Most people’s year runs either alongside the calendar year or the tax year. For reasons I won’t get in to, my year starts in August, and I try to make some “New Year’s resolutions” for the year ahead. This time, my goal is to read at least one book per month to improve my financial, economic and political knowledge, which is designed to make me a better investor.
A smart friend once told me that to write down or share your objectives with others, you are more likely to achieve them, as you are being held to account. So, I am sharing my reading list here and explaining why I am intending to read each book now.
Financial history
I recently visited a hedge fund manager friend of mine. When she had to step out to take a call, I decided to look at her bookshelf. Surprisingly, there was only one book about economics and finance and that was"Against the Gods" by Peter L. Bernstein. When my friend returned, I asked her about the book. She told me she had read it at university and that it was a great book that merged history, mathematics and finance and she kept it so that from time to time she could remind herself of key risk management principles and that the book covered everything from options traders in ancient Greece to modern chaos theory.
Flicking through the book, I noticed my friend had underlined the following passage:
“The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us.”
Exploring more financial history
I also want to read "Capital Ideas," which is about modern investment theory, and "The Power of Gold," both of which are also by Bernstein. Since I want to start thinking more holistically about my portfolio and how I can better incorporate risk management tools and diversification, these two books should be helpful. Taking a historical look at finance should help give better perspective on some of the fads we see in today’s markets.
Another financial history book I want to read is "Manias, Panics, and Crashes"by Charles P. Kindleberger. I read this book quickly when I was in university and while I thought it was interesting, at the time, with not much life experience, I did not appreciate how useful this book could have been if I had stopped to think about its content and studied more deeply each episode in the book.
One of my favourite hedge fund managers, Hugh Hendry, has mentioned this book several times in interviews, noting he has read it many times and quoting various episodes, in detail, off the top of his head. Mark Twain is credit with saying, “History never repeats itself, but it does often rhyme.” So, I think this is another important financial history book to study.
China
China and Taiwan make up 45% of the MSCI Emerging Markets Index. Geopolitics experts like to talk about the G2, the U.S. and China, as they are the two largest economies. The China-U.S. relationship is going to be key to the global economy and for all investors.
One podcast I enjoy listening to is "Drum Tower," hosted by The Economist’s China correspondents. They analyze the stories at the heart of China and its changing role in the world. On a recent episode titled "Digging the Past," the host highly recommended a book called "The Invention of China" by Bill Hayton. Foreign Affairsmagazine called it “An excellent starting point for understanding how and why China’s search for identity has come to shape international affairs.” Written in 2020, it is really more of a history book.
The second China-related book I plan to read is "Has China Won?" by Kishore Mahbubani, who is a former Singaporean diplomat. It was written in 2020. In its review, the Financial Timessaid:
"Has China Won? is certain to antagonise and even outrage American readers. But that is a good thing. For above all, it will force them to confront the unsettling probability that China will this century usurp the U.S. as the world’s hegemon."
That may or not be true, but the news outlet concludes" “Read this book to be provoked, if not convinced.” I believe it is important to have our world view provoked sometimes.
The final China book on my reading list is "The Long Game," which was written in 2021 by Rush Doshi. Greg Ip, The Wall Street Journal’s chief economics commentator, has mentioned this book at least twice in his columns and the Journal has reviewed the book, calling it “compelling.”
As Ip wrote in his column in October 2021:
"Engagement [between the US and China] was always doomed to fail, because China never believed in the global order the U.S. and other market-oriented democracies stand for. This thesis is best laid out in “The Long Game: China’s Grand Strategy to Displace American Order” by political scientist Rush Doshi, now serving on Mr. Biden’s National Security Council. (He finished the book before joining the administration.)"
Icahn and Soros
In his Yale Financial Markets lecture with Professor Robert Schiller, a student asked Carl Icahn (Trades, Portfolio) what historical figures had inspired or influenced him. The guru's response was quite interesting:
"Well, one of the greatest philosophers I ever read was Aristotle and I think his Nicomachean Ethics, if you read it, makes a great deal of sense — where you live with this golden mean but at the end use your intellect. I mean, now you have to really read him in depth to understand what he’s saying."
Interestingly, Icahn and George Soros (Trades, Portfolio) both studied philosophy at university. So, for this reason, I think it makes sense to read "The Nicomachean Ethics"by Aristotle.
Another book I want to read is Soros' latest book, "In Defense of Open Society," which was written in 2019. According to the synopsis of the book:
"Soros brings together a vital collection of his writings, some never previously published. They deal with a wide range of important and timely topics: the dangers that the instruments of control produced by artificial intelligence and machine learning pose to open societies; what Soros calls his 'political philanthropy'; his founding of the Central European University, one of the world’s foremost defender of academic freedom; his philosophy; his boom/bust theory of financial markets and its policy implications; and what he calls the tragedy of the European Union. Soros’s forceful affirmation of freedom, democracy, the rule of law, human rights, social justice, and social responsibility as a universal idea is a clarion call-to-arms for the ideals of open society."
You may or may not agree with Soros’ politics, but you cannot deny he is one of the world’s foremost original thinkers, which is what has made him such a guru on financial markets. I have learned a great deal from his previous books, so I plan to read this one soon.
Investing
One question some of my friends always ask me is if they should sell now and look to buy back stocks cheaper. I always tell them, unless they have very strong reasons for doing that, based on solid research, they should just hold their stocks for the long run. I say this because I know the conclusions of "Stocks for the Long Run" by Jeremy Siegel. I studied some chapters of this book at university many years ago, but want to completely read a more recent edition to understand concepts such as the equity risk premium in more detail, based on over 200 years of U.S. stock market history.
A book I want to discuss with more sophisticated investors is "The Long Good Buy" by Peter C. Oppenheimer, chief global equity strategist at The Goldman Sachs Group Inc. (GS, Financial), which was published in 2020. I previously read a lot of Oppenheimer’s Goldman portfolio strategy research, where he would write about cyclical versus defensive and value versus growth. In this book, he writes about different market phases and cyclical, structural, event-driven bull and bear markets, the influence of commodities, technology and sentiment.
The final book on my list is "The Snowball"by Alice Schroeder, which I believe will be a good complement to and different perspective from Roger Lowenstein’s book on Warren Buffett (Trades, Portfolio) .
