Monday, February 1, 2010

Investment Related Books

  • Lynch, Peter, and Rothchild, John. Learn to Earn: A Beginner's Guide to the Basics of Investing and Business, 1995. A good place to start for the true novice. Written at a level anyone can understand.
  • Malkiel, Burton A. A Random Walk Down Wall Street, 8th ed., 2003. A must read for anyone seriously interested in understanding investments. Extremely well-written, humorous, and well documented. A thorough reading of Malkiel will give you a good understanding of the world of investments and finance. This is a book you will want to save for a long time.
  • Lynch, Peter, and Rothchild, John. One Up on Wall Street, 1989. Lynch's first book on Wall Street. Read what he says on page 165 about stocks with high P-E ratios: "If you remember nothing else about p/e ratios, remember to avoid stocks with excessively high ones. You'll save yourself a lot of grief and a lot of money if you do."
  • Lynch, Peter, and Rothchild, John. Beating the Street, 1993. Lynch talks about how a grade school class picked winning stocks, just by paying attention to what was around them, and beat most of the pros.
  • Haugen, Robert A. The New Finance: The Case Against Efficient Markets, 1995. Value Stocks (low price to book value) consistently yield superior returns, with lower risk, than do growth stocks (high price to book). It appears that the cheap companies are those in trouble, and in competitive markets many of them eventually turn around. The expensive stocks are those which have been doing great, but entry erodes their profits and brings them back down to reality.
  • Fischel, Daniel. Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution, 1995. An alternative view of Milken and the "decade of greed." Argues that Milken was railroaded by a conspiracy of ambitious prosecutors and corporate leaders who felt threatened by Milken. The book gives good insight into Milken's long-term impact on corporate restructuring.
  • Buffet, Mary, and Clark, David. Buffettology, 1997. A good synopsis of Warren Buffett's approach to what is called "business perspective" investing. Mary Buffett, the former daughter-in-law of Warren Buffett, details Warren Buffett's journey from Benjamin Graham to Philip Fisher and Charlie Munger and to his own synthesis of how to choose stocks.
  • Shiller, Robert J. Irrational Exuberance, 2000. In reading Shiller's descriptions of past speculative bubbles, one has the rather eerie sense that we are reliving what we have gone through before. Shiller does a masterful job of detailing those factors, economic and particularly psychological, that lead to speculative booms.
  • Siegel, Jeremy J. Stocks for the Long Run, 1998. Siegel demonstrates convincingly that stocks have outperformed other investments by a wide margin, at least over the past, in U.S. markets, with a broadly diversified portfolio, and with a long time horizon. This book, as much as any other, provides the basis for the "Gospel of Stock Market Investing," the good news that if you just put your money in stocks and hold on for the long run you will come out ahead.
  • Smithers, Andrew, and Stephen Wright. Valuing Wall Street: Protecting Wealth in Turbulent Markets, 2000. Tobin's q, expressed as a ratio of market value of stocks to the replacement cost of their underlying assets, appears to be mean-reverting over long periods of time. When q has been very high, as it has been recently, stock returns over the next ten years have tended to be low.
  • Lowenstein, Roger. When Genius Failed: The Rise and Fall of Long-Term Capital Management, 2000. John Meriwether, of legendary fame from Michael Lewis' Liar's Poker, combined with two Nobel Prize winners to amass a huge pool of capital and then convinced banks to lend much more for investment in their hedge fund. Then excessive leverage and a series of improbable events brought it crashing down. A fascinating story of hubris run amok and how the Fed at last had to intervene in an impending crisis.
  • Lewis, Michael. Liar's Poker: Rising Through the Wreckage on Wall Street, 1989. A fascinating story of life on Wall Street, at least as it was in one firm twenty years. Michael Lewis describes how he entered Solomon Brothers as a young trainee, how he mastered the game and rose through the ranks, and then how he left a bit jaded.
  • Lewis, Michael, The New New Thing: A Silicon Valley Story, 2000. Here Lewis describes, through the career of Jim Clark (Silicon Graphics, Netscape, and Healtheon), how the "new economy" firms were able to raise vast sums of money from venture capitalists well before they had any real prospects for profit. This turn in financing set the stage for the rise of the dot.coms and then for the collapse of so many of them.

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