minds and Markets. The book helps readers learn what they might not already know, and reasserts foundational principles and methodologies for more experienced investors.
-- David M Gordon / The Deipnosophist


who's online