HERE ARE 22 BOOKS EVERYONE MUST READ
Back in November, top Wall Street strategist Dylan Grice
announced that he was leaving his post at Societe Generale. As Grice prepares
to move to his new venture, he put together a series of his reports that were important
to him in his "intellectual journey". Among the essays were book
recommendations he made from 2009 through 2012. Book lists, according to Grice,
became a SocGen tradition during former co-head of global strategy James
Montier's time at SocGen.
We put together all 22 recommendations which include
financial books that changed the way Grice views the world and some of his
recent recommended beach and rainy day reading. It also includes a fictional
title.
MANIAS, PANICS, AND CRASHES BY CHARLES P. KINDLEBERGER
Kindleberger's "history of financial calamity"
is a no brainer for Grice. He says the book is great not just because of its
content and structure but because it was ahead of its time in saying that
markets are not rational and for fitting historical facts into Hyman Minksy's
framework. "It is the best single book on how financial markets actually
behave and if I could recommend only one book to understand finance it would be
this."
THE ESSAYS OF WARREN BUFFETT EDITED BY LARRY CUNNINGHAM
"For pure timeless investment wisdom I don’t think
there is a better book than this abridged version of Warren Buffett’s letters
to Berkshire shareholders. The healthy influence one would expect from
Buffett’s early mentor (Munger has had a greater influence later in Buffett’s
life) is ever present: a subsection is dedicated to the story of Mr. Market,
Ben Graham’s mental framework for dealing with the price fluctuations which are
so often fatal to the best laid plans; another is called ‚Intelligent
Investing.
But Buffett and Munger’s thinking not only updates that
of Graham and Dodd, it goes beyond it. It is therefore as pioneering in my
view."
REMINISCENCES OF A STOCK OPERATOR BY EDWIN LEFEVRE
Grice who isn't comfortable with the distinction between
investors and speculators and the positive and negative sentiment associated
with each respectively, he says LeFevre's book articulates the founding
principles of "intelligent speculation".
"A thinly disguised biography of legendary early
20th century speculator, Jesse Livermore, the accounts of the panic of 1907, or
of the Lusitania sinking of 1915, is riveting in themselves. But the real
richness of the book is in the principles it articulates. Though learned in the
markets of a century ago they remain as pertinent today because they are rooted
in the hardwired tendency to folly that is the human condition."
FOOLED BY RANDOMNESS BY NASSIM TALEB
"Taleb warns us to beware of confirmation bias. We
focus on the seen and the easy to imagine and use them to confirm our theories
while ignoring the unseen. If we had an urn with 999 red balls and 1
black one, for example, our knowledge about the presence of red balls grows
each time we take out a red ball. But our knowledge of the absence of black
balls grows more slowly. This is Taleb’s key insight and it has profound
implications."
THE CASE AGAINST THE FED BY MURRAY ROTHBARD
"Rothbard’s disconcertingly simple thesis is that
there is no need for a central bank. There is no need for a government monopoly
on the issuance of money and so no need for the monopoly issuer to set a price
(i.e. the central bank sets interest rates). Heavily regulated fractional
reserve banking creates a persistent bias towards unstable credit inflation and
therefore economic instability, while activist central bankers merely add to
the problem." Grice says Rothbard was too marginalized and deserved more
attention.
JUDGEMENT UNDER UNCERTAINTY: HEURISTICS AND BIASES EDITED
BY KAHNEMAN, SLOVIC AND TVERSKY
Grice said whenever he re-reads certain chapters of this
book he learns something new. This book shows that humans are flawed as
rational thinkers.
"‘Heuristics and Biases’ proves, for example, that
our preferences change when the context in which they arise changes, that we
see patterns in random data; that we are even more prone to see patterns in
random data when in possession of a theory predicting such patterns; that we
overweight outcomes we can imagine easily; that even though we prefer more
information to less we are hopeless at processing it; that we are hopeless at
gauging correlations until they are very obvious."
THE DRUNKARD’S WALK BY LEONARD MLODINOW
"The Drunkard's Walk isn’t just a book about how
deceptive randomness can be; it’s about our apparent emotional need to reject
luck as an explanation for the events shaping our lives and our world. I
actually found it a very uplifting book. It’s not just about probability or
even investing, but about life."
THE LITTLE BOOK OF BEHAVIOURAL INVESTING BY JAMES MONTIER
"A brilliant summary of behavioural finance written
by the guy who did more than anyone else to bring behavioural psychology out of
academia and into the investing community. It’s as punchy as you’d expect from
anything written by Montier, and with characteristic 'Little Book‛ conciseness."
MOBS, MESSIAHS, AND MARKETS BY BILL BONNER AND LILA
RAJIVA
"I warn you now: ‚Mobs, Messiahs, and Markets‛ by
Bill Bonner and Lila Rajiva is impossible to put down once you’ve started it. I
suppose it’s a book about mob psychology, but ... that just doesn’t do this
wonderful book justice.
Drawing on psychology, evolutionary biology,
anthropology, history, politics and economics, the authors - with trademark
humility and wit – develop, illustrate and warn with their theory of 'the
Public Spectacle‛."
GOLD AND IRON: BISMARCK, BLEICHRÖDER
AND THE FORGING OF A NEW GERMAN EMPIRE BY FRITZ STERN
"The book is about the unification of Germany in the
19th century, and the prominent role played by the relationship between
Chancellor Otto von Bismarck… This is a fascinating period in world history
anyway, but one reason I found this book especially rewarding was for the
parallels between events in Europe then with those we are seeing today in
Asia."
While some might be put off by the 600 page academic
book, Grice says it is easy to read just the sections you want because of the
way it is organized.
LORDS OF FINANCE BY LIAQUAT AHAMED
This is unlike any other book about the Great Depression
for three key reasons. First, it is written almost "almost as a biography
of the four most prominent central bankers of the day as they struggled from
one crisis to another". Second, it starts at the beginning i.e. WW1 where
the seeds to the problems of the 30s began. Third, it isn't U.S.-centered, it
is looked at as a global phenomenon.
THE MOST IMPORTANT THING: UNCOMMON SENSE FOR THE
THOUGHTFUL INVESTOR BY HOWARD MARKS
The book focuses on the downside rather than the
upside. "Much of the book is focused on conceptually isolating the types
of errors which are commonly made and managing the risks accordingly. One of
the most basic mistakes and one I think is most prevalent in our industry is
the reliance on forecasts."
EXPECTED RETURNS: AN INVESTOR’S GUIDE TO HARVESTING
MARKET REWARDS BY ANTTI ILMANEN
"Providing a rational framework for forming
realistic return expectations is the subject of this book. …Ilmanen doesn’t
restrict his analysis of available risk premia to asset classes. He includes
styles in his analysis too, such as value, volatility-selling, trend-following
and carry-trading."
RED CAPITALISM: THE FRAGILE FINANCIAL FOUNDATION OF
CHINA’S EXTRAORDINARY RISE BY CARL E. WALTER AND FRASER J. T. HOWIE
"I’m not sure how the authors managed it, but
they’ve turned frankly ‘challenging subject matter’ into a decent read. You
really get a tantalizing glimpse into the murky, haphazard and rickety edifice
which is the Chinese banking system."
CAESAR: THE LIFE OF A COLOSSUS BY ADRIAN GOLDSWORTHY
"This one is just a fantastic story, well told,
about one of the most remarkable lives ever lived, and in a time so distant
from our own on so many levels but identical in the most fundamental.
During the time of the Roman Republic which Caesar
brought to an end, the fabric of society was both weaved and torn by the pursuit
of wealth by many, the pursuit of great wealth by a few, and the subsequent
divisions caused as that wealth was distributed."
MR. SPEAKER! THE LIFE AND TIMES OF THOMAS B. REED BY
JAMES GRANT
"In his recounting the life and times of Thomas
Bracket Reed, James Grant rescues one of the most influential politicians in
American history… from what had hitherto been an undeserved near
anonymity."
Grice also says that's Grant descriptions of some of the
time's most famous events like the rigging of the 1876 presidential election,
the debate on the Gold Standard, and the background to war with Spain are
great.
GENIUS: THE LIFE AND SCIENCE OF RICHARD FEYNMAN BY JAMES
GLEICK
Grice has long been a fan of American physicist Ricard
Feynman and recommends this biography over others because of it's
comprehensiveness
RED PLENTY: INSIDE THE SOVIET DREAM BY FRANCIS SPUFFORD
Grice picks Spufford's part fictional part historical
work that centers on the failed Soviet dream of an idealistic economy.
"One thing the book very subtly gives is an appreciation of the
free-market, not with any great eulogy to free exchange (it’s not like reading
Ayn Rand), but rather by showing how difficult it is to replicate and
manipulate that most remarkable agent of self- organization: the market
mechanism."
SWAG BY JOE ROSEMAN
A book about 'real assets' by Grice's friend who has
tremendously influenced him over the years. These real assets are Silver, Wine,
Art and Gold (hence SWAG). This isn't just a plug, after all Roseman made him
buy a copy.
THINKING, FAST AND SLOW BY DANIEL KAHNEMAN
A study of the dual-process model of the brain that Grice
thinks is "for anyone compiling a list of absolutely 100% necessary reads
for new recruits into their firm, I’d have to put this book close to the top of
that list."
PAPER PROMISES: MONEY, DEBT AND THE NEW WORLD ORDER BY
PHILIP COGGAN
A book about the tension between the various roles of
money.
"It’s a very unusual financial history book in that
although it has a nice and pacey narrative (Phil writes the Buttonwood column
for the Economist), in another sense it has a degree of rigor most narrative
histories lack because it’s told using the simple but very powerful framework
of the debtors and creditor nexus."
SPECIAL MENTION - A CONSPIRACY OF PAPER BY DAVID LISS
This book is one a lighter read and is a detective story
set against the backdrop of the world's first global stock market bubble in the
1720's.
"Today that street [Change Alley] looks drab, grey
and anonymous. But it was one of the main theatres in which the drama played
out. If you’re like me and you wander around this town wondering what London,
and ‘Change Alley’ in particular looked and felt back then, you’ll love David
Liss’s book."
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