Review-Brainwashing of the American Investor is Entertaining

The best thing that I took away from this book is:

Selling

  • taking profits is good
  • selling too early is good
  • selling at a profit is good.

I really needed this advice and this book came at me with sledgehammer force.

Author Steve Selengut asked if I’d review his book and I agreed. I’m guessing it was because I had posted a review of Burton Malkiel’s “A Random Walk Down Wall Street” earlier in the year. It’s interesting that both books “slam” Wall Street’s schemes, but they do it in very different ways. Where “Malkiel” is even and fair, “Selengut” is totally one-sided (Wall St is BAD … period). Author Selengut is constantly whipping the reader into a frenzy with concrete examples of Wall Street’s “products”. It is quite fun, except when he slams the reader for buying into Wall Street’s greed tactics.

On a technical level “A Random Walk” says, “You can’t beat the Index … so join it”. Burton Makiel is a very credible guy and he provides plenty of examples of why you can’t beat the Street. The Brainwashing of the American Investor says that the “Index” doesn’t matter. Overall, I still can’t figure out why it doesn’t matter. The examples on this point do not stick with me ’cause at some point I need to be able to compare investment strategies. Also, there is no summary of Selengut’s QDI scheme, it is embedded in the overall story. The reader has to read the whole book. What a pain.

The best part of the book are the mini-stories of investments gone bad or evil Wall Street tactics. There are tons of them and there were many that I’ve experienced first hand. It is good to be reminded of them ’cause this is experience that most people don’t want to share. ( ie when we are really dumb & main-lining the kool-aid ) Everyone should know about these details.

The most difficult part of the book is piecing together the “Quality Diversification and Income” (QDI) strategy and trying to compare it to other strategies. In many ways QDI appears to be a formalized “buying on the dips” strategy. To limit risk one only buys S&P A-grade stocks ( this is considered low risk ’cause historically these stocks always trend up). But this is only presented anecdotally. It is interesting, but the author recommends spending over an hour per day on it. Even working on holidays. Good luck with that.

Very Sticky

  • This book is very sticky. It is so sticky that I thought it would be interesting to apply the Made to Stick SUCCES filter to this book. Here is what I found.
    • the book uses the six “Made to Stick” characteristics masterfully — it is almost clinical.
    • it is sooooo sticky that it makes me “skeptical”
  • Simple
    • Core thread is that Wall St is Bad
  • Unexpected
    • The Index doesn’t matter
    • That we are to blame for our greed and complicity with Wall St.
      • It’s not often an author will bash the reader.
  • Concrete
    • Loads of specific examples of … he won’t miss you. Hit me many times.
  • Credible
    • This is the weakest part of the book.
    • He is part of the industry and is bashing it.
      • I kept thinking — remind me why you are the good guy?
      • there is no question that his disection of Wall St buys him “some luv”
    • there is no summary of QDI and there is no “hard data” for QDI
      • it’s interesting, but if it were really this good wouldn’t there be an “evil Wall St” Mutual Fund selling it?
  • Emotional
    • Losing money with Stocks is very emotional
    • He has a emotional story for everyone one. No one will escape.
  • Stories
    • This book is full of little stories that capture the reader.

The Bottom Line

This books shock tactics are entertaining. The “under-the-hood” look at Wall Street “products” is valuable for all individual investors. The “sledgehammer-over-the-head” to remind the reader that Wall Street “products” are often “tantalizing” is necessary. The weakest part of the book is the QDI investment strategy. While QDI is fairly simple and seems worthy; there is no attempt at hard proof. Embedded in the text are some hints at nice returns, there are no promises, only hints of lotsa solid basehits. There is also a huge time commitment involved ( over an hour per day). In the end it feels like he is selling his services. Does that make him part of Wall St? I don’t know 😉

On my part, I’m glad that I got another kick-in-the-pants on the topic of Selling. Thanks Steve.

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2 Responses to Review-Brainwashing of the American Investor is Entertaining

  1. Thank’s for reviewing my book, I appreciate your comments… I had never heard of “sticky” before.

    QDI are portfolio design criteria, just one important piece of the investment strategy.

    Thanks, really.

  2. Iain Verigin says:

    You’re very welcome.

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