I've Read and Recommend
are no clunkers here.
following are books I have read and found either interesting in general, or vital
to my investing techniques. Each has a relationship to investing, but some are
of general rather than specific interest. They appear below in no order other
than chronological with the most recent appearing at the top. I will continue
to add to the list when appropriate.
I just finished reading Probable
Outcomes, by Ed Easterling, and learned more about the eight
secular bull and bear markets of the last century than I wanted to know.
of the things I didn't want to know is that the average price/earnings ratio
(PE) at the end of each of the four bear markets in the 20th century was 8,
just half the current PE. So unless earnings double in the next few years, the
market is likely to undergo some serious corrections before this decade is over.
Wars, by James Rickards is a must read for anyone wishing to
understand what's going on in the world. Not only in financial matters but in
politics in general.
well written and can be absorbed by readers with or without a lot of prior exposure
to the material. It received only two 1-star reviews out of 107 at Amazon, and
one of the 1-star reviews said "it was actually one of the best books I have
read this year."
I very carefully research the books I choose to read and even so rarely find
one as good as Keynes
Hayek, by Nicholas Wapshott. The writing is excellent, easy
to read and completely unbiased in spite of the controversial nature of the material.
will walk away with a feeling for all of the presidents from Wilson through Obama
and all of the English Prime Ministers since Lloyd George. Their economic strengths
and weaknesses are noted and you will learn the causes and possible solutions
for the present economic crisis.
Summer is here and one of the most
enjoyable books I have read in a long time is well-suited for vacation reading.
It is not an investment book, but if you read it you will know more about the
history of the planet and of civilization than almost everyone you know, and you
will learn it from a page-turner.
by Steven Solomon is subtitled "The Epic Struggle for Wealth, Power,
and Civilization." Among many other things, you will learn how spices
were brought to Europe in boats that were disassembled, hauled across Africa by
camel and reassembled to cross the Mediterranean.
Water by Steve Hoffmann is a book I wish I had read when it
first came out two years ago -- I'd be richer -- but it's not too late.
The Water Industry can only grow
as the infrastructure continues to deteriorate, population continues to grow and
aspects of purification, distribution and recycling are discussed, with specific
coverage of both domestic and international companies. I
won't recommend specific companies, but a likely general ETF is the Guggenheim
S&P Global Water Index ETF (CGW).
It is difficult to examine a group
of indicators and then analyze, rate and put them together into a meaningful single
indicator that retains their meanings while providing market guidance. I have
been trying to do that with my Summary Index, which is based on 29 technical
indicators, so I know whereof I speak.
his Book, The
Magic 8, Arthur M. Field has accomplished this for a group
of diverse economic indicators, and has distilled the information provided by
them into a single indicator that helps one trade on the right side of the economy.
Profit Candlestick Patterns, by Stephen Bigalow is not a cheap
book, but it was worth every penny to me. It is not that there is anything mysterious
about candlestick charts, but they can be used in conjunction with standard tools
of technical analysis to confirm or deny them.
patterns stand out so clearly that I can scan more charts faster and more accurately
than before, and if I choose I can use programs to find patterns automatically
so I can zero in on the ones to study in more detail.
I started reading the Technical
Analysis of Stock Trends, by Edwards and Magee over again --
it's excellent and well worth the time spent. I found the latest edition
(9th) edited by W. H. C. Bassetti to be acceptable, but it is the original material,
not the editor's additions that are worth reading, his embellishments detract
somewhat from the original.
I found that the 1992 edition is still available on Amazon.com, and it is half
the price ($30).
One of the books I read on vacation
Forgotten Man, by Amity Shlaes. It is a book about the
1930s and if you want to understand
what is happening now in America, I recommend it.
will find uncanny parallels to the present economic and political scene that will
astonish you regardless of your political leanings. Love it or hate it, it will
leave you with a clearer picture of both periods.
Future of Everything: The Science of Prediction, by David Orrell.
In three major areas of investigation
-- the climate, the economy and biology -- predictions have
been found to be no more accurate than random guesses because of the complexity
of each field. There are just too many variables to be able to predict how a system
will respond to change.
twins with identical DNA express differences due to local phenomena active during
their development. So it is obvious that if one makes many changes simultaneously,
there are going to be surprises and unintended consequences. It is better to study
the effects of moving averages and the MACD by making small changes in one at
a time to learn their effect on stock selection.
Nathan Lewis, in Gold,
The Once and Future Money has traced the history of money from the
ancients through Clinton and has documented many monetary disasters. In every
case, without exception, spending was raised to the point of insolvency by every
failed government and taxation was increased to the point of civil unrest, exodus
been many bailouts throughout history and in every case the bankers have been
bailed out while the shareholders have been left swinging in the wind. Resolution
has always required stabilization of the currency and in most cases, gold came
to the rescue.
I read Anatomy
of the Bear, by Russell Napier in July when it was optional,
it is mandatory now.
excellent book discusses the similarities between four major bear markets; 1921,
1932, 1949 and 1982, and how to know when to get back in. One of the most important
similarities was that good news appeared in the Wall Street Journal and
elsewhere at least three months before the market hit bottom.
is counter to conventional wisdom that suggests stock market lows lead economic
recovery by 6 to 9 months -- quite the opposite is true, so there's likely to
be a long road ahead of us.
I am not a conspiracy theorist.
I do not accept as fact the belief expressed in The
Creature from Jekyll Island that Winston Churchill was complicit
in the sinking of the Lusitania or that the Federal Reserve is the
tool of Socialists.
most of this book presents in clear and compelling terms how the Federal Reserve
works, how money is created from thin air and the mechanism behind the recent
takeovers of financial institutions like Fannie Mae, Freddie Mac,
AIG, Bear Stearns, etc. As a bonus, it reads like an action novel.
is quick to blame "big business" for our difficulties, but they
should reserve most of the blame for themselves. Google "Fannie Mae
lobbyists" for names of the extortionists.
Alexander Elder's new book
and Sell Short, was certainly timely, coming out just before the market
self-destructed, but it is important in all market climates to know when to sell
a good thing as well as one that is underperforming.
discusses the selection of a target in addition to a stop, and teaches how to
use it to get out when the getting is good.
book is an important supplement to his classic, Come
Into My Trading Room, in which he presented his Kangaroo
Tail trade, to which I have referred many times in these reports.
The collapse of the subprime market
is just the latest in a string of financial collapses and crashes, and more
will follow. The crash of 1987, the Asian Contagion and the collapse
of Long Term Capital Management had a common thread -- positive feedback
-- and the fact that Richard Bookstaber, the author of A
Demon of Our Own Design, was working as a risk manager during all
three crises makes him eminently suited to explain their cause.
more interest are the lessons we can learn about designing our own investment
program and how we can avoid the many pitfalls. The book is extremely well written
and reads like an action novel.
The conditions that existed in 1907
when many banks failed and businesses went bankrupt, strike me as being very similar
to present conditions. To add another eerie similarity to the present, the actions
of J. P. Morgan did much to shorten and finally end the panic, just as
his namesake was involved with Bear Stearns last week.
Panic of 1907, by Robert Bruner and Sean Carr, is not
only informative, but it is a page turner. They made the events understandable
and exciting to read -- well worth spending a few hours to appreciate the
potential of our current situation.
For a better appreciation of the
importance of probability in investing, I suggest Chances
Are, by Michael Kaplan and Ellen Kaplan. They discuss
the history of probability from Aristotle to the present. It was written by a
student of European history who has written and produced films for PBS,
and a mathematician/archaeologist.
well-written book covers gambling, weather, warfare, medical treatment and other
subjects -- it will give you an understanding of the role that probability plays
in the stock market, and in life in general.
Last week I tried to take a break
from the stock market by reading Endless
Universe by Steinhardt and Turok. It didn't quite work
because they presented a theory that the universe has neither a beginning or an
end -- when one cycle ends another starts, like the market seems to be repeating
book is the best I've read on the subject. Without any math at all, the authors
were able to paint a clear historical picture of cosmology including the
latest research available in 2007. They also discussed where research will be
taking us in the next 10 years. It's an excellent read.
Paul Samuelson said, "The stock
market is a great leading indicator, it has forecast 10 out of the last seven
opposite side of the coin is what Joseph Ellis spent much of his time discussing
in his must-read 2005 book, Ahead
of the Curve.
shows that by the time a recession has started the stock market has generally
fallen at least 12% from its high, so obsessing over a possible recession is not
going to save your from losses.
then analyzes economic indicators that have helped forecast recessions with enough
lead time to avoid the carnage.
In addition to providing information
that will improve the technique of even experienced professionals, Marcel Link
offers in depth descriptions of price movements that clarify one's understanding
of previously opaque chart patterns. Foremost among them is a discussion of the
relationship between price and volume that lies behind Benjamin Crocker's Price/Volume
Probability Trading because I guarantee that you will discover many
trading tricks that will make money for you on your first trade.
I usually dislike alarmist books.
They have been coming out every few years for as long as I can remember and I
cannot think of one that was both accurate and without an ulterior motive. Crash-Proof:
How to Profit from the Coming Economic Collapse by Peter Schiff
is no exception, he spends half the book selling his brokerage house, but
many of his points made a lot of sense even if his disaster scenario is, hopefully,
In addition to limiting risk by
selecting firm mental stop losses, the size of the position relative to
your portfolio size is critical. I have read several books that address the subject,
but probably the most thorough is Trade
Your Way to Financial Freedom, an important book by Van Tharp.
method I have chosen to determine position size is to set three times the Average
Trading Range (ATR) equal to the maximum dollar risk I am willing to take.
In his book Come
Into My Trading Room, Alexander Elder provides the benefit of his
experience in trading by discussing in detail three important concepts:
Mind, Method and Money Management. While he occasionally strays from his message
to indulge in personal stories, I found the book extremely helpful in all three
areas and have made real dollars immediately by following his techniques.
Method part was of particular interest to me since in it he discusses his personal
technical indicators and trading tools, but I was probably more in need of the
"Mind" section since he addressed those characteristics that differentiate
between anxiety and calm and that often represent the difference between success
In his book Money
Mischief, the late Milton Friedman presents the research behind
his well known theory that "substantial inflation is always and everywhere
a monetary phenomenon." Simply stated this means that you don't create
inflation by raising prices or stop it imposing price controls. The only way to
create inflation is for a government to print money, thereby increasing the supply
of money without there being a commensurate increase in production.
book is written with almost no math and provides a painless introduction to a
vitally important subject.
If you wonder how big your position in a stock should be relative to the size
of your portfolio, and where you should place a protective stop loss, Trend
Trading by Kedrick Brown is a book that will help you.
Trading presents the "how to" while Trading in The Zone provides the
I can't say enough about Trading
In The Zone, by Mark Douglas. If you have ever thought a stock
would go up, bought it and then blamed yourself when it went down, you have to
read this. Douglas shows us how to handle a position -- once we have decided to
trade it -- in an automatic and consistent manner, and to take advantage of an
edge without self-doubt.
All right, I admit it, even though I have spent decades studying technical
anallysis, I have had several sojourns into fundamentals. I've read a score of
books on intermarket analysis, value investing, earnings analysis and earlier
books about economic indicators, but until I found Bernard
Secrets of Economic Indicators
-- which in my opinion is required reading -- I could not get into it.
I don't think it is possible to read The
World Is Flat by
Thomas L. Friedman and not run out and buy Indian stocks. The story
of outsourcing and its effect on the present and future growth in India is just
too compelling. I only wish I had read the book last summer after the big correction,
rather than now.
book is almost 600 pages, but it reads quickly, is well written and in reality
you will get the message from the first 325 pages. The rest has a bit of politics
thrown in which I found I could take or leave. However, the body of the book discusses
business in general, not just in India, and things I found so important for my
grandchildren's education that I sent copies to my daughters.
Terry Burnham in Mean
Markets and Lizard Brains has written a book that is perfect for the
summer -- well written, entertaining and at the same time it provides a good grounding
in behavioral finanance and macroeconomics. Here you will find evidence to support
the observation that things are different from the 1980s and 1990s, and suggestions
for conducting your investment program accordingly. It is a book I liked a lot
and strongly recommend.
(MIS)Behavior Of Markets, by Benoit Mandelbrot
is an absolutely must-read book by Benoit Mandelbrot, the mathematician
who was deeply involved in the early days of chaos theory and fractals. He is
well grounded in the stock market, and has studied price extremes of securities
for 50 years. The math is conveniently tucked away in the appendix where it can
be easily ignored. If you measure the value of a book in terms of the new understanding
it gives you about things with which you are already familiar, this book rates
near the top. As the author correctly warns in the first pages, the book will
not make you a fortune, but it will help to think more clearly about price movements,
and it may save you from losing a fortune.
Thomas Bulkowski's Encyclopedia
of Chart Patterns is the definitive work in which to find information
describing the myriad of patterns found in charts of individual stocks and indices.
It is the first and only place that I go to to find out if a chart pattern is
In it he exhaustively defines and describes the success and
failure rates of over 75 generic patterns and presents specific profit-loss returns
with targets and logical entry points and exits.
If you have ever wondered as I have,
how the stock market can make sudden reversals when there was nothing markedly
different in the world situation (there is still shooting in the Middle East),
or in the economic fundamentals, you will be interested in reading Mark Buchanan's
entertaining and well-written book Ubiquity.
explains the similarity between wild moves in the stock market and natural occurrences
such as earthquakes, hurricanes, avalanches and forest fires. How it is possible
to believe in the efficient market hypothesis as espoused in Burton
Random Walk Down Wall Street after reading this,
I don't know.
Marty Zweig's book, Winning
on Wall Street is the classic book on technical analysis that I refer
to constantly and reference frequently in the reports.
Martin Pring -- Market
Momentum is another classic text that is written clearly and precisely
and will provide a good grounding in the fundamental techniques for technical
The GPS technique has been
refined using optimization of test parameters on past stock price data.
have had considerable criticism heaped on them -- and rightly so -- for being
used to "data mine" or "curve fit" past results. When one
tightly fits an equation to past data it almost always ceases to fit new
data quite quickly. To make my testing as robust as possible to markets as they
evolve in real time, I have used techniques documented in the excellent book
Design, Testing and Optimization of Treading Systems by Robert
There are other
cycles and seasonal trends of interest. Most of us have heard the dictum "sell
in May and go away." This came from the observation that markets have been
stronger in the period November through April, than during the rest of the year.
According to Les Masonson's excellent book All
About Market Timing,
which I highly recommend, an initial investment of $10,000 invested every May
through October produced a cumulative loss of $77 dollars between 1950 and 2001.
On the other hand, the same investment, invested every November through April
during those same years, yielded a gain of $457,103.
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Fred Goodman, CFP,
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