11 of 14 people found the following review helpful
Douglas B. Moran
- Published on Amazon.com
Vine Customer Review of Free Product
The explanations in the book are for absolute novices (details below), that is, people with no previous interest in investing. But I just don't see such a person having the time and money to implement the advocated strategy: The description of the number of metrics you need to understand, gather data for and monitor seems to be a full-time job, if not more. And having to invest in a range of stocks within industries, within market categories (large cap, small cap) and within markets themselves (domestic, OECD, developing, emerging) would seem to involve a portfolio of well over a million dollars. Aside: Another reviewer here--Korava (July 27, 2009)--makes similar observations, but estimates the minimum portfolio at $250-500K.
Might an individual investor try to implement a rough version of this strategy within a mutual fund family that allows no/low-cost transfers? Maybe. But the book assumes investments at the granularity of individual stocks and doesn't touch upon the issue of having multiple "baskets" of stocks whose compositions are controlled by someone else with different objectives. And there is still the significant knowledge and effort required of the investor. Similarly for ETFs.
Might this book be a good introduction for someone who has suddenly acquired a large portfolio, such as an inheritance, and needs to choose and then interact with a professional investment advisor? Probably not: There is no advice relevant to this aspect.
This book has the feel of an extended version of the sales presentation that the author would give to potential customers of his bank's investment services. It feels like it was dictated to McGee, who then had time to clean it up only the basics. One sign of this is that sections of the book come across as an infomercial. Another is that virtually all of the supposed "how-to" advice on implementing the strategy comes across as "This is so knowledge- and labor-intensive that it needs a team of professional analysts." The author repeatedly talks about how he and his team build a model and then assembled and analyzed data covering many years (typically about 20 years) to find a helpful signal. Note: This is about areas where the book says the investor needs to be working, not the areas where it (legitimately) points out that you cannot compete with professional analysts.
While the book makes an argument for this strategy ("You should"), it provides no help in even starting to pursue it ("How to"). The anecdotes mention various categories of data, but the book provides no advice on how an individual investor might get practical access to that data. For example, it talks about using the 200-day moving average. While it is trivial to check this for an individual stock, the strategy involves monitoring hundreds of stocks (owned and under consideration) as just a small part of what you need to do. Neither does the book mention, much less assess, any investing tools/services that are a good fit to this strategy.
How to use the data is almost always in the form of a basic definition and then a few anecdotes, as are the cautions about interactions ("Metrics A and B were giving me opposite signals about stock X so I realized C."), leaving the reader in the dangerous position of not knowing how much they don't know. In discussing using momentum, the author claims that the 200- and 50-day moving averages can be used to signal buys and sells. This is inexcusably simplistic advice, especially at a time like this: In a recovery, the momentum signaled can be that of the general stock market itself, not the individual stock. Even in normal times, these averages are unreliable signals and should be used only as a filter to alert you to stocks that warrant a closer look.
I normally read a book in one or two days, and I rarely stop within a chapter. This book took me two weeks to finish, and that was only because I pushed myself so I could write this review (to satisfy my obligation to the Vine program). I kept putting the book down because it wasn't telling me anything new or useful. Note: Books that cover old ground can be useful/entertaining if they cause you to think about things in a different way, for example, the interaction of two things you learned separately. I found none of that in this book.
---- Optional: examples on why I say it is written for an absolute novice ----
Half the book (6 chapters, 96 pages) is an introduction to investing based heavily on anecdotes (versus using anecdotes to make more memorable what has been presented). It will not help a novice get started, but by mentioning terms and concepts, it might reduce the memory load during subsequent presentations. However, I would recommend the novice simply skip this book and start with a better introduction.
This book repeatedly explains the events of 2007-2008 (housing crash, CDOs, credit freeze ...) as if it was new information to the reader. The sophistication of the explanations is at or below the level in the Main Stream Media (not including the serious financial press).
The chapter on "Metrics" starts by defining the term, then argues that metrics are important, and then providing a very few examples. I suspect that a reasonably intelligent novice would find this chapter obvious and worse.
Analogies that are mentioned but not developed, thus providing no explanatory or mnemonic value. Intent seems to be to simply reassure the (novice) reader. Examples: Building a portfolio and a house; the economy is like a ship; liquidity is like gasoline.