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John Mauldin's Recommended Books
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| These are books I have read and found to be very useful and enlightening. I make a short comment and then use a review I think is representative from someone else (usually Amazon.com) to give you some more detail. |
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 | The Black Swan
| | by Nassim Nicholas Taleb |
Glancing through the book when I first got it assured me that I wanted to give the book more than a quick read. I was not disappointed. You can quibble over various points in the book (and I may at some point), or not like his confrontational style, but this is a book that demands to be consumed slowly and thoughtfully.
The Black Swan took me several times longer to read than normal. Not because it is not easy or fun to read (Taleb can be quite humorous), but because I had to regularly stop and think (and often to re-read several times) about what he was saying. I rarely read a book twice. So many books, so little time. Generally, I mark it up and return to important sections if I need to. This is one book that I will definitely read more than once. Let me strongly suggest you get the book and set aside some time to read it.
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 | Rocking Wall Street
| | by Gary Marks |
| I am proud that the first book is by my good friend Gary Marks. Gary is a very successful hedge fund manager and investor as well as a first-rate businessman, but just as importantly a very involved family man. He is CEO of an asset management firm with offices in New York, Tampa, and Hawaii, where he lives. However, he started out in life as a rock and roll artist, having done 10 recordings of original music over the years. Appropriately enough, his book is called Rocking Wall Street and discusses in detail four main strategies for managing your portfolio and your life. This is a valuable book for seasoned investors as well as those just starting out. Gary talks about investing from a practical, holistic viewpoint. He asks you to consider your portfolio of assets, your career, and your personal life as one inseparable "investment."
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 | Automatic Wealth: The Six Steps to Financial Independence
| | by Michael Masterson |
I have known Michael for over twenty years. He has one of the smartest business minds I know. When he gives me advice, I pay attention, and you should, too. Automatic Wealth is full of wisdom and insight filtered by a master and brought to you in a well-written and delightful style.
Editorial Review: (from Amazon)
The advice and concepts outlined in Automatic Wealth are best suited for those in their 30s-50s who recognize that their current job will never afford them true financial independence. Rather than encourage readers to quit their day jobs today and launch into a new scheme tomorrow, Masterson shows how to turn your skills and experience into significantly more money within seven to fifteen years. For those just getting by, he details how to get the biggest pay raises now and how to move into more lucrative ventures in the near future. For those with some savings, he offers specific advice on building equity and increasing net worth significantly and quickly. Since Masterson made his millions starting and developing small businesses, he encourages people to become entrepreneurs themselves and discusses which kinds of ventures to invest in and which ones to avoid. He also stresses the importance of developing multiple income streams, offering chapters on real estate, stocks and bonds, consulting, direct mail, and other opportunities.
In addition to concrete steps, Masterson also writes about attitude and expectations. His first step, in fact, is to take an honest and realistic assessment of your current financial situation and prepare yourself to change habits. He stresses that you must make getting rich a priority and devote the necessary time to it--act immediately and don't wait until the perfect moment to change your situation (hint: the perfect moment rarely arrives.). Clearly written and filled with informative anecdotes and examples, Automatic Wealth will not make you a millionaire overnight. It could, however, make you one in a decade, and that's a timeline most people can deal with. --Shawn Carkonen
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 | Wedding of the Waters: The Erie Canal and the Making of a Great Nation
| | by Peter L. Bernstein |
Editorial Review: (from Amazon)
Begun in 1817 and completed in 1825, the Erie Canal stretches 363 miles across upstate New York from Buffalo on Lake Erie to Albany on the Hudson River. A stunning achievement, the canal was hacked through a densely forested pass in the Appalachian Mountains using only axes, shovels, low-grade explosive power, beasts of burden, and some ingenious devices. The engineers and workers created locks, bypassed rapids and waterfalls, and adjusted to countless changes in elevation. When the canal was completed it became one of the wonders of the world. But the canal was much more than a spectacular construction project; it also served to bind a young United States to itself and the rest of the world in one bold stroke. In this thoroughly absorbing book, Peter Bernstein describes in vivid detail how the Erie Canal helped to shape the United States into a great nation by connecting the eastern seaboard and western expanses of America, as well as propel the Industrial Revolution and stimulate global trade, economics, and immigration. It was so important to the development of the U.S., argues Bernstein, that without the canal the detached western territories "would in all likelihood have broken away" and created another, if not several, separate countries. Manifest Destiny would have been denied.
In telling this gripping tale, the author offers a brief history of canals through the ages, explains the foresight exhibited by George Washington and Thomas Jefferson regarding the need for a waterway to the west, and outlines the political wars, financing challenges, and seemingly endless delays and false starts to the project. He also reveals much about the political landscape of early America through his profiles of the personalities and visionaries who devoted their lives to the project, along with the engineers and surveyors, most of whom had little experience designing or constructing a canal of any kind, much less such a massive undertaking. Wedding of the Waters succeeds brilliantly in bringing this rich story to life. --Shawn Carkonen
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 | Unexpected Returns: Understanding Secular Stock Market Cycles
| | by Ed Easterling |
Ed Easterling has given the world of investing the single best, easy-to-read, study of stock market cycles of which I know. He lays out a path for you to find your own Unexpected Returns, showing you how to confidently navigate the waters of market volatility. Serious investors will devour this book and profit. It should be required reading for investment professionals.
Book Description: (from Amazon)
This investment book uses extensive full-color graphics to explain the fundamentals of the markets-an essential resource before reading how-to books or engaging investment advice. It is a unique combination of investment art and investment science that enables the reader to differentiate between irrational hope and a rational view of current market conditions.
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 | Financial Reckoning Day: Surviving the Soft Depression of the 21st Century
| | by Bill Bonner |
Review by Amazon.com:
The investor’s guide to surviving a slowing economy
Financial Reckoning Day is a "big picture" investment book that skillfully illustrates how the American economy is following in the footsteps of the Japanese economy, which fell into a long, soft "slow motion" deflationary depression brought about by two irresistible forces–its aging population and a structural reaction to the greatest financial boom in its history. With the U.S. market in a downturn, investors are looking for answers to why this is happening and what they can do to protect their investments. Financial Reckoning Day will provide the answers to those questions. Written by a team of well-respected financial professionals–whose publications and newsletters reach a quarter million investors each week–this book shows readers how the economic megaboom of the 1990s will inevitably be followed by a megabust in the first decade of the twenty-first century. Many believe that depressions are artifacts of financial history, not features of the future. Financial Reckoning Day shows why these events are a real possibility and discusses the dangers they pose to investors around the world, arguing that popular democracy, aging populations, and bad economic theories doom Western economics to bear markets, and falling consumer spending for years to come. More importantly, it shows readers how they can survive and thrive during such events.
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 | Fooled By Randomness: The Hidden Role of Chance in the Markets and in Life
| | by Nassim Nicholas Taleb |
One of the best books on risk and investing I have read. I consider it essential reading for anyone who wants to be a better investor. I highly recommend the book.
Review by Amazon.com:
In Fooled by Randomness, Nassim Nicholas Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life and why human beings are so prone to mistake dumb luck for consummate skill. This eccentric and highly personal exploration of the nature of randomness meanders from the court of Croesus and trading rooms in New York and London to Russian roulette, Monte Carlo engines, and the philosophy of Karl Popper. Part of what makes this book so good is Taleb's ability to make seemingly arcane mathematical concepts (at least to this reviewer) entirely relevant in evaluating and understanding everything from the stock market to the success of those millionaires cited in the aforementioned bestsellers. Here's an articulate, wise, and humorous meditation on the nature of success and failure that anyone who wants a little more of the former would do well to consider. Highly recommended.
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 | John Adams
| | by David McCullough |
One of the best written and more fascinating books on history I have read in years. John Adams comes alive in this tome, and I found it hard to put down.
It was listed as Amazon.com's best of 2001. Their review:
Left to his own devices, John Adams might have lived out his days as a Massachusetts country lawyer, devoted to his family and friends. As it was, events swiftly overtook him, and Adams--who, David McCullough writes, was "not a man of the world" and not fond of politics--came to greatness as the second president of the United States, and one of the most distinguished of a generation of revolutionary leaders. He found reason to dislike sectarian wrangling even more in the aftermath of war, when Federalist and anti-Federalist factions vied bitterly for power, introducing scandal into an administration beset by other difficulties--including pirates on the high seas, conflict with France and England, and all the public controversy attendant in building a nation.
Overshadowed by the lustrous presidents Washington and Jefferson, who bracketed his tenure in office, Adams emerges from McCullough's brilliant biography as a truly heroic figure--not only for his significant role in the American Revolution but also for maintaining his personal integrity in its strife-filled aftermath. McCullough spends much of his narrative examining the troubled friendship between Adams and Jefferson, who had in common a love for books and ideas but differed on almost every other imaginable point. Reading his pages, it is easy to imagine the two as alter egos. (Strangely, both died on the same day, the 50th anniversary of the Declaration of Independence.) But McCullough also considers Adams in his own light, and the portrait that emerges is altogether fascinating.
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 | When Genius Failed: The Rise and Fall of Long-Term Capital Management
| | by Roger Lowenstein |
An analysis of the Long Term Capital debacle of 1998 and one of the best written books I have read in a long time. Completely fascinating from beginning to end. Read this and then Fooled by Randomness (above) to get a feel for how hard it is to choose money managers.
Amazon.com review:
On September 23, 1998, the boardroom of the New York Fed was a tense place. Around the table sat the heads of every major Wall Street bank, the chairman of the New York Stock Exchange, and representatives from numerous European banks, each of whom had been summoned to discuss a highly unusual prospect: rescuing what had, until then, been the envy of them all, the extraordinarily successful bond-trading firm of Long-Term Capital Management. Roger Lowenstein's When Genius Failed is the gripping story of the Fed's unprecedented move, the incredible heights reached by LTCM, and the firm's eventual dramatic demise.
Lowenstein, a financial journalist and author of Buffett: The Making of an American Capitalist, examines the personalities, academic experts, and professional relationships at LTCM and uncovers the layers of numbers behind its roller-coaster ride with the precision of a skilled surgeon. The fund's enigmatic founder, John Meriwether, spent almost 20 years at Salomon Brothers, where he formed its renowned Arbitrage Group by hiring academia's top financial economists. Though Meriwether left Salomon under a cloud of the SEC's wrath, he leapt into his next venture with ease and enticed most of his former Salomon hires--and eventually even David Mullins, the former vice chairman of the U.S. Federal Reserve--to join him in starting a hedge fund that would beat all hedge funds.
LTCM began trading in 1994, after completing a road show that, despite the Ph.D.-touting partners' lack of social skills and their disdainful condescension of potential investors who couldn't rise to their intellectual level, netted a whopping $1.25 billion. The fund would seek to earn a tiny spread on thousands of trades, "as if it were vacuuming nickels that others couldn't see," in the words of one of its Nobel laureate partners, Myron Scholes. And nickels it found. In its first two years, LTCM earned $1.6 billion, profits that exceeded 40 percent even after the partners' hefty cuts. By the spring of 1996, it was holding $140 billion in assets. But the end was soon in sight, and Lowenstein's detailed account of each successively worse month of 1998, culminating in a disastrous August and the partners' subsequent panicked moves, is riveting.
The arbitrageur's world is a complicated one, and it might have served Lowenstein well to slow down and explain in greater detail the complex terms of the more exotic species of investment flora that cram the book's pages. However, much of the intrigue of the Long-Term story lies in its dizzying pace (not to mention the dizzying amounts of money won and lost in the fund's short lifespan). Lowenstein's smooth, conversational but equally urgent tone carries it along well. The book is a compelling read for those who've always wondered what lay behind the Fed's controversial involvement with the LTCM hedge-fund debacle.
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 | Against the Gods: The Remarkable Story of Risk
| | by Peter Bernstein |
I found this book to be well written and an excellent study of how the world has come to view risk. This is a book for serious investors and historians. This is a highly recommended book.
Bernstein has written a comprehensive history of man's efforts to understand risk and probability, beginning with early gamblers in ancient Greece, continuing through the 17th-century French mathematicians Pascal and Fermat and up to modern chaos theory. Along the way he demonstrates that understanding risk underlies everything from game theory to bridge-building to winemaking.
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 | Stock Cycles: Why Stocks Won't Beat Money Markets over the Next Twenty Years
| | by Michael Alexander |
This started as a self-published book, and is now making the mainstream. A well reasoned book on Kondratieff long wave theory, and other stock cycles, Alexander makes a powerful case for a long term secular bear. Read it.
From Amazon.com:
Dr. Alexander has tackled one of the most difficult, ambiguous and controversial topics of economics: long wave cycles and their effects on stock market prices. His text along with the more popular "Irrational Exuberance" by Robert Shiller is a highly cautionary perspective on stock market investments. Both books appeared almost simultaneously with the downturn of the market in January 2000. Both books, for different reasons and by different routes, arrived at the conclusion that that the market was grossly overvalued.
Alexander takes a historical approach by looking at the performance of traditional indicators over many decades or even centuries. He analyzes the statistical probability of trends continuing for one, five, ten and twenty years, and then derives relationships that can be used to predict future behavior. One of the more interesting indices developed by Alexander is the P/R or Price/Resources ratio. The Price term is the traditional index of stock prices. The Resource term represents the sum of "plant, equipment, technical knowledge, employee skills, market, position, etc." that enable the operator to produce a profit. Alexander aggregates and normalizes this value to constant dollars. He then uses the P/R ratio to express whether stocks are over or under valued.
Shiller tends to camouflage his statistics, but makes a much stronger argument for how people think about stock values: When prices are going up, it is easy to get excited about buying; prices rise, excitement rises, and they feed on one another. When prices are going down, people get discouraged, prices fall, people panic and loose faith in the ability of the market to produce future value. While we know and understand this relationship, we get caught up in it all the same.
The second major contribution that Alexander makes to long-term analysis is in tying stock cycles to technology cycles. This section of the text draws heavily on the Kondratiev cycle theory, but it then integrates this analysis into a more contemporary treatment that focuses on innovation and the resulting investment booms. It is easier to discern technology cycles from a historical perspective, and it is probably fair to say that earlier in the industrial revolution, basic changes did not come with the frequency that we are experiencing today. Even so, the telegraph, telephone, telecom and internet investment booms have clearly come one after another to produce the crescendo of investment frenzy that we experienced at the end of the 20th century. That is starting to unwind now, and P/E (or P/R) ratios are beginning to approach, however painfully, something that is closer to a historical norm. What we can't really know is when the aggregate trend will turn around or how the change will manifest itself.
Alexander does not present a pessimistic view. Indeed, if one were to consider potential energy or resource shortages, economic disparity, agricultural or environmental dislocations, there could be much more room for gloom. On the other hand, he has not fully considered the potential positive effects of biotechnology on agriculture, health and the chemical industry (which is a bit surprising considering his background), the efficient allocation of resources that is resulting from greater accessibility of information or the general synergy in technology that is resulting from the interactions of computational, biological, physical and chemical sciences.
"Stock Cycles" is a highly useful book for anyone interested in technical prognostication about the future movements of markets. It will loose some readers with its charts, equations and generally dry style, but it is a serious and meritorious effort to put some sense into what is an otherwise emotion-driven field. Most readers would probably wish that they had read and heeded the advice from both Alexander and Shiller as soon as the texts appeared.
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