Falkenblog answers two critics of his book that found it did not have any implication for your average investor (I dont know why Falken feels that it is necessary that his book be relevant to individual investors). He starts by praising (and self-praising) his critics:
Aaron Brown, well, his investing take-away, I confess to not follow. So let me try again, because obviously anyone smart enough to buy and read my book is no fool, as this is all my fault.Then he tells the truth (the reaon I like him):
In the book I go into 'finding alpha' strategies, based on the fact good strategies are highly parochial, most people fail at such endeavors, and people lie about what they are doing.Then he gives a "30,000 foot practical investing application":
buy 'low risk' stocks, relatively. This can be done many ways: while keeping total beta at 1.0, maximizing the Sharpe ratio, or maximizing the Information Ratio. All of these are improvements relative to the S&P500 passive benchmark at orders of magnitude greater than the lift of going from active to passive equity investing. As long as the CAPM does not work, and I argue it does not because most investors are benchmarking, this implies such obvious investing tactics that basically focus on the low volatility, and avoid the high volatility.Well, this is also a "parochial" strategy, and I dont know if it is applicable to the TASE (Tel Aviv Stock Exchange). Here people are crazy and dont behave like in the USA. But in Europe, where investors are very conservative, it may succeed. The first pic shows TASE from 30,000 feet (SPOT satellite image) and below, from near.