Millenial Money, by Patrick O’Shaughnessy

I thought this book was very readable and enjoyable. Perhaps not very focused in its presentation, but I would be happy for my first book to be written at the level of this one.

  • Patrick does a very good job of making himself seem familiar to the reader, with anecdotes of his child’s birth as his deadline for finish the book, his failure to be admitted to any college, and his clueless start in the finance world. I think this is a great way to start a book giving financial advise, as it prevents me from thinking that he is out to get me somehow. The only negative about his approach is that, reading between the lines, I almost get the impression that he was able to get his start in finance thanks to his daddy. Not that any of this should affect a rational agent, of course…

  • The argument that bonds and cash are poor securities for young investors - “cash is trash”, he says - because the USD is no longer on the gold standard is a very interesting one.

  • I may be wrong, but volatility is never defined when he discusses “The Millenial Money Strategy” in Chatper 6, which is frustrating.

  • The book doesn’t seem to state this explicitly, but a central premise is that the market can be beat because many investors take the strategy of either (1) buying the market with market index funds or (2) letting their emotions get the best of themselves. On point (2) this may be true of individual investors not trading professionally, or even of professionals, but I am curious how quants and high frequency traders weigh in on this argument. On page 108, he says that “investor behavior […] has not change one wink since stocks were traded in […] the early eighteenth century.” Perhaps not, but FINRA and laws after the market collapse in 2008 have made exchanges far more automated, allowing algorithmic trading, which presumably has different behavior than that of human investors. On point (1), the claim is made that “[w]ithmore and more investors think that it is impossible to beat the market, there is more opprortunity for those seeking an edge” on page 76. It is backed up with a Warren Buffet quote, which does not satisfy me.

  • I feel the book reads like a bunch of points that I am supposed to agree with without thinking too hard about. This is irksome to me.

    For example, in the “Be Different” chapter, he discusses on pages 70 and 71 the disastrous performance of managed funds in the 2008 crash, followed by their miraculous performance after. First, I’m concerned about cherry-picking of the statistics. Secondly, the management fees of these funds are not discussed. Only at the end of the next chapter does he warn about fees associated with funds.

    On the plus side, Patrick does a good job of citing his references, which I appreciate.

    The absence of math is also a little frustrating for me. I would very much appreciate walked-through calculations on some of his claims, including all the details like management fees, fees to trade, and so on. But maybe that’s not the goal of this book; it would certainly read differently were that the case. I get the impression that developing these kinds of precise prediction skills are necessary for successful investing, not reading through a book and agreeing with its premises, essentially letting someone else do the thinking on my behalf. In fact this reminds me of the quote in the book by Warren Buffet about the value of having opponents who have been educated that thinking is worthless. I don’t think Patrick means to trick his readers, but I wish he would sound less certain about his not-super-mathily-backed-up claims.

Overall, the book is very readable and I enjoyed it. It taught me a lot of financial terminology and allowed me to peer into the mind of a professional investor. However, I would not want to put the advice of the author in place without dong my own research - including the math! - on it first. I just have a hunch that one cannot be a truly good investor without verifying the facts for him or herself.