Market History & Bubbles

Triumph of the Optimists: 101 Years of Global Investment Returns The authors assembled 101 years of international market data covering 70% of world GDP - something that nobody else had ever done. Then they analyzed this mountain of data to test the conventional investment wisdom that is founded almost exclusively on United States financial data. The results are fascinating for true market junkies.

Stocks for the Long Run 5/E: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies While I have a serious problem with Siegel's perennial optimism and his academic blindness to real-world investor issues, there are data-driven conclusions in this book that absolutely must be understood by every serious investor. I love his risk analysis comparing short-term equity volatility to long-term risk of losing purchasing power for supposedly "safe" investments - pure gold (pun intended). Other valuable insights make this book an essential read, despite various shortcomings.

Reminiscences of a Stock Operator This book should be read as a fun introduction to certain investment principles that are completely useless when you are practicing buy & hold but will be useful to understand before you advance to quantitative investment strategy. It's in the history section because it was written in the 1920's about the life and times of Jesse Livermore with discussion about "pools" and "bucket shops". It is a fictional account, but history repeats with the recent Forex bucket shops. More importantly, it includes essential investment concepts in an easy to read and understand story format.

When Genius Failed: The Rise and Fall of Long-Term Capital Management I recommend this book because it perfectly illustrates the shortcomings of advanced mathematical models applied to real world finance and how short-term track records can deceive. Knowing this story will help you avoid getting burned by a future version of this same fiasco. In this book Lowenstein details the rise and fall over 4 years of Long Term Capital Management with 3 Nobel Laureates and assorted PhD mathematicians at the helm. When it blew up, it nearly took the entire financial system down with it. Entertaining story with important historical lessons to understand.

Peter L. Bernstein Classics Collection: Capital Ideas, Against the Gods, The Power of Gold and Capital Ideas Evolving This is 4 books in one - more than 1200 pages. This collection was published posthumously after the market historian's death. A lot of valuable insights to be gleaned in this value packed collection of historical market analysis.

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street The book provides the history behind the Kelly formula and Ed Thorpe's rise to prominence - both relevant subjects as you move into more advanced investment strategies and start developing risk management concepts for investing. Reserved for the true investment junkies in the crowd, this book can be skipped by most readers.

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street An important examination of financial theories like the Efficient Market Hypothesis - blatantly false, but close enough to true that you can't ignore them. So many investment theories work 95-98% of the time, but fail miserably the other 2-5% of the time... when it matter most. This is an essential concept that you must work deep into your bones to protect your capital. Very few people get the serious implications and how to manage your investments to avoid being blindsided by these contextual half-truths parading as conventional wisdom.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition The common structure behind all manias and crashes is revealed in this historical study. In simple terms, beware when monetary policy is easy, banking regulation is lax, and the masses fall in love with a specific asset, often with leverage (think stocks in the 1990's, real estate until 2007, and bonds up to 2013). What is self-reinforcing on the way up will be self-reinforcing on the way down, but with greater speed and ferocity, as bad debts have to be liquidated. Learn the pattern so you can recognize when you are living it... or pay the price.

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds What I like about books describing historical, financial mania's is they give you valuable perspective for understanding the current mania you're living through. I read this book when I was in college and never forgot the lessons. The perspective helped me correctly identify the last three bubbles because the patterns of group consciousness and excess remain unchanged.