The Clover holiday reading guide — summer 2018/19
Yeay, we made it!! The end of another work year. Seriously, where did 2018 go? Now that you’ve made it to the finish line, it’s time to kick those work shoes off, grab a cold beverage and relax. And what better way to unwind than burying yourself in a good book?
At Clover, we read a lot of finance books and in our estimation, most of them are needlessly complex for the vast majority of investors.
We’ve curated a list of some of our favourite finance-related books from the past five or so years. These books have been selected for their easy reading style, brevity (none should take more than a day or so to read) and high fun-factor.
So, pick one up over the holiday break (we included links to ebook (Kindle) versions wherever possible), grab a comfy spot, a cool drink and bliss out!!
The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen & Harold Pollack (Portfolio / Penguin, 2016)
When Harold Pollack, a University of Chicago professor, posted an image of a 4X6 index card with his top 10 financial tips in April 2013, he had no idea the buzz his actions would generate.
The card resulted from an interview Pollack had with journalist and personal finance expert Helaine Olen, when the professor had remarked that the best financial advice should be able to fit on an index card. Listeners asked for the card, Pollack obliged, uploaded this image and both he and Olen were blown away as it went viral.
Before long Pollack’s index was being lauded by websites like Lifehacker to prestigious newspaper the Washington Post. Pollack had clearly struck a chord with people who wanted to get their financial lives in order, but were not finding the simple guidance they craved in the self-help finance and investing books available at the time.
Pollack and Olen have turned that original card into an easily digestible book that takes the reader through the basics of getting financially fit; from setting a savings habit, to paying down credit card debt in full each month, to avoiding stock-picking and instead investing in low-cost, highly diversified funds like ETFs.
There are a few areas that are less relevant to Australian readers, such as the chapters on 401(k) plans (the US version of superannuation) and Social Security, but an investment of a few hours of your time buried in The Index Card this holiday season will return you outsized dividends for years and decades to come.
The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy by James Montier (John Wiley & Sons, 2010)
James Montier is one of investing’s most flamboyant and colourful characters. In a world known for its sombre attire, sensible shoes and emotional restraint, Montier is famous for his loud Hawaiian shirts, equally colourful language and searing intellect, as Head of Asset Allocation at famed global investor GMO, working alongside founder and legendary investor Jeremy Grantham.
We once saw Montier present at an investment conference where he had the crowd of senior investment boffins mesmerised by his encyclopaedic knowledge of investment markets; hanging on his every word only to be left in stitches by occasional bursts of his wicked British sense of humour.
The key theme of this book is how investing is deeply psychological, and that to succeed as an investor you will need to understand, acknowledge and control emotions that are likely to make you poorer rather than richer if left unchecked.
Montier weaves evidence from psychological studies and experiments together with anecdotal stories to create a highly entertaining work that carries the reader on a break-neck journey through the world of behavioural finance. In this world the winners are not necessarily the smartest investors, but the ones most able to control their emotions.
As with other titles in ‘The Little Book’ series, this book can easily be read in the space of a day. I cannot recommend it highly enough for those who want to understand why, in investing, as noted Physicist Richard Feynman said about science, the first principle is that you must not fool yourself; and you are the easiest person to fool.
[Side note: Dr Jack Gray, who chairs Clover’s Investment Committee, was GMO Co-Head of Asset Allocation some years before Montier’s arrival].
The 3 Simple Rules of Investing: Why Everything You’ve Heard about Investing is Wrong — and What to Do Instead by Michael Edesess, Kwok L.Tsui, Carol Fabbri and George Peacock (Berrett — Koehler Publishers Inc , 2014)
Michael Edesess is something of an insider’s outsider in the investment world. With a doctorate in pure mathematics, he is what is often termed a “Quant”, a finance professional who combines deep investment knowledge with high-level mathematical and programming skills.
Where he differs from most other quants is in his skepticism in the ability of highly trained finance professionals to beat the market, irrespective of the complexity of their algorithms or the speed of their super-computers.
In Edesess’ view, what passes for supposed market beating complexity is often little more than marketing spin, designed to help the finance industry more than the end investor.
Edesess and his co-authors, statistician Kwok L.Tsui and financial advisers Carol Fabbri and George Peacock, take the reader on a part expose, part journey of discovery to uncover what they term Investing’s Seven Deadly Temptations. We won’t spoil it for you, but rest assured it is far less gruesome than the 1995 Brad Pitt and Gwyneth Paltrow movie that revolved around the seven deadly sins.
The Big Short: Inside the Doomsday Machine by Michael Lewis (Penguin, 2011)
Global financial information powerhouse Reuters called The Big Short “probably the single best piece of financial journalism ever written”, and many would agree with that high praise.
Michael Lewis is no stranger to great investment storytelling, having written the smash hit Liar’s Poker; the story of how he stumbled out of the prestigious London School of Economics, Masters degree in hand, and onto the bond trading desk of Solomon Brothers, at the time the most powerful investment bank in the world, to bear witness to the collective mania of Wall Street in the lead up to the 1987 stock market crash.
Having seen the excesses of the 1980s Lewis was sure that regulators would never allow the entire global economy to be put in jeopardy by the investment industry, but to his surprise that is exactly what happened in the run up to the Global Financial Crisis (GFC) of 2007–2009.
A policy to encourage home ownership, combined with rampant mortgage lending to individuals with little hope of repaying their loans, and the repacking of these dubious loans into complex financial derivatives blew up spectacularly during 2008, leaving the global economy teetering on the brink of total collapse.
Lewis crafts the book around a colourful band of investors who saw the GFC iceberg coming while everyone else, oblivious to the danger, partied in the ballroom of the Titanic. These odd-balls bet that US housing prices would fall so dramatically that the complex home loan derivatives market would implode, and they were right. This is their story.
The Big Short was made into a movie in 2015, starring Ryan Gosling, Christian Bale, Steve Carell and (that man again) Brad Pitt. Watch it by all means, but read the book first if you haven’t already seen the movie. It is a riotous read, with the biggest financial crisis of the past 80 years seen through the eyes of the individuals who found themselves at the heart of the chaos.
So there you have it, four great additions to your holiday reading list that will entertain, enlighten and inform you about the world of investment finance.
We at Clover wish you and your family a very joyous holiday season and the best for 2019.
Season’s Greetings,
The Clover Team 🍀🎄
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