Required Reading

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Abnormal Returns — If you need a chart of the day or catchy quote to start your mornings, the Abnormal Returns blog will be right up your alley.  Founder Tadas Viskanta has been in the blogoshpere for 8 eight years, and has gathered quite a following since then. Abnormal Returns is a one stop shop for what you need to know about what’s going on in the world on finance. While the majority of his articles are links, he does a fantastic job categorizing them, and find interesting thought provoking research and data. You might even see some of our articles featured on there now and again.

The Reformed Broker– Josh Brown’s blog is best described in his own words: “… markets, politics, economics, media, culture and finance. I’ll use statistics, satire, anecdotes, pop culture references, sarcasm, fact, fantasy and any other device that I feel necessary to get my points across.” Sometimes that device is one of the most pertinent charts on the web, and sometimes it’s his own hand-sketched cartoon. Expect refreshing honesty and deliberate opinions at every turn.

A Wealth of Common Sense — Ben Carlson does a fantastic job of seeing through the noise and honing in on the topics worth discussing, in a concise manner. From stocks, to commodities, to general portfolio questions, there isn’t a topic Ben hasn’t tackled.

Altucher Confidential– James Altucher is a little bit crazy- and by a little, we mean a lot. His blog is not the traditional financial rag, and he tends to go off on tangents that can last for thousands of words without reaching much of a discernible point. Why include him? He is- at times- hilarious, wise and too unique to ignore. Fair warning- his content may offend on occasion.

All Star Charts — If you don’t want to have to watch CNBC consistenly, and still want regular commentary from a regular guest of CNBC, look no further than J.C. Parets’ blog, All Star Charts. From commodities, to currencies, and stocks, his charts provide analysis on any market on your watch list.

Meb Faber – He doesn’t post as often as we would like (maybe he’s busy writing another book or launching another ETF), but when he does it’s well worth the wait.  Founder of Cambria Funds, which runs multiple ETFs, Meb’s perspective is quite a bit different than the usual suspects, with quite a lot of skin in the game.

J. Lyons Fund Management on Tumblr – Our good friends at JLFM have a knack for grabbing a hold of some rather obscure data and putting it in a nice looking chart, with items such as the US Employment to Population ratio, Stocks as a % of household net worth, and a periodic mystery chart.

The Big Picture Blog– Run by the one and only Barry Ritholtz, this blog is a must read for anyone looking for thoughtful and diverse perspectives on world happenings and market events. Ritholtz has a wit we can appreciate, intelligence we respect, and the content bravado to keep us coming back for more. You can expect to find posts related to essentially any macro event of significance, investing advice from someone with a brain on the stocks side of things, and particularly keen insights into the ever evolving tech world.

Peter Brandt — Been in the Biz since 1976. Considered one of the greats when it comes to classic trading books. Included in the Top 30 most influential people in finance by Barry Ritholtz. We could all learn a thing or two from him.

Michael Covel — A Blogger, Podcast creater, and author, and it’s almost all about one of Managed Futures original strategies, Trend Following.

Lakewood Views — Mark Rzepczynski has over 25 years of market experience on both the buy and sell side of the markets. He was formerly a professor of finance with a focus on futures, options, and speculative markets. He is looking to engage in a dialogue on global economic and finance issues to enhance our understanding of markets.

Looking for instant commentary and reaction from the people in the alternatives realm? Here’s our big list of alternative folks to follow on twitter.

 

 

books

 

books_pielThe Success Equation: Untangling Skill and Luck in Business, Sports, and Investing by Michael Mauboussin (Our Review)

The title caught our eye right away, being in the business of untangling luck and skill to a certain extent in helping clients identify and invest in alternative investment managers. The question at the end of the day is whether the impressive track record a client is considering investing in is the result of skill, or whether it is luck. If you’re a chess player – or even tennis, it’s nearly all skill.   If you’re a hockey player… it’s way more luck than your agent would care to admit.

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money (Our Review)

While all money is “real,” Steven Drobny creates this classification of “real money,” which is essentially money institutional firms like pensions and endowments access to do real things with (like pay out benefits and build classrooms and pay the electric bill). After the financial crisis, Drobny points out that no new money management model had been introduced to avoid another 2007-2008. He specifically focuses on institutional investors and how they should view alternatives, and portfolios. Hint, a lot of it is weighing risk management.

More Money Than God: Hedge Funds and the Making of a New Elite (Council on Foreign Relations Books (Penguin Press)) by Sebastian Mallaby (Our Review)

The general public knowing and understanding the hedge fund industry is a rather recent development, but the investment style is not. For the longest time, it’s was a generally accepted statement, that the market couldn’t be “beat.” That was until the “It-Boys” in of 21st century capitalism. Read how they cracked the code, made a fortune, and the role hedge funds played in the 2007-2008 financial crisis.

The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders by Kate Kelly (Our Review)

After finishing it off – think the title probably should have been something more like:  A few traders who took enormously large risks, made fortunes, lost fortunes, and then faded into relative obscurity. Beyond the critique of the title, however; this was quite an entertaining read for anyone involved in the commodity futures markets – and especially the energy markets.  The book touches a lot of different areas, including profiles on former regulators Bart Chilton and Gary Gensler; the dangers of indexing commodities after a huge run up, and how commodities were the red headed step child at Morgan Stanley.

Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone (Our Review)

William Poundstone’s book is ostensibly about the Kelly Criterion, a formula used to calculate the optimal bet size given one knows their probability of winning and the payout odds for a winning bet. An example from Wikipedia: if a gamble has a 60% chance of winning (p = 0.60, q = 0.40), but the gambler receives 1-to-1 odds on a winning bet (b = 1), then the gambler should bet 20% of the bankroll at each opportunity (f* = 0.20), in order to maximize the long-run growth rate of the bankroll. But the real story is the historical characters laid out therein.

Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments by Reformed Broker (Our review)

Brown writes candidly about his life in the brokerage world, going so far as to outline the Straight Line Pitch word for word- a pitch that elicited more than handful of chuckles in how familiar it is. Brown probably made quite a few enemies out of his scathing criticisms of those who peddle investments, but to us, it smacked of truth.

 

 

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The Little Book of Trading: Trend Following Strategy for Big Winnings – (Michael Covel)

This “little” book of trading is a quick read teaching readers big lessons and short chapters of how to think about bear market strategies. But more than that, Covel does a perfect job at capturing the ideas, and basics, and philosophies of trend following through great personal narratives, including John Henry, and more.

When Genius Failed: The Rise and Fall of Long-Term Capital Management (Roger Lowenstein)

I’m not sure who gets the credit for the line, but we’ve all heard in one form or another that growing as a person (or investor) is to learn from one’s mistakes. Well, this book details the very large mistakes that were made by one of the biggest (and supposedly smartest) hedge funds ever, Long Term Capital Management and their pair of Economics Nobel Prize Laureates. Their collapse nearly crippled the financial system, resulting in an unprecedented bailout from the US fed (sound familiar to current times). Just how such ipad_propped_upsmart people who literally wrote the book on risk got it so wrong is truly an intriguing story which helps the every day investor understand there is much more to risk than meets the eye. The sheer size of the numbers of dollars being made or lost in this book make it a compelling read.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto) (Nassim Nicholas Taleb)

Fooled by Randomness stands a lot of conventional wisdom on its head by questioning the very fabric of skill and success. Are traders/investment managers actually good? Or just lucky? Mr. Taleb would have you believe there is a lot more luck to it than one would think, and not really even luck as you or I would think about it, but luck in terms of not yet having experienced an outlier event such as a 1 in 100 year storm or “black swan”, as he would call it. The end result for Mr. Taleb is a market that is much more random and crazy than can be modeled or predicted, leading those who believe it can be modeled or predicted down a dangerous path. Warning for option sellers – Mr. Taleb is wholeheartedly against option selling, and in fact runs his own hedge fund which specializes in option buying in hopes of profiting from the impending outliers he believes the rest of us aren’t thinking about.

The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility” (Incerto) (Nassim Nicholas Taleb)

Continuing on with his theories from his first book – Mr. Taleb’s follow up book gets into a few more specifics about how the world (and especially the financial world) is comprised of rare events he calls “black swans”, which are so rare as to not even be considered as a risk. The tragedy on 9/11 is a prime example of a Black Swan. The stock market crash in October 1987 is another. This book quickly became his most famous work due mostly to its timing, coming out in early 2007 (just monthly before the real life black swan of the credit crisis started to show), and some passages blasting bankers as little more than lemmings following the herd without a clue as to the risk and leverage they are employing.

The Predictors: How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street (Thomas A. Bass)

Quite the opposite of the book above, this book details the trials and tribulations of a group who actually did believe the markets could be modeled and profitably predicted. If you have ever thought of writing your own trading system – these guys sure did, and took it to a whole new level. The title is a little misleading, as they were mainly dealing with derivatives markets, not Wall St. stocks and bonds – but it is an interesting read on just how far some will go to “beat” the market. And just how much big money or banks are willing to believe that such “beating” of the market is possible, even if the proof isn’t exactly there. The beginning of this book paints a great picture of the now nearly defunct, controlled chaos that is/was futures trading pits in Chicago, and is worth the price of admission just for those few dozen pages.

Handbook of Alternative Assets (Mark J. P. Anson)

While this is more of a textbook than a narrative like the other books listed here, and rather statistically heavy, this is a great book for learning the different types of alternative investments, along with the benefits and dangers of each. The many different types of hedge funds, commodity and managed futures, private equity, credit derivatives, and corporate governance are all covered. Anson is the former Chief Investment Officer of CalPERS, the huge California Pension which is the largest Pension fund in the US with nearly $250 Billion in assets, and as such one of the largest investors into alternative investments. With that type of experience, it is worth hearing what he has to say.

The Prize : The Epic Quest for Oil, Money & Power (Daniel Yergin)

For anyone who gets excited whenever the prices at the pump go up and down, or takes a peek at the news or online to see what Crude Oil prices did each day – this book is for you. It is the history of the modern world, in a way, told through the eyes of the oil industry. Did you know the first oil wells in the world were in Pennsylvania, that the rights to Saudi Arabia’s oil was first secured for just $175,000, or where the name Shell Oil came from. The Prize is a Pulitzer Prize winning must read that puts you behind the scenes at important cross roads in history where oil was often the main character. With the current state of affairs in the world regarding oil, seeing how we got there is a great exercise.

Hedge Fund Market Wizards: How Winning Traders Win (Jack D. Schwager)

(the whole market wizard series is worthwhile)

Endgame: The End of the Debt Supercycle and How It Changes Everything (John Mauldin)

We’ve all heard of the Commodity Supercycle — but what’s this Debt Supercycle? If you’re looking for a cheering, optimistic on our nation’s and foreign nation’s debt, look somewhere else. Mauldin explains that decades long unreformed debt results with sovereign debt and credit crisis. Fortunately, he has two options to solve such a problem. Although, he says they aren’t any “good choices,” but that ignoring the issue will be the worst choice of all.

How to Lie with Statistics (Darrell Huff)

Ignore the fact that this came out in 1993, because it certain puts the saying, “Numbers don’t lie,” to the test. Huff runs the “Gambit” on the most popular used statistics, and points out ways data is more misleading than informative.

Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics (Gary Belsky)

If the title wasn’t an enough of an explanation, this book goes into detail on the psychology of how we spend, save, and invest our money, specifically focusing on underlying irrational financial behavior. What better way to do such a thing to learn about some pretty comical case studies.  Plus, new economic data helps you through your financial decisions since the 2007-2008 financial crisis.

The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets (Meb Faber)

We’ve all seen the headlines of Endowments raking in millions, but how do they do it? The Ivy Portfolio is a do-it-yourself book, teaching to how to invest like the Yale and Harvard Endowments. Faber suggests such a portfolio is possible through an ETF based portfolio. While we think commodity ETFs suck, the idea behind the book is a good one, and worth the read.

Shareholder Yield: A Better Approach to Dividend Investing (Meb Faber) 

Faber’s second book details a step-by-step how to find returns in a low yield world. Investing in the 21st century is unlike any other, and according the Faber, investors must look at all of the direct and indirect ways in which companies distribute their cash to shareholders, a metric commonly referred to as “Shareholder Yield.” It also just so happens that Faber has launched two ETFs, dealing with this shareholder yield. If you’re looking for a book how to get the most out of your portfolio through ETFs, this is the book for you.

Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market (Meb Faber)

Faber’s 3rd and most recent book is all about the bubble. Where to spot them, how to spot them, and more importantly, to avoid the bursting of those bubbles. Faber uses Robert Shiller’s CAPE ratio, and applies it across 40 foreign markets, and creates a tradying system around these numbers to identify outlier moves in the market. Sounds pretty cool to us. Again, his focus is all about making big profits when it comes to stocks, but the idea behind the book is very similar to Global Macro and Alternative strategies.

 

some

Barry Ritholtz’s Extensive List of Reviews & Books purchased by blog readers:

James Montier’s Suggested Reading

Meb Faber’s Reading List

others

The  Beginner’s Guide to Managed Futures is a great place to start – and it’s free.  The following resources are excellent as well.

For those looking to start a CTA, or grow your business, we have just the list. The 108 Tools to Grow your CTA Business. Essentially, it’s just a list of software, lawyers, accountants, and a lot more – that CTAs use and rely on to make their business go.

CME Group Education Page– The CME, as the largest futures exchange in the world, has taken it upon themselves to put together a fantastic educational hub for all things futures related. Whether you’re just learning what an expiration date is, are trading your own account, or have been in the managed futures space for decades, their education page has something for you, ranging from introductory guides and games to more complex market commentary.

National Futures Association (NFA)- The self-regulatory body of the futures industry, the NFA maintains intricate records of participants, their associations, and any disciplinary actions that have been taken. Visit the website to verify a member’s status, read up on the latest actions taken by the regulators, or learn more about the regulations governing our trade.

Commodity Futures Trading Commission (CFTC)- Established in the 1970’s to act as the government regulatory body for the futures industry, the CFTC works in conjunction with the NFA to ensure that all regulations are being followed to the letter of the law. Their website contains a plethora of information on how these laws work, and ways that investors can protect themselves when deciding where and how to invest.

The Education Center– Whether you’re looking to subscribe to our newsletter, peruse the futures industry glossary, learn more about the basics involved in managed futures and trading systems, or look through the hundreds of newsletters published by us in the past, here is your one stop shop.