A Dozen Things I’ve Learned from Dr. Michael Burry about Investing

 

Dr. Michael Burry is the founder of Scion Capital. He was recently made famous with the general public as a character in the movie adaptation of Michael Lewis’ book The Big Short, but even before then he was famous in investing circles for his astute investing during times like the financial crisis of 2007. Michael Burry is portrayed in the movie by Christian Bale. The real Michael Burry started out as a part time investor and blogger and built his reputation and AUM with great results and original thinking. He is a physician by training and has diagnosed himself as having Asperger’s Syndrome. Burry is particularly interesting for investors in that he has adapted value investing principles to his personality, skills and nature. Like Charlie Munger did many years before, Burry found new ways for value investing to evolve beyond using the system to find “cigar butt” stocks. Burry’s approach indicates that value investing can work for technology and other stocks that people like Warren Buffet may invest in if circle of competence exists and the holding period is not as long that used by someone like Warren Buffett. Technology changes too much to adopt the same holding period as Munger and Buffett. What is Burry doing today? “Michael Burry is still managing a hedge fund named Scion and is still critical of the way the financial system is being run, but now he’s more interested in water than real estate” wrote the author of a New York magazine article who interviewed him in late 2015. Burry’s story demonstrates several important things. Most importantly, the power of being rational and the power of fundamental bottoms up research. It also demonstrates the huge value that permanent capital provides to a rational money manager since as Keynes once said: Markets can remain irrational longer than you can remain solvent. Even as rational as Burry is, it took courage to make and to hold on to the investments that made him famous. Being right, but too early, is indistinguishable from being wrong.

1. “My weapon of choice as a stock picker is research; it’s critical for me to understand a company’s value before laying down a dime. I really had no choice in this matter, for when I first happened upon the writings of Benjamin Graham, I felt as if I was born to play the role of value investor.” “Investors in the habit of overturning the most stones will find the most success.” “The late 90s almost forced me to identify myself as a value investor, because I thought what everybody else was doing was insane.” Burry has not completely adopted the ideas of Warren Buffett or Ben Graham and has instead developed his own approach that remains true to the fundamental bedrock of value investing. Burry’s example illustrates how it is possible to follow the value investing system and yet have your own unique style. Again, he is at his core a value investor. Burry makes clear in this set of quotes that he treats shares of stock as a partial ownership of a real business and that understanding any business requires research. You must genuinely understand of the underlying business. A share of stock is not a piece of paper to be traded like a baseball card. The movie version of The Big Short conveys that the style of Burry has a lot more stress associated with it than a Buffett approach, but for Burry it has worked out well financially.

 

2. “All my stock picking is 100% based on the concept of a margin of safety, as introduced to the world in the book “Security Analysis,” which Graham co-authored with David Dodd. By now I have my own version of their techniques, but the net is that I want to protect my downside to prevent permanent loss of capital. Specific, known catalysts are not necessary. Sheer, outrageous value is enough.”  “My firm opinion is that the best hedge is buying an appropriately safe and cheap stock.” “It is a tenet of my investment style that, on the subject of common stock investment, maximizing the upside means first and foremost minimizing the downside.” Burry reveals in these statements that he keeps the core value investing faith by always using a “margin of safety” approach. When Burry says: “Lost dollars are simply harder to replace than gained dollars are to lose” it is another way of saying what Warren Buffett has said many times: “The first rule of investing is: don’t lose money; the second rule is don’t forget Rule No. 1.” Joel Greenblatt agrees: “Look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.” Seth Klarman writes in his book of the same name: “A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world.” An investor who purchases shares in a business at a price that reflects a margin of safety can make a mistake and still do well financially. When Burry refers to “catalysts” he is talking about the events that I wrote about in my post on Mario Gabelli, who has said: “A catalyst may take many forms and can be an industry or company-specific event. Catalysts can be a regulatory change, industry consolidation, a repurchase of shares, a sale or spin-off of a division, or a change in management.” Burry, Buffett, Greenblatt, Klarman, Gabelli all think about margin of safety first. It is not an optional part of value investing.

 

3. “I try to buy shares of unpopular companies when they look like road kill, and sell them when they’ve been polished up a bit.” “Fully aware that wonderful businesses make wonderful investments only at wonderful prices, I will continue to seek out the bargains amid the refuse.” The third bedrock value investing principle is: Mr. Market is your servant and not your master. Howard Marks makes the same point Burry is making about the necessity of sometime being contrarian: “It is our job as contrarians to catch falling knives, hopefully with care and skill. That’s why the concept of intrinsic value is so important. If we hold a view of value that enables us to buy when everyone else is selling – and if our view turns out to be right – that’s the route to the greatest rewards earned with the least risk…. To achieve superior investment results, your insight into value has to be superior. Thus you must learn things others don’t, see things differently or do a better job of analyzing them – ideally all three.” Adopting the popular viewpoint will not result in market out-performance if the popular forecast is also right. Some roadkill is really roadkill, and some refuse is really refuse.  Finding an out-of-favor business selling at a substantial bargain and then waiting is the name of the value investing game. It is easier to say than do.

 

 

4. “If you are going to be a great investor, you have to fit the style to who you are. At one point I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham, but rather set out on his own path, and ran money his way, by his own rules.… I also immediately internalized the idea that no school could teach someone how to be a great investor. If it were true, it’d be the most popular school in the world, with an impossibly high tuition. So it must not be true.” “Ick investing means taking a special analytical interest in stocks that inspire a first reaction of ‘ick.’ I tend to become interested in stocks that by their very names or circumstances inspire unwillingness – and an ‘ick’ accompanied by a wrinkle of the nose on the part of most investors to delve any further.” In his book The Big Short Michael Lewis describes Burry’s view: “The lesson of Buffett is, to succeed in a spectacular fashion you have to be spectacularly unusual.” The movie version ofThe Big Short certainly portrays Burry as a very usual character due to his Asperger’s syndrome. Burry believes he has an advantage in the investing process since Asperger’s allows him to be more rational/less emotional.  There will be times when Mr. Market will offer up shares in a business at a price that reflects a substantial margin of safety, and to find that bargain wise investors try to find something that is out-of-fashion.  Burry believes there is no better place to look for something that is out-of-fashion than the “ick” category.

 

 

5. “I prefer to look at specific investments within the inefficient parts of the market.” “The bulk of opportunities remain in undervalued, smaller, more illiquid situations that often represent average or slightly above-average businesses.” “In essence, the stock market represents three separate categories of business. They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value. The preference, always, would be to buy a long-term franchise at a substantial discount from growing intrinsic value.” Markets are often efficient but that does not mean that they are always efficient. If you work hard at the research side of investing and are diligent Burry believes that bargains can be found. The bargains may not always be found within your circle of competence and may not be available for very, long but if you are aggressive and willing to act quickly Burry believes there are big opportunities for an investor.

 

6. “It is Buffett, not Graham that espouses low turnover. Graham actually set targets: 50% gain or 2 years. That actually ensures rather high turnover.” The actual Ben Graham quote from an interview is: “If a stock hasn’t met your objective by the end of the second calendar year from the time of purchase, sell it regardless of price.” This statement by Graham is not consistent with Warren Buffett’s view of the world, but it is perfectly acceptable for a value investor to do as long as the holding period is not so short that it falls within the definition of speculation. Burry feels comfortable buying stocks and other assets that Buffett would avoid. Both approaches are still value investing.

 

 

7. “Credit-default swaps remedied the problem of open-ended risk for me.  If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.” Burry is describing a classic example of positive optionality that I discussed in my post on Nassim Taleb: “Optionality is the property of asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny).” If you can buy positive optionality at a bargain price that investment can be very valuable. It is of course possible to overpay for optionality.

 

 

8. “A Scion portfolio will be a concentrated portfolio.” “The Fund maintains a high degree of concentration – typically 15-25 stocks, or even less. Some or all of these stocks may be relatively illiquid.” “I like to hold 12 to 18 stocks diversified among various depressed industries, and tend to be fully invested.” Burry is what Charlie Munger calls a “focus investor” since he concentrates his bets. For Burry, owning a small number of stocks in “various depressed industries” is enough diversification. This means he does not buy a dozen health care stocks. In other words, Burry diversifies based on categories.

 

9. “One hedges when one is unsure. I do not seek out investments of which I am unsure.” It is always wise to have what Charlie Munger calls a “too hard” pile and avoid investment about which you are unsure.  But this approach is especially important if an investor has as few as 12 stocks in their investment portfolio like Burry. One way to make peace with this approach and avoidhyperactive investor syndrome is to realize that you can be a successful investor by making only one of two sound decisions a year. Joel Greenblatt says: “Even finding one good opportunity a month is far more than you should need or want.”

 

10. “How do I determine the discount? I usually focus on free cash flow and enterprise value (market capitalization less cash plus debt). I will screen through large numbers of companies by looking at the enterprise value/EBITDA ratio, though the ratio I am willing to accept tends to vary with the industry and its position in the economic cycle. If a stock passes this loose screen, I’ll then look harder to determine a more specific price and value for the company. I also invest in rare birds — asset plays and, to a lesser extent, arbitrage opportunities and companies selling at less than two-thirds of net value (net working capital less liabilities). I’ll happily mix in the types of companies favored by Warren Buffett — those with a sustainable competitive advantage, as demonstrated by longstanding and stable high returns on invested capital — if they become available at good prices.”  Burry is not like Buffett in every way and not like Graham either. Burry shows how it is possible to follow the value investing system and yet have your own unique style. But he is still a value investor since he buys at a price that reflects a margin of safety, does not make Mr. Market his master and treats shares of stock as a partial ownership of a real business. Burry’s style is opportunistic and fits with who is he is.  You are not Michael Burry and neither am I. Most everyone is far better off investing in a low cost portfolio of diversified index funds.

 

11. “Volatility does not determine risk.” “I certainly view volatility as my friend. Volatility is on sale because 99% of the institutions out there are doing their best to avoid it.” “I will always choose the dollar bill carrying a wildly fluctuating discount rather than the dollar bill selling for a quite stable premium.” Michael Mauboussin has a wonderful description of volatility that I like a lot.

 

“A lot of value investors shun concepts such as volatility, or standard deviation, as a measure of risk — and I’m sympathetic to that point of view. That said, the notion of risk is very time-dependent. For very short periods of time, volatility is a pretty good way to think about risk. I have kids in college and I have to write a check for their tuition, so volatility is a very important concept for me. I want to minimize my volatility so I can make sure I can write that check. Or if you go out to an options desk and say, “Options traders, we’re taking away your measure of implied volatility,” they would actually be very much hamstrung. But if you take a long-term point of view, which most value investors do, then that idea of volatility melts away and, in fact, volatility becomes your friend. Risk then becomes the loss of permanent capital. You can bring these under the same tent by thinking about the temporal dimension.”

 

 

12. “Innovation, especially in America, is continuing at a breakneck pace, even in areas facing substantial political or regulatory headwinds.” Anyone involved in a real business or an occupation like medicine can see the pace of innovation in increasing not decreasing. That people are not buying as much capital equipment like machine tools is not evidence that innovation has slowed. That software is replacing capital goods is obvious to anyone paying attention to the real economy.  Innovation is racing ahead, but not all innovation is profitable. A simple way to think about disruption is to say that it happens when one business is able to harm or eliminate the competitive advantage of another business. It’s that simple. Disruption happens when a business creates innovation which reduces the competitive advantage of rival businesses. Innovation both creates and destroys competitive advantage and therefore profit. Consumers always benefit from innovation. Producers only sometimes benefit from innovation depending on whether the innovation creates or harms a moat.

 

UDAY

Does UDAY have the potential to turn out to be a SURYUDAY for Power Sector in India ? :: An Analysis !!

The Ujjwal DISCOM  Assurance Yojna (UDAY), approved by the union cabinet on November 5, 2015 will not only improve the capability of distribution companies. Beside this , it will also account to capital savings around Rs.12,000 Crore for Public Sector Banks (PSBs) as estimated by the Credit Rating Information Services of India Limited(CRISIL).

Why UDAY: 

• The Overall losses of the power distribution companies were estimated to be around Rs.62,000 Crore as of March 2015(estimated by CRISIL).
• This is mainly due to operational inefficiencies, discounted tariffs and subsidies, power thefts and leftover interest rates on the past debts.
• The companies were facing a total debt of about Rs.4.3 Lakh Crore and most of them are on the verge of bankruptcy. So the scheme launched for financial restructuring for these companies.

How is it implemented: 

• According to this scheme the Union government allowed state governments to take 75% of the debt (as of September 30) of the distribution companies owned by them and pay back the lenders by selling government bonds and for the remaining 25% the concerned companies will be issuing the bonds. 

• The State governments will be provided incentives which will allow them to borrow more from the Bond Market. The bonds issued by the state government are offered at a coupon of 8-9% and the rest will be reprised at the minimum lending rate of banks plus 0.1percent.

Positive Outcomes ? : UDAY scheme 2015 for power DISCOMS

1. It helps to reduce the financial pressure of the power distributioncompanies and reduction in cost of power.
2. It helps in improving the operational efficiencies and to provide clean and 24×7 power supply across the nation.
3. It enforces financial discipline in the companies.
4. This prevents the standing loans from converting to Non-Performing Assets.
5. It improves liquidity in the financial market.
6. This Scheme has the potential to wipe out losses of DISCOMS in Andhra Pradesh Telegana and Haryana by 2018. For the states of Tamil Nadu, Rajasthan, Uttar Pradesh Jharkhand and Bihar, loses will reduce. But the total elimination will only happen by the improved performance of the companies.

Now the first question why DISCOMs have accumulated huge losses?

There are three chief reasons for the accumulation of the liability:

1. Tariff hikes not keeping pace with the rise in costs.
2. Pilferage
3. Transmission losses.

How will UDAY improve the situation?

• UDAY attempts to buffer the finances of the distribution companies, or discoms, from the subsidies that state governments may want to provide for power. This is done by asking states to issue bonds to banks as repayment for discom dues. The states will now have to directly bear on their budgets the entire cost of the subsidies.

• It attempts to enforce discipline on States as it requires them to absorb a part of future losses of the discoms.

What is left out of UDAY?

UDAY is silent on improving the operational efficiencies.

Following ways can be adopted to improve the operational efficiencies:

• Smart metering.
• Upgrading of transformers.
• Separating agricultural connections at the transformer level.
• Use of efficient LED bulbs, agricultural pumps, fans & air-conditioners

(But it seems government is also working on this aspects !! )

Now lets move to ANALYSING the REFORM !!

lets go back a little !!

After the 2003 Electricity Act was passed by the Vajpayee government, the discoms were carved out of the monolithic state electricity boards across India at varying speed and efficiency. This last mile aspect of the power sector never had any central control given that electricity is an area of concurrent list in India. Since their creation, state governments running the discoms have routinely attempted to rope the central governments to underwrite their operational inefficiencies, given the importance of power supply as an instrument of politics. Twice the central governments have attempted to clean up the poor management of state discoms and both attempts were a failure.

• The first one came right at the time of generation, transmission and distribution functions decoupling which happened in the Vajpayee era.
• The second attempt was made by the UPA-2 government in 2012, via Financial Restructuring Plan or FRP. .

Both the plans focused largely on capital infusion into discoms, but like black holes absorbing all mass coming towards them, discoms continued to burn all cash thrown at them without turning profitable.

So how is UDAY different ??

Firstly UDAY is about Financial Restructuring and Not a Bailout. 

• UDAY is not a simple central government driven bailout programme which just gives cash to discoms and states without accountability.
• There’s a specific roadmap for debt restructuring and there are hard budget constraints imposed for participating in the programme.
• Once on board, the states will not be able to back out and the only prudent course of action for them will be to keep their side of the bargain – which is around driving operational efficiencies.
• The centre is allowing states to relax their Financial Responsibility and Budget Management (FRBM) Act 2003.
• Under UDAY, participating states will take over their public discom (private discoms are not allowed to participate in the programme) debt over two years with the debt benchmarked to September 2015. In 2015-16, they can take over 50% and in 2016-17 25% of the outstanding debt on their books.

State government BONDS as State Development Loans and not as Statutory Liquidity Ratio !

• Another great point about this plan with respect to the banks is that these state government bonds cannot be counted against banks’ statutory liquidity ratio (SLR) requirements – presumably the RBI was roped in for this provision already.
• While this will classify these bonds as state development loans (SDLs) available for sale in the bank books – currently overwhelmed by similar securities – over time, they can create a tradable market in these securities.
• This can be a good template for future, with a degree of market tempering built into what the discoms can borrow.

Regarding Value Chain reform !!

• Indian power sector has a very complex value chain – which involves fuel, fuel linkages, power generation, power transmission, power trading and financing, distribution, and end consumption.
• Different steps in the chain are owned by different parts of the central and/or state governments.
• UDAY ensures that the discom reforms are not just distribution centric, but positively impact various inputs and outputs to the distribution function, even those which are not owned by the centre directly.
• This is a big positive vis-à-vis the past discom reform packages.

Reforms relating to Operational Efficiency 

• UDAY compels the discoms to improve operational efficiency.
• The financial restructuring package will be based on a loss trajectory agreement where the discoms will sign up for ensuring their cost of operations reduces and their revenue from operations is sufficient to cover their cost of supplies.
• The UDAY package will need the states to bring their AT&C losses to 10% or 15% (customized for each state) by 2018-19. 
• This is a huge ask, but if the states achieve this, they will get the additional benefits of better infrastructure and technology via the centrally sponsored schemes.
• The central government will be monitoring the progress on this parameter regularly – a clause built in the UDAY MOU.

(Case Study :- Rajasthan which has been blazing a reform trail of its own may well be the first state to commit to hard AT&C control targets – the state is considering monitoring these losses not for the state as a whole, but at circle level – for better accountability of individuals in the state electricity board.)

The Carrot and Stick policy !!

• The action on this count by the states will be the single biggest driver towards the “power on tap” dream – and for the first time, there will be carrots and sticks for the states to act on this.
• Even if the bigger culprit states get in the region of 20% AT&C losses in the next 4 years, it will move the needle significantly.

The right to select and switch  DISCOM of own choice !!

• The central government has promised legislative changes required to ensure consumers choose their discom and switch, letting multiple discoms operate in the same region.
• This will require amendments to the Electricity Act, so the enforcement may be delayed, but even talking about separating content from carriage and encouraging last mile competition is a bold move given the state of the power sector today.

Operational bottlenecks  on the generation side….!!

• The UDAY plan provides for easier transferring coal linkages from old to more modern plants, and incentives for creating large plants running at an economy of scale rather than operating small sub 200 MW plants.
• Additionally, UDAY will involve incentivizing 11 top industries which consume almost 50% of all industrial power to improve their operations.

Focus on Renewable energy

• As part of the 2012 FRP, discoms had signed up for a Renewables Purchase Obligation (RPO), which then was never enforced as the FRP itself fell apart.
• UDAY brings back the focus on this RPO again, although no dates are mandated. This is a significant step especially in light of the recent Sun Edison bid for an Andhra Pradesh solar power plant at sub Rs.5 / unit.
• If discoms start mandating purchase via renewable sources as per their respective RPOs, it will give a big boost to the renewable sector.
• (we will see this in  detail in our other post which will be regarding the new POWER TARIFF POLICY !! )

Towards Cooperative Federalism !

• The power sector reforms have traditionally been marred by the “centre knows best” approach.
• UDAY however creates enabling provisions across the power value chain for states to choose and do what fits them, with the view of reaching the committed operational goals. 
• There are incentives at various stages of the value chain, and each state will find value in choosing different paths and different speeds of implementation.
• The only binding part will be reducing the AT&C losses i.e. improving the law and order situation enough to ensure there is no pilferage.

MORAL of the STORY !!

UDAY seems to be a well thought-out, scalable, future proof-reform and restructuring programme for the struggling power distribution companies.While there is nothing certain in a democracy laced with electoral populism and constantly edgy centre-state relations, this plan may well be the “now or never” stage for discom revival. UDAY addresses a range of issues rather than doling out cash and hope things will improve operationally. It is broad-based and comprehensive, “ready for future” and agreed in principle by the states. These factors make this plan turn out to be OPTIMISTIC for us

Book List

Bill Gates: 5 Books To Read This Summer

Here in Seattle, summer is a gift you earn by gutting out nine months of rain and gloom. The skies are clear, there’s hardly any humidity, and the nights are cool. Best of all, you sometimes get the chance to sit outside reading a great book.

This summer, my recommended reading list has a good dose of books with science and math at their core. But there’s no science or math to my selection process. The following five books are simply ones that I loved, made me think in new ways, and kept me up reading long past when I should have gone to sleep. As a result, this is an eclectic list—from an 800-page science fiction novel by a local legend to a 200-page nonfiction book on how Japan can get its economic mojo back. I hope you find at least one book here that inspires you to go off the beaten path when you get some time to yourself this summer.

The five books are….

1. Seveneves
2. The Power to Compete: An Economist and an Entrepreneur on Revitalizing Japan in the Global Economy
3. The Vital Question: Energy, Evolution, and the Origins of Complex Life,
4. How Not to Be Wrong: The Power of Mathematical Thinking
5. Sapiens: A Brief History of Humankind

See the full post from Bill Gates here

More on the books and a video with Gates below.

Book Recommendations from Bill Gates for this summer

Book Recommendations from Bill Gates – Seveneves, by Neal Stephenson

From the #1 New York Times bestselling author of Anatham, Reamde, and Cryptonomicon comes an exciting and thought-provoking science fiction epic?a grand story of annihilation and survival spanning five thousand years.

What would happen if the world were ending?

A catastrophic event renders the earth a ticking time bomb. In a feverish race against the inevitable, nations around the globe band together to devise an ambitious plan to ensure the survival of humanity far beyond our atmosphere, in outer space.

But the complexities and unpredictability of human nature coupled with unforeseen challenges and dangers threaten the intrepid pioneers, until only a handful of survivors remain.…

Five thousand years later, their progeny?seven distinct races now three billion strong?embark on yet another audacious journey into the unknown…to an alien world utterly transformed by cataclysm and time: Earth.

A writer of dazzling genius and imaginative vision, Neal Stephenson combines science, philosophy, technology, psychology, and literature in a magnificent work of speculative fiction that offers a portrait of a future that is both extraordinary and eerily recognizable. As he did in Anathem, Cryptonomicon, the Baroque Cycle, and Reamde, Stephenson explores some of our biggest ideas and perplexing challenges in a breathtaking saga that is daring, engrossing, and altogether brilliant.

Book Recommendations from Bill Gates – How Not to Be Wrong: The Power of Mathematical Thinking, by Jordan Ellenberg

The Freakonomics of math—a math-world superstar unveils the hidden beauty and logic of the world and puts its power in our hands

The math we learn in school can seem like a dull set of rules, laid down by the ancients and not to be questioned. In How Not to Be Wrong, Jordan Ellenberg shows us how terribly limiting this view is: Math isn’t confined to abstract incidents that never occur in real life, but rather touches everything we do—the whole world is shot through with it.

Math allows us to see the hidden structures underneath the messy and chaotic surface of our world. It’s a science of not being wrong, hammered out by centuries of hard work and argument. Armed with the tools of mathematics, we can see through to the true meaning of information we take for granted: How early should you get to the airport? What does “public opinion” really represent? Why do tall parents have shorter children? Who really won Florida in 2000? And how likely are you, really, to develop cancer?

How Not to Be Wrong presents the surprising revelations behind all of these questions and many more, using the mathematician’s method of analyzing life and exposing the hard-won insights of the academic community to the layman—minus the jargon. Ellenberg chases mathematical threads through a vast range of time and space, from the everyday to the cosmic, encountering, among other things, baseball, Reaganomics, daring lottery schemes, Voltaire, the replicability crisis in psychology, Italian Renaissance painting, artificial languages, the development of non-Euclidean geometry, the coming obesity apocalypse, Antonin Scalia’s views on crime and punishment, the psychology of slime molds, what Facebook can and can’t figure out about you, and the existence of God.

Ellenberg pulls from history as well as from the latest theoretical developments to provide those not trained in math with the knowledge they need. Math, as Ellenberg says, is “an atomic-powered prosthesis that you attach to your common sense, vastly multiplying its reach and strength.” With the tools of mathematics in hand, you can understand the world in a deeper, more meaningful way. How Not to Be Wrong will show you how.

Book Recommendations from Bill Gates – The Vital Question: Energy, Evolution, and the Origins of Complex Life, by Nick Lane

To explain the mystery of how life evolved on Earth, Nick Lane explores the deep link between energy and genes.

The Earth teems with life: in its oceans, forests, skies and cities. Yet there’s a black hole at the heart of biology. We do not know why complex life is the way it is, or, for that matter, how life first began. In The Vital Question, award-winning author and biochemist Nick Lane radically reframes evolutionary history, putting forward a solution to conundrums that have puzzled generations of scientists.

For two and a half billion years, from the very origins of life, single-celled organisms such as bacteria evolved without changing their basic form. Then, on just one occasion in four billion years, they made the jump to complexity. All complex life, from mushrooms to man, shares puzzling features, such as sex, which are unknown in bacteria. How and why did this radical transformation happen?

The answer, Lane argues, lies in energy: all life on Earth lives off a voltage with the strength of a lightning bolt. Building on the pillars of evolutionary theory, Lane’s hypothesis draws on cutting-edge research into the link between energy and cell biology, in order to deliver a compelling account of evolution from the very origins of life to the emergence of multicellular organisms, while offering deep insights into our own lives and deaths.

Both rigorous and enchanting, The Vital Question provides a solution to life’s vital question: why are we as we are, and indeed, why are we here at all?

Book Recommendations from Bill Gates – The Power to Compete: An Economist and an Entrepreneur on Revitalizing Japan in the Global Economy, by Ryoichi Mikitani and Hiroshi Mikitani

Father and son – entrepreneur and economist – search for Japan’s economic cure

The Power to Compete tackles the issues central to the prosperity of Japan – and the world – in search of a cure for the “Japan Disease.” As founder and CEO of Rakuten, one of the world’s largest Internet companies, author Hiroshi Mikitani brings an entrepreneur’s perspective to bear on the country’s economic stagnation. Through a freewheeling and candid conversation with his economist father, Ryoichi Mikitani, the two examine the issues facing Japan, and explore possible roadmaps to revitalization. How can Japan overhaul its economy, education system, immigration, public infrastructure, and hold its own with China? Their ideas include applying business techniques like Key Performance Indicators to fix the economy, using information technology to cut government bureaucracy, and increasing the number of foreign firms with a head office in Japan. Readers gain rare insight into Japan’s future, from both academic and practical perspectives on the inside.

Mikitani argues that Japan’s tendency to shun international frameworks and hide from global realities is the root of the problem, while Mikitani Sr.’s background as an international economist puts the issue in perspective for a well-rounded look at today’s Japan.

• Examine the causes of Japan’s endless economic stagnation
• Discover the current efforts underway to enhance Japan’s competitiveness
• Learn how free market “Abenomics” affected Japan’s economy long-term
• See Japan’s issues from the perspective of an entrepreneur and an economist

Japan’s malaise is seated in a number of economic, business, political, and cultural issues, and this book doesn’t shy away from hot topics. More than a discussion of economics, this book is a conversation between father and son as they work through opposing perspectives to help their country find The Power to Compete.

Book Recommendations from Bill Gates – Sapiens: A Brief History of Humankind, by Noah Yuval Harari

From a renowned historian comes a groundbreaking narrative of humanity’s creation and evolution—a #1 international bestseller—that explores the ways in which biology and history have defined us and enhanced our understanding of what it means to be “human.”

One hundred thousand years ago, at least six different species of humans inhabited Earth. Yet today there is only one—homo sapiens. What happened to the others? And what may happen to us?

Most books about the history of humanity pursue either a historical or a biological approach, but Dr. Yuval Noah Harari breaks the mold with this highly original book that begins about 70,000 years ago with the appearance of modern cognition. From examining the role evolving humans have played in the global ecosystem to charting the rise of empires, Sapiens integrates history and science to reconsider accepted narratives, connect past developments with contemporary concerns, and examine specific events within the context of larger ideas.

Dr. Harari also compels us to look ahead, because over the last few decades humans have begun to bend laws of natural selection that have governed life for the past four billion years. We are acquiring the ability to design not only the world around us, but also ourselves. Where is this leading us, and what do we want to become?

Featuring 27 photographs, 6 maps, and 25 illustrations/diagrams, this provocative and insightful work is sure to spark debate and is essential reading for aficionados of Jared Diamond, James Gleick, Matt Ridley, Robert Wright, and Sharon Moalem.

Goldman Sachs’ Recommended Reading List – Written About, By or For Money Managers and Traders

Goldman Sachs put together a list of the best books and it is impressive and long – unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions. Note: we do not endorse the short term trading strategies (well we really do not officially endorse anything) but to keep the list complete we have included all descriptions of books below. Because this is lengthy we will be breaking them up by section so stay tuned for more!- which brings to that first the sections.

Also see Bill Gates: 5 Books To Read This Summer

Goldman Sachs reading list sections

 

Written About, By or For Money Managers and Traders

Industry Background and Flavor

Broad Industry History

Analytical and Reference

Periodicals

Wall Street Journal (daily, Monday through Friday)

Barron’s (weekly publication)

General

IMD

FICC & Equities

Options/Derivatives

Written by Current or Former Goldman Sachs Employees

 

 

So we start with ….

Written About, By or For Money Managers and Traders

Market Wizards: Interviews with Top Traders by Jack D. Schwager

This book is a series of interviews with 18 of the top stock, option and commodity traders of the day when it was written in 1990. Most were unknown to the public, and even to most professional investors, until Jack Schwager ferreted them out and amazingly convinced these “traders who neither need nor seek publicity” to allow him to interview them and publish their stories. Now, 23 years later, Schwager’s “Wizards” are the stuff of legend among speculators both professional and amateur.

The interviews are divided into five groups: futures traders, stock traders, outliers (hard to classify), floor traders and a trader psychologist. There are two postscript sections, one describes a personal experience of Schwager’s as a trader, and the other an interesting story told by an anonymous top trader about dreams and trading.

The New Market Wizards: Conversations with America’s Top Traders by Jack D. Schwager

In The New Market Wizards, successful traders relate the financial strategies that have rocketed them to success. Asking questions that readers with an interest or involvement in the financial markets would love to pose to the financial superstars, Jack D. Schwager encourages these financial wizards to share their insights. Entertaining, informative, and invaluable, The New Market Wizards is destined to become another Schwager classic.

• Stock Market Wizards: Interviews with America’s Top Stock Traders by Jack D. Schwager

The third in the bestselling Market Wizards series, this time focusing on the barometer of the economy – the stock market.

It has been nearly a decade since the publication of the highly successful The New Market Wizards. The interim has witnessed the most dynamic bull market in US stock history, a collapse in commodity prices, dramatic failures in some of the world?s leading hedge funds, the burst of the Internet bubble, a fall into recession and subsequent rumblings of recovery. Who have been the market wizards during this tumultuous financial period? How did some traders manage to significantly outperform a stockmarket that during its heyday moved virtually straight up?

This book will feature interviews with a variety of traders who achieved phenomenal financial success during the glory days of the Internet boom. In contrast with the first two Market Wizard books, which included traders from a broad financial spectrum – stocks, bonds, currencies and futures – this volume will focus on traders in the stockmarket.

• Trader Vic: Methods of a Wall Street Master by Victor Sperandeo

Trader Vic — Methods of a Wall Street Master Investment strategies from the man Barron’s calls “The Ultimate Wall Street Pro” “Victor Sperandeo is gifted with one of the finest minds I know. No wonder he’s compiled such an amazing record of success as a money manager. Every investor can benefit from the wisdom he offers in his new book. Don’t miss it!” –Paul Tudor Jones Tudor Investment Corporation “Here’s a simple review in three steps: 1. Buy this book! 2. Read this book! 3. See step 2. For those who can’t take a hint, Victor Sperandeo with T. Sullivan Brown has written a gem, a book of value for everyone in the markets, whether egghead, novice or seasoned speculator.” –John Sweeney Technical Analysis of Stocks and Commodities “Get Trader Vic-Methods of a Wall Street Master by Victor Sperandeo, read it over and over and you’ll never have a losing year again.” –Yale Hirsch Smart Money “I have followed Victor Sperandeo’s advice for ten years, and the results have been outstanding. This book is a must for any serious investor.” –James J. Hayes, Vice President, Investments Prudential Securities Inc. “This book covers all the important aspects of making money and integrates them into a unifying philosophy that includes economics, Federal Reserve policy, trading methods, risk, psychology, and more. It’s a philosophy everyone should understand.” –T. Boone Pickens, General Partner Mesa Limited Partnership “This book gave me a wealth of new insights into trading. Whether you’re a short-term trader or a long-term investor, you will improve your performance by following Sperandeo’s precepts.” –Louis I. Margolis Managing Director, Salomon Brothers, Inc.

• Trader Vic II: Principles of Professional Speculation by Victor Sperandeo

he man Barron’s dubbed “the ultimate Wall Street pro” returns with a stunning follow-up to his bestselling Trader Vic–Methods of a Wall Street Master (“The best investment book of 1992”–The Stock Trader’s Almanac). Take an advanced class in his patented trading and investment philosophy and learn how the master makes better investment decisions . . . deciphers economic theories and uses them to predict investment outcomes . . . cuts through the lies, fallacies, and distortions that muddle and confound trading and investment decision making . . . and much more!

What the experts said about Trader Vic–Methods of a Wall Street Master . . .

“Victor Sperandeo is gifted with one of the finest minds I know. No wonder he’s compiled such an amazing record of success as a money manager. Every investor can benefit from the wisdom he offers in his new book. Don’t miss it!” –Paul Tudor Jones, Tudor Investment Corporation.

“Here’s a simple review in three steps: 1. Buy this book! 2. Read this book! 3. See step 2. For those who can’t take a hint, Victor Sperandeo with T. Sullivan Brown has written a gem, a book of value for everyone in the markets, whether egghead, novice, or seasoned speculator.” –John Sweeney, Technical Analysis of Stocks and Commodities.

“Get Trader Vic–Methods of a Wall Street Master by Victor Sperandeo, read it over and over and you’ll never have a losing year again.” –Yale Hirsch, Smart Money.

• Exceptional Trading: The Mind Game by Ruth Barrons Roosevelt

This book is written to give traders a winning edge. Winning eludes some 80 to 90 percent of people who trade.
Each year millions of dollars are spent creating and buying and selling trading systems. Hopeful traders seek the holy grail only to find that their latest acquisition doesn’t work or they can’t work it. Information flow is instant and vast. Computers calculate and grind out data 24 hours a day around the globe. Every conceivable edge is sought and provided. And still traders lose.
The rules for good trading are simple and understandable: Buy low, Sell high, or buy high and sell higher. Sell low and buy lower. Cut your losses. Let your profits run. Never overtrade. Act promptly on signals to enter and exit. Trade a proven winning system or strategy as it was designed to be traded; i.e., take every signal and stay the course. Control and balance fear and greed.
But traders don’t follow the rules, not even the rules they commit to following. As the Book of Common Prayer says, “That which I would do, I do not; and that which I would not do, that I do.” The prayer goes on to say, “And there is no health in me.” It’s a simple human condition which becomes writ large in trading.
The good news is that some traders do win. They win consistently over time. Success leaves clues. This book examines the clues and shows traders seeking to win how to run their own minds the way winning traders do.
It’s not enough to simply know how to think or what to think. It’s important to do it. This book outlines proven techniques for making the necessary mind shifts that will enable a trader to create a mental winning edge. Trading is, after all, mind over markets, quick action, clear thinking, and an unclouded intent to win.

• Trading to Win: The Psychology of Mastering the Markets by Avi Kiev

A breakthrough programfor achieving new heights of trading success

The product of a five-year collaboration between Dr. Ari Kiev, a leading psychiatrist renowned for his success with Olympic athletes, and top equities trader Steve Cohen, Trading to Win gives you the essential tools to overcome outmoded, self-limiting beliefs and mindsets that may be keeping you from a higher level of success. Illustrated with real market scenarios and applications, this powerful program will help psych you into a less stressful, more self-possessed mastery of the trading game and help you reach goals you may never have thought possible.

“The strategies in this book will unleash the hidden trader in you, and can substantially increase your trading profits.” –Jay G. Goldman, Hedge Fund Manager.

“Ari Kiev has written a wonderful guide for money managers, traders, brokers, and investors alike. Sharing his thoughts with us regarding our behavior patterns enables us to take a step back and look at ourselves more objectively.” –Seymour W. Zises, President and CEO, Family Management Corp.

The trading arena has produced its share of select “super-traders,” market practitioners who set themselves apart from the rest of the field with one distinct advantage: mental and emotional toughness. Like outstanding athletes who stay focused, remain calm, and stick to their game plan, these master traders in this highly risky, highly competitive arena possess an edge that keeps them from being distracted by fear, self-doubt, greed, and other emotional components that can cause major losses and prevent gains from soaring to new highs.

Trading to Win presents a step-by-step, goal-oriented program for building the mental and emotional stamina not only to win, but to win on an unprecedented level. Created by a leading psychiatrist for a top trading firm, this proven approach spotlights a set of philosophical and behavioral principles designed to assist you in implementing proactive trading strategies, as well as developing the mindset needed to trade effectively in the realm of uncertainty. Delving into your underlying thought processes when you trade, Trading to Win enables you to understand what is motivating you, whether it is consistent with your game plan, and whether you are in any way sabotaging yourself.

Fully supplemented with real market trading scenarios, Trading to Win shows you how to apply key concepts where it counts–in actual trading room situations. For both professional traders and sophisticated investors, this remarkable program offers a rare opportunity for both personal and financial gain

• The Disciplined Trader: Developing Winning Attitudes by Mark Douglas

One of the first books to address the psychological nature of howsuccessful traders think ~ The Disciplined Trader™is now an industryclassic.   In this groundbreaking work published in 1990 ~Douglas examines the causes as to why most traders cannot raise and keep their equity on a consistent basis ~ and brings the reader to practical and unique conclusions as to how to go about changing any limitingmindset. The trader is taken through a step-by-step process to breakthrough those queries ~ and begin to understand that their very thoughts may be limiting their ability to accumulate and succeed at trading.

• Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets by Stan Weinstein

Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets reveals his successful methods for timing investments to produce consistently profitable results.

Topics include:

• Stan Weinstein’s personal philosophy on investing
• The ideal time to buy
• Refining the buying process
• Knowing when to sell
• Selling Short
• Using the best long-term indicators to spot Bull and Bear markets

Odds, ends, and profits

• Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas and Thom HartleTrading in the Zone : Maximizing Performance with Focus and Discipline by Ari Kiev

Overcome the obstacles that can prevent you from winning at the trading game

A trader’s emotional state is vital to being a successful investor. There are many psychological factors that can affect the decisions one makes in the course of a trading day. This book focuses on overcoming issues such as anxiety, fear, and over-ambition so that traders can become more focused and be more successful-in other words, enter the zone-and stay in it as long as possible.

• Trading With Crowd Psychology by Carl Gyllenram

LET THE SOUND OF THE CROWD HELP YOU CREATE A SUCCESSFUL TRADING PLAN

Praise for Carl Gyllenram and Trading with Crowd Psychology

“Investing is first and foremost a psychological process and good market technicians are really psychologists. Mr. Gyllenram understands this and his book offers deep insight into the psychology of the trading range, the area from which big moves-up and down-emerge.”
–John Bollinger CFA, CMT, President, http://www.EquityTrader.com

“Every trader and investor will recognize themselves and their habits (good and bad) among the characters whose trading decisions are so vividly described in this book, and all should discover ways of improving those trading decisions. A very timely publication.”
–Michael Smyrk Global Coordinator, International Federation of Technical Analysts

“Carl Gyllenram takes a new approach to looking at the workings and importance of crowd psychology in the financial markets … [he] shows a clear understanding of the subject, providing a thoroughly useful addition to the writings on crowd psychology.”
–Anne WhitbyFSTA, Vice Chairman, Society of Technical Analysts UK

“We are an emotional species and seldom more so than when dealing with money. It is this raw human factor that creates most of the volatility in all financial and commodity markets, not economics … With this book Carl Gyllenram has made an important contribution to the subject of Behavioral Technical Analysis.”
–David FullerGlobal Strategist at Stockcube Research Ltd. Writer of the Fullermoney investment letter

• Pit Bull: Lessons from Wall Street’s Champion Day Trader by Martin S. Schwartz et al

Welcome to the world of Martin “Buzzy” Schwartz, Champion Trader–the man whose nerves of steel and killer instinct in the canyons of Wall Street earned him the well-deserved name “Pit Bull.” This is the true story of how Schwartz became the best of the best, of the people and places he discovered along the way and of the trader’s tricks and techniques he used to make his millions.

• The Master Swing Trader: Tools and Techniques to Profit from Outstanding Short-Term Trading Opportunities by Alan S. Farley

Swing trading is gaining popularity as a powerful method to increase returns—and potentially lower risks—by profiting from short-term price moves. The Master Swing Trader explains how traders can use technical analysis, charting, and market sentiment to make trades that hold through price fluctuations and noise with wider stops. This complete, practical guide to making profitable short-term trades—based on the author’s popular “Mastering the Trade” online course—uses dozens of charts and graphs to illustrate proven swing trading concepts and strategies. Experienced day, position, and online traders will benefit immediately from: – The 7 Bells – unique tools to uncover promising short-term prospects – Techniques to profit from low-risk short sales – The 4 repeating cycles for perfectly timed trades

• How to Trade In Stocks by Jesse Livermore

Jesse Livermore was a loner, an individualist-and the most successful stock trader who ever lived. Written shortly before his death in 1940, How to Trade Stocks offered traders their first account of that famously tight-lipped operator’s trading system. Written in Livermore’s inimitable, no-nonsense style, it interweaves fascinating autobiographical and historical details with step-by-step guidance on:

• Reading market and stock behaviors
• Analyzing leading sectors
• Market timing
• Money management
• Emotional control

In this new edition of that classic, trader and top Livermore expert Richard Smitten sheds new light on Jesse Livermore’s philosophy and methods. Drawing on Livermore’s private papers and interviews with his family, Smitten provides priceless insights into the Livermore trading formula, along with tips on how to combine it with contemporary charting techniques. Also included is the Livermore Market Key, the first and still one of the most accurate methods of tracking and recording market patterns

• The Market Maker’s Edge: A Wall Street Insider by Josh Lukeman

This book will let you see the little-known but effective trading tactics and methods of today’s top market makers.”–Technical Analysis of Stocks and Commodities

Active traders must get inside the head of the all-important market maker–“The Ax”–before they can begin to truly compete.

The Market Maker’s Edge, written by longtime ax Josh Lukeman, is the first inside look at how axes think, what they look for, and, most important, how they can be beat.

• The Super Traders: Secrets and Successes of Wall Street’s Best and Brightest by Alan Rubenfeld

This behind-the-scenes look at Wall Street not only contains candid personal accounts of these heavy hitters, but their trading secrets and philosophies as well. Some of the secrets and strategies revealed here include valuable insights into: Options Trading, Hedge Fund Trading, Sales Trading, Buyside Trading, Third-Market Trading, Block Trading, Electronic Trading, Institutional Trading and Program Trading. The unadulterated insights presented here make this a one-of-a-kind book written by, for and about traders. Contributors include: Bob Scavone: Set the Standard for NYSE Specialists, Victor “Trader Vic” Sperandeo: Market “Prophet”, Joseph Apisa: Master Sales Trader, Evan Schulman: Pioneer in Electronic Trading, Jon Najarian: Renowned Options Trader, Frank Baxter: fading Third-Market Trader, Jay Mangan: Esteemed Industry Spokesperson, Stephen Bodurtha: Program Trader Extraordinaire, Denny Engelman: Premier Floor Broker.

• Zebra In Lion Country by Ralph Wanger with Everett Mattlin

alph Wanger explains the principles of investing in small, rapidly growing companies whose stocks represent good value. Anyone who invested $10,000 in his Acorn Fund at its inception in 1970 would have $618,000 at the end of 1996. But whether you are investing in mutual funds or buying individual stocks on your own – or doing both – A Zebra in Lion Country offers an investment philosophy that will carry you through the rough spells and bring you greater wealth over the long term. Famed for his witty, insightful reports to shareholders, Wanger displays his irreverent savvy in this guide to locating small company “value” stocks that will yield well-above-average returns. As the title suggests, investors are like zebras in lion country: They must settle for half-eaten grass in the middle of the herd, or seek fresh grass at the outer edge, where hungry lions lurk. Wanger shows every investor how to achieve the right balance of safety and risk, and imagination and discipline, to survive and prosper in the investment jungle. Destined to become a classic in the field of investing, A Zebra in Lion Country is as entertaining as it is instructive.

• Technical Analysis of the Financial Markets by John J. Murphy

This outstanding reference has already taught thousands of traders the concepts of technical analysis and their application in the futures and stock markets. Covering the latest developments in computer technology, technical tools, and indicators, the second edition features new material on candlestick charting, intermarket relationships, stocks and stock rotation, plus state-of-the-art examples and figures. From how to read charts to understanding indicators and the crucial role technical analysis plays in investing, readers gain a thorough and accessible overview of the field of technical analysis, with a special emphasis on futures markets. Revised and expanded for the demands of today’s financial world, this book is essential reading for anyone interested in tracking and analyzing market behavior.

• Hit and Run Trading: The Short-Term Stock Traders’ Bible by Jeff Cooper

eff Cooper is back with a newly updated Hit & Run Trading Volume I. Delivering a day-by-day trading plan of attack, this comprehensive manual is your key to conquering the market on a daily basis.

Join Jeff as he reveals his most intimate winning methods for daytrading and short trading the market. While the traditional “buy and hold” strategy may work well in bull markets, Cooper’s “Hit & Run” methods work in ALL markets. His easy to follow methods will show you exactly:

• Which stocks to focus on each day
• Where to place your buy stops and sell short stops
• The precise amount of risk you should take
• And how to take the psychology out of trading in his new “Mind Over Money” chapter!
• Hit and Run Trading II: Capturing Explosive Short-Term Moves in Stocks by Jeff Cooper

Following up on his original collection of trading methods in Hit & Run Trading, is Jeff Cooper’s second and equally exceptional book, Hit & Run Trading Volume II – recently updated!

Discover how to capture the explosive moves in stocks in his latest work containing:

• 16 personal trading strategies
• Readily identifiable patterns you can consistently count on
• Over 200 information-packed pages in a large 8½ x 11 format
• 21 fully illustrated chapters with over 100 sample charts of real trades
• Cooper’s finest learning sheets that will serve as your personal coach on a daily basis
• PLUS answers and insight into the most frequently asked questions about short-term trading

With or without Volume I, you’ll find plenty of new, high-profit potential strategies and methods in Jeff Cooper’s newly updated Hit and Run Trading II.

• Street Smarts: High Probability Short-Term Trading Strategies by Laurence A. Connors and Linda Bradford Raschke

Published in 1996 and written by Larry Connors and “New Market Wizard” Linda Raschke. This 245 page manual is considered by many to be one of the best books written on trading futures. Twenty-five years of combined trading experience is divulged as you will learn 20 of their best strategies.

Among the methods you will be taught are:

* Swing Trading – The backbone of Linda’s success. Not only will you learn exactly how to swing trade, you will also learn specific advanced techniques never before made public!
* News – Among the strategies revealed is an intra-day news strategy they use to exploit the herd when the 8:30am economic reports are released. This strategy will be especially appreciated by bond traders and currency traders.
* Pattern Recognition – You will learn some of the best short-term set-up patterns available. Larry and Linda will also teach you how they combine these patterns with other strategies to identify explosive moves.
* ADX – In our opinion, ADX is one of the most powerful and misunderstood indicators available to traders. Now, for the first time, they reveal a handful of short-term trading strategies they use in conjunction with this terrific indicator.
* Volatility – You will learn how to identify markets that are about to explode and how to trade these exciting situations.
* Also, included are chapters on trading volatility, trading Crabel, trading the smart money index, trading gap reversals, a special chapter on professional money management, and many other trading strategies!

• The 5 Day Momentum Method by Jeff Cooper

How Would You Like To:

1. Buy a stock today
2. Sell it for a solid profit in 5 days
3. Repeat this again and again for the rest of your life!

Jeff Cooper’s 5 Day Momentum Method Can Help You Do This

In his first book, Hit & Run Trading, Jeff Cooper taught traders how he has made his living day-trading stocks over the past decade. The book is such a success that it is now back for its fifth printing in its first 18 months.

Now, for the first time, Jeff Cooper releases the 5 Day Momentum Method — his most powerful trading system for those traders who are looking for substantial 3 – 7 day gains.

How The 5 Day Momentum Method Works:

Rapidly moving momentum stocks always pause before resuming their trend. The 5 Day Momentum Method will teach you how to identify the exact day and price to enter these stocks before they explode again. You will usually risk only 1-2 points and your upside potential is 5 – 20 points, all within 5 days!

Do I Have To Sit In Front Of A Screen All Day Watching My Stocks?

Absolutely not! The best part of the 5 Day Momentum Method is that you do not have to watch your positions intra-day. Simply enter an order to buy or sell short, give your broker an order with your protective stop, and then go back to your daily routine. You can check prices each evening at your convenience. At the end of 5 days, simply take your profits (if your stop wasn’t triggered) and go onto the next set-up.

Among the features you will learn are:

The specific, simple-to-follow rules to identify the fastest moving stocks.

Where to exactly place your entry and exit orders.

Where and how to take profits.

Advanced trading techniques to maximize gains.

Precise options strategies to leverage yourself to gains of 50% – 200% within days.

… and much, much more!

• The Real Holy Grail: Money Management Techniques of Top Traders by Eddie Kwong

Have you ever had a stock up 10 points, only to have it turn into a loss in a blink of an eye?

The key to attaining success as a trader is to minimize your losses. In this book, you will receive detailed Money Management lessons from the combined wisdom of Jeff Cooper, Mark Boucher, Dave Landry, Kevin Haggerty, and many more experts.

This collection of secrets from the world’s Top Traders will teach you: how to use different types of orders to get the best possible price and execution, how to place and trail stops, how to manage positions, how to scale in their position, how to adjust position size relative to account size, how to properly use leverage, how to have the discipline to do the right thing, and more.

The strategies and techniques assembled in this book will give you the tools and insight needed to make better trading decisions, ultimately becoming a smarter trader. This book is a must for anyone who has the drive to be successful where others have failed.

• Trading Connors VIX Reversals by Laurence A. Connors and Gregory Che

Here is Larry Connors First Published Research In Over Three Years!

In this just released guide, you will learn 10 strategies to trade the VIX. Five of these strategies have never been published before! Connors VIX Reversals have correctly predicted the direction of the S&P’s over the past 8 1/2 years approximately 65% of the time within a 2 to 3 day period. Some of these indicators have correctly predicted the market direction nearly 70% of the time!

Within this book you will learn….

The new CVR strategies taught in his manual are even better than the originals. As powerful as the original signals were, these new signals have pushed the envelop…with some performing with nearly 70% accuracy.

Trading market sentiment? As you know the VIX is one of the best ways to measure market sentiment. But, now one has ever measured and quantified the VIX the way Connors and Che do.

Trade mechanical and objectively. $100,000 grew to over $1.9 million in 8 1/2 years if CVR signals were traded mechanically.

Through both back testing and actual use in trading, the Connors VIX Reversals have proven to be one of the premier market timing tools for serious S&P traders, options traders, and stock traders. Put this new research to use in your trading today!

Index for this section below:

Written About, By or For Money Managers and Traders

• Market Wizards: Interviews with Top Traders by Jack D. Schwager
• The New Market Wizards: Conversations with America’s Top Traders by Jack D. Schwager
• Stock Market Wizards: Interviews with America’s Top Stock Traders by Jack D. Schwager
• Trader Vic: Methods of a Wall Street Master by Victor Sperandeo
• Trader Vic II: Principles of Professional Speculation by Victor Sperandeo
• Exceptional Trading: The Mind Game by Ruth Barrons Roosevelt
• Trading to Win: The Psychology of Mastering the Markets by Avi Kiev
• The Disciplined Trader: Developing Winning Attitudes by Mark Douglas
• Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets by Stan Weinstein
• Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas and Thom Hartle
• Trading in the Zone : Maximizing Performance with Focus and Discipline by Ari Kiev
• Trading With Crowd Psychology by Carl Gyllenram
• Pit Bull: Lessons from Wall Street’s Champion Day Trader by Martin S. Schwartz et al
• The Master Swing Trader: Tools and Techniques to Profit from Outstanding Short-Term Trading Opportunities by Alan S. Farley
• How to Trade In Stocks by Jesse Livermore
• The Market Maker’s Edge: A Wall Street Insider by Josh Lukeman
• The Super Traders: Secrets and Successes of Wall Street’s Best and Brightest by Alan Rubenfeld
• Zebra In Lion Country by Ralph Wanger with Everett Mattlin
• Technical Analysis of the Financial Markets by John J. Murphy
• Hit and Run Trading: The Short-Term Stock Traders’ Bible by Jeff Cooper
• Hit and Run Trading II: Capturing Explosive Short-Term Moves in Stocks by Jeff Cooper
• Street Smarts: High Probability Short-Term Trading Strategies by Laurence A. Connors and Linda Bradford Raschke
• The 5 Day Momentum Method by Jeff Cooper
• The Real Holy Grail: Money Management Techniques of Top Traders by Eddie Kwong
• Trading Connors VIX Reversals by Laurence A. Connors and Gregory Che

Goldman Sachs’ Favorite Books List – Broad Industry History

 

Goldman Sachs’ Favorite Books List

Goldman Sachs put together a list of the best books and it is impressive and long – unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions. Note: we do not endorse the short term trading strategies (well we really do not officially endorse anything) but to keep the list complete we have included all descriptions of books below. Because this is lengthy we will be breaking them up by section so stay tuned for more!- which brings to Industry Background and Flavor – there are some real classics in here and a few lesser known names and many of the books only cost a few pennies from Amazon and even with shipping will cost you less than $5 TOTAL, a bunch only cost a penny plus a few dollars shipping – so make sure to check them out!!

 

Also see Bill Gates: 5 Books To Read This Summer

Also see Written About, By or For Money Managers and Traders -> here

Also see Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part I

Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part II

Goldman Sachs reading list sections

Written About, By or For Money Managers and Traders

Industry Background and Flavor

Broad Industry History

Analytical and Reference

Periodicals

Wall Street Journal (daily, Monday through Friday)

Barron’s (weekly publication)

General

IMD

FICC & Equities

Options/Derivatives

Goldman Sachs’ Favorite Books List – Broad Industry History

Investment Banking: A Tale of Three Cities by Samuel L. Hayes III and Philip M. Hubbard

Traces the evolution of international banking, focusing on the three principle markets of the investment banking industry.

A History of Corporate Finance by Jonathan Barron Baskin and Paul J. Miranti, Jr.

This study focuses on the role of institutions and organizations in the development of corporate finance from the Italian merchant banks of the Renaissance through the formation of conglomerates and leveraged-buy-out partnerships in contemporary Wall Street. It also puts forth a compelling argument for the closer integration of historical and quantitative research methodologies in financial theory. The epilogue contains an original algorithm that explains the relationship between the short-term, firm-specific factors and longer-term environmental elements that have shaped the historical development of finance.

Review

“A History of Corporate Finance is a solid contribution to scholarship that should gain the interest of historians, lawyers, economists, and business persons. Its unusual combination of scope, clarity, and brevity, combined with its reasonable price, may induce professors to make it required reading for advanced undergraduate and graduate cources in economic and business history, or in management education courses….an outstanding study that will deservedly gain a wide audience…” H-Net Book Reviews

“A History of Corporate Finance by Baskin and Miranti provides a panoramic account of the evolution of financial organizations and practices from ancient time through the present. It also compares these organizations and practices with the assumptions and conclusions of contemporary financial theories. It is must reading for both history buffs and for students, scholars, and practitioners of financial theory.” Harry Markowitz, 1990 Winner of the Nobel Prize in Economics

“Business corporations, once rare, have become the dominant organization of the modern economy. The corporation as we know it owes its existence to a long history of financial innovations–in institutions, markets, and instruments (securities). This is the first in-depth history to tell us how it all happened, from the merchants and bankers of medieval and Renaissance Italy to today’s corporate managers and wizards of Wall Street. Students of business, economics, finance, law, and history will learn much from it.” Richard Sylla, New York University

“The work embodied in A History of Corporate Finance is a brilliant combination of theoretical and historical analysis. Given the path dependency of the structure of financial institutions, the book will become required reading for anyone interested in the evolution and development of business finance over the past five hundred years or, for that matter, anyone interested in understanding today’s financial markets.” Lance E. Davis, California Institute of Technology

“…this is an outstanding book.” Book Reviews

“…immeasurable value as a survey of business and financial history.” Canadian Business Law Journal

Global Banking by Roy C. Smith and Ingo Walter

Few sectors of the global economy have experienced the dynamic and structural change that has occurred over the past several decades in banking and financial services or as much turbulence and damage to the economy and to ordinary people. Regulatory and technological changes have been among the main catalysts of change in the financial industry worldwide, making entrenched competitive structures obsolete and mandating the development of new products, new processes, new strategies, and new public policies toward the industry.

This third edition of Global Banking reassess the continuing transformational process of global banking and finance–its causes, its course, and its consequences. It begins with an overview of the most recent developments and goes on to examine the major dimensions of international commercial and investment banking, including money and foreign exchange markets, debt capital markets, international bank lending, derivatives, asset-based and project financing, and equity capital markets. Later, the various advisory businesses–mergers and acquisitions, privatizations, institutional asset management, and private banking–are analyzed. In each case, the factors that distinguish the winners from the losers are identified. This is brought together in the final section of the book, which deals with problems of strategic positioning and execution, as well as critical risk issues and regulations.

Review
“This is a very useful update on the authors’ overview of the strategic challenges facing the banking industry. It is both a useful book of reference and an easy read for expert and non-expert alike”–Charles Aldington, former Chairman, Deutsche Bank, London

“A must-read to understand the trends and issues in international banking and capital markets. Drawing on their vast academic and professional experience, Roy Smith and Ingo Walter present in a crystal-clear manner the various segments of the global banking industry, the competitive strategies of players and the pending regulatory issues. The perfect balance between presentation of institutions and economic analysis helps greatly to the understanding of a complex fast-moving industry” –Jean Dermine, Professor of Banking and Finance, INSEAD, Fontainebleau, France

“This is the third and thoroughly revised edition of a path-breaking analysis of the global banking sector. The prior edition of this book was published in 2003 and since then all of the major investment banks have disappeared and 80 percent of the wholesale business has become concentrated among a handful of megabanks. The authors have succeeded not only in making sense of these changes in the structure and regulation of the industry, but also in providing an analytical framework for understanding the forces that are shaping current and future developments. This book is a useful resource for practitioners who want to gain a strategic overview of the industry and also to university students who are contemplating careers with global banks. No other book even attempts such an ambitious agenda.”–Richard J. Herring, Jacob Safra Professor of International Banking, The Wharton School, University of Pennsylvania

Wall Street Women by Anne B. Fisher

Wall Street Women tells the story of the first generation of women to establish themselves as professionals on Wall Street. Since these women, who began their careers in the 1960s, faced blatant discrimination and barriers to advancement, they created formal and informal associations to bolster one another’s careers. In this important historical ethnography, Melissa S. Fisher draws on fieldwork, archival research, and extensive interviews with a very successful cohort of first-generation Wall Street women. She describes their professional and political associations, most notably the Financial Women’s Association of New York City and the Women’s Campaign Fund, a bipartisan group formed to promote the election of pro-choice women.

Fisher charts the evolution of the women’s careers, the growth of their political and economic clout, changes in their perspectives and the cultural climate on Wall Street, and their experiences of the 2008 financial collapse. While most of the pioneering subjects of Wall Street Women did not participate in the women’s movement as it was happening in the 1960s and 1970s, Fisher argues that they did produce a “market feminism” which aligned liberal feminist ideals about meritocracy and gender equity with the logic of the market.

Review

“Detecting gendering in high finance is a long-standing challenge—it is a domain inhospitable to the main categories of feminist analysis. Melissa S. Fisher goes at it with gusto and gives us a great book.”—Saskia Sassen, author of Territory, Authority, Rights

“Melissa Fisher’s Wall Street Women introduces us to a feminist world that we can hardly imagine. As they dream of changing the hostile domain of finance, women find themselves drawing on traditional notions of gender equality and coaching each other in old-fashioned survival skills. Written in enticing prose, Wall Street Women offers us an illuminating peek into a wholly unexpected fusion of feminism with the market.”—Alice Kessler-Harris, author of A Difficult Woman: The Challenging Life and Times of Lillian Hellman

“Extensively researched and thoroughly documented, this portrait of a pioneering generation of women provides context for understanding the emergent discourse of feminizing markets. Strongly recommended for readers interested in business anthropology or gender studies, particularly for gendered discourses of finance and the female financial elite.”

(Rebekah Wallin Library Journal)

“Fisher presents a world to us that taps into a current public interest in women pioneers in business, is methodologically innovative, is theoretically rich, and is ethnographically vital in understanding how to move forward as both gendered and market-engaged persons in the post–?nancial crisis world.”

(Sarah A. Tobin American Ethnologist)

“Fisher . . . combines the detached curiosity of an anthropologist studying the folkways of a tribal village with a sure grasp of history, politics, and economics, as well as an affectionate regard for her subjects, a small group of highly successful women who entered Wall Street in the ’60s.”

(Publishers Weekly)

“Melissa Fisher has written a fascinating, fresh, and accessible account of the pioneering women who started careers on Wall Street in the 1960s and 1970s and established themselves as successful financial professionals. . . . This book offers a readable ethnography that would be a valuable course adoption in both undergraduate and graduate courses on social aspects of finance or gender and labor markets.”

(Louise Marie Roth American Journal of Sociology)

“Wall Street Women serves not only as an helpful reminder of women’s struggles and successes, but also as an enlightening depiction of changes—and continuing challenges—in a part of the business world often seen as mysterious at best and oppressive at worst. Indeed, the material Fisher gleans through ethnographic and archival research establishes the importance of her project, even if the book raises troubling questions about the compromises that women continue to make in the name of success, and about the nature of high finance itself.”

(Megan Brown Reviews in Cultural Theory)

“[W]ell-argued and superbly researched. . . . Fisher’s in-depth case study of a Wall Street women’s cohort adds ethnographic specificity to the typically cross-societal literature on market feminism.”

(Alexandra Michel Administrative Science Quarterly)

“Wall Street Women offers insightful interpretations of the noticeable changes in the rhetoric and practice of the first women of Wall Street, encouraging further comparative study of elites in this area. Fisher’s extensive fieldwork, conducted over many years, has produced a detailed, wide-ranging and thoughtful exploration of the first women of Wall Street and their navigation of a competitive corporate culture structured by ideas about masculinity. Furthermore, it makes a significant contribution to our wider understanding of capitalism and finance as gendered and the resulting complexity of this for women in a market-driven society.”

(Alison C. Kay Women’s History Review)

In the Black: A History of African Americans on Wall Street by Gregory S. Bell

The never-before-told story of five decades of African Americans on Wall Street

Here, for the first time, is the fascinating history of the African American experience on Wall Street as told by Gregory Bell, the son of the man who founded the first black-owned member firm of the New York Stock Exchange. A successful finance professional in his own right with close ties to leading figures in both the black financial and civil rights communities, Bell tells the stories of the pioneers who broke down the ancient social and political barriers to African American participation in the nation s financial industry. With the help of profiles of many important black leaders of the past fifty years including everyone from Jesse Jackson and Maynard Jackson, former mayor of Atlanta, to E. Stanley O Neal, COO and President of Merrill Lynch, and Russell Goings, founder of First Harlem Securities and cofounder of First Harlem Securities he shows how in the years following World War II the growing social, political, and financial powers of African Americans converged on Wall Street. Set to publish during Black History Month, In the Black will be warmly received by African American business readers and general readers alike.

Review – From Publishers Weekly

Tough, resourceful and determined, the small band of early African-American pioneers venturing into Wall Street’s fast-paced, hard-driving financial markets have not often been recognized for their achievements. Bell’s history of those men who made a difference corrects that oversight. Bell (whose father, Travers Bell, worked for the New York Stock Exchange’s first black-owned firm) brings an insider’s view to the realm of investment banking and finance, starting with a brief biography of his family a clan enamored with trading and brokerage, but hampered by the restraints of Jim Crow. With well-researched support and measured prose, Bell chronicles the first black attempts to penetrate the securities industry pre- and post-Civil War. Little-known facts, such as the entry of the first black registered stockbrokers and salesmen on “The Street” in the early 1940s and the importance of black firms like McGhee & Company and Patterson & Company, underline the relentless struggle these men endured. Some of the best segments come in Bell’s recounting of their difficulties during the turbulent 1960s and ’70s, when slow yet persistent progress was made on several fronts against discriminatory practices on Wall Street, beginning with Merrill Lynch’s hiring of three black brokers in 1965. For those seeking a close, informed look at the long, heroic battle by black businessmen and brokers to seize a piece of the action on Wall Street, this book is a source lean, informative and devoid of filler or tirades.

From Library Journal

Wall Street has been responsible for creating an enormous amount of wealth in the United States, but according to Bell, the son of the man who founded the first black-owned member firm of the New York Stock Exchange, not much of that has found its way into the pockets of African Americans. This book, which charts the African American experience on Wall Street, doesn’t contain much prior to the 1960s, but the author offers in-depth coverage of the past 40 years, showing how small, black-owned investment houses got started. Many of these small start-ups were undercapitalized, and while they grew during the good times, they frequently failed during the bad. The author suggests that the “old boy” white network was, in part, responsible for keeping blacks out, and there is some truth to that. However, the times have changed, with Wall Street investment banks actively recruiting minorities and black-owned asset management firms thriving. Unfortunately, the book suffers from spotty research and is not well written or edited. Still, this is the only book to offer much-needed research in this area and is appropriate for larger public library nonfiction collections and African American studies. Richard Drezen, Washington Post, New York City Bureau

From Booklist

This well-written, straightforward history of African Americans on Wall Street is peppered with both familiar and not-so-well-known names such as Joe Searles, the first black New York Stock Exchange member, and Reginald Lewis, the late head of TLC Beatrice International. Decade by decade, Bell (son of financial firm Daniels Bell cofounder Travers Bell) chronicles successes and setbacks in various segments of the industry, from brokerage firms to investment banks. Real-money deals for these firms begin to abound in the 1980s and 1990s, including the financing of Atlanta’s Hartsfield Airport and the largest-ever bond offering in 1993 in Los Angeles. On the other hand, most of these firms struggled for survival, handicapped by undercapitalization as well as by more stringent SEC rulings, such as the May 1, 1975, end of fixed commissions. Today, the black American community is represented throughout all financial services (though probably in fewer numbers than originally expected), and Bell’s nonglitzy narrative secures their place in Wall Street history.

The Last Partnerships: Inside the Great Wall Street Money Dynasties by Charles R. Giesst

Selected as one of the Top 10 Business Books by “Booklist

“”The Last Partnerships “is an enormously enjoyable read.”–United Press International

“The Last Partnerships narrates the rise and fall of the great financial houses–from the “Yankee Bankers” at the turn of the 19th century, up to Goldman Sachs’s historic IPO in 1999– tracing their origins, their successes and failures over the years, and the reasons for their ultimate demise.

Reviews – From Publishers Weekly

Despite the subtitle, this book doesn’t throw wide the back-room doors of major investment banking and brokerage firms like Merrill Lynch and Salomon Brothers. Instead, it provides a general history of Wall Street, organized in chronological chapters, each featuring two famous houses. The first chapter covers 1812 to 1873, focusing on Clark Dodge and Jay Cooke. The last chapter runs from the 1930s to the present, featuring Lazard Freres and Goldman Sachs. Most of the material can be found in the author’s previous works, 100 Years of Wall Street and Wall Street: A History. This reorganization might have yielded new insights had it shown how certain firms helped shape their time and place, and vice versa, or perhaps if it had focussed on the passing of the torch from era to era. As it stands, Ron Chernow’s The Death of the Banker and Martin Mayer’s The Bankers and even Geisst’s previous works are more compelling and better written. Still, Geisst has more understanding of finance than most popular financial historians; despite the drawbacks of this Wall Street history, it represents the various firms fairly and aptly.

From Library Journal

Geisst (Wall Street: A History; Monopolies in America: Empire Builders and their Enemies from Jay Gould to Bill Gates) here provides a history of U.S. investment banking over the past 200 years. As the title indicates, investment banking has shifted from partnership activity to corporate ownership. Geisst creditably describes the forces at work in the creation of capital, providing some sociological context through ethnicity and gender issues. Geisst accounts for a number of factors that have caused investment banking to undergo a sea change: increasingly high dollar amounts, the ability of inexperienced traders to bankrupt firms, and the demise of relationship banking. He shows how cutthroat competition changed investment banking from a business based on relationships to one based on the deal itself. This book’s appeal will be limited to those interested in financial history. Steven Silkunas, Southeastern Pennsylvania Transportation Authority, Philadelphia

The City of London, vol 1-4 by David Kynaston

The ‘Square Mile’, London’s financial powerhouse, rose to prominence with the defeat of Napoleon in 1815. David Kynaston’s vibrant history brings this world to life, taking us from the railway boom of the 1830s to the ‘Golden Age’, when the legendary gold standard reigned supreme. Between the two World Wars the City was affected by the Wall Street Crash, pressured by politicians, trade unions and industrialists, but by the end of the twentieth century it had regained a precarious global might. Woven throughout are the stories of four individuals who shaped the City in different ways – Nathan Rothschild, Ernest Cassel, Montagu Norman and Siegmund Warburg. But the realm of great bankers and brokers is also the workplace of young clerks throwing paper darts, typists bringing in their sandwiches, and sad racketeers watching aghast as the markets fall. Above all, we see what it was like to work in the City – the dress codes, eating habits, work hours, pay, humour, changing architecture and language that forged the unique culture of the Square Mile. Richly entertaining, full of vivid anecdotes, this is a story of booms, busts and bankruptcies – from the Kaffir boom to the Marconi scandal, the ‘Big Bang’ deregulation of 1986, and the Barings crash in 1995 – bringing us to the brink of the modern age. David Knayston’s groundbreaking history of the “City of London”, published in four volumes between 1994 and 2001, is a modern classic. Skillfully edited into a single volume by David Milner, it tells a story as dramatic as any novel, while explaining the mysteries of the financial world in a way that we can all understand.

Review

“The story is never dry, for Kynaston tells it as human drama… This is economic history at its most glittering.” — Simon Jenkins The Times

“A work of breathtaking scope and accomplishment” — D.J. Taylor Independent

“Magisterial… Kynaston is compulsively readable on all the great City scandals.” — William Keegan Observer

“No one knows more secrets about the City of London than David Kynaston… about what goes on behind the copper-plate facades of old City firms, or in the boardrooms of the gleaming glasshouses. Kynaston is the historian of the City.” — Peter Oborne Sunday Express

“Everyone should read David Kynaston’s riveting history of the City: a subject too important to be left to the bankers.” — John Lanchester, author of Whoops! Why Everyone Owes Everyone and No one Can Pay

The Rise and Fall of the Merchant Bank by Erik Banks

The series provides up-to-date information on the international capital markets from the best financial institutions in the world. The high-level professional titles explain, analyse and examine the latest instruments and markets and the fast-evolving regulatory framework.

How did Britain’s former Titans of banking, respected the world over, lose their grip? This expert analysis of the current state of investment banking also provides all the historical perspective to explain the demise of UK merchant banking and the fading glory of the British financial institution.

With the recent wave of mergers and acquisitions throwing the global financial industry into turmoil and turning the former plants of finance into mere nameplates on the doors of large foreign institutions. Erik Banks discusses the impact of globalization on the historical banking bodies and explains why the securities sector was found wanting and the domestic industry transformed into a huge financial supermarket.

The London Stock Exchange: A History by Ranald Michie

In 2001, the London Stock Exchange will be 200 years old, though its origins go back a century before that. This book traces the history of the London Stock Exchange from its beginnings around 1700 to the present day, chronicling the challenges and opportunities it has faced, avoided, or exploited over the years.

Review

“No one familiar with Professor Ranald Michie’s earlier work…will be surprised that he has produced a superb volume that will atmost certainly be the last institutional history of the first two hundred years of the London Stock Exchange….His book is a ‘must-read’ for any student of British and world finance, of formal security markets, and of British economic history, and an ‘almost-must-read’ for anyone with a general interest in economic history….carefully drawn and thorough…a superb study…truly fascinating.”–Journal of Economic History

The Death of Gentlemanly Capitalism by Philip Auga

This work will examines the decline of the British merchant bank during the 1980’s and 90’s. The story of Barings is commonly told, but Barings was just one of a significant number of British merchant banks which collapsed, were sold, or simply gave up. Only four now remain, and all of these survivors are independent of outside institutional shareholders. Phillip Augar takes us through the boom of the Thatcher years, the crash of 1987, the “Big Bang” and the impact of technology, and the aggressive invasion of the American banks. He looks at why the British banks failed to keep pace with these changes like their American counterparts, and what this says about the way they were run, and the way that companies in general are run. He also examines the issue of ownership and shareholding, which appear pertinent given that the four surviving British merchant banks are independent.

Goldman Sachs’ Favorite Books List – “Exaggerated Depictions of The Darker Side of The Industry”

 

Goldman Sachs’ Favorite Books List

Goldman Sachs put together a list of the best books and it is impressive and long – unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions. Note: we do not endorse the short term trading strategies (well we really do not officially endorse anything) but to keep the list complete we have included all descriptions of books below. Because this is lengthy we will be breaking them up by section so stay tuned for more!- which brings to Industry Background and Flavor – there are some real classics in here and a few lesser known names and many of the books only cost a few pennies from Amazon and even with shipping will cost you less than $5 TOTAL, a bunch only cost a penny plus a few dollars shipping – so make sure to check them out!! WARNING : Goldman says before introing these books:

The following popular works are, of course, exaggerated depictions of the darker side of the industry. However, they do provide some of the flavor of life on “The Street.”

Also see Bill Gates: 5 Books To Read This Summer

Also see Written About, By or For Money Managers and Traders -> here

Also see Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part I

Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part II

Goldman Sachs reading list sections

Written About, By or For Money Managers and Traders

Industry Background and Flavor

Broad Industry History

Analytical and Reference

Periodicals

• Wall Street Journal (daily, Monday through Friday)
• Barron’s (weekly publication)

General

IMD

FICC & Equities

Options/Derivatives

Goldman Sachs’ Book List – Industry Background and Flavor is a lengthy section so we split them up below is part III (final) AKA The following popular works are, of course, exaggerated depictions of the darker side of the industry. However, they do provide some of the flavor of life on “The Street.”

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burroughs and John Helyar

One of the finest, most compelling accounts of what happened to corporate America and Wall Street in the 1980’s.”

—New York Times Book Review

A #1 New York Times bestseller and arguably the best business narrative ever written, Barbarians at the Gate is the classic account of the fall of RJR Nabisco. An enduring masterpiece of investigative journalism by Bryan Burrough and John Helyar, it includes a new afterword by the authors that brings this remarkable story of greed and double-dealings up to date twenty years after the famed deal. The Los Angeles Times calls Barbarians at the Gate, “Superlative.” TheChicago Tribune raves, “It’s hard to imagine a better story…and it’s hard to imagine a better account.” And in an era of spectacular business crashes and federal bailouts, it still stands as a valuable cautionary tale that must be heeded.

From Library Journal

The leveraged buyout of the RJR Nabisco Corporation for $25 billion is a landmark in American business history, a story of avarice on an epic scale. Two versions of the fierce competition for the largest buyout ever consummated are presented by skilled journalists with contrasting styles. Burrough and Helyar are clearly fascinated with the personalities of the players in the deal and with the trappings of corporate wealth. The restless, flamboyant personality of Ross Johnson, CEO of RJR Nabisco, is portrayed as the key to the events that were to unfold. The colorful description of all of the players and the events will likely have broad appeal. Lampert signals the complexity of her story by introducing her narrative with a three-page cast of characters. Her focus on the strategy of the players and on the fast-paced action provides a more concise description of a deal big enough to augment the wealth of many rich people. Business libraries will want both versions of this story of capitalism drawn to the extreme, but students, looking for a more comprehensive treatment, will favor Lampert’s version.
– Joseph Barth, U.S. Military Acad. Lib., West Point, N.Y.

Review

“It’s hard to imagine a better story…and it’s hard to imagine a better account” (Chicago Tribune)

“A superlative book…steadily builds suspense until the very end.” (Los Angeles Times Book Review)

“The fascinating inside story of the largest corporate takeover in American history… It reads like a novel.” (Today Show)

“The most piercing and compelling narrative of a deal to date.” (Boston Globe)

“Impressive qualities… delicious scenes… a cinematic yet extraordinarily careful book.” (Ken Auletta, New York Daily News)

Liar’s Poker by Michael Lewis

The time was the 1980s. The place was Wall Street. The game was called Liar’s Poker.

Michael Lewis was fresh out of Princeton and the London School of Economics when he landed a job at Salomon Brothers, one of Wall Street’s premier investment firms. During the next three years, Lewis rose from callow trainee to bond salesman, raking in millions for the firm and cashing in on a modern-day gold rush.

Liar’s Poker is the culmination of those heady, frenzied years—a behind-the-scenes look at a unique and turbulent time in American business. From the frat-boy camaraderie of the forty-first-floor trading room to the killer instinct that made ambitious young men gamble everything on a high-stakes game of bluffing and deception, here is Michael Lewis’s knowing and hilarious insider’s account of an unprecedented era of greed, gluttony, and outrageous fortune.

The Predators’ Ball: The Inside Story of Drexel Burnham and the Rise of the Junk Bond Raiders by Connie Bruck

During the 1980s, Michael Milken at Drexel Burnham Lambert was the Billionaire Junk Bond King. He invented such things as “the highly confident letter” (I’m highly confident that I can raise the money you need to buy company X) and “the blind pool” (Here’s a billion dollars: let us help you buy a company), and he financed the biggest corporate raiders-men like Carl Icahn and Ronald Perelman. And then, on September 7, 1988, things changed… The Securities and Exchange Commission charged Milken and Drexel Burnham Lambert with insider trading and stock fraud. Waiting in the wings was the U.S. District Attorney, who wanted to file criminal and racketeering charges. What motivated Milken in his drive for power and money? Did Drexel Burnham Lambert condone the breaking of laws? The Predator’s Ball dramatically captures American business history in the making, uncovering the philosophy of greed that has dominated Wall Street in the 1980s.

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowensteinshows that LTCM’s implosion should be seen not as a one-off drama but as a template for market meltdowns in an age of instability—and as a wake-up call that Wall Street and government alike tragically ignored.

Fiasco: The Inside Story of a Wall Street Trader by Frank Portnoy

FIASCO is the shocking story of one man’s education in the jungles of Wall Street. As a young derivatives salesman at Morgan Stanley, Frank Partnoy learned to buy and sell billions of dollars worth of securities that were so complex many traders themselves didn’t understand them. In his behind-the-scenes look at the trading floor and the offices of one of the world’s top investment firms, Partnoy recounts the macho attitudes and fiercely competitive ploys of his office mates. And he takes us to the annual drunken skeet-shooting competition, FIASCO, where he and his colleagues sharpen the killer instincts they are encouraged to use against their competitiors, their clients, and each other.

FIASCO is the first book to take on the derivatves trading industry?the most highly charged and risky sector of the stock market. More importantly, it is a blistering indictment of the largely unregulated market in derivatives and serves as a warning to unwary investors about real fiascos, which have cost billions of dollars.

Confessions of a Street Addict by James J. Cramer  Den of Thieves by James B. Stuart

Bestselling author Jim Cramer takes readers on a wild Wall Street ride—revealing how to play the game, who breaks the rules, and who gets hurt.

Everyone on Wall Street knows Jim Cramer, and Cramer knows Wall Street better than anyone. In the most candid and outrageous look at Wall Street since Liar’s Poker, Cramer, co-founder ofTheStreet.com, radio and television commentator, and for years a premier money manager, takes readers on the wild ride that is Wall Street — revealing how the game is played, who breaks the rules, and who gets hurt.

Confessions of a Street Addict takes us from Cramer’s roots in the middle-class Philadelphia suburbs to Harvard, where he began managing money, and then to Goldman Sachs, where he went into business with his wife — Karen, the “Trading Goddess” — as his partner. He brilliantly describes the life of a money manager: the frenetic pace, the constant pressure to outperform the market and other fund managers, and the sharklike attacks fund managers make as they circle a fund perceived to be in trouble.

Throughout the book Cramer is characteristically outspoken, offering his hard-won insights about the market and everyone in it, himself included. There has never been a more eloquent market insider than Cramer, nor a more high-octane book about Wall Street.

Monkey Business: Swinging Through the Wall Street Jungle by John Rolfe and Peter Troob

They Hit “The Street.” Forget what you’ve read, forget what you’ve heard, forget what you’ve been taught. Monkey Business pulls off Wall Street’s suspenders and gives the reader the inside skinny on real life at an investment bank, where the promised land is always one more twenty-hour workday and another lap dance away. “The Street” Hit Back. Fresh out of Wharton and Harvard business schools, John Rolfe and Peter Troob ran willingly into the open arms of investment bank giant Donaldson, Lufkin and Jenrette. They had signed on as foot soldiers in a white-collar army of overworked and frustrated lemmings furiously trying to spin straw into gold. They escaped with the remnants of their sanity-and, ultimately, this book. Uncensored, unsanitized, and uncut, it captures the chaotic essence of the Wall Street carnival and the outlandish personalities that make it all hum…and it will become the smartest, most entertaining investment you’ll make this year.

Next: The Future Just Happened by Michael Lewis

The New York Times bestseller. “His book is a wake-up call at a time when many believe the net was a flash in the pan.”?BusinessWeek

With his knowing eye and wicked pen, Michael Lewis reveals how the Internet boom has encouraged changes in the way we live, work, and think. In the midst of one of the greatest status revolutions in the history of the world, the Internet has become a weapon in the hands of revolutionaries. Old priesthoods are crumbling. In the new order, the amateur is king: fourteen-year-olds manipulate the stock market and nineteen-year-olds take down the music industry. Unseen forces undermine all forms of collectivism, from the family to the mass market: one black box has the power to end television as we know it, and another one may dictate significant changes in our practice of democracy. With a new afterword by the author.

The New New Thing: A Silicon Valley Story by Michael Lewis

New York Times Bestseller. “A superb book. . . . [Lewis] makes Silicon Valley as thrilling and intelligible as he made Wall Street in his best-selling Liar’s Poker.”?Time

In the weird glow of the dying millennium, Michael Lewis set out on a safari through Silicon Valley to find the world’s most important technology entrepreneur. He found this in Jim Clark, a man whose achievements include the founding of three separate billion-dollar companies. Lewis also found much more, and the result?the best-selling book The New New Thing?is an ingeniously conceived history of the Internet revolution.

Goldman Sachs’ Favorite Books – Index

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burroughs and John Helyar

Liar’s Poker by Michael Lewis

The Predators’ Ball: The Inside Story of Drexel Burnham and the Rise of the Junk Bond Raiders by Connie Bruck

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein

Fiasco: The Inside Story of a Wall Street Trader by Frank Portnoy

Confessions of a Street Addict by James J. Cramer Den of Thieves by James B. Stuart

Monkey Business: Swinging Through the Wall Street Jungle by John Rolfe and Peter Troob

Next: The Future Just Happened by Michael Lewis

The New New Thing: A Silicon Valley Story by Michael Lewis

Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part I

 

Goldman Sachs put together a list of the best books and it is impressive and long – unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions. Note: we do not endorse the short term trading strategies (well we really do not officially endorse anything) but to keep the list complete we have included all descriptions of books below. Because this is lengthy we will be breaking them up by section so stay tuned for more!- which brings to Industry Background and Flavor – there are some real classics in here and a few lesser known names.

Also see Bill Gates: 5 Books To Read This Summer

Goldman Sachs reading list sections

Written About, By or For Money Managers and Traders

Industry Background and Flavor

Broad Industry History

Analytical and Reference

Periodicals

Wall Street Journal (daily, Monday through Friday)

Barron’s (weekly publication)

General

IMD

FICC & Equities

Options/Derivatives

See Written About, By or For Money Managers and Traders -> here

Industry Background and Flavor is a lengthy section so we are splitting up –   part I below

Understanding Wall Street by Jeffrey Little & Lucien Rhodes

Over the past twenty-five years, Understanding Wall Street has helped investors at every level to understand exactly how the stock market works, and how they can build strong portfolios.

Over the past quarter century, Understanding Wall Street has helped everyone from rookie investors to Wall Street veterans understand exactly how the market works and how to determine which stocks to buy … and which to avoid. The fourth edition of this top-selling guide–still as easy-to-read, practical, and comprehensive as the first three–has been completely updated to help investors prosper in today’s new, no-limits marketplace.

• The Global Bankers by Roy Smith

An interesting and illuminating perspective on global banking as it was carried out on the eve of the 1990s from its three continental centers: New York, London, and Tokyo.

rom Publishers Weekly

This balanced, instructive and readable narrative both records and projects a new financial era. In worldwide perspective, Smith, who teaches finance at New York Univeristy, analyzes Japan’s major investment in U.S. industry, London’s huge bond market in “Eurodollars” free of regulation, Germany’s potentially dominant role in a tariffless Europe after 1992, the massive Third World debt’s impact on American bank earnings and foreign involvement in Wall Street’s high-stakes mergers and acquisitions. “The financial industry simply cannot escape the consequences of globalization,” the author convincingly declares. Smith is particularly enlightening on the Japanese ethic and related bargaining methods in his depiction of Goldman Sachs, where he was a partner, negotiating a deal for international operations with Tokyo’s Sumitomo Bank.
Copyright 1989 Reed Business Information, Inc.

From Library Journal

This book provides an insider’s view of the rapidly evolving integration of the world’s financial markets. The author formerly worked for Goldman Sachs and now teaches international banking and finance at NYU. Given the freer trade measures to be enacted in 1992 in the European Common Market, his book is on a timely and important subject. However, the first half of the book has too many technicalities and too much jargon. The second half of the book does better in providing some historical perspective. Still, the major trends and motivations that fuel international finance remain somewhat obscured after reading this book. Most libraries will find that general books on international finance and banking will cover this subject more successfully.
– Richard C. Schiming, Mankato State Univ., Minn.
Copyright 1989 Reed Business Information, Inc.

• The Money Masters by John Train

If you want to read a concise book about the investment styles and philosophies of historic “golden age” investors this book might be the one for you. Any student considering asset management as a career should read this one as well as The New Money Masters, its counterpart that highlights investors post 1975 or so.
I would encourage everyone to understand the difference from this book and its latter brother, the NEW MONEY MASTERS. This book is primarily focused on investors that became household names via the companies that are their legacy such as T. Rowe Price, John Templeton and Warren Buffett. Other notable investors are Paul Cabot, Philip Fisher, Benjamin Graham, Stanley Kroll, Larry Tisch, and Robert Wilson. If you want to know how the experts do it, this is a great anthology to get you started. Listen to the best and forget the rest!

• The New Money Masters by John Train

An expert reviews the experts – new and updated appraisals of the winning investment strategies of the greatest financial wizards.

Money Masters of Our Time is a reappraisal and revision of those money masters who have stood the test of time plus a look at new money masters. Train emphasises the parts of their various business careers that illuminate their investment techniques focusing on notable individuals whose decisions to buy and sell have actually made money grow. How do they reason? Where do they get their information? How much do they depend on fact and how much on psychology? What are their criteria in selecting a stock? What stocks are they buying now, and why?

The ?Money Masters? covered are: Warren Buffet, Paul Cabot, Philip Carret, Philip Fisher, Benjamin Graham, Mark Lightbrown, Peter Lynch, John Neff, T. Rowe Price, Richard Rainwater, Julian Robertson, Jim Rogers, George Soros, Michael Steinhardt, John Templeton, Ralph Wanger, Robert Wilson. Train centres on their investment techniques and methods and also gives brief biographical evaluations

• Money Masters of Our Time by John Train

In Money Masters of Our Time John Train once again displays his ability to explain clearly the strategies, experience, and human qualities of those money masters who have stood the test of time, as well as newer ones. He brings together experts who represent various investment “schools”–growth, value, technology, emerging markets, specialty companies, micro-caps, turnarounds, top down, bottom tip, and others–clarifying their similarities and differences and showing how different methods and techniques work.

Whether contrasting the long-term approach of Warren Buffett, with the “relentless pursuit” style of Peter Lynch or distilling the principles of market timing or expounding a list of investment “don’ts,” John Train makes the collective wisdom of the greatest, most successful investors available to all, professional and amateur alike. Money Masters of Our Time covers the investment methods of: T. Rowe Price, Warren Buffett, Paul Cabot, Philip Carret, Philip Fisher, Benjamin Graham, Mark Lightbown, Peter Lynch, John Neff, Richard Rainwater, Julian Robertson, Jim Rogers, George Soros, Michael Steinhardt, John Templeton, Ralph Wanger, and Robert Wilson. Train focuses on their investment techniques and also gives critical evaluations. The text includes an Introduction, Appendixes, and an Index.

• The Intelligent Investor: The Classic Text on Value Investing by Benjamin Graham

The Classic Text Annotated to Update Graham’s Timeless Wisdom for Today’s Market Conditions

The greatest investment advisor of the twentieth century, Benjamin Graham taught and inspired people worldwide. Graham’s philosophy of “value investing” — which shields investors from substantial error and teaches them to develop long-term strategies — has made The Intelligent Investor the stock market bible ever since its original publication in 1949.

Over the years, market developments have proven the wisdom of Graham’s strategies. While preserving the integrity of Graham’s original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today’s market, draws parallels between Graham’s examples and today’s financial headlines, and gives readers a more thorough understanding of how to apply Graham’s principles.

Vital and indispensable, this HarperBusiness Essentials edition of The Intelligent Investor is the most important book you will ever read on how to reach your financial goals.

• The Visual Investor: How to Spot Market Trends by John J. Murphy

The Visual Investor, Second Edition breaks down technical analysis into terms that are accessible to even individual investors. Aimed at the typical investor–such as the average CNBC viewer–this book shows investors how to follow the ups and downs of stock prices by visually comparing the charts, without using formulas or having a necessarily advanced understanding of technical analysis math and jargon. Murphy covers all the fundamentals, from chart types and market indicators to sector analysis and global investing, providing examples and easy-to-read charts so that any reader can become a skilled visual investor.

• The Essays of Warren Buffett: Lessons for Corporate America by Warren Buffett

The year 2015 marks the fiftieth anniversary of Berkshire Hathaway under Warren Buffett’s leadership, a milestone worth commemorating. The tenure sets a record for chief executive not only in duration but in value creation and philosophizing. The fourth edition of The Essays of Warren Buffett: Lessons for Corporate America celebrates its twentieth anniversary. As the book Buffett autographs most, its popularity and longevity attest to the widespread appetite for this unique compilation of Buffett’s thoughts that is at once comprehensive, non-repetitive, and digestible. New and experienced readers alike will gain an invaluable informal education by perusing this classic arrangement of Warren’s best writings.

The fourth edition’s new material includes:

 

• Warren’s 50th anniversary retrospective, in what Bill Gates called Warren’s best letter ever, on conglomerates and Berkshire’s future without Buffett;

 

• Charlie Munger’s 50th anniversary essay on ”The Berkshire System”;

 

• Warren’s definitive defense of Berkshire’s no-dividend practice; and

 

• Warren’s best advice on investing, whether in apartments, farms, or businesses.
• Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds by Mary Buffett and David Clark

In the world of investing, the name Warren Buffett is synonymous with success and prosperity. Learn how Warren Buffett did it—and how you can too.

Building from the ground up, Buffett chose wisely and picked his stocks with care, in turn amassing the huge fortune for which he is now famous. Mary Buffett, former daughter-in-law of this legendary financial genius and a successful businesswoman in her own right, has teamed up with noted Buffettologist David Clark to create Buffettology, a one-of-a-kind investment guide that explains the winning strategies of the master.

* Learn how to approach investing the way Buffett does, based on the authors’ firsthand knowledge of the secrets that have made Buffett the world’s second wealthiest man
* Use Buffett’s proven method of investing in stocks that will continue to grow over time
* Master the straightforward mathematical equipments that assist Buffett in making investments
* Examine the kinds of companies that capture Buffett’s interest, and learn how you can use this information to make your own investment choices of the future

Complete with profiles of fifty-four “Buffett companies” — companies in which Buffett has invested and which the authors believe he continues to follow — Buffettology can show any investor, from beginner to savvy pro, how to create a profitable portfolio.

• The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor by Robert G. Hagstrom Jr.

Simply the most important new stock book of the 1990s, to date. Buy it and read it.” -Kenneth L. Fisher Forbes

The runaway bestseller-updated with new material included for the first time!

“The Warren Buffett Way outlines his career and presents examples of how his investment techniques and methods evolved and the important individuals in that process. It also details the key investment decisions that produced his unmatched record of performance.” -from the Foreword by Peter S. Lynch Bestselling author, One Up on Wall Street and Beating the Street

“. . . an extraordinarily useful account of the methods of an investor held by many to be the world’s greatest.” -The Wall Street Journal

“Robert Hagstrom presents an in-depth examination of Warren Buffett’s strategies, and the ‘how and why’ behind his selection of each of the major securities that have contributed to his remarkable record of success. His ‘homespun’ wisdom and philosophy are also part of this comprehensive, interesting, and readable book.” -John C. Bogle Chairman, The Vanguard Group

“It’s first rate. Buffett gets a lot of attention for what he preaches, but nobody has described what he practices better than Hagstrom. Here is the lowdown on every major stock he ever bought and why he bought it. Fascinating. You could even try this at home.” -John Rothchild Financial columnist Time magazine

• The Alchemy of Finance: Reading the Mind of the Market by George Soros

New chapter by Soros on the secrets to his success along with a new Preface and Introduction.
New Foreword by renowned economist Paul Volcker
“An extraordinary . . . inside look into the decision-making process of the most successful money manager of our time. Fantastic.” -The Wall Street Journal
George Soros is unquestionably one of the most powerful and profitable investors in the world today. Dubbed by BusinessWeek as “the Man who Moves Markets,” Soros made a fortune competing with the British pound and remains active today in the global financial community. Now, in this special edition of the classic investment book, The Alchemy of Finance, Soros presents a theoretical and practical account of current financial trends and a new paradigm by which to understand the financial market today. This edition’s expanded and revised Introduction details Soros’s innovative investment practices along with his views of the world and world order. He also describes a new paradigm for the “theory of reflexivity” which underlies his unique investment strategies. Filled with expert advice and valuable business lessons, The Alchemy of Finance reveals the timeless principles of an investing legend.
This special edition will feature a new chapter by Soros on the secrets of his success and a new Foreword by the Honorable Paul Volcker, former Chairman of the Federal Reserve.
George Soros (New York, NY) is President of Soros Fund Management and Chief Investment Advisor to Quantum Fund N.V., a $12 billion international investment fund. Besides his numerous ventures in finance, Soros is also extremely active in the worlds of education, culture, and economic aid and development through his Open Society Fund and the Soros Foundation.

• Bill Gross on Investing by William H. Gross

Learn where the markets are headed–and how to ride them to success.

Global changes point toward a dramatically different next decade in the realm of finance. As the bull markets of the last twenty years fade away, new investment tools and strategies are necessary. In this book, William Gross, one of today’s most respected money managers who has built his fame on tracking economic trends, prepares readers for a completely new approach to investing. He emphasizes bonds, the right kinds of stocks, and a globalized investment portfolio for this new era in investment. In an accessible style, Gross intermingles discussions of investment with humor, wit, and personal anecdotes.

William H. Gross (Laguna Beach, California) is the founder, managing director, and CEO of Pacific Investment Management Company, which manages over $90 billion in assets for both institutional investors and individuals  (at the time of this edition – how times have changed)!

• Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

Capital Ideas traces the origins of modern Wall Street, from the pioneering work of early scholars and the development of new theories in risk, valuation, and investment returns, to the actual implementation of these theories in the real world of investment management. Bernstein brings to life a variety of brilliant academics who have contributed to modern investment theory over the years: Louis Bachelier, Harry Markowitz, William Sharpe, Fischer Black, Myron Scholes, Robert Merton, Franco Modigliani, and Merton Miller. Filled with in-depth insights and timeless advice, Capital Ideas reveals how the unique contributions of these talented individuals profoundly changed the practice of investment management as we know it today.

• Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay

his classic survey of crowd psychology offers an illuminating and entertaining look at three grand-scale swindles. Originally published in England in 1841, its remarkable tales of human folly reveal that the hysteria of the Wall Street Crash of 1929 and the junk-bonds frenzy of the 1980s were far from uniquely twentieth-century phenomena.
The first of the financial scandals discussed, “The Mississippi Scheme,” concerns a disastrous eighteenth-century plan for the commercial exploitation of the Mississippi valley, where investors were lured by Louisiana’s repute as a region of gold and silver mountains. During the same era, thousands of English investors were ruined by “The South-Sea Bubble,” a stock exchange based on British trade with the islands of the South Seas and South America. The third episode involves Holland’s seventeenth-century “Tulipomania,” when people went into debt collecting tulip bulbs — until a sudden depreciation in the bulbs’ value rendered them worthless (except as flowers).
Fired by greed and fed by naiveté,  these historic investment strategies gone awry retain an irrefutable relevance for modern times. Extraordinary Popular Delusions is essential and enthralling reading for investors as well as students of history, psychology, and human nature.

• Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta

On a quiet July morning, one of the world’s most powerful and prestigious investment banking partnerships was launched on the path to ruin-not by the economy, not by an act of God, but by a self-inflicted wound.

The firm was Lehman Brothers Kuhn Loeb, a revered Wall Street institution with roots that stretched back to the Civil War. And what happened that July morning in 1983 would not only spell the end of a banking firm but would come to symbolize the recklessly high-flying Wall Street of the 1980s.

Through hundreds of hours of interviews, through access to private company records, through the confidence of board members, partners, associates and employees, Ken Auletta created a prophetic spellbinder which resonates especially today. It is a story of greed, ego and error; a tale of primal combat between two men and between two irrevocably different and hostile worlds; a superb example of investigative journalism that rivals any best-selling novel for sheer surprise, drama and excitement.

• The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

Published to critical acclaim twenty years ago, and now considered a classic, The House of Morgan is the most ambitious history ever written about American finance. It is a rich, panoramic story of four generations of Morgans and the powerful, secretive firms they spawned, ones that would transform the modern financial world. Tracing the trajectory of J. P. Morgan’s empire from its obscure beginnings in Victorian London to the financial crisis of 1987, acclaimed author Ron Chernow paints a fascinating portrait of the family’s private saga and the rarefied world of the American and British elite in which they moved—a world that included Charles Lindbergh, Henry Ford, Franklin Roosevelt, Nancy Astor, and Winston Churchill. A masterpiece of financial history—it was awarded the 1990 National Book Award for Nonfiction and selected by the Modern Library as one of the 100 Best Nonfiction Books of the Twentieth Century—The House of Morgan is a compelling account of a remarkable institution and the men who ran it, and an essential book for understanding the money and power behind the major historical events of the last 150 years.

• The House of Nomura: The Inside Story of the Legendary Japanese Financial Dynasty by Albert Alletzhauser

A major work of finance, big business, and politics by the only Westerner who has gained access to the inner sanctum of Nomura Securities, the Nomura family records, and the amazing cast of characters who make up the Nomura dynasty.

From Library Journal

The house of Nomura is one of several large financial conglomerates (or zajbatsu ) which currently influence the Japanese and world business environment. Though Nomura is not a recognizable name in most parts of America, the financial assets controlled by the group are enormous. Alletzhauser, an American stockbroker who spent two years in Tokyo, tells the history of Nomura from its beginning in 1872 through two wars to its present-day stature as one of the most influential financial groups in the world. The story abounds with insights into Japanese society and culture, making it a thoroughly captivating experience for a wide range of readership.
– Joseph Barth, U.S. Military Acad. Lib., West Point, N.Y.
Copyright 1990 Reed Business Information, Inc.

• The New Crowd: The Changing of the Jewish Guard on Wall Street by Judith Ramsey Ehrlick & Barry J. Rehfeld

A detailed social history of the rise of the Jewish entrepreneurs of Wall Street. The colourful characters who run these highly successful firms are described.

From Library Journal

Since the end of World War II, the talented sons of the great wave of Jewish immigrants have managed to overcome class differences and barriers and gain power and control over the German Jews who founded and dominated some of the most prestigious firms on Wall Street. Sanford Weill, Felix Rohatyn, and Michael Milken are just a few of the major personalities whose careers are detailed in this readable book that provides a look at recent Wall Street history from a different perspective.
– Steven J. Mayover, Free Lib. of Philadelphia
Copyright 1989 Reed Business Information, Inc.

• One Up On Wall Street : How To Use What You Already Know To Make Money In The Market by Peter Lynch

More than one million copies have been sold of this seminal book on investing in which legendary mutual-fund manager Peter Lynch explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success.

America’s most successful money manager tells how average investors can beat the pros by using what they know. According to Lynch, investment opportunities are everywhere. From the supermarket to the workplace, we encounter products and services all day long. By paying attention to the best ones, we can find companies in which to invest before the professional analysts discover them. When investors get in early, they can find the “tenbaggers,” the stocks that appreciate tenfold from the initial investment. A few tenbaggers will turn an average stock portfolio into a star performer.

Lynch offers easy-to-follow advice for sorting out the long shots from the no-shots by reviewing a company’s financial statements and knowing which numbers really count. He offers guidelines for investing in cyclical, turnaround, and fast-growing companies.

As long as you invest for the long term, Lynch says, your portfolio can reward you. This timeless advice has made One Up on Wall Street a #1 bestseller and a classic book of investment know-how.

• Beating the Street by Peter Lynch

More than one million copies have been sold of this seminal book on investing in which legendary mutual-fund manager Peter Lynch explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success.

America’s most successful money manager tells how average investors can beat the pros by using what they know. According to Lynch, investment opportunities are everywhere. From the supermarket to the workplace, we encounter products and services all day long. By paying attention to the best ones, we can find companies in which to invest before the professional analysts discover them. When investors get in early, they can find the “tenbaggers,” the stocks that appreciate tenfold from the initial investment. A few tenbaggers will turn an average stock portfolio into a star performer.

Lynch offers easy-to-follow advice for sorting out the long shots from the no-shots by reviewing a company’s financial statements and knowing which numbers really count. He offers guidelines for investing in cyclical, turnaround, and fast-growing companies.

As long as you invest for the long term, Lynch says, your portfolio can reward you. This timeless advice has made One Up on Wall Street a #1 bestseller and a classic book of investment know-how.

• “Our Crowd”: The Great Jewish Families of New York by Stephen Birmingham

A novelist who has specialized in creating tales of the rich and well placed offers an insider’s view of one of the wealthiest segments of an affluent city: Jewish upper–class life in New York.

Working with diaries, letters, and personal reminiscences supplied by members of interwoven families–Loeb, Lehman, straus, seligman, and Guggenheism, among others–Stephen Birmingham has assembled a remarkable composite portrait. some of his tales are wildly funny. others are poignant. All are set within a world of numbing opulence–Fifth Avenue mansions, chateaux on Long Island, castles in Westchester, vast art collections–millions given away so quietly and steadily that they have never properly been counted. This economic power and unique culture was played out alongside–but never a part of–the gentile establishment.

Remarkable individuals, resplendent dynasties–out of the elegant fabric of their lives, Birmingham has fashioned superb social history.

• Reminiscences of a Stock Operator by Edwin Lefevre‘

Although Reminiscences…was first published some seventy years ago, its take on crowd psychology and market timing is a s timely as last summer’s frenzy on the foreign exchange markets.”
—Worth magazine

“The most entertaining book written on investing is Reminiscences of a Stock Operator, by Edwin Lefèvre, first published in 1923.”
—The Seattle Times

“After twenty years and many re-reads, Reminiscences is still one of my all-time favorites.”
—Kenneth L. Fisher, Forbes

“A must-read classic for all investors, whether brand-new or experienced.”
—William O’Neil, founder and Chairman, Investor’s Business Daily

“Whilst stock market tomes have come and gone, this remains popular and in print eighty years on.”
—GQ magazine

First published in 1923, Reminiscences of a Stock Operator is the most widely read, highly recommended investment book ever. Generations of readers have found that it has more to teach them about markets and people than years of experience. This is a timeless tale that will enrich your life—and your portfolio.

Part I index below

Understanding Wall Street by Jeffrey Little & Lucien Rhodes

• The Global Bankers by Roy Smith
• The Money Masters by John Train
• The New Money Masters by John Train
• Money Masters of Our Time by John Train
• The Intelligent Investor: The Classic Text on Value Investing by Benjamin Graham
• The Visual Investor: How to Spot Market Trends by John J. Murphy
• The Essays of Warren Buffett: Lessons for Corporate America by Warren Buffett
• Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds by Mary Buffett and David Clark
• The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor by Robert G. Hagstrom Jr.
• The Alchemy of Finance: Reading the Mind of the Market by George Soros
• Bill Gross on Investing by William H. Gross
• Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein
• Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay
• Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta
• The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow
• The House of Nomura: The Inside Story of the Legendary Japanese Financial Dynasty by Albert Alletzhauser
• The New Crowd: The Changing of the Jewish Guard on Wall Street by Judith Ramsey Ehrlick & Barry J. Rehfeld
• One Up On Wall Street : How To Use What You Already Know To Make Money In The Market by Peter Lynch
• Beating the Street by Peter Lynch
• “Our Crowd”: The Great Jewish Families of New York by Stephen Birmingham
• Reminiscences of a Stock Operator by Edwin Lefevre

Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part II

 

Goldman Sachs’ Book List

Goldman Sachs put together a list of the best books and it is impressive and long – unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions. Note: we do not endorse the short term trading strategies (well we really do not officially endorse anything) but to keep the list complete we have included all descriptions of books below. Because this is lengthy we will be breaking them up by section so stay tuned for more!- which brings to Industry Background and Flavor – there are some real classics in here and a few lesser known names and many of the books only cost a few pennies from Amazon and even with shipping will cost you less than $5 TOTAL, a bunch only cost a penny plus a few dollars shipping – so make sure to check them out!!

Also see Bill Gates: 5 Books To Read This Summer

Also see Written About, By or For Money Managers and Traders -> here

Also see Goldman Sachs’ Recommended Reading List – Industry Background and Flavor Part I

Goldman Sachs reading list sections

Written About, By or For Money Managers and Traders

Industry Background and Flavor

Broad Industry History

Analytical and Reference

Periodicals

Wall Street Journal (daily, Monday through Friday)

Barron’s (weekly publication)

General

IMD

FICC & Equities

Options/Derivatives

See Written About, By or For Money Managers and Traders -> here

Goldman Sachs’ Book List – Industry Background and Flavor is a lengthy section so we are splitting up – below is Part II

Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider

William Greider’s groundbreaking bestseller reveals how the mighty and mysterious Federal Reserve operates—and manipulates and the world’s economy.

This ground-breaking best-seller reveals for the first time how the mighty and mysterious Federal Reserve operates—and how it manipulated and transformed both the American economy and the world’s during the last eight crucial years. Based on extensive interviews with all the major players, Secrets of the Temple takes us inside the government institution that is in some ways more secretive than the CIA and more powerful than the President or Congress.

• Soros on Soros: Staying Ahead of the Curve by George Soros, Bryon Wien & Krisztina Koenen

George Soros Ends the Speculation

“The outcome [of this book] is a summing up of my life’s work. . . As I finish the book, I feel I have succeeded.”-George Soros from the Preface

Critical praise for Soros on Soros

“If you have ever wanted to sit down for a candid conversation with a phenomenal financial success, George Soros’s book provides the opportunity. You will meet a complex man and a first-rate mind.”-Henry A. Kissinger

“The best expert on Soros is undoubtedly George Soros! After all, who is better equipped to tell us what he really thinks and how he thinks, a matter of some importance given the fact that he has translated a remarkable personal financial success into a truly generous and historically significant effort to promote postcommunist democracy.” -Zbigniew Brzezinski

“The best X-ray of the mind of the master yet.” -Barton M. Biggs

“George Soros brings a lot more to the world of finance than the intuition and nerve of a born trader-and in Soros on Soros he’s no longer bashful about telling us about it. A philosopher at heart, George attributes his success at investing to a theory of the interaction of reality and human perception. What really drives the man now, with a personal fortune beyond all personal need, is a different kind of strategic investing-investment to build in Eastern Europe the kind of open societies he came to value in his own life.” -Paul A. Volcker

Financial guru George Soros is one of the most colorful and intriguing figures in the financial world today. Now in Soros on Soros, readers are given their most intimate and revealing look yet into the life and mind of the one BusinessWeek dubbed, “The Man Who Moves Markets.”

Soros on Soros interweaves financial theory and personal reminiscence, political analysis and moral reflection to offer a compelling portrait of the world (and its markets) according to Soros. In an interview-style narrative with Byron Wien, Managing Director at Morgan Stanley, and with German journalist Krisztina Koenen, Soros vividly describes the genesis of his brilliant financial career and shares his views on investing and global finance, politics and the emerging world order, and the responsibility of power.

Speaking with remarkable candor, he traces his progress from Holocaust survivor to philosophy student, unsuccessful tobacco salesman to the world’s most powerful and profitable trader and introduces us to the people and events that helped shape his character and his often controversial views.

In describing the investment theories and financial strategies that have made him “a superstar among money managers” (The New York Times), Soros tells the fascinating story of the phenomenally successful Soros Fund Management and its $12 billion flagship, Quantum Fund. He also offers fresh insights into some of his most sensational wins and losses, including a firsthand account of the $1 billion he made going up against the British pound and the fortune he lost speculating on the yen. Plus: Soros’s take on the devaluation of the peso and currency fluctuations internationally.

He tells of the personal and professional crises that more than once threatened to destroy him and of the personal resources he drew upon to turn defeat into resounding victory. And he explains his motivations for establishing the Soros Foundation and the Open Society Institute through which he worked to build open societies in postcommunist countries in Eastern Europe and the former Soviet Union.

Finally, turning his attention to international politics, Soros offers keen insights into the current state of affairs in Russia and the former communist bloc countries and analyzes the reasons behind and likely consequences of the West’s failure to properly integrate them into the free world. He also explores the crisis of the ERM and analyzes the pros and cons of investing in a number of emerging markets.

Find out what makes one of the greatest financial wizards of this or any age tick. Soros on Soros is a must read for anyone interested in world finance and international policy.

• Guerrilla Investing: Winning Strategies for Beating the Wall Street Professionals by Peter Siris

Amazon.com Review

For Peter Siris, the stock market is a battleground. And if you’re an individual investor, you’d better understand your enemy–the professional investor–as well your own limits and capabilities. According to Siris, the professionals have many advantages over individual investors: they’ve got the inside track on information that moves the market, and they’re backed by research staffs and their networks with other pros. The trick to beating the pros is to employ guerrilla tactics–that is avoid their strengths and exploit their weaknesses.Guerrilla Investing looks at techniques that individual investors can use to win the investing game. Siris cautions against short-term trading, which plays into the hands of the professionals, and he instead advocates a buy-and-hold strategy. He shows how to read charts, interpret a company’s financial statement, and how not to get suckered by what market analysts say. He also encourages investors to develop a investment style and to stick with it. If you consider yourself a serious investor or are interested in becoming one, Guerrilla Investing is something you’ll find yourself coming back to again and again. Highly recommended. –Harry C. Edwards –This text refers to an out of print or unavailable edition of this title.

From Booklist

Siris headed his own retail consulting firm before becoming an investment analyst, and he is the author of the spy thriller The Peking Mandate (1983). He now makes the point that with every stock transaction, either the buyer or the seller has made a wrong decision, and he goes on to compare trading to a war with winners and losers. His audience is the “serious amateur investor,” and he warns that the enemy is the professional trader who has more time, money, information, and technology at his disposal. He suggests that the individual can still gain an advantage by discovering and exploiting small market niches overlooked by bigger traders. Pursuing his combat analogy, Siris stresses that intelligence gathering and analysis are at the heart of any guerrilla strike. He details such resources as the Internet and cable television’s financial news networks and explains how to interpret the information one uncovers. In addition, he supplies such weapons as fundamental analysis and technical analysis to the guerrilla’s arsenal. David Rouse

• The Battle For Investment Survival by Gerald Loeb

A reader of one of my earlier discussions asked-“Have you ever tried out the ideas outlined in your book?” My reply was to the effect that the ideas were tried out first, and the book written afterward. Any earner who earns more than he can spend is automatically an investor. It doesn’t matter in the slightest whether he wants to be or not, or even whether he realizes that he is investing. Storing present purchasing power for use in the future is investing, no matter in what form it’s put away. Some popular and common forms include money itself, government bonds, savings bank deposits, real estate, commodities, securities of all types, diamonds and where and when it’s legal, gold.

• Money and Power: The History of Business by Howard B. Means

The dramatic story of greed, money, power, and the moguls and dynasties that have shaped business From merchant ships to microchips, industry has been defined by the powerful business leaders who have caused seismic shifts in the growth of commerce. The companion book to the acclaimed CNBC documentary, Money and Power takes readers on a gripping journey following the movement of power from east to west-from the feudal estates of medieval Europe to the halls of modern finance, from the teeming streets of ancient Venice to the serene campuses of Silicon Valley-to tell the story of how business shaped the modern world, and how the goals of a few ambitious people paved the way to the wealth and prosperity shared by so much of the world’s population today. A dramatic narrative focusing on the groundbreakers throughout history-from St. Godric, the twelfth-century monk reviled for his love of money to Bill Gates, the contemporary embodiment of money and power-traces the roots of banking, industry, commerce, and power. Fever-pitch moments in the book center around pivotal figures such as Cosimo de Medici, Philip II, the Rothschilds, J. P. Morgan, the Rockefellers, Henry Ford and others. The authors also extract important lessons about the strategies and tactics used to build these business empires.

• The Great Game: The Emergence of Wall Street as a World Power: 1653-2000 by John Steele Gordon

In “The Great Game,” acclaimed business historian John Steele Gordon chronicles the rise of Wall Street from its humble beginnings as an American trading post to its domination of the world economy, bringing to life the remarkable cast of bankers and brokers, visionaries and crooks who made it happen. From Alexander Hamilton to Michael Milken, the history of Wall Street is a history of risk, courage, avarice, patriotism, power, genius, and, occasionally, remarkable stupidity. In Gordon, Wall Street has finally found a biographer worthy of its extraordinary story.

• Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith

To an unprecedented degree, the health of the American economy, and the financial well-being of the average American, is tied to the stock market. Toward Rational Exuberance tells the story of how the market came to be what it is today, providing an in-depth understanding of the theories that drive investor behavior, the vivid personalities who have dominated the stock market’s turbulent history, and the processes by which the market has evolved to its present state — elements essential to anyone seeking to understand the workings of the modern economy.

The stock market is big news now, influencing every aspect of the modern economy. Accepted wisdom has it that the market will provide retirement security for anyone willing to diligently save and invest.

Yet many people still alive can remember a very different time, when the stock market was little more than a primitive insider’s game viewed by most Americans with skepticism and suspicion. In Toward Rational Exuberance, B. Mark Smith, a retired stock trader with nearly two decades of practical experience, tells the story of how this stunning transformation occurred. It is a fascinating story, involving colorful personalities, dramatic events, and revolutionary new ideas. In the course of the narrative, Smith traces the evolution of popular theories of stock market behavior, showing how they have become widely accepted over time and have greatly influenced the way the investing public views the market. But he also shows how some of these theories — such as the notion that the market is often susceptible to speculative “bubbles” that will inevitably burst — are based on faulty interpretations of market history that may lead investors to draw inaccurate conclusions about the market today.

The central thesis of Toward Rational Exuberance is that the modern stock market is the product of a dynamic evolutionary process; it is very different from what it was in the past. It cannot be measured simply by comparison with arbitrary historical standards, and its behavior cannot be predicted by extrapolating those standards into the future. It is only by understanding the process by which the modern market has been created that today’s investor can begin to understand the market itself.

• 100 Years of Wall Street by Charles R. Geisst, Richard A. Grasso

There is probably no other “street” in the world that is as influential as Wall Street. From robber barons to money trusts; the Depression to the great 1950s bull market; increased government regulation and war to the ongoing 1990s boom; from insider trading and fraud to antitrust suits; from J.P. Morgan, Michael Milken, Ivan Boetsky to Bill Gates, Wall Street is a site of history-making events and unforgettable figures. This book gives a decade-by-decade, pictorial eyewitness account of Wall Street’s past, its people and events throughout the 20th century.

• A Random Walk Down Wall Street by Burton Gordon Malkiel

This is an investement guide for the 1990s. An entirely new chapter has been added, “A life cycle guide to personal investing”, which shows how individuals can tailor their financial objectives to their particular incomes at any age and how a mix of saving and investment plans will provide funds when needed and for the years beyond retirement. Another new chapter takes up the techniques that turn the odds of success significantly in favour of the individual investor, while debunking premature claims of the death of the random walk theory. In addition, Burton Malkiel explains the new financial instruments that increase the options for either short-or long-run gains.

• Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher

Widely respected and admired, Philip Fisher is among the most influential investors of all time. His investment philosophies, introduced almost forty years ago, are not only studied and applied by today’s financiers and investors, but are also regarded by many as gospel. This book is invaluable reading and has been since it was first published in 1958. The updated paperback retains the investment wisdom of the original edition and includes the perspectives of the author’s son Ken Fisher, an investment guru in his own right in an expanded preface and introduction

“I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits…A thorough understanding of the business, obtained by using Phil’s techniques…enables one to make intelligent investment commitments.”
—Warren Buffett

• The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60s by John Brooks

The Go-Go Years

“The Go-Go Years is not to be read in the usual manner of Wall Street classics. You do not read this book to see our present situation reenacted in the past, with only the names changed. You read it because it is a wonderful description of the way things were in a different time and place.”
—From the Foreword by Michael Lewis

The Go-Go Years is the harrowing and humorous story of the growth stocks of the 1960s and how their meteoric rise caused a multitude of small investors to thrive until the devastating market crashes in the 1970s. It was a time when greed drove the market and fast money was being made and lost as the “go-go” stocks surged and plunged. Included are the stories of such high-profile personalities as H. Ross Perot who lost $450 million in one day, Saul Steinberg’s attempt to take over Chemical Bank, and the fall of America’s “Last Gatsby,” Eddie Gilbert.

Praise for The Go-Go Years

“Those for whom the stock market is mostly a spectator sport will relish the book’s verve, color, and memorable one-liners.”
—New York Review of Books

“Please don’t take The Go-Go Years too much for granted: as effortlessly as it seems to fly, it is nonetheless an unusually complex and thoughtful work of social history.”
—New York Times

“Brooks’s great contribution is his synthesis of all the elements that made the 1960s the most volatile in Wall Street history . and making so much material easily digestible for the uninitiated.”
—Publishers Weekly

“Brooks … is about the only writer around who combines a thorough knowledge of finance with the ability to perceive behind the dance of numbers ‘high, pure, moral melodrama on the themes of possession, domination, and belonging.’”
—Time

• Against the Gods: The Remarkable Story of Risk by Peter Bernstein

A Business Week, New York Times Business, and USA Today Bestseller

“Ambitious and readable . . . an engaging introduction to the oddsmakers, whom Bernstein regards as true humanists helping to release mankind from the choke holds of superstition and fatalism.” -The New York Times

“An extraordinarily entertaining and informative book.” -The Wall Street Journal

“A lively panoramic book . . . Against the Gods sets up an ambitious premise and then delivers on it.” -Business Week

“Deserves to be, and surely will be, widely read.” -The Economist

“[A] challenging book, one that may change forever the way people think about the world.” -Worth

“No one else could have written a book of such central importance with so much charm and excitement.” -Robert Heilbroner author, The Worldly Philosophers

“With his wonderful knowledge of the history and current manifestations of risk, Peter Bernstein brings us Against the Gods. Nothing like it will come out of the financial world this year or ever. I speak carefully: no one should miss it.” -John Kenneth Galbraith Professor of Economics Emeritus, Harvard University

In this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today.

“An extremely readable history of risk.” -Barron’s

“Fascinating . . . this challenging volume will help you understand the uncertainties that every investor must face.” -Money

“A singular achievement.” -Times Literary Supplement

“There’s a growing market for savants who can render the recondite intelligibly-witness Stephen Jay Gould (natural history), Oliver Sacks (disease), Richard Dawkins (heredity), James Gleick (physics), Paul Krugman (economics)-and Bernstein would mingle well in their company.” -The Australian

• Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay, Martin Fridson, Joseph de la Vega

“The market never ceases to befuddle and beguile. These two venerable works are fixtures on the short lists for most valuable books on the securities markets, and investors continue to cherish them.” -From the Introduction by Martin S. Fridson Managing Director, Merrill Lynch & Co. Author of Investment Illusions

Exploring the sometimes hilarious, sometimes devastating impact of crowd behavior and trading trickery on the financial markets, this book brilliantly combines two all-time investment classics. Extraordinary Popular Delusions and Confusión de Confusiones take us from Tulipmania in 1634-when tulips actually traded at a higher price than gold-to the South Sea “bubble” of 1720, and beyond. Securities analyst and author Martin Fridson guides you on a quirky, entertaining, and intriguing journey back through time.

Chosen by the Financial Times as Two of the Ten Best Books Ever Written on Investment

Critical Praise . . .

“This is the most important book ever written about crowd psychology and, by extension, about financial markets. A serious student of the markets and even anyone interested in the extremes of human behavior should read this book!” -Ron Insana, CNBC

“In combining ‘Extraordinary’ with ‘Confusion,’ the result is not extraordinary confusion. Instead, with clarity, the book sears into modern investor minds the dangers of following the crowd.” -Greg Heberlein, The Seattle Times

“You will see between its staid lines (written in ye olde English and as ponderable as Buddha’s navel) that, despite what the media says, nothing really important has changed in the financial markets in centuries.” -Kenneth L. Fisher, Forbes

• Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger

Manias, Panics, and Crashes, Fifth Edition is an engaging and entertaining account of the way that mismanagement of money and credit has led to financial explosions over the centuries. Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book puts the turbulence of the financial world in perspective. The updated fifth edition expands upon each chapter, and includes two new chapters focusing on significant financial crises of the last fifteen years.

• Capital Ideas: The Improbable Origins of Modern Wall Street by Peter Bernstein

Capital Ideas traces the origins of modern Wall Street, from the pioneering work of early scholars and the development of new theories in risk, valuation, and investment returns, to the actual implementation of these theories in the real world of investment management. Bernstein brings to life a variety of brilliant academics who have contributed to modern investment theory over the years: Louis Bachelier, Harry Markowitz, William Sharpe, Fischer Black, Myron Scholes, Robert Merton, Franco Modigliani, and Merton Miller. Filled with in-depth insights and timeless advice, Capital Ideas reveals how the unique contributions of these talented individuals profoundly changed the practice of investment management as we know it today.

• The Big Board: A History of the New York Stock Market by Robert Sobel

First published in 1965, The Big Board was the first history of the New York stock market. It is a story of people: their foibles and strengths, earnestness and avarice, triumphs and crash-and-burns. It is full of entertaining anecdotes, cocktail-party trivia, and tales of love and hate between companies and investors.

Early investments in North America consisted almost exclusively of land. The few securities holders lived in cities, where informal markets grew, with most trading carried out in the street and in coffeehouses. Banking, insurance, and manufacturing activity increased only after the Revolution. In 1792, 24 prominent New York businessmen, for whom stock and bond trading was only a side business, met under a buttonwood tree on Wall Street and agreed to trade securities on a common commission basis. Five securities were traded; three government bonds and two bank stocks. Trading was carried out at the Tontine Coffee-House in a call market, with the president reading out a list of stocks as brokers traded each in turn.

The first half of the 19th century was heady for security trading in New York. In 1817, the Tontine gave way to the New York Stock and Exchange Board, with a more organized and regulated system. Canal mania, which peaked in the late 1820s, attracted European funds to New York and volume soared to 100 shares a day. Soon, the railroads competed with canals for funding. In the frenzy, reckless investors bought shares in “sheer fabrications of imaginative and dishonest men,” leading an economist of the day to lament that “every monied corporation is prima facie injurious to the national wealth, and ought to be looked upon by those who have no money with jealousy and suspicion.”

Colorful figures of Wall Street included Jay Gould and Jim Fisk who, in 1869, precipitated one of the worst panics in American financial history by trying to corner the gold market. Almost lynched, the two were hauled into court, where Fisk whined, “A fellow can’t have a little innocent fun without everybody raising a halloo and going wild.” Then there was Jay Cooke, who invented the national bond drive and, practically unaided, financed the Union effort in the Civil War. In 1873, however, faulty judgment on railroad investments led to the failure of Cooke & Co, and a panic on Wall Street. The NYSE closed for ten days. A journalist wrote: “An hour before its doors were closed, the Bank of England was not more trusted,”

Despite J, P. Morgan’s virtual single-handed role in stemming the Knickerbocker Trust panic of 1907, upon his death in 1913, someone wrote, “We verily believe that J. Pierpont Morgan has done more harm in the world than any man who ever lived in it.” In the 1950s, Charles Merrill was instrumental in changing this attitude toward Wall Streeters. His firm, Merrill Lynch, derisively known in some quarters as “We, the People” and “The Thundering Herd,” brought Wall Street to small investors, traditionally not worth the effort for brokers.

The Big Board closes with this story. Asked by a much younger man what he thought stocks would do next, J,P. Morgan “never hesitated for a moment. He transfixed the neophyte with his sharp glance and replied ‘They will fluctuate, young man, they will fluctuate,’ And so they will,”

• The Chastening: Inside The Crisis That Rocked The Global Financial System And Humbled The Imf by Paul Blustein

Lauded by reviewers and scholars alike, Paul Blustein’s The Chastening examines the role of the International Monetary Fund in the series of economic crises that rocked the globe in the last decade. Based on hundreds of interviews with officials at the IMF, the World Bank, the U.S. Treasury, the Federal Reserve, the White House, and many foreign governments, The Chastening offers a behind-the-scenes look at the Fund during an extraordinarily turbulent period in modern economic history and at a time when the IMF has become the object of intense political controversy.

While the IMF and its overseers at the Treasury and the Fed have sought to cultivate an image of economic masterminds coolly dispensing effective economic remedies, the reality is that as markets were sinking and defaults looming, the guardians of global financial stability were often floundering, improvising, and feuding among themselves. The Chastening casts serious doubt on the IMF’s ability to combat of investor panics at a time when massive flows of money traverse borders and oceans.

A readable, compelling account of the deeply flawed workings of the international political system, The Chastening is vital reading for students and scholars of international diplomacy, government, and economic and public policy.

• From Here to Economy: A Shortcut to Economic Literacy by Todd G. Buchholz

What is the GDP, and what does it mean? Why does the stock market go down when interest rates go up? What causes a dreaded recession? Economics impacts everyone’s life, but most people take on faith what they read in the newspaper. Now, for anyone who doesn’t know much about economics, noted economist Todd Buchholz explains it all simply and clearly. With refreshing wit and irreverence, Buchholz takes readers by the hand and reveals the basic rules behind everything from food prices to trade deficits. Instead of complicated graphs and charts he uses examples from contemporary life and popular culture to demonstrate the principles at work. By cutting through the arcane musings of academicians, the jargon of analysts and advisors, and the rhetoric of politicians, he gives us a precise and accessible understanding of economic ideas, actions, and consequences as they actually exist in the here and now. Here are some of the heretofore unintelligible ideas he helps us to understand: what causes or combats inflation, and why it is so feared; what moves stocks and bonds up and down – and how to invest wisely and safely; whether it is good or bad to “protect” America from foreign goods – and what happens when we do and when we don’t; what exactly Social Security is, and whether government spending is good or bad – and how dangerous the national debt is or isn’t. In today’s confusing economic climate, it has never been more important for everyone from homemakers to small-business owners to individual investors and middle managers to understand the forces at work.

• After the Trade Is Made: Processing Securities Transactions by David Weiss

This third edition of After the Trade Is Made reflects the changes that have taken place in recent years as a result of new products, technological breakthroughs, and the globalization of the securities industry. Comprehensive and easy to understand, it provides brokers, operations personnel, and individual investors with definitive and up-to-the-minute explanations of each step in the trading process—from the moment a customer decides to buy or sell a security through the final requirements of record keeping.

• The Crisis of Global Capitalism: Open Society Endangered by George Soros

The global economy, on which the world now depends more than ever, is in crisis. The Russian economy has collapsed, leading to punishing inflation and economic hardship. Scores of Japanese banks are in ruin while the Japanese government muddles along, the nation falling deeper and deeper into recession. The once-booming economies of Thailand, Malaysia, and Indonesia have imploded. Brazil and the rest of Latin America has begun to edge toward the precipice, and even in Europe and America the markets lurch violently, wiping out gains with each passing week.

No one is better positioned to explain the current global financial crisis than George Soros, the man Morgan Stanley head Barton Biggs calls “the finest analyst of the world in our time.” In The Crisis of Global Capitalism, Soros, chairman of Soros Fund Management (whose Quantum Fund is considered to have been the best performing investment fund in the world over the past thirty years), dissects the current crisis and economic theory in general, revealing how theoretical assumptions have combined with human behavior to lead to today’s mess. He shows how unquestioning faith in market forces blinds us to crucial instabilities, and how those instabilities have chain-reacted to cause the current crisis—a crisis that has the potential to get much, much worse. Offering brilliant solutions to the global meltdown, based on years of Soros’s own experience as a financier and philanthropist, this is essential reading for anyone involved with the new economy—that is, all of us.

• Martin Zweig’s Winning on Wall Street by Martin Zweig

Arthur Zweig is the publisher of the influential, trend-spotting Zweig Forecast. Now in this new edition Zweig adds the latest numbers to his classic investment primer and evaluates their impact on the challenging market at the turn of the century.

From Publishers Weekly

Financial adviser and Wall Street Week TV panelist Zweig has been fascinated by the stock market since childhood, he tells usnot industry or commerce as such, but the buying and selling of stocks to make money. He has evidently made a lot of it, and has won the confidence of readers of his financial newsletter. Zweig is more enthusiastic about the intricacies of his “technical” stock market approach than he can expect the average investor-reader to be. Nevertheless, he has produced here a clear and detailed analysis of market trends, interest rates, Federal Reserve policy, debt volume, market “momentum,” etc., that seems to carry the technical side of stock-market theory as far as it can go. The result is a sure-fire system for beating the marketprovided you make no mistakes.
Copyright 1986 Reed Business Information, Inc. –This text refers to the Hardcover edition.

From Library Journal

Zweig’s “proven methods for market forecasting and stock selection” are presented in a simplified version of the approach he uses in his Zweig Forecast newsletter calculations. Tables show how well an investor would have done by following the buy or sell signals for his Super Model, which is constructed of various “monetary” and “momentum” indicators. He also subjects his decisions to “sentiment” and “seasonal” indicators. Scan earnings reports, he advises, be flexible, have patience and discipline, set stop orders, and “don’t fight the tape.” The drawback, common to all such systems, is that transaction costs and taxes are ignored. Nor does Zweig’s claim that his model can be accomplished on one transaction per year square with his admonition to diversify into several stocks. On balance, however, the concepts are clearly presented, and his success will probably create a demand. Alex Wenner, M.L.S., Bloomington, Ind.
Copyright 1986 Reed Business Information, Inc. –This text refers to the Hardcover edition.

• Money Game by Adam Smith

“This is a modern classic.” —Paul A. Samuelson, First American Nobel Prize Winner in Economics

“The best book there is about the stock market and all that goes with it.” —The New York Times Book Review

“Anyone whose orientation is toward where the action is, where the happenings happen, should buy a copy of The Money Game and read it with due diligence.” —Book World

” ‘Adam Smith’ is a veteran observer and commentator on the events and people of Wall Street…. His thorough knowledge of financial affairs gives his observations a great degree of authenticity. But the joy of reading this book comes from his delightful sense of humor. He is a lively and ingeniously witty writer who never stoops to acerbity. None of the solemn, sacred cows of Wall Street escapes debunking.” —Library Journal

• The Fed : The Inside Story How World’s Most Powerful Financial Institution Drives Markets by Martin Mayer

Interest in Alan Greenspan and the Federal Reserve Board has never been greater and veteran financial journalist Martin Mayer delivers a first rate explanation of how the Fed works and how its decisions drive financial markets.

The Fed has entered a new era, and few understand the rules of its game. Whereas it once indirectly exerted influence on the economy by overseeing what the banks did, it now must push directly on the markets. What brought about this sweeping change? Why do interest-rate changes sometimes move the markets as expected and other times fail to have any effect? How else do Fed decisions affect us?

Offering behind the scenes stories from past and present Fed administrations and explaining the significance of the recent expansion in the Fed’s power and perks, Martin Mayer, one of the world’s best financial journalists, offers a new explanation of the Fed’s changing role, explains why all the old rules for Fed watchers are no longer relevant, and what investors must know to understand the Fed today.

• Maestro : Greenspan’s Fed and the American Boom by Bob Woodward

In eight Tuesdays each year, Federal Reserve chairman Alan Greenspan convenes a small committee to set the short-term interest rate that can move through the American and world economies like an electric jolt. As much as any, the committee’s actions determine the economic well-being of every American. The availability of money for business or consumer loans, mortgages, job creation and overall national economic growth flows from those decisions. Perhaps the last Washington secret is how the Federal Reserve and its enigmatic chairman, Alan Greenspan, operate. In Maestro, Bob Woodward takes you inside the Fed and Greenspan’s thinking. We listen to the Fed’s internal debates as the American economy is pushed into a historic 10-year expansion while the world economy lurches from financial crisis to financial crisis. Greenspan plays a sometimes subtle, sometimes blunt behind-the-scenes role. He appears in Maestro up close as never before — alternately nervous and calm, plunging into mathematics one moment and politics the next, skeptical, dispassionate, always struggling — often alone.

Maestro traces a fascinating intellectual journey as Greenspan, an old-school anti-inflation hawk of the traditional economy, is among the first to realize the potential in the modern, high-productivity new economy — the foundation of the current American boom. Woodward’s account of the Greenspan years is a remarkable portrait of a man who has become the symbol of American economic preeminence.

• The Quotations of Chairman Greenspan: Words from the Man Who Can Shake the World by Larry Kahaner

The core of this book is a series of quotations by Dr. Alan Greenspan, chairman of the Federal Reserve (1987 – ) on the subjects of banks, capitalism, competition, debt and deficits, derivatives, education, employment, the Federal Reserve, forecasting, the gap between rich and poor, globalization, gold, housing, humor, inflation, the new economy, politics, reputation, risk, small business, Social Security and Medicare, the stock market, technology, and trade. The quotations are simplified into their key principles in brief commentaries by the author, Mr. Kahaner. The author has also provided a brief biographical sketch of Dr. Greenspan as well as comments by others about Dr. Greenspan. (For trivia buffs: Did you know he was once married to the painter, Joan Mitchell?)

Index below

Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider

• Soros on Soros: Staying Ahead of the Curve by George Soros, Bryon Wien & Krisztina Koenen
• Guerrilla Investing: Winning Strategies for Beating the Wall Street Professionals by Peter Siris
• The Battle For Investment Survival by Gerald Loeb
• Money and Power: The History of Business by Howard B. Means
• The Great Game: The Emergence of Wall Street as a World Power: 1653-2000 by John Steele Gordon
• Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith
• 100 Years of Wall Street by Charles R. Geisst, Richard A. Grasso
• A Random Walk Down Wall Street by Burton Gordon Malkiel
• Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher
• The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60s by John Brooks
• Against the Gods: The Remarkable Story of Risk by Peter Bernstein
• Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay, Martin Fridson, Joseph de la Vega
• Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger
• Capital Ideas: The Improbable Origins of Modern Wall Street by Peter Bernstein
• The Big Board: A History of the New York Stock Market by Robert Sobel
• The Chastening: Inside The Crisis That Rocked The Global Financial System And Humbled The Imf by Paul Blustein
• From Here to Economy: A Shortcut to Economic Literacy by Todd G. Buchholz
• After the Trade Is Made: Processing Securities Transactions by David Weiss
• The Crisis of Global Capitalism: Open Society Endangered by George Soros
• Martin Zweig’s Winning on Wall Street by Martin Zweig
• Money Game by Adam Smith
• The Fed : The Inside Story How World’s Most Powerful Financial Institution Drives Markets by Martin Mayer
• Maestro : Greenspan’s Fed and the American Boom by Bob Woodward

 

12 Things Lee Kuan Yew Taught Me About the World

12 Things Lee Kuan Yew Taught Me About the World
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“It’s no accident that Singapore has a much better record, given where it started, than the United States. There, power was concentrated in one enormously talented person, Lee Kuan Yew, who was the Warren Buffett of Singapore.”
— Charlie Munger

***

Singapore seemed destined for failure or subservience to a more powerful neighbor. The country is by far the smallest in Southeast Asia and was not gifted with many natural resources. Lee Kuan Yew thought otherwise. “His vision,” wrote Henry Kissinger, “was of a state that would not simply survive, but prevail by excelling. Superior intelligence, discipline, and ingenuity would substitute for resources.”

To give you an idea of the magnitude of success that Lee Kuan Yew achieved, when he took over, per capita income was about $400 and now, in only about two generations, it exceeds $50,000.

Here are 12 things I learned from Lee Kuan Yew about the world and the source of many of our present ills reading  Lee Kuan Yew: The Grand Master’s Insights on China, the United States, and the World

1. You need a free exchange of ideas. “China will inevitably catch up to the U.S. in absolute GDP. But its creativity may never match America’s, because its culture does not permit a free exchange and contest of ideas.”
2. Technology will change how governance operates. “Technology is going to make (China’s) system of governance obsolete. By 2030, 70% or maybe 75% of their people will be in cities, small towns, big towns, mega big towns. They are going to have cell phones, Internet, satellite TV. They are going to be well-informed; they can organize themselves. You cannot govern them the way you are governing them now, where you just placate and monitor a few people, because the numbers will be so large.”
3. Don’t try to install a democracy in a country that has never had one. “I do not believe you can impose on other countries standards which are alien and totally disconnected with their past. So to ask China to become a democracy, when in its 5,000 years of recorded history it never counted heads; all rulers ruled by right of being the emperor, and if you disagree, you chop off heads, not count heads.”
4. Welcome the best the world has to offer. “Throughout history, all empires that succeeded have embraced and included in their midst people of other races, languages, religions, and cultures.”
5. It’s about results, not promises. “When you have a popular democracy, to win voices you have to give more and more. And to beat your opponent in the next election, you have to promise to give more away. So it is a never-ending process of auctions—and the cost, the debt being paid for by the next generation. Presidents do not get reelected if they give a hard dose of medicine to their people. So, there is a tendency to procrastinate, to postpone unpopular policies in order to win elections. So problems such as budget deficits, debt, and high unmployment have been carried forward from one administration to the next.”
6. Governments shouldn’t have an easy way out. “American and European governments believed that they could always afford to support the poor and the needy: widows, orphans, the old and homeless, disadvantaged minorities, unwed mothers. Their sociologists expounded the theory that hardship and failure were due not to the individual person’s character, but to flaws in the economic system. So charity became “entitlement,” and the stigma of living on charity disappeared. Unfortunately, welfare costs grew faster than the government’s ability to raise taxes to pay for it. The political cost of tax increases is high. Governments took the easy way out by borrowing to give higher benefits to the current generation of voters and passing the costs on to the future generations who were not yet voters. This resulted in persistent government budget deficits and high public debt.”
7. What goes into a standard of living? “A people’s standard of living depends on a number of basic factors: first, the resources it has in relation to its population . . .; second, its level of technological competence and standards of industrial development; third, its educational and training standards; and fourth, the culture, the discipline and drive in the workforce.”
8. The single most important factor to national competitiveness … “The quality of a nation’s manpower resources is the single most important factor determining national competitiveness. It is a people’s innovativeness, entrepreneurship, team work, and their work ethic that give them the sharp keen edge in competitiveness. Three attributes are vital in this competition—entrepreneurship to seek out new opportunities and to take calculated risks. Standing still is a sure way to extinction. . . . The second attribute, innovation, is what creates new products and processes that add value. . . . The third factor is good management. To grow, company managements have to open up new markets and create new distribution channels. The economy is driven by the new knowledge, new discoveries in science and technology, innovations that are taken to the market by entrepreneurs. So while the scholar is still the greatest factor in economic progress, he will be so only if he uses his brains—not in studying the great books, classical texts, and poetry, but in capturing and discovering new knowledge, applying himself in research and development, management and marketing, banking and finance, and the myriad of new subjects that need to be mastered.”
9. Earning your place in history … “A nation is great not by its size alone. It is the will, the cohesion, the stamina, the discipline of its people, and the quality of their leaders which ensure it an honorable place in history.”
10. Weak leaders rely on opinion polls. “I have never been overconcerned or obsessed with opinion polls or popularity polls. I think a leader who is, is a weak leader. If you are concerned with whether your rating will go up or down, then you are not a leader. You are just catching the wind … you will go where the wind is blowing. . . . Between being loved and feared, I have always believed Machiavelli was right. If nobody is afraid of me, I am meaningless. When I say something … I have to be taken very seriously.”
11. We are fundamentally competitive. “Human beings are not born equal. They are highly competitive. Systems like Soviet and Chinese communism have failed, because they tried to equalize benefits. Then nobody works hard enough, but everyone wants to get as much as, if not more than, the other person.”
12. The value of history: “If you do not know history, you think short term. If you know history, you think medium and long term.”

Buffett Partnership Letters: 1961

Berkshire Hathaway’s letters to shareholders are oft-quoted and Berkshire’s annual shareholder meeting is well-followed, as value investors try to glean the wisdom of the world’s greatest investor. But before he ran Berkshire, Warren Buffett was far less followed and ran his partnership with a sum of money much smaller than he employs today. The issues he faced then are probably far more relevant to the individual investor today than are Berkshire’s current challenges. The following series attempts to summarize the key takeaways from Buffett’s partnership letters.

Add Value Or Don’t Do It

Buffett’s objective is to achieve long-term returns superior to those of the Dow Jones Industrial Average. If he is unable to do that, he notes that there is no reason for the partnership to exist. Capital would be mis-allocated.

Long-term Focus

What happens in any one year is irrelevant. In fact, during bull markets, Buffett expects his returns to be lower than those of the market. What’s important is whether the partnership can outperform over several years, cumulatively. Buffett is “much more geared towards five year performance, preferably with tests or relative results in both strong and weak markets.”

Asset Values Are Sometimes Ignored

Buffett discusses a stock in which he invested 35% of the partner’s funds. The company, Sanborn Maps, had lost a lot of earnings power in recent years. However, the company had stockpiled cash during its good years, and therefore had a portfolio of investments adding up to way more than the stock price. The company was on sale for just 70% of its investments (in the form of blue-chip stocks), with the map business thrown in for free!

Patience Is Key

Buffett has begun open market transactions of a “potentially major commitment”. As such, he hopes the stock does not increase in price for the next year, in order that he may accumulate more shares. A stagnant stock in which the partnership holds a large position would most assuredly hurt the partnership’s short-term performance, but that is irrelevant in the long term.

MAX

In Jan’ 2015, almost a year back diversified firm Max India spin off plan were announced management indicated it is splitting listed entity into three companies with the existing firm becoming India’s first listed company with insurance as the sole business.

The Max India Group is a multi-business corporate, the listed entity has following primary business

1. Life Insurance – As a 74: 26Joint venture with Mitsui Sumitomo of Japan
2. Max healthcare – Operating as equal JV with Life group of South Africa
3. Health Insurance – As a 74: 26 Joint venture with BUPA of UK
4. Antara – 100% owned retirement living real estate venture
5. Max specialty Films – 100% owned

Last year the conglomerate began a demerger exercise which will result in listed company being spilt into three listed companies as per below

Source – Investor presentation, Nov 2015

In this brief post we try and examine if the sum of parts would be greater or lesser than the current M-cap, Let’s go to the drawing board.

Max Financial services – The largest piece of the spun off entity is a well-established life insurance provider in India. Life Insurance is a crowded place in India were on one hand we have behemoth LIC, while on other hand you have well-funded strong private players like ICICI prudential, HDFC Life and SBI. Apart from them there are more than dozen challengers all gunning for the growing middle class population in the country where life insurance coverage is abysmally low even compared to developing countries. It’s a highly competitive market with lot of pricing pressure on incumbents specially from new challengers. However the size of pie will ensure all players will have decent opportunity to grow.

Max Life insurance is currently 4^th largest private life insurer, it claims to have Industry best margins and RoEV an industry term which expands to Return on Embedded Value (in life insurance). RoEV shows the after tax profit as a percentage of the equity on an embedded value basis (ie valuing all existing contracts at present day values).

Insurance is a very difficult business to value and Buffett also touches on what makes valuing an insurance company difficult. An investor has to trust that the firm’s actuaries are making sound and reasonable assumptions that balance the premiums they take in with the future claims they will have to pay out as insurance payments. Few errors can ruin a firm, and risks can run many years out, or decades in the case of life insurance.

However we have some pointers,

1. A) In August 2012 the life insurance piece was valued at INR 10,500 Crore

Japan’s Mitsui Sumitomo Insurance Co. Ltd said it will purchase a 26% stake in Max New York Life Insurance Co., a joint venture between Max India Ltd and US-based New York Life Insurance Co., for Rs2,731 crore in an all-cash transaction.

The transaction values Max New York Life at more than Rs10,500 crore and is the second largest foreign direct investment (FDI) in the Indian life insurance industry.

Source

Max Life bought Axis Bank’s 1% stake in the same year at INR 103.5 crore valuing the full business at INR 10,350 Crore with a put option to acquire remaining 3% stake in Oct’14 , 15 and 16.

However come 2015, There is change in heart

The details of this deal are not out but what made a partner to make a reverse turn ? But overall this a positive move,

Also post 2012, the business has gone from strength to strength increasing revenue by almost 40% from FY12 to FY15 and its competitive position improved

if Mitsui Sumitomo’ s price paid follows the trajectory of revenue than this piece could be worth around ~INR 14700 Crores

1. B) There is another way to look at life insurance business, Insurance operations are often acquired at multiples of embedded value (EV) , Embedded value is the value of in-force business plus the value of the free capital. The management has indicated that recent deals in insurance industry has happened at 3X EV.

Source

as per November 2015 analyst presentation EV of life insurance business is INR 5363 Crore and to complicate matters Max India has moved to market consistency method in last fiscal. The Market consistency method overstates EV. So we have to work with EV based on both methods.

In above tables items in yellow are estimated EV based on traditional method, therefore EV is INR ~ 4754 crores.

Based on above market value of life insurance business could be around ~INR 14,260 Crores using Traditional Method and ~INR 16089 using the market consistency method

With above two data points and make no mistake, I am no insurance industry expert so take everything I am writing with a pinch of salt.

The value of Life insurance business would be between ~INR 14250 crore to ~ INR 16000 crore. Max India’s share with 72% ownership would be around ~INR 11000 Crore

Max healthcare business – This is the second largest piece of this spin-off, This entity will have three business under its umbrella

Health Insurance – In 74:26 JV with Bupa, In November 2015- Bupa announced that it is paying INR 191 Crores for 23% stake in health insurance business, This announcement pegs the value of health insurance business at ~ INR 830 Crore. With a 74% share, Max India’s current share would be ~INR 615 Crores

Health care (Hospital) business – This business is in recovery mode, They are very much north india focused business. Looking at FY16 profit and assigning a PE ratio would be inappropriate to put a value on this business. leading brokerage use EBITDA multiple. For H1 FY16 EBITDA was ~97 INR Crore, with a full year estimate of EBITDA of ~INR 200 Crore and using a multiple of 14, the value of health care business could be around ~INR 2800 Crore. At corporate level the company is almost debt free so no debt is deducted for this calculation. Max India owns half of this business so their share would be ~ INR 1400 Crore

We have used 14x exercising some conservatism

ICICI Direct has used 16x for Apollo in August 2015, However Apollo is market leader with better ROCE than Max India

Antara – A 100% owned retirement living real estate venture. This business is in development mode the management has commented below in FY15 annual report

Senior Living as a business represents a tremendous opportunity in a nascent market and Antara Senior Living is extremely well positioned to execute the Dehradun project successfully and review opportunities for building its next community in the NCR region.

FY 15 it lost 50% of its net worth, Although Management is optimistic about its future, I can’t a put a number to this component so we value this piece as ‘Nil’

So overall Max India’s Max Health care share could be roughly valued at ~INR 2000 Crore

Max speciality Films – This will be the smallest spun off entity with FY16 estimated annual turnover of ~INR 800 Crore and EBITDA of ~INR 100 crore. Another blogger has done some great work on this piece of spin off. The industry analysis is sourced from the blog

At average industry multiple the value of this piece should be around ~INR 500 Crore, However if we go by what promoters are saying this piece of business is valued at ~INR 168 Crore. In Jan’15 – this is what promoters have said,

The promoter of Max India, Analjit Singh, today announced his intention to make a voluntary open offer for buying upto an additional 34.5% stake in Max Ventures and Industries Limited (MVIL), which will be listed post the demerger of Max India, as announced earlier today, and which will hold the investment in Max Speciality Films Limited (MSF Ltd)…. listing of MVIL at an approximate valuation of Rs. 168 Cr. for 100% of MVIL.

On conservative note we will assign a value of ~INR 250 Crore for this piece of spin off.

Putting the jigsaw together

At the current m-cap we are paying about 5% premium over our conservatively build total value of each unit. There is no free lunch on offer here but bear in mind most of business are growing and now they will get undivided dedicated management attention. Also life insurance business is not directly listed in India so may see some traction with investors. In past this kind of spin off have resulted in value unlocking.

I will be delighted to get more inputs from you in comments

Disclosure – I am long with a tracking position to see how event unfolds.

Caution – I have made many mistakes in past in analysing spin off situations, don’t lose your salt by getting swayed by this post.

Jim Chanos’s value traps

• Cyclical and/or overly dependent on one product (e.g., anything housing related in 2000s. – Ed.)

• Cycles sometimes become secular (steel, autos)
• Fad does not equal sustainable value (Coleco, Salton, renewable energy)
• Illegal does not equal value (online poker)

• Hindsight as the driver of expectations

• Technological obsolescence (minicomputers, Eastman Kodak, video rentals)
• Rapid prior growth – “Law of Large Numbers” (telecom build-out)

• Marquis management and/or famous investor(s)

• New CEO as savior – ignoring Buffett’s maxim (Conseco)
• The “Smart Guy Syndrome” (Take your pick!) (Lampert/ESL/SHLD? – Ed.)

• Appears cheap using management’s metric

• EBITDA (cable TV, Blockbuster) (EBITDA[anything else] too. – Ed.)
• Ignore restructuring charges at your own peril (Eastman Kodak)
• “Free” cash flow…? (Tyco)
• Anything non-GAAP, industry specific, and/or new deserves special cynicism. – Ed.

• Accounting issues

• Confusing disclosure (Bally Total Fitness)
• Nonsensical GAAP (subprime lenders)
• Growth by acquisition (Tyco, roll-ups)
• Fair Value (Level 3 assets)

• “A lot of our best shorts have looked short all the way down. Just because something is cheap doesn’t make it a good value. A lot of times the company can get into distress due to a declining business. That defines a value trap.”

MBS, CDO’s and CDS’s In Layman’s Terms……

MBS – Mortgage Backed Security

This is in its simplest form a bond. The bond is backed by a pool of mortgages that are being paid by homeowners across the United States. Each month a homeowner makes a payment, that payment basically sent to the holder of this bond. If one were to buy a Mortgage Backed Security (MBS) they would receive an interest payment and a partial repayment of their principal (since some of a homeowners payment is interest and principal). These securities are issued by Fannie Mae, Freddie Mac and Ginnie Mae – but can also be issued by other institutions. When an investor buys a Fannie Mae bond, they are essentially buying the cash flow from different homeowners as they make their monthly mortgage payments. If a homeowner defaults on their mortgage or misses a payment, the MBS holder suffers….of course this is where Fannie, Freddie and Ginnie step in and make them whole. With so many people in foreclosure and not making payments……you can see why Fannie and Freddie had to be bailed out.

O.K. – as if MBS was not hard enough – Collateralized Debt Obligations or CDO’s.

These are tough to understand and I won’t bore you with the internals, but think of this as a Mortgage Backed Security on steroids. Instead of one investor owning the cash flow of a mortgage – multiple investors could own it. Here is an example of how a CDO might work:

Pretend that you have a mortgage (okay, most of us aren’t pretending) and you make principal and interest payments each month – these payments are made to your loan servicer and then split up as follows:

Investor A – Gets all of the interest payments from years 1 – 4
Investor B – Gets all of the principal payments from years 1 – 4
Investor C – Gets all of the interest payments from year 5
Investor D – Gets all of the principal payments from year 5
Investor E – Gets the interest and principal payments from years 6 – 10
Investor F – Gets interest payments from years 11- 24
Investor G – Gets principal payments from years 11 – 24
Investor H – Gets the remainder of principal and interest payments, if made from years 25 – 30

Imagine you are the borrower – your payments don’t just go to your local bank anymore – they get split up depending on the year you are making a payment and how much is principal and interest. All of these investors who are in line to receive these payments have bought into a trust – called a CDO. The trustee of the trust has a fiduciary responsibility to each of these investors. Now you know why when someone who is having problems paying their mortgage and is on the brink of foreclosure is having such problems trying to get their loan modified – if the trustee changes the interest payments, one of multiple investors may get hurt at the expense of another, same goes for principal changes. The trustee is in an impossible situation and thus does nothing……..the house forecloses even though a workout was entirely possible.

CDO’s were purchased by investors who were told by “creditable” ratings agencies that these securities were “investment grade”. Some of these investors obviously didn’t believe the credit agencies and decided to seek insurance in the case that their CDO defaulted. They went out and bought………Credit Default Swaps or CDS.

There is nothing wrong with a Credit Default Swap – it is basically an insurance policy against the failure of a specific asset. The reason these have been in the news is because some companies – like AIG, Lehman and Fortis (and many others) found these insurance policies to be very lucrative business. AIG in particular issued Credit Default Swaps on CDO’s so that institutions that held CDO’s would be made whole if the CDO defaulted. The problem is that AIG didn’t foresee that ANY of these would default – they thought this was a risk free operation. AIG took in a ton of money to insure the CDO’s through Credit Default Swaps – but never reserved for losses. As we all know now, AIG made a huge mistake as there were and is risk with CDO’s. Credit Default Swaps are basically just insurance policies for securities.

Collateralized debt obligations and credit default swaps

The CDO, the CDS, and the Subprime Mortgage Crisis

How these two financial instruments helped cause the financial crisis

What exactly are collateralized debt obligations (CDOs) and credit default swaps (CDSs)? This post draws from The Big Short by Michael Lewis and a study on CDOs by A.K. Barnett-Hart to summarize how these two financial instruments are structured and why they’re in part responsible for the financial crisis.

They have a well-deserved reputation for being very technical, but at their core they are simple concepts. A CDO is just a fancy bond, while a CDS is basically an insurance policy. Bear with me and I’ll try to explain them in the clearest terms I can. This is not so much about the actions of individual banks or hedge funds; instead, it’s about how these two instruments are structured.

First we get into the CDO, then the CDS, then how they relate to each other, and finally their role in the subprime mortgage crisis.

Mortgage-backed Securities

CDOs are made up of sections of mortgage bonds, or mortgage-backed securities (MBS). So to understand the CDO you have to first understand the mortgage bond. What is a mortgage bond?

If you’re buying a house you’re probably taking out a mortgage. That means that you’re getting a loan from a bank or a lending agency and then making a payment back every month with some interest.

Interest rates on mortgages are fairly high. A 30-year U.S. Treasury Bond may yield about 3 to 6%, while a homeowner pays between 5 to 10% on her monthly mortgage payment.  Mortgages offer much higher returns, and so investors are more attracted to them.

But for various reasons, it’s hard to invest in individual mortgages. They’re easier to invest when thousands of individual mortgages are bundled together to form a mortgage bond. The mortgage bonds were packaged by agencies like Fannie Mae and Freddie Mac, who bundled the mortgages from banks like Wells Fargo or lending agencies like the New Century Financial Corporation.

A mortgage bond isn’t like a corporate bond or a government bond. Instead, it’s a claim on payments from its thousands of mortgages. But just as a corporate bond can default, a mortgage bond can fail too: When enough individual mortgages failed, the entire bond won’t be able to generate its promised returns.

What happens when thousands of bonds get pooled together? Then the law of large numbers kicks in: Maybe a few mortgages will fail, but it’s unlikely that all of them will fail. The failure of a few are unlikely to sink the whole bond. So they’re pooled together to reduce the idiosyncratic risk of letting any single failure get in the way.

But there was one more problem for investors: When interest rates fall, homeowners tend to re-finance. So they pay back the old mortgage and receive a new mortgage with a new interest rate. Where does this leave the original investor? She gets a big pile of cash when she least wants it, i.e. when interest rates are low and when they can’t get great returns.

How did the creators of mortgage bonds deal with this problem?

By carving the mortgages into different segments. These segments are called tranches (it rhymes with LAUNCHES.) The bottom tranches are filled with the mortgages that are most likely to be pre-paid. Because they’re more risky for investors, they offer higher interest rates; the top tranche is expected to be safest, and they offer the lowest interest rate. Rating agencies like Moody’s and S&P gave the safest tranches their highest ratings: AAA, and put the lowest rating you can get before you’re called a junk bond to the bottom tranches: BBB.

The BBB tranche is filled with subprime mortgages. A mortgage is subprime if the homeowner for whatever reason is unlikely to make consistent mortgage payments. Perhaps her job doesn’t pay well enough, perhaps she has a history of getting into financial trouble, or perhaps she’s very strategic and will refinance when she knows it’s smart.

Let’s review mortgage-backed securities

Following along so far? Just think of an MBS, or mortgage bond, as a pool of thousands of mortgages, ordered from most to least risky for investors. The most risky tranches offer the highest interest rates, and the least risky offer the lowest interest rates.

Collateralized Debt Obligations

The first thing to understand about the CDO is that each one is its own little corporation. (It’s a special corporation that’s known as a Special Purpose Entity.) The next thing to understand is that each CDO is made up of hundreds of mortgage bonds.

To be more precise, a CDO is typically constructed from the bottom, or riskiest, tranches of a hundred different mortgage bonds. Hundreds of sections of different mortgage bonds get bundled together into a new instrument, or re-securitized.

Why would anyone package a hundred of the most risky sections of a mortgage bond together?

Think back to why individual mortgages are pooled together in the first place: When a lot of them are bundled, you’re betting on systematic risk, i.e. the health of the pool, rather than idiosyncratic risk, i.e. the health of any single mortgage. The same principle applies here. Creators of CDOs asserted that when the riskiest tranches of mortgage bonds are pooled together, the average level of risk diminishes.

Just as a mortgage bond can be tranched, the CDO can be tranched as well. A high-grade CDO, also known as a senior or super-senior CDO, would be composed of about 90% of the AAA-rated tranche of mortgage bonds. A low-grade CDO is known as a mezzanine CDO, and is composed mostly of the BBB-rated tranche of mortgage bonds.

CDOs are organized in a waterfall model. All you need to know is that in case the bonds fail, the senior tranches get paid with whatever remains of the financing first, while the mezzanine tranches get paid if there’s anything left. So the mezzanine is more risky, and offers the highest interest rates for investors, while the senior levels are more safe, and offer lower interest rates.

What exactly does a CDO look like?

A CDO is an investment vehicle that’s its own corporation. On average their size was about $800 million, and a CDO had an average of about 7 tranches. Typically three of these tranches would be rated AAA, and at least one would be BBB. The average tranche size is about $100 million.

CDOs can have weird and obscure names which rarely told you anything about their contents or origins. These names include Abacus 2005-3, Class V Funding, and Jupiter High Grade.

Who bought and sold CDOs?

CDOs were issued mostly by big banks, the most active of which were J.P. Morgan, which issued $128 billion of them, and Citigroup, which issued $110 billion. The banks would create a subprime-backed CDO filled with the tranches of BBB-rated bonds, then take it to rating agency which would declare it to be rated AAA or something else that indicated safety. By pooling together the riskiest tranches of mortgage bonds, banks with the help of rating agencies turned them into safe-looking investments.

And why would these banks sell CDOs? CDOs did two big things. First, a lot of people genuinely believed that risk had been engineered with a new formula that came out a decade ago called the Gaussian Copula Function. They thought that a big problem was solved. A lot of people wanted what they thought were fancy returns. Perhaps more importantly, CDOs allowed banks to securitize their loans, which gave them the chance to move their debt off their books and look in better shape than they were.

Investors would look at these subprime-backed CDOs and see a safe investments. And who were some of these investors? They included insurance companies, pension funds, farmers’ unions, university endowments, big banks themselves, and any institution with a lot of money to invest. A key characteristic of CDO investors is that they’re typically institutions who are required by their charters to buy AAA-rated securities. These CDOs were rated AAA, and they offered high returns, and so were appealing investments.

More complicated CDOs

There are more complicated CDOs than the standard CDOs described above.

One of these is the CDO-squared. A CDO-squared is composed of the bottom tranches of hundreds of other CDOs. Pool a few hundred of the bottom tranches of CDOs together, and you get a CDO-squared.

Another is the synthetic CDO. To understand a synthetic CDO, you have to first understand credit default swaps. So keep reading.

Let’s review CDOs

Individual mortgages are risky investments. But when they’re pooled together into a bond, they’re less risky because then what matters is the health of the pool, not any individual mortgage. The bottom tranche of mortgage bonds are risky investments. But if those tranches are pooled together, then they’re once more supposed to be less risky. Banks believed that these bonds weren’t highly correlated, i.e. one failure doesn’t have much to do with another failure. Eager investors believed that, and snapped them up.

Credit Default Swaps

Though there are some important differences, credit default swaps very closely resemble insurance contracts.

Let’s say that you want some insurance for your home. What happens when you buy home insurance? Your insurer sells you an insurance policy: You regularly make small premium payments to the insurer so that if say your house ever floods, the insurer covers the costs of repair.

So what exactly is a CDS?

Think of a credit default swap as an insurance contract between the seller of a CDO or bond, which would be an insurance company like AIG, and the buyer of a CDO or bond, such as a hedge fund which believes that CDOs aren’t as safe as everybody says they are. AIG would sell an insurance policy on the risk of a bond default. If you bought that policy, you’d make regular premium payments to AIG so that in case the bond defaults, AIG would give you protection against the entire worth of the bond.

Let’s be more concrete.

Say you believe that a subprime-backed CDO isn’t as safe as it appears. So you purchase a credit default swap on that CDO. You’ll pay something like 150 basis points (or 1.5% of the value of the entire bond) to AIG every year to protect against the $100 million, 10-year bond from defaulting. In other words, you’ll pay $1.5 million a year to the insurer. If the CDO does not default, then you’ll have lost $15 million to premium payments. If it does default, then the insurer will give you the entire value of the CDO: $100 million.

Who bought and sold credit default swaps?

The seller of a CDS is typically a reinsurance company like AIG Financial Products, Zurich Re, and Credit Suisse Financial Products. These companies looked at certain bonds and CDOs, thought that they wouldn’t default, and offered to sell insurance on them. They thought that they could rake in a few million every single year in more or less perfect safety: They thought that the risk had been engineered away. Here’s a way to picture that behavior: Insurance companies were content to pick up nickels in front of a steamroller; they’d make small sums, but they thought that they’d never be flattened.

And the buyers of CDSs? They are the protagonists of Michael Lewis’s book. They were relatively small hedge funds who believed that the risks of CDOs weren’t engineered away. These hedge funds included Frontpoint Partners, Scion Capital, Cornwall Capital, and Paulson & Co.

These investors decided that CDOs weren’t safe, and so bought lots of credit default swaps. When it turned out that they were right, they made billions. But more on that later.

What is a synthetic CDO?

Remember that a CDO is an instrument constructed out of the payment flow of mortgage bonds. In principle, though, a CDO can be constructed out of anything with regular cash flows, like the repayment of college loans, Goodlife membership dues, or credit card receivables.

Or, the premium payments that flow from credit default swaps.

That’s right, banks issued CDOs based on the cash flow from the hedge funds and other banks that bought credit default swaps. The premium payments that flow from credit default swaps replicated the cash flows of subprime-backed CDOs that they were wagered against.

The more credit default swaps outstanding, the more synthetic CDOs can be created. It was hard to issue sufficient numbers of mortgages to create a CDO, but a synthetic CDO does not face that same constraint.

These two instruments fed on each other, growing larger and larger and entangling the banks, hedge funds, and the insurance companies. With each new CDS there was a greater degree of counterparty risk.

Let’s review credit default swaps

Credit default swaps let you bet on bonds and CDOs that you don’t own. A few hedge funds determined that certain bonds and CDOs weren’t as safe as they’re claimed to be; that is, they looked at a AAA-rated CDO and didn’t believe that it could be that safe. So they bought credit default swaps from insurers like AIG. AIG believed that CDOs were so safe that they didn’t even bother posting reserve capital in case that the CDOs failed; they were happy to collect nickels in front of a steamroller. They hedge funds paid a few hundred thousand or a few million dollars every year that the CDO they bet against did not fail; if it did, then they received the entire value of the CDO from the insurer.

CDOs and CDSs in the financial crisis of 2008

By now you may be able to piece everything together. Here’s Lewis’s account of how CDOs and credit default swaps brought down the economy:

Though synthetic CDOs and CDOs-squared were far removed from homeowners, their foundations rested on homeowners making regular mortgage payments.

In 2005 there was a rash of subprime mortgages issued with two-year teaser rates. These rates would be around 4 to 65, and then jump to 10 to 15% in two years.

When teaser rates were low, a lot of people bought houses. Lewis memorably offers the example of the Mexican strawberry picker who earned $14,000 a year and was lent all the money he needed to buy a house for $724,000. A lot of people were offered loans to buy a house beyond their means, or to buy a second or third house purely as an investment. The people who were at risk of not making their monthly payments put the subprime in subprime mortgages.

So: Teaser rates were low in 2005, and mortgage lenders jacked up these rates in 2007. Suddenly, when interest rates increased, homeowners were no longer able to make mortgage payments.

Dominoes

When individual mortgages started to fail in record numbers, the mortgage bond they make up got in worse health.

When the mortgage bond started to go down, its tranches also started to go down. And then the CDO, which is made up of the riskiest tranches of mortgage bonds, started to go down. Suddenly, the CDOs that were rated A, AA, and AAA started to fail. Assets that were supposed to be risk free were started to fail.

When the CDOs started to collapse, the CDS contracts were triggered. The hedge funds that bet against CDOs found that their bets had paid off. The annual trickle of premiums they paid gave them the claim to the billions in worth of outstanding CDOs.

The banks (including Lehman Brothers, Merrill Lynch, and J.P. Morgan) and the insurance companies (including AIG), all either owned CDOs or sold credit default swaps. They found that their CDOs had failed, and were on the hook for billions of losses because they bet wrong.

Dozens of banks failed, the most high-profile of which are Lehman Brothers and Bear Sterns. AIG declared bankruptcy. Merrill Lynch was sold to Bank of America. People started to panic, and credit markets seized up. Businesses struggled to keep their loans and get new ones.

It was at this time that Congress passed TARP, the Troubled Asset Relief Program, a $700 billion bailout of the big banks and the insurance companies. Citigroup, for example, received $45 billion; AIG received $40 billion; J.P. Morgan and Wells Fargo both received $25 billion; Goldman Sachs received $10 billion; and so on.

Meanwhile, the hedge funds that saw the crisis coming made billions.

Is this the right account?

It’s important to note that the subprime mortgage crisis is only one part of the general financial crisis. There are other factors that helped to cause the deepest recession since the Great Depression. Economists discuss also the run on the shadow banking system in 2007; the high degree of leverage of the banks; general high tail risk; and others. For a more complete understanding, read the report prepared by Congress on the causes of the financial crisis.

CDOs caused between $400 to $600 billion of the writedowns of banks, and the market size of CDSs peaked at $60 trillion. Now you know how they’re structured and how they got to the size they did.

Michael Burry – WHY INVEST IN WATER?

 

Depending on where you live, you might take fresh, clean water for granted. I know that I normally do.

We often spout off the fact that 70% of the Earth’s surface is covered in water – something we probably all learned in kindergarten. While this is true, freshwater – the kind we care about – actually only represents 2.5% of that amount. On top of that, only 1% of our freshwater is easily accessible, with most of the other 99% trapped in glaciers and snowfields. In the end, only 0.007%of the planet’s water is actually available to fuel and feed the world’s 7 billion people.

We all know that water is essential for life. But 0.007% of the world’s total water is still a lot of freshwater. So what’s the problem here?

According to the U.N., water use has grown at over twice the rate of the world’s population increase in the last century. Today, we use about 30% of the world’s total accessible renewal supply of water. In less than 10 years, that percentage could reach 70%. By 2025, an estimated 1.8 billion people will live in areas plagued by water scarcity, with 2/3rds of the world’s population living in water-stressed regions.

Making matters worse, the water infrastructure in most developed countries is aging… and we haven’t taken any steps to upgrade it yet. The American Society of Civil Engineers (ASCE) predictsthat at current rates there will be an $84.4 billion gap by 2020 between what we’re spending on water infrastructure and what is needed. Without upgrades, the U.S. is facing a loss of $416 billion in GDP.

Still don’t think access to freshwater is an issue?