Tutorials

Five must-read books for your Christmas break

From how to be a better investor to putting the year in perspective, John Stepek picks the five best non-fiction books he's read this year.

171221-books-b

Today I'm going to run through my books of the year.

Now I may be unusual, but I don't have time to read everything as it comes out, and as with just about everything else in life, 80% of it is a waste of time anyway.

So only a couple of these were published in 2017. Instead, this is a list of the five best non-fiction books I read this year.

The important thing is that they're all excellent reads so buy them for yourself or for a friend...

Putting the political picture of 2017 into perspective

Poverty Safari (2017) by Darren McGarvey

poverty-safari

Poverty Safari: Understanding the anger of Britain's underclass.Published by Luath Press. Buy it on Amazon.

The Trump/Brexit votes have fuelled the rise of a sub-genre of articles and books that look at people in poorer areas of the US and the UK as if they are alien tribes. The writers are usually (though not always) well-intentioned. Yet the basic question they ask is: "What's wrong with these people, and how can we make them more like us?"

Poverty Safari is not one of those books. It's a clever mix of autobiography and polemic from a writer who was brought up in Pollok, a poor area of Glasgow. At 33, McGarvey has experienced much of the worst of what deprivation has to offer from a violent home life to substance addiction to homelessness and so has seen the problems of both poverty and the poverty-alleviation industry up close, and knows there are no simple solutions.

McGarvey writes brilliantly about the chaos and constant threat of potential violence that underpins genuine poverty. Aspiration has to be hidden; soft feelings have to be cloaked; and space to think or work or just exist in peace is a luxury rather than a basic expectation.

He makes no bones about being left-wing, he's certainly a class warrior, and at times, I found some of his polemics exasperating. But that said, I found myself nodding in agreement at least as often. McGarvey is not interested in partisan point scoring he emphasises the importance of taking personal responsibility, and is brutal about organisations which helicopter in and out of poorer areas, largely to "justify and perpetuate" their own existence.

Indeed, despite the anger and uncompromising writing style, Poverty Safari feels like a plea for political tolerance, empathy and pragmatism. After a year that has been characterised by mindless tribalism, this feels like a way forward. It's inspiring, it's challenging, and if you only buy one book on this list, I'd make it this one.

The Dark Valley (2000) by Piers Brendon

dark-valley

The Dark Valley: A panorama of the 1930s. By Piers BrendonPublished by Jonathan Cape. Buy it on Amazon.

Speaking of populism, this is a fantastic, sweeping history of the 1930s. If I'm honest, I have a tendency to underplay the importance of the political vs the economic when it comes to investment. That's what comes of growing up in the post-Berlin Wall globalisation consensus era of the 1990s. This book is an ideal antidote to that particular delusion.

Brendon looks at how the 1930s unfolded across seven major countries America, Japan, Germany, Russia, Britain, France and Italy. Those of you who are historians will no doubt be familiar with much of the material already, but I'd recommend it anyway. Brendon is a superb writer, taking an exceptionally complex, dense topic and building a compelling narrative without ever over-simplifying or getting lost in the weeds.

Hedge fund founder Ray Dalio has compared aspects of today's environment with the 1930s, and at a time of rising populism, it's useful to be familiar with what happened, so that you can decide for yourself whether or not such comparisons are justified. My own view is that today is nowhere near as bad as the 1930s. But there are certainly warnings worth heeding if we want that to remain the case.

How to be a better investor

Free Capital (2011) by Guy Thomas

free-capital

Free Capital: How 12 private investors made millions in the stock marketBy Guy ThomasPublished by Harriman House.Buy it on Amazon.

This is a great book. Thomas interviews 12 private investors who make a living purely from investing. You'll recognise a few of the names most notably John Lee, a regular columnist in the FT but the majority are anonymous, which allows Thomas to really get into the details of what they do. It's always interesting reading about how other people invest, and this book is extremely well researched a private investor version of Jack Schwager's Market Wizards.

It also covers a wide range of investment styles. There are technical traders, professional contrarians, value investors, macro traders all of them earning a comfortable living from their investments. As such, it gives the lie to the idea that you can't beat the market, and makes it clear that there's more than one way to do so. So if you're at all interested in investment, you're likely to get fired up by Free Capital. But there are no false promises here either the interviews also amply demonstrate that beating the market is hard work, and requires a certain mindset. Thoroughly recommended.

A Man for All Markets (2017) by Ed Thorp

a-man-for-all-markets

A Man for All Markets: Beating the Odds, from Las Vegas to Wall StreetBy Ed ThorpPublished by Oneworld PublicationsBuy it on Amazon.

Edward O Thorp's major claim to fame is his casino exploits he figured out and published ways to beat blackjack, and also used a wearable computer to beat roulette machines. However, there is so much more to him than that. This is one of those autobiographies that makes you wonder what you've been doing with your entire life. Among other things, Thorp set up the first quant hedge fund (one that used algorithms to spot discrepancies in the market); spotted Warren Buffett (who he invested in) in the late 1960s; and spotted Bernie Madoff (who he did not invest in) as far back as 1991.

Thorp himself doesn't believe in false modesty, and given his achievements he doesn't have a lot to be modest about. But while there's certainly a bit of myth-making going on here, I'd have been interested to know how the other people in his life coped with keeping up with someone so relentlessly focused and rational.

For example, he discusses his occasional near-fatal encounters with casino heavies in the same tone as he might discuss a statistical problem. I'm not sure how calmly his fellow passengers would recall an incident in which Thorp discovered that the brakes on his car had been cut as he was freewheeling downhill following a particularly profitable night out.

But overall he comes across as a fundamentally likeable guy with sensible views on markets (his view is that most of us should invest in cheap index funds, and that's hard to disagree with). And his insatiable curiosity particularly as a child is inspiring.

Devil Take the Hindmost (1998) by Edward Chancellor

devil-take-the-hindmost

Devil Take the Hindmost: A History of Financial SpeculationBy Edward ChancellorPublished by Plume BooksBuy it on Amazon.

If you're only going to read one history on bubbles and busts, Chancellor's account deeply researched, and stuffed full of wonderful little details that'll have you quoting out loud and annoying your partner is the one to choose. It takes us through the classics in roughly chronological order the Tulip bubble, the South Sea bubble, railway mania, the Depression, all the way up to Japan's epic bubble in the 1980s.

One thing that Chancellor's account makes clear is that while all bubbles share certain characteristics, they are also deeply specific, which is one of the things that makes them very hard to predict. It's also useful, while reading, to remember that it was published just before the dotcom bubble burst. Given that we're in a similarly febrile investment atmosphere right now, it's a useful reminder that what looks obvious with hindsight is not always so at the time.

(Oh, and to get Chancellor's view on bitcoin, read our Christmas issue sign up here if you haven't already done so).

Recommended

Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
The great rotation is firmly underway – what does it mean for you?
Stockmarkets

The great rotation is firmly underway – what does it mean for you?

As investors move away from “jam tomorrow” stocks and back into “old economy” stocks that should benefit from the post-pandemic recovery, the tech-hea…
5 Mar 2021
America’s “SPAC” boom is coming to Europe
Stockmarkets

America’s “SPAC” boom is coming to Europe

SPACs are shell firms that list on the stockmarket in order to raise cash, then merge with another company. Once confined to the US tech scene, Europe…
4 Mar 2021
Why the classic 60/40 investment portfolio may no longer work
Investment strategy

Why the classic 60/40 investment portfolio may no longer work

The dramatic events in the bond market have thrown into question the classic investment strategy of the last 40 years. An investment portfolio made up…
1 Mar 2021

Most Popular

A beginner’s guide to bitcoin: where to store your bitcoins
Bitcoin

A beginner’s guide to bitcoin: where to store your bitcoins

Once you've got hold of some bitcoins, you need somewhere secure to keep them. Dominic Frisby outlines some of the best options, from exchanges to col…
4 Mar 2021
A beginner’s guide to bitcoin: the technical genius behind bitcoin and the blockchain – and how it all works
Bitcoin

A beginner’s guide to bitcoin: the technical genius behind bitcoin and the blockchain – and how it all works

In the second in his series on bitcoin, Dominic Frisby looks at the blockchain – bitcoin’s unique underlying architecture – and what makes it and the …
2 Mar 2021
A beginner’s guide to bitcoin: how to buy bitcoin
Bitcoin

A beginner’s guide to bitcoin: how to buy bitcoin

For the novice, buying bitcoin can be a daunting prospect. Here, Dominic Frisby outlines the process from start to finish.
3 Mar 2021