Following our last post, here is the second half of the investment books list picked by Mark!
7. Inside the House of Money
Inside the House of Money, by Steven Drobny, focuses on global macroeconomic investing and the strategies used by fund managers. Similar to The Market Wizard series, this book is a collection of 13 interviews with some of the top performing mangers in the world. Personally, I’ve always been more interested in the macroeconomic side of finance and I found this book very informative.
The book delves into the different ways the mangers profiled in this book navigated through major world financial crises, including the 1997 Asian financial crisis and the 1998 Russian Ruble crisis. It’s particularly interesting to see how a single event from across the world can become an investment opportunity for global macro investors.
Oftentimes, investors only focus on the domestic market, without giving any thought to the way global economic trends affect them. With the recent withdrawal of the United Kingdom from the European Union, the subject of macroeconomic investing has never been more relevant and Inside the House of Money is a great place to start.
8. More Money Than God
More Money Than God, by Sebastian Mallaby, was recommended to me by a friend that’s currently working as an investment banker. The book gives you a rundown on the history of the hedge fund industry and introduces some of the most famous names in the industry. It also gives readers an insight into the dynamic and ever-changing strategies of hedge funds.
In contrast to recent arguments favoring passive investing over active investing, Mallaby states that hedge funds are the future of Wall Street and will continue to thrive in the upcoming years. He also argues against the efficient market hypothesis, explaining that market information and inefficiencies are some of the methods used by hedge funds to make money.
It’s worth noting that the book was nominated for the Financial Times and Goldman Sachs Business Book of the Year Award and was one of Wall Street Journal’s 10-Best Books of 2010.
9. The New Market Wizard
The New Market Wizard, by Jack Schwager, was the first finance related book I read prior to starting my internship at UBS. It’s a collection of interviews with traders that have a proven track record of overwhelmingly positive returns. It’s not just about stocks. The author also interviews traders that deal with commodities, currencies, and options. Some are well known, while others are less so, but they all give you a good idea of the different principles and thought processes of veteran traders.
Every trader in this book has his own method of trading and you’ll be surprised at how different these strategies are, some even contradicting each other. It should be noted that the book was released in 1992, prior to the implementation of Dodd-Frank Reform, which restricts depository banks from participating in proprietary trading. Nowadays, banks deal with client execution trades and work off of commission. Nonetheless, the advice in this book is still relevant to traders who are developing their own core principles and strategies; find which trader’s goals align with yours and modify your approach to the market based on that. Although I prefer this version, the prequel to this book, The Market Wizard, is worth checking out as well.
10. Value Investing: From Graham to Buffett and Beyond
Bruce Greenwald, the author of Value Investing, is famous for his executive education course on value investing at Columbia Business School. He is often referred to as “a guru to Wall Street’s gurus” and an expert in value investing. In this book, Greenwald covers some of the core concepts and techniques for value investing. He also explains the evolution of value investing and the modifications people have made to adapt to the new market environment.
The biggest asset to this book is the real-life examples provided by the author, in which he profiles 8 famous value investors, including Warren Buffett, and their methods of application of the core principles of value investing.
The book can be technical and complex at times, but if you would like to gain insight into the techniques of valuing and analyzing companies used by successful investors, this is the perfect book for you.
11. A Random Walk Down Wall Street
The underlying principle in A Random Walk Down Wall Street, by Burton Malkiel, is that markets are efficient and people are wasting their time and money trying to beat them. Malkiel makes some convincing arguments with plenty of examples from history, including the tulip mania during the Dutch Golden Age.
The author argues that stock price rises from disagreements among investors about the true value of a company. The inflation in price leads to a bubble, which eventually pops and reverts the stock back to its normal value. He’s also a big supporter of passive investing, recommending investors to avoid micromanagement and simply buy and hold market index funds.
Although I don’t necessarily agree with the author’s point of view, I believe that Malkiel and his support of the efficient market hypothesis mainly refers to large-cap stocks, where the market environment is extremely competitive with many players. There are still inefficiencies in the market where money can be made, especially with small to mid-cap stocks, commodities, and options.
As a trader, being well-rounded and having as much information as possible is the best way to succeed. Although the underlying principles in A Random Walk Down Wall Street go directly against the belief of many traders and fund managers, I believe it’s important to be aware of both sides of the argument. There are plenty of takeaways from the book, even if you disagree with what the author has to say. If anything, it should be a reminder for traders to tread lightly and never get carried away with the way the market is performing. If something is too good to be true, it probably isn’t.
12. Reminiscences of a Stock Operator
Reminiscences of a Stock Operator, by Edwin Lefevre, is a fictionalized biography of Jesse Livermore, a famous stock trader who started speculating in the bucket shops of New England in the late 19th century before moving onto Wall Street. Published in 1922, this book is a timeless classic that continues to inspire traders to this day.
The book delves into the emotions of a trader and how pride, greed, and fear play a huge part in driving the market. Oftentimes, the protagonist reflects on his trade mistakes and develops his own set of investment principles and guidelines to help him succeed. Although the market environment has changed significantly since the book was published, the human emotions described in the book still exist and continue to affect the market.
Many of the traders interviewed in Jack Schwager’s Market Wizard series cite this book as inspiration, and Alan Greenspan referred to it as “a font of investing wisdom.”
Mark is Keel’s Research Intern.
Mark developed an interest in investing when he placed top 10 in the school-sponsored stock trading challenge.
Following his service in the Air Force after his sophomore year, he worked as a Sales & Trading Intern at UBS before returning to school. He is a growth, contrarian investor, specializing in the consumer goods sector. He also writes writes as a contributor on Seeking Alpha. When markets are closed, he enjoys working out at the gym and watching the UFC with a cold IPA.
Mark is currently a junior economics major, minoring in business, at Cornell University.