Book Marks: 7 Good Reads

Categories Author: Patrick O'Shaughnessy, Investing

FULL DISCLOSURE: to be perfectly honest — or “transparent” to use a saturated term — we’re still buried with quarter/year/month-end! Tons of new stuff coming in 2017. I hope these selections & reviews will fill your Smart Cart™ in the meantime, pending our next Blogpost:

What Works on Wall Street
by James O’Shaughnessy


I am, of course, massively biased in this first selection but hear me out. I never like anything just because it was produced by someone well known or well regarded, our firm’s CIO included. But this book is a classic for two reasons. First, its early chapters give an excellent overview of the modern investor’s options and obstacles. These chapters (1 through 4) explain investor fallibility and how a model-based approach to investing can help investors overcome their inherent faults. Second, the remainder of the book — the “data” chapters (5 through 29) — provide extensive evidence in favor of systematic investment strategies that favor value, quality, momentum and yield. My entire personal portfolio is dedicated to these ideas.

Inside the Investor’s Brain
by Richard Peterson


This is the most informative book on investor behavior that I’ve ever read. It is like Daniel Kahneman’s Thinking, Fast and Slow¸ but specific to investing. It is comprehensive, entertaining, and chock full of stories and examples that I use on a weekly basis.

Contrarian Investment Strategies
by David Dreman


This was one of the first books I read on investing when I was 22 and remains at the top of my favorites list to this day. It reveals “forecasters” as charlatans, highlights the contrary nature of the most successful investing strategies, and proposes concrete strategies for outmaneuvering the market.

The Most Important Thing: Uncommon Sense for the Thoughtful Investor
by Howard Marks


“To boil it all down to just one sentence, I’d say the necessary condition for the existence of bargains is that perception has to be considerably worse than reality.”

Howard Marks rivals Warren Buffett when it comes to quality shareholder letters. This book is Marks’ picks for the best of those letters and ideas weaved together into a brilliant narrative. One of my favorite books on value/distressed investing.

Here is a good passage:

“Unlike market darlings, the orphan asset is ignored or scorned. To the extent it’s mentioned at all by the media and at cocktail parties, it’s in unflattering terms. • Usually its price has been falling, making the first-level thinker ask, “Who would want to own that?” (It bears repeating that most investors extrapolate past performance, expecting the continuation of trends rather than the far-more-dependable regression to the mean. First-level thinkers tend to view past price weakness as worrisome, not as a sign that the asset has gotten cheaper.) • As a result, a bargain asset tends to be one that’s highly unpopular. Capital stays away from it or flees, and no one can think of a reason to own it.”

The History of Money
by Jack Weatherford


Ever since finding this book, I’ve been fascinated with the history of money. Weatherford’s book is my favorite on the subject, because it is equally entertaining and informative. Money is arguably our most important invention, and it has changed a lot over the centuries. This is a great story that will make you think about your money and its future. Weatherford’s book on Genghis Kahn is also fantastic.

“Humans have found many ways to bring order to the phenomenological flow of existence, and money is one of the most important. Money is strictly a human invention in that it is itself a metaphor; it stands for something else. It allows humans to structure life in incredibly complex ways that were not available to them before the invention of money. This metaphorical quality gives it a focal role in the organization of meaning in life. Money represents an infinitely expandable way of structuring value and social relationships — personal, political, and religious as well as commercial and economic.”

Rational Expectations:
Asset Allocation for Investing Adults (Investing for Adults Book 4)
by William Bernstein


I’ve really enjoyed William Bernstein’s e-book series, especially this latest one. In typical Bernstein fashion, it’s very straightforward and informative. A few choice passages:

Oh, yes, and one more thing. Make sure, absolutely sure, that you have enough riskless assets to tide you over during the bad times, when you are the most likely to see your income fall or even lose your job. Preferably, you should have yet more than this, so as to take advantage of that high exchange rate when it shows up, as it inevitably does. Even more simply: you must have patience, cash, and courage — and in that order. All else, as Hillel said, is commentary.

This is no small point: how much liquidity you have when blood runs in the streets is likely the most important determinant of how successful you’ll be in the long run, since this is the time you’re most likely to lose your job, need cash to purchase stocks on the cheap, or buy the corner lot you covet from your impecunious neighbor.

Beware! Financial systems are not airfoils or electrical circuits that respond identically, each and every time, to given inputs. Stock, bonds, and portfolios are different animals, and can behave unpredictably.

Devil Take the Hindmost by Edward Chancellor


No investing education is complete without a healthy dose of history. Chancellor’s book is — BY FAR — the best collection of investing history lessons ever compiled in my opinion. Learning from your own mistakes is great, but learning from the mistakes of others is even better. This is the most entertaining book on this list.

Subscribe to the OSAM Blog to stay tuned for more good reads in the months ahead — including some picks not even about investing (for those readers who’ve asked) …

Smart Cart™ is a service mark of O’Shaughnessy Asset Management, LLC.