If there is someone on your holiday shopping list who would like to put the rough times of the past few years into perspective or start the year right with a more thoughtful approach to investing, I have some ideas for you.
The theme running through many books released recently has been: How did the United States get so far off track, and how do we get it right? Individuals, too, are looking for a fresh start after losing money in the stock market and on homes. Here are some books a friend or loved one might appreciate.
Nassim Nicholas Taleb’s “The Black Swan” is nothing like the ballet movie, and it’s one of my all-time favorite books because it reminds us that the improbable can happen without warning, or little warning, and be painful. We learned that in dramatic fashion in 2008-09 with a financial crisis of grand proportions. The idea behind “The Black Swan” is that we assume swans are white, so we never contemplate or prepare for the devastation that could come with an unlikely “black swan” event. Yet, when the unthinkable shows up, we must deal with the reality. Another fascinating read that deals with the way our brains sometimes lead us astray is psychologist Daniel Kahneman’s “Thinking, Fast and Slow.”
Emanuel Derman’s “Models. Behaving. Badly.” captured my attention because it deals with a tendency by the brainiest to over-rely on models and fail to miss critical points. That’s been my gripe with economists clinging to outdated models and assuming more than a year ago that a robust recovery would be imminent. If you know someone who believes in models, perhaps they will enjoy an oath Derman created with a colleague in response to the financial crisis: “I will never forget that the model is not the world.”
James Rickards’ “Currency Wars” is a controversial book written by an investment manager who has worked with the U.S. Defense Department on war games. It’s got a doomsday quality, and gold bugs love it. While some argue the chaos Rickards envisions is preventable, the book alerts readers to the risks the U.S. could face in a financially weak state with a declining dollar.
Diana Henriques’ “The Wizard of Lies” tells the reader how Bernie Madoff pulled off the biggest Ponzi scheme in history and what he was thinking over decades as he cheated friends and enjoyed national financial prominence. It’s a great read and provides insight into how the investment business works.
Sheldon Garon’s “Beyond Our Means” examines the messages that various cultures send people on saving and spending and the vastly different impacts they leave in nations, ranging from Japan to Germany and the U.S. For the U.S., a country that nearly choked to death on debt, this book provides insights for a new agenda.
Niall Ferguson’s “Civilization: The West and the Rest” also draws contrasts between various parts of the world and shows how developing nations are gaining strength by embracing some of America’s greatest characteristics at a time when the U.S. is letting them slip. For example, he emphasizes the significance of exceptional education, a point also made by Raghuram Rajan in his book “Fault Lines.”
Joel Greenblatt’s “The Big Secret for the Small Investor” or “The Little Book That Still Beats The Market” would be a good starting place for the person who has turned away from stocks the past couple of years and would like to return with the basics about investing. Greenblatt is a respected professional investor, but unlike most, he can explain the essentials so simply that anyone can get it in a few minutes. People working with an adviser can make sure they are getting their money’s worth if they read Larry E. Swedroe and RC Balaban’s “Investment Mistakes Even Smart Investors Make and How to Avoid Them.”
Marilyn Cohen and Chris Malburg’s “Surviving the Bond Bear Market” is an important book for many to read after shunning stocks and building up massive exposure to bonds. While some think they are safe because they have no stocks, bonds can turn harsh, too, and this book explains how to protect yourself.
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