Book Reviews
Welcome to my book review section. In this section I will be posting occasional book reviews of finance oriented books that may be of interest and use to readers. Currency Wars Boomerang The Price of Everything Trade Your Way to Financial Freedom Trend Following: Learn to Make Millions in Up or Down Markets New Ideas from Dead Economists Outliers: The Story of Success The History of Money Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers Unfair Advantage - The Power of Financial Education How I made $2,000,000 in the Stock Market When Money Dies - the Nightmare of Deficit Spending, Devaluation and Hyperinflation in Weimar Germany How to Make Money Selling Stocks Short
Trade Like an O’Neil Disciple
How an Economy Grows and Why it Crashes
Profiting from the World’s Economic Crisis
The Great Reflation
The New Market Wizards
The Greatest Trade Ever
The Great Inflation and Its Aftermath The Retirement Savings Time Bomb...And How to Defuse It The World is Curved: Hidden Dangers to the Global Economy The Great Wave: Price Revolutions and the Rhythm of History Far From Random: Using Investor Behavior and Trend Analysis to Forecast Market Movement America's Great Depression Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets Crash Proof 2.0 This Time is Different: Eight Centuries of Financial Folly The Great Depression Ahead The Myth of the Oil Crisis: Overcoming the Challenges of Depletion, Geopolitics, and Global Warming The Crash of 2008 and What it Means: The New Paradigm for Financial Markets The Return of Depression Economics and the Crisis of 2008 Game Over: How You Can Prosper in a Shattered Economy The Ascent of Money: A Financial History of the World The Forgotten Man: A New History of the Great Depression The Shack Economics in One Lesson Sway: The Irresistible Pull of Irrational Behavior Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism
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James Rickards
Portfolio/Penguin
5 out of 5 Stars
For a couple of years now, I’ve enjoyed listening to James Rickards in podcast interviews. So when his book came out, Currency Wars, I was excited to pick up a copy. I was not disappointed – this is a great book! Rickards splits the book into three parts. In the first, he tells a story of some actual war games put on by the Department of Defense. These were the first war games that the DoD held to model what a financial war might look like. In part two, Rickards walks the reader through the history of what he calls Currency War 1 (1921-1936), Currency War 2 (1967-1987), and the start of Currency War 3 (2010-). In the third part, he gives us his perspective on the current crisis and the possible endgames. This book is timely reading, and I recommend it to everyone. In my opinion, Rickards’ analysis is spot on. If you doubt that we’re in the midst of a currency war, think about the U.S. reaction to China’s peg to the dollar, or the recent decline of the Euro, the Swiss Central Bank’s recent pledge to set a minimum exchange rate to the Euro, and Japan’s constant intervention in the currency market. The list goes on and on. Then reflect on this quote from the introduction: “At best, currency wars offer the sorry spectacle of countries stealing growth from trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation and actual violence as the scramble for resources leads to invasion and war.” That isn’t hyperbole; it is history. If you have an interest in understanding what’s happening in the world politically and economically and where events may be headed, this book is a must read.
Rick McCallister
January 7, 2012
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Boomerang: Travels in the New Third World
Michael Lewis (author)
Dylan Baker (reader)
W.W. Norton & Company
5 out of 5 Stars
This is a review of the audiobook version of Boomerang. In the book, Lewis takes the reader through a "tour" of Iceland, Greece, Ireland, Germany, and California, and tells the story of how each location entered, handled, and is in the process of trying to exit the financial crisis. He traveled to each country and interviewed a variety of players in each location. Apparently, each section of the book was already published as an article in Vanity Fair. However, I found the behind-the-scenes stories fascinating to listen to and really enjoyed some of the inside stories provided by his interviews. Baker was easy to listen to and I enjoyed his style. The book contained some vulgarity that some folks may find offensive, especially in the chapter on Germany. Lewis also generalizes a great deal in the search for some underlying "truth" about each country that could explain why they all got into the situation they did. I remain unconvinced that his oversimplifications and stereotypes are correct, but that doesn’t really take away from the quality of the book, the stories, or the information it provides. I highly recommend the audiobook, and if you prefer reading, I am certain that this book is a quick and easy read.
Rick McCallister
December 23, 2011
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The Price of Everything
Russell Roberts
Princeton University Press
4 out of 5 Stars
The author, Russell Roberts, is a professor of economics at George Mason University. He does a weekly podcast at www.econtalk.org that I’ve been listening to regularly for years, and absolutely love. If the reader has any interest in economics, I can’t recommend his podcast highly enough.
In The Price of Everything, Roberts introduces some basic economic concepts tilted toward Austrian economics. He does a great job explaining the concepts of how a capitalist economy operates in a manner that anyone can understand. This is another of those books that I wish every congressman would read – and, in this case, every congressman would understand what he or she is reading.
In the meat of the book, a fictitious economics professor explains the concepts to a student. In fact, most of the book is just a dialog between a professor and a student. The way Roberts presents it keeps the explanations simple and understandable – not a single chart to be found!
Roberts calls The Price of Everything a parable, but I think that is stretching the definition of parable. The only reason I rate the book four instead of five stars is because the "story" is rather weak. The first quarter of the book, in which Roberts sets up the story, is slow and a little painful to get through. After that, when he gets into the dialog, the book is excellent. And, after all of the effort spent to set up the story, there isn’t much of one. At the end of the book, I ended up feeling like the message was great, but the story itself was just a "good try" by an economist hoping to be a novelist.
The book helps the reader understand why free markets work so much better than any other economic system that man has developed. I highly recommend the book for anyone interested in an easy, enjoyable introduction to free markets.
Rick McCallister
November 30, 2011
Trade Your Way to Financial Freedom
Van K. Tharp
McGraw-Hill
4 out of 5 Stars Trade Your Way to Financial Freedom, as the title implies, isn’t for the long-term investor, but for those who trade or want to trade financial instruments such as stocks, options or futures. As is so common with books in this genre, the title is designed to sell books rather than accurately describe the contents. The reader will not walk away from the book ready to be financially free, but will come away with some new ideas on how to trade. The book is broken into three parts. The first talks about basic trader psychology and biases, the second and third parts go over trading systems and, finally, the fourth section contains the vaunted chapter 14 – position sizing. One of the things that Tharp is known for (and talks about throughout his book) is his view on position sizing. Chapter 14 is good, and alone it is worth the price of the book. Although I did not find anything particularly new in the chapter, it’s a very nice summary of the ways in which one can size one’s positions in a trading account. For those interested in trading, I recommend this book. While I wouldn’t call it a classic, it is a “must-read” for traders. Van Tharp is a well-known figure in trading circles, and although he isn’t a trader himself, he is a trading coach and psychologist. As such, I think there may be more value in the psychological aspects that he discusses than some of the technical aspects of trading. Still, he has met great traders and discussed systems with them during his career, so even the technical aspects provide worthwhile information for the reader. Rick McCallister
November 15, 2011
Trend Following: Learn to Make Millions in Up or Down Markets
Michael W. Covel
Pearson Education
3 out of 5 Stars While earning a rating of only 3 stars, the book was still enjoyable to read. The reason I gave it three stars is because, in contradiction to the title, it taught the reader nothing about the how to trade trends. Rather, it was more of a cheerleading book about how successful one might be as a trend trader. However, in researching the book Covel interviewed some of the most successful trend traders out there, and reading about these traders made the book worthwhile. The book is split into four parts. The first part talks about some of the basics defining trend trading, and then includes sections on some of the famous trend traders, including Ed Seykota, John Henry, Richard Dennis, and Richard Donchian, among others. While the book offered no specifics on their techniques, readers can still pick up some insightful tidbits in this section. In Part II, Covel provides some trend-trading performance data, and how trend trading performed through some of the major market events of recent years, such as the LTCM collapse and the Asian Contagion. In Part III, the author relates human behavior to trends, and includes other chapters that begin to feel like filler. For example, he has a section on compounding interest. While an important concept, it is out of place in a book like this. Anyone reading this book will already understand the concept of compound interest and a whole section on the concept is overkill. Last, Part IV goes over the essentials of a trading system, which is very basic but mildly interesting, as well as some of the psychological aspects of trading in general, a very important concept. All in all, the book was interesting and fun to read. As long as the reader doesn’t expect to walk away learning how to trend trade, the book is worth reading. Rick McCallister
August 28, 2011
New Ideas from Dead Economists
Todd G. Buchholz
A Plume Book
5 out of 5 Star
This is an outstanding book. Bucholtz walks through the ideas of the most influential economists in history, including Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, Karl Marx, John Maynard Keynes, and Milton Friedman. It is a very readable, great overview of the thoughts of each of these economists. Buchholz does a great job of explaining the main ideas of each economist. He also contrasts the ideas of one economist against the others, and talks about how the ideas had an impact on society. For someone with no experience in economics, this book is a great introduction to the main schools of thought. Even for someone trained in economics, the book is a nice overview and might be a good way to recall other ways of thinking. For the uninitiated, this book is very helpful in beginning to understand the arguments surrounding the events in today’s economy, and what should be done. The only criticism of the book is that I think he should have included a chapter on Friedrich Hayek or Ludwig von Mises. Still, I rate the book five stars and highly recommend it to anyone who is interested in economics. Rick McCallister
August 7, 2011
Outliers: The Story of Success Malcolm Gladwell Audible.com 4 out of 5 Stars This is a review of the unabridged audio book version of Outliers: The Story of Success. I recommend this book to everyone. Malcolm Gladwell explores success – why is it that some people are successful (e.g. Bill Gates, Mozart, hockey champions) while others aren’t? In an overly simplistic summary, he says that success is not just about innate ability, but that maybe, more importantly, opportunity, circumstance, and effort create success. Bill Gates, for instance, had very unique opportunities to learn and practice computer programming that prepared him for other opportunities that later came his way. Gates had to have the interest and make the effort to become an expert programmer, but without the opportunity he had to learn programming, he wouldn’t have been able to make Microsoft into the success that it is. So, while Gates had innate intelligence and drive, without extremely unique circumstances and opportunities, Microsoft wouldn’t have happened. In my opinion, the most important takeaway from the book is the importance of practicing to become expert in what you do. One of the major differentiating factors of the “outliers” is that they practiced what they do to become expert. Gladwell concludes that to become truly expert one needs about 10,000 hours of practice in his or her subject, whether hockey, playing the violin, or programming as in the case of Bill Gates. I suppose the 10,000 hours is a debatable figure, but Gladwell’s point is that the difference between the outlier and the average person is, in large part, practice. I am giving this book four instead of five stars because the last half of the book dragged on a bit. Gladwell attempted to provide examples about how our surrounding circumstances have an impact on our opportunities and the way we act, but I didn’t find this to be new information to anyone. While the examples he provided were interesting, I found nothing particularly insightful in the conclusions in the last half of the book. Rick McCallister June 29, 2011
The History of Money Jack Weatherford Audible.com 4 out of 5 Stars This is a review of the unabridged audiobook version of The History of Money. The book was originally published in 1997. Jack Weatherford is an anthropologist, not an economist; so, not surprisingly, this book is not an economics book. It is, as the title says, a history of money – but more from an anthropological view than an economics view. Weatherford talks about money and its forms, starting with the first coins in Lydia 3,000 years ago through to today, and the future that he sees in electronic money. He discusses such things as the government, banking, and the role of other financial institutions in creating and managing different types of money. The book is well narrated. It occasionally drags on, but overall, Weatherford tells the story in an interesting way, and I found it fascinating to listen to. This is a book that anyone could listen to or read, and you don’t have to be a financial professional or have an understanding of finance to enjoy the history. After listening to this book, you won’t walk away with great investment ideas, or a new understanding of economics. But you will have learned a great deal about how money came to be and some of the perils related to the different ways that institutions have managed it throughout history. If the title sounds interesting to you, then I highly recommend the book. Rick McCallister May 20, 2011
Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers John L. Casti Copernicus Books 2 out of 5 Stars The central hypothesis behind this book is fascinating to me – that humans have a proclivity to herd, thus they form groups and together create a social mood (beliefs/feelings), and that this social mood biases the types and timing of events. This makes sense. Casti takes it further, however, and says that there is no backward bias – in other words, events do not have an impact on the social mood. So, 9/11 did not affect the social mood; rather, the mood already existed and influenced the event of 9/11. After reading the book, I remained unconvinced of his central hypothesis. The book is an interesting read, and contained some thought-provoking points. In speaking of herding, he said, “there is enormous ‘denial-of-responsibility’ value in following the herd.” He’s probably not the first to say this, but it is a brilliant insight into how the financial meltdown of 2007 could have occurred. You can just imagine all of the bankers talking about what they were doing and taking comfort knowing that they were just doing what everyone else was doing, and knowing that although in the long run it would blow up – at that moment it was easier to follow the herd. Casti’s conclusions about where we are in our current world in terms of social mood are interesting. He concludes that, “The most straight forward short-term forecast to make is that the global social mood will move sharply toward the negative, giving rise to events in all spheres that could be labeled using everyday words like discord, fear, anger, somberness, exclusion, separatism and the like.” From a financial perspective, this means a long recession/depression and the things that go along with it, such as poor stock market performance and high unemployment. He may be right about the outcome, but he precludes any outside influence possibly changing where the social mood is taking us – such as new discoveries in biotechnology and stem cell research, or new green energy technologies, or other discoveries that could radically change the world. His basic position is that none of those things can happen when the social mood is negative. Overall, I’ve given the book a two star-rating because I believe that Casti proved his thesis. Still, the book provides enough food for thought that it is worth reading. Rick McCallister May 14, 2011
Unfair Advantage - The Power of Financial Education Robert T. Kiyosaki Plata Publishing, LLC 1 out of 5 Stars I read Robert Kiyosaki’s first book, Rich Dad Poor Dad, back in 2001 and loved it. Since that time, I’ve read five or six of his other books and have been disappointed by every one of them. Unfortunately, this book is no exception. This book is really nothing but a sales job for the reader to take some of Kiyosaki’s education courses. The summary of the book is that to be successful, people need more financial education. I certainly can’t argue with that point. The problem is that the book really does not contain any other information except for that. I do not recommend this book. Rick McCallister May 22, 2011 How I Made $2,000,000 in the Stock Market
Nicolas Darvas
BN Publishing
5 out of 5 Stars Don’t let the name of this book scare you off. The name makes the book sound like it might be a sales pitch or hype of some sort, but it’s not. This is the story of how Nicolas Darvas turned $8,000 into over $2,000,000 in about 18 months, back in 1952. This book is considered an investment classic. Darvas describes an investment style that is very similar to the momentum/growth strategy of the famed William O’Neill. In fact, I believe that I read somewhere that O’Neill’s CANSLIM method is an evolution of Darvas’ techniques. The book walks you through Darvas’ trades, which might sound boring to some. But he explains how his thought process evolved, how he learned, and how he came to make those trades. He also describes the basics of the techniques. For today’s trader, this is not at all a how-to book, but it is fascinating to read about how Darvas’ understanding of the stock market evolved over time and led to the wealth he created. Although this book is an easy and quick read, I don’t recommend it for someone not interested in trading in the stock market. For anyone interested or involved in trading, I highly recommend reading this book. Rick McCallister
April 16, 2011 When Money Dies – The Nightmare of Deficit Spending, Devaluation and Hyperinflation in Weimar Germany
Adam Ferguson
Public Affairs, New York
5 out of 5 Stars This is the 2010 edition of a book written in 1975. The book covers the hyperinflation that happened in Weimar Germany in the early 1920s. It is very readable, and has no charts, graphs, or lists of numbers—just easy-to-read prose. The book, covering the years from about 1919 to 1924, takes you through the political decisions made along the way and draws on documented personal experiences of people from different classes during that time. Ferguson presents a fascinating read, as he describes what happened to Germany throughout this period. It is a good mix of social, political and monetary history. From a financial planning standpoint, those who were successful in Germany moved their money out of the country early in the hyperinflation period. The middle class was hurt badly; pensioners were known to pass out from hunger, including individuals retired from high government positions. Landowners were reduced to beggars because of rent restrictions and an inability to rent their property in such a terrible economic environment. Others were able to take advantage of the inflation by borrowing and paying back with cheaper dollars, or by shifting assets out of Germany; however, most people suffered greatly. People in the countryside held up much better than people in cities. The working class held up best, as they were able to demand higher wages. This is a great book. Anyone with any historical interest in Europe, or concerned about the possibility of inflation in modern society will appreciate Ferguson’s effort. In fact, with the money printing happening right now in our own country, I think this is a book that everyone concerned with their finances should read. While I do not believe that we will end up like Weimar Germany—in fact, if you read the book you’ll clearly see that we won’t make the same mistakes—there are some very good lessons to take away. I’ll end with a quote from the epilogue that might make one think about the risks that exist in our own society: “What really broke Germany was the constant taking of the soft political option in respect to money. The take-off point therefore was not a financial but a moral one.” Rick McCallister
March 5, 2011
William J. O’Neil with Gil Morales
John Wiley & Sons, Inc.
3 out of 5 Stars
Compared with O’Neill’s well-known book, How to Buy Stocks, this book doesn’t hold up well. I rated his first book 5 out of 5 stars. I give this book only three stars because it fails to provide the reader with as much good information.
Almost half of the book is filled with annotated charts of good shorting candidates over the last 45 years or so. Now, don’t get me wrong; a reader who is really interested in learning to short stocks can glean a great deal of information from those charts and their associated annotations. Still, it takes a lot more than charts to make a good book. In fact, this book was rewritten from a pamphlet originally written in 1976.
The first two sections of the book describe when to short stocks, and walks through different situations, formations, market environments, etc., where a stock should be shorted. This is where O’Neill provides details on the right timing of entering a short position, which is very worthwhile reading.
However, the work is very basic and probably not sufficient for someone to use as one’s only guide to shorting stocks.
Rick McCallister
December 8, 2010
Gil Morales & Dr. Chris Kacher
John Wiley & Sons, Inc.
5 out of 5 Stars
If you are a stock trader, this is one of those books where you should take copious notes as you go through it, and then reread it more than once. First, however, you need to read William O’Neil’s book, How to Make Money in Stocks. O’Neil started Investors Business Daily and amassed his wealth by trading in the stock market. His book is definitely an investment classic. Morales and Kacher worked for O’Neil as portfolio managers at his investment management business.
In this book, Morales and Kacher explain their investing techniques, which are based on O’Neil’s concept that he calls CAN SLIM. Where this book really excels is in providing a different perspective on O’Neil’s methodologies. It helps the reader better understand O’Neil’s methods by seeing them through the eyes of successful traders who have both worked with O’Neil and used his methods.
The authors spend a large part of the book walking through specific trades, charts, and markets. If you are not a stock trader interested in O’Neil’s methods, you probably won’t find this book of much interest. However, if you are, then I highly recommend this book.
Rick McCallister
November 23, 2010
Peter D. Schiff and Andrew J. Schiff
John Wiley & Sons, Inc.
5 out of 5 Stars
You first have to know that this book is just an illustrated parable. There are no in-depth discussions, no charts, no technical jargon. Actually, the book is meant to be a little humorous, and it is.
The Schiff brothers have put together a neat little story that starts out with an economy of just three people stranded on an island. They then walk through generations of islanders, showing how the economy changes with innovation, spending, savings and investments. They make key points along the way about how the economy is affected by different decisions.
The target reader is really someone without any understanding of economics, but it’s also a great book for people who haven’t gone beyond econ 101. A great follow-on book for someone new to the concepts is Henry Hazlitt’s Economics in One Lesson. I’m going to set aside How an Economy Grows and Why it Crashes and give it to my kids to read when they’re in late middle or high school. While it is great for kids to read, don’t let that deter you from picking it up, as it’s a quick, fun and educational read for adults as well.
Rick McCallister
October 23, 2010
Bud Conrad
John Wiley & Sons, Inc.
4 out of 5 Stars
“The global financial collapse will affect all your investments, and you need protection. That, in a nutshell, is what this book is about.”
The above are the first two lines of the introduction, and is an accurate picture of the contents of the book.
The book is divided into five parts: Economic Forces, Financial Crisis Response, Recession or Depression, Investment Opportunities, and a final section called Putting it All Together. Essentially, Conrad runs through his economic analysis of what has been happening, and what he sees happening, in the U.S. and global economy, and he proposes some investment theses to take advantage of the changes.
Conrad states that his fundamental thesis is “that the paper dollar will collapse in my lifetime, eventually requiring the issuance of a new currency.” There are well over 200 charts in the book supporting his positions, which I generally appreciated, but this may be a bit much for some.
His basic recommendation is that people should get their money out of U.S.-dollar denominated assets such as cash, bonds or annuities, and instead invest in physical assets such as agricultural products, energy and gold.
I recommend this book. Although there are a lot of charts, Conrad writes to the layperson, not the financial world, and the book is definitely accessible. In fact, sometimes he fails to support his position as well as he might have because to do so might have required too much detail. I find his general theme convincing, although what is missing is a sense of timing. He says that the dollar will collapse “in his lifetime” and presents investments appropriate for that scenario. The problem is, even if he is correct, the collapse of the dollar maybe a long time coming and to invest now based on that scenario may require an extreme amount of patience and pain while waiting for that scenario to unfold. Still, I think the wise investor will invest at least some portion of his or her assets based on the themes presented in this book.
Rick McCallister
October 13, 2010
The Great Reflation
J. Anthony Boeckh
John Wiley & Sons, Inc.
5 out of 5 Stars This is one of the best books I’ve read this year. Boeckh, who ran the highly respected Bank Credit Analyst from 1968 to 2002, holds a PhD in Finance and Economics from the Wharton School, University of Pennsylvania. Boeckh does an amazing job in this book of describing both the cause of the financial crisis and where we may be headed financially and economically, as the country and world move forward. He breaks the book into three sections: 1) Financial Instability, 2) The Markets: Preparing for the New Investment Environment, and 3) The Future: Is a Return to Lasting Stability Possible? In the first section, Boeckh talks about inflation and deflation, his concept of a debt supercycle, central banks and money printing, and manias and bubbles – all in relation to where we are today. In the second section, he discusses investing in this environment, what he thinks about the dollar, stocks, bonds, gold, real estate, and commodities, and how to allocate one’s investments among these instruments. I found that this book offers a good, balanced look at where we are and where we’re going. If you are managing your own investments, consider this book a must read. Rick McCallister
July 24, 2010 The New Market Wizards
Conversations with America’s Top Traders
Jack D. Schwager
HarperCollins
4 out of 5 Stars After having been on my reading list for years, I finally got around to reading The New Market Wizards. I thoroughly enjoyed reading this classic book on the invest
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