Viskanta, Abnormal Returns

Tadas Viskanta, whose well-respected and heavily-followed blog Abnormal Returns is a blend of aggregation and analysis, has entered the world of print. I am happy to say that Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere (McGraw-Hill, 2012) lives up to the high standards of his blog. It manifests his keen curatorial skills; he knows how to sift the wheat from the chaff and to present the reader/investor with what he needs to know, no more and no less.

Viskanta won me over already on p. xi when he wrote, “becoming a merely competent investor seems like a worthy goal.” When I first started trading I decided I needed a mantra and chose “competence.” I overlaid the word on a chart, printed it out, and put it in a cheap little frame. A friend stopped by and inquired what it was all about. When I explained, she said, “Well, you certainly have set a lofty goal for yourself!” Actually, I think my goal was lofty. After all, two key meanings of competence are “a specific range of skill, knowledge, or ability” and “sufficient means for a comfortable existence.” So don’t knock the goal of becoming a competent investor.

In about 200 pages of text Viskanta discusses risk, return, equities, fixed income, portfolio management, active investing, exchange-traded funds, global investing, alternative assets, behaviors and biases, smarter media consumption, and lessons from a lost decade. His 20 pages of notes are a great bibliography for those who want to dig a little deeper into particular topics. I, for instance, followed up on his discussion of skill versus luck by reading the sources he cited (papers, blog entries, not books).

I think that what distinguishes Abnormal Returns from most books on investing is that Viskanta rarely talks in generalities. He zeroes in things that trip investors up and provides concrete examples to help the investor. For instance, referencing Atul Gawande’s work The Checklist Manifesto in his chapter on active investing, Viskanta writes: “Checklists don’t dictate what a trader does; rather they ensure that what a trader is supposed to do in a trade gets done.” And, he continues, “The hallmark of a well-designed trading system may be the actuality that a checklist can be created.” (p. 90)

In a section on noise, the author moves almost seamlessly from Fisher Black’s article “Noise” to the noise of business news channels and then on to the personal finance magazines that “have been running articles with titles like ‘10 Stocks to Buy Now’ for ages. These articles are not much different from the ‘10 Ways to Drive Your Man/Woman Crazy in Bed’ articles that festoon the magazine covers next to your checkout aisle at the grocery store. Both magazine covers appeal to our more base instincts: in one case greed, the other lust.” (p. 165)

Although I would never go so far as to say that an investor should have only a single book in his financial library, Abnormal Returns (plus an Internet connection to flesh out many of the ideas presented here) might satisfy the minimalist book collector. It definitely should be a core holding in an investing library.