Reading Minds and Markets: Minimizing Risk and Maximizing Returns in a Volatile Global Marketplace [Hardcover]

Before you go any further, ask yourself two key questions. First, how much time are you willing to devote to managing an investment portfolio? Second, how much money are you capable of managing yourself?

These two questions are important because Jack Ablin's "global macro" strategy is not for beginning investors nor is it for people who are not able to make running their portfolio one of their core activities. Implementing Ablin's strategy will require a substantial amount of planning and setup activity and, depending on how complex your models become, probably a significant time commitment once things are up and running.

In addition, you must be able to commit enough capital to the strategy to make all the work worthwhile. The global macro strategy would be an insane amount of effort for portfolios that are smaller than the minimum initial investment (typically somewhere between $250k and $500k) for a customized account run by a professional manager.

OK--if all that didn't make you too discouraged--let's say you're game to check out the strategy. You'll find Reading Minds and Markets to be a good primer on how many big money managers, such as private bankers and high-net worth advisors, make asset allocation decisions. Ablin describes, in fairly broad terms, the five macro factors he uses to select asset classes, countries, and economic sectors. There is some useful discussion about edge and why it's important to invest globally, but the main focus is on explaining the key data that drive his strategy and tactics. It is left to readers to move themselves beyond these first theoretical building blocks and actually build a robust and useful model. Ablin doesn't provide much guidance on choosing benchmarks, portfolio diversification, or risk management either.

Bottom line: Reading Minds and Markets describes, at a 30,000-foot level, an investing strategy that is used by professional money managers. As such, the book will be most useful for readers who have some experience managing their own portfolios and are ready to move beyond indexing by rote, choosing individual equities on gut feel, or relying on mutual funds. Also, keep in mind that this book is just a starting point and doesn't contain the sort of granular detail a full how-to guide would have as a matter of course. 3.5 stars, rounded up to 4 for to a data-centric, hype-free approach to investing.

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Additional books to read if the global macro strategy appeals to you:
The Only Three Questions That Count (Fisher)-another top-down strategy
Unconventional Success (Swensen)-all about asset allocation from the manager of Yale's endowment
Trend Following (Covel)-why bother forecasting and building models?
Beyond Greed and Fear (Shefrin)-influential book about behavioral finance
Fooled by Randomness(Taleb)-were you good or were you just lucky?

This was a good read. Sometimes when I pick up books by veterans of Wall Street they can become so mired in "Streetspeak" that the thing ends up reading like a textbook. That was not the case here. Ablin's book reads more like an interesting newspaper or novel. If you are intelligent and comfortable with the markets but you do not work on Wall Street, this book is going to work for you.

Ablin accurately identifies the major misconception among small investors that the way to invest is by stock picking. He spends a good deal of time showing the futility of the exercise for any little guy because he is up against highly sophisticated investors in NY and elsewhere. Instead he teaches why focusing on the big picture is best and how that is the path best taken by prudent do-it-yourself investors. One of the things I really liked was the author's intense effort to remind the reader that this is not a get rich quick book. He lays out how his strategy of identifying what he calls "metrics" is for finding long term trends for various asset classes in an attempt to ride multi-year type moves. If you want to know if you should buy IBM or McDonald's you have the wrong book but if you want to decide between the US market and foreign markets this is the guy. I think both weekend warriors and the pros would be well served to crack open this book.

The best thing I can say about this book is that it is a quick read. It is tough to write a good investment book nowadays; the average retail investor is fairly well-informed. But this book adds nothing to an introduction to investing, and as an introduction it is a half baked mix of ancient cliches. They either (i) dialed it in, or (ii) they do invest this way, in which case, this is *exactly* why you shouldn't let some professionals manage your money (specifically, when they bring almost no discernible originality or insight to the table): they don't mean you harm, they haven't had an original idea in a long long time.

Specific deficiences include:

* He promises a new world of "global macro" then spends exactly two pages on international markets. There is no insight here into global or macro. (you'll want to admire the shiny globe on the cover because that's the last global thing you'll find here)
* The asset allocation offered is absolutely ancient: decision 1 is "stocks or bonds," decision 2 is "which kind of stocks (foreign is listed but no insights), decision 3 is which sector or style (style + sector), decision 4 is which funds. That's fine, but brings nothing new to this framework and nothing on alternatives (commodities) or options or ETF (okay a half page, not helpful). In other words, the asset allocation strategy here is both ancient and not really actionable. I dare you to actually construct a portfolio with this recipe.
* Here is the worst problem, in all seriousness: because this is offered as advice and because the advice is absolutely routine, this is a recipe for following the crowd. I wouldn't mind that if it were fundamental, value-based strategy that truly does minimize risk but the metrics include P/E. His promotion of P/E metric as-it-appears is so lazy (bordering on malpractice) that your average finance undergrad can surely write you something more informative about the modern use of P/E ratio. To promote P/E ratio investing (buy low PE) without some meaningful color or detail (his incessant equivocation doesn't count!) on the associated challenges (e.g., which flavor? earnings-based distortions? benchmarking challenges?) is not good.

* The first factor (momentum) is probably important, but as it equivocates without meaningful guidance, it is absolutely not actionable.

* Also, as the author works in private banking, the total omission of suitability (i.e., recognizing the portfolio needs to adjust to your individual needs and risk appetite) and tax perspectives is just unforgivable.

... I am not criticizing the strategy per se, but rather the lazy presentation of a half-backed strategy. If liquidity, momentum, and P/E ratio are seriously your metrics, you should take them seriously.

...and don't get me started with the Fed model...I understand there can be a debate and some will use it to allocate, but lordly lord, you've got to situate these ancient metrics against their devil's advocate.

The book is filled with equivocations (follow the trend but be careful; buy low P/E but be careful it's not always right). Equivocation per se adds no value; investors already know that no rule is iron clad. You gotta be specific.

In short: a breezy brochure of an aging sort of asset allocation, sans global, sans alternative perspectives; promotes P/E, momentum, Fed model; not a single fresh insight; not informed of modern practices; if it were a formula (and thankfully, it isn't specific enough to be actionable), it would be a formula for following the herd, or the herd running thirty years ago.