The last two years have been great for readers of financial literature. I've been thinking about doing a list of my personal favorites for a while. Today I completed Alan Greenspan's epic "The Age of Turbulence," which is a genuine classic. It tops my list:
1. "The Age of Turbulence" - Alan Greenspan. The best and classiest memoir I've ever read. It cements Greenspan in the Pantheon of last century's great leaders, and establishes a lofty benchmark to which future memoirists will aspire. I know many people feel frustrated by his hedges and equivocations when giving testimony in front of Congress, and frankly I wish he had asserted his opinions more strongly while leading the Fed. In any case, he is a survivor, and he lays out his meticulously reasoned economic judgment and political analysis over the past 40+ years.
2. "More Than You Know" - Michael Mauboussin. An innovative multidiciplinary approach to understanding financial markets. It is fantastic, and a revised version was just released. Mauboussin ecclecticism is sorely needed in financial theory, and Mauboussin delivers exquisitely formulated multi-dimensional analyses. The analogies he brings from other areas of research are truly eye-opening when applied to explaining paradoxes in the financial markets.
3. "Inside the House of Money" - Steven Drobny. An excellent collection of revealing interviews with top global macro money managers, conducted in 2005. It intelligently delves into the thought processes and psychologies of these high achievers, which sets it apart from more anecdotal collections.
4. "The Little Book That Beats the Market" - Joel Greenblatt. The best book I've read on the fundamentals of successful long term stock-picking. It covers the basics of business and stock valuation in an entertaining and engaging fashion.
5. "Fortune's Formula" - William Poundstone. Entertaining and very useful summary of the foundations of quantitative analysis. It describes the evolution and utility of the Kelly criterion, arithmetic vs geometric means in portfolio design, and the impact of return volatility in a fun-to-read and narrative style.
I'm often asked which books are ideal for getting acquainted with behavioral finance and investment psychology. I'll answer that question in another post.