Get some conflicting ideas. Two great, short books are The Mystery of Banking by Rothbard (available for free here: https://mises.org/library/mystery-banking) and Economics in One Lesson by Hazlitt (free here: https://fee.org/resources/economics-in-one-lesson/). They both conflict quite substantially with the mainstream and might open up a whole new line of inquiry for you.
Ask HN: Book recommendations for understanding financial systems?
41–50 of 211 posts
Re: Ask HN: Book recommendations for understanding financial systems?
#42Some more heterodox takes on economics/finance:
https://www.goodreads.com/book/show/17836526-killing-the-hos...
https://www.goodreads.com/book/show/42515482-and-forgive-the...
https://www.goodreads.com/book/show/20655234-freakonomics-su...
https://www.goodreads.com/book/show/6304389-the-spirit-level
https://www.goodreads.com/book/show/17368973-the-heretic-s-g...
More conventional investment perspectives, particularly useful if you want to invest:
https://www.goodreads.com/zh-TW/book/show/11645917-a-random-...
https://www.goodreads.com/book/show/106835.The_Intelligent_I...
https://www.goodreads.com/book/show/25574.Common_Stocks_and_...
Re: Ask HN: Book recommendations for understanding financial systems?
#43Get some conflicting ideas. Two great, short books are The Mystery of Banking by Rothbard (available for free here: https://mises.org/library/mystery-banking ) and Economics in One Lesson by Hazlitt (free here: https://fee.org/resources/economics-in-one-lesson/ ). They both conflict quite substantially with the mainstream and might open up a whole new line of inquiry for you.
To add to this, Understanding Money Mechanics (https://mises.org/library/understanding-money-mechanics-0) is a fantastic “comprehensive overview of the theory, history, and practice of money and banking, with a focus on the United States.”
I highly recommend it, especially because it was written recently so it provides understanding behind contemporary banking procedures, practices, and econometrics.
Re: Ask HN: Book recommendations for understanding financial systems?
#44This is the best online course I've ever taken:
https://www.coursera.org/learn/money-banking
The professor explain the financial system very well using fairly recent and historic events.
Re: Ask HN: Book recommendations for understanding financial systems?
#45For learning I strongly recommend against almost all books mentioned in this thread. They don't really teach how financial systems work in the society or the underlying principles. They give you just a viewpoint. Some of them are good read after you know the basics.
You need to pick up real college textbook (or online course) and read the parts that interest you and skim other parts. Example: Introduction to Finance: Markets, Investments, and Financial Management by Melicher and Norton
You can also pick up introductory undergraduate college textbook in economics and read the parts that interest you. Greg Mankiw's books are good but the price is off the charts, so maybe don't buy them. (Macroeconomics & Financial Systems could be cheap if bought used)
After that some light reading for general audience with interesting viewpoints and lessons:
- A Random Walk Down Wall Street by Malkiel
- Common Sense on Mutual Funds by John Bogle
- The Alchemy of Finance by George Soros (Sorosls theory of reflexivity in finance, nontechnical take on nonlinear dynamics in the markets)
Re: Ask HN: Book recommendations for understanding financial systems?
#46I think the first question that you will face is if you agree with the Efficient Market Hypothesis (EMH) and the random walk. Basically they say that prices reflect all available information and that you cannot "beat" the market (there's a subtle difference between EMH and random walk). The return on an investment is a direct reflection of the risk.
Good reading to get an understanding for this are "A Random Walk Down Wall Street" and papers by Eugene Fama (EMH will be covered by any intro to finance book as well). For a good overview of EMH, I like this paper: http://www.cs.ucl.ac.uk/fileadmin/UCL-CS/images/Research_Stu...
The investment takeaway is that you should invest in passive index funds with low management cost (typically ETFs).
There's different contrasting points of view most notably behavioral finance. The EMH argument is basically the market is an aggregation of all available information. Due to the power of averaging it is going to be correct (if one person overestimates, another will underestimate and it will all cancel out). The behavioral counterargument is that there are certain human biases that lead to all parties being wrong in the same direction (such as risk aversion). Another POV that is aligned with the behavioral view is that the theory of evolution provides a good framework for thinking about markets. I like the book "Adaptive Markets" which also gives a good overview of EMH and behavioral finance so I'll recommend that as a reference. I think together with "A Random Walk Down Wall Street" you're set for "general framework of thought" material.
Personally, I am a value investor so I can only recommend books from that school of thought. The basic idea is that you look at the fundamentals of a company and the stock market can misprice them. The holy grail is finding a company where the sum of (current) assets is worth more than the current market valuation via the stock price because in essence that means if the company would be liquidated and everything would be sold off, you'd still walk away with a profit. In essence, you're trying to buy 1$ for I think the best essay that describes what markets are good for is "The use of Knowledge in Society" by Hayek. At least it makes sense for me that they serve the function of aggregating local and specialized information. If you're interested, it's also a decent idea to research the different theories of the business cycle. Keynesian, Real Business Cycle, Austrian etc.
tl;dr:
- A Random Walk Down Wall Street
- Adaptive Markets
- Value Investing (+ Warren Buffett Accounting Book)
Edit: I'm assuming you want a "quick overview". Otherwise, get some mainstream Finance and Behavioral Finance textbooks :D
Re: Ask HN: Book recommendations for understanding financial systems?
#47Earlier quoted context omitted.
The entire Incerto book series by Taleb (which includes Fooled by Randomness and The Black Swan) are awesome and they are talking about big catastrophic events like the current one. This pandemic is a classic Black Swan event: it's a surprise, it has a major impact and lots of experts will try to say that it was easily foreseeable in hindsight.
It's not a black swan, a pandemic was long on the horizon (think SATS, MERS, Ebola, ...). Just to add: I found taleb pretty opionated and had trouble distinguishing his own opinions from facts/theories.. I'd not recommend his books.
"a surprise for the turkey is not a surprise from the butcher."
Whether it's a black swan event depends on the perspective you're taking.
Re: Ask HN: Book recommendations for understanding financial systems?
#48How The Economic Machine Works by Ray Dalio https://www.youtube.com/watch?v=PHe0bXAIuk0 I don't agree entirely but good signal-to-noise ratio on this content
That's not bad intro, but it's very rudimentary. It has necessary errors of omission. It really don't teach teach how economy works
Btw. his site https://www.economicprinciples.org/ has good reading if you scroll down below the video.
Re: Ask HN: Book recommendations for understanding financial systems?
#49At Finimize, we offer a selection of products designed to help with exactly this: https://www.finimize.com/
Disclaimer: I work there!
Aside from that, I'd also recommend the previously mentioned Ray Dalio economic machine video, Benjamin Graham's Intelligent Investor (for understanding value investing) and Black Swan (for an alternative insight into tail risks such as the one we're going through)
Re: Ask HN: Book recommendations for understanding financial systems?
#50How The Economic Machine Works by Ray Dalio https://www.youtube.com/watch?v=PHe0bXAIuk0 I don't agree entirely but good signal-to-noise ratio on this content
"Ray Dalio says 'cash is trash' and advises investors hold a global, diversified portfolio" - Jan 21 2020 Had you have listened to him, you would have just been taken out back, shot, and put in one of wuhans finest crematoriums… better off reading "Statistical Consequences of Fat Tails"[0] [0] https://arxiv.org/abs/2001.10488
His advise is still sound if you are an investor and not speculator.
The part of your investment that is in stock should be determined your investment horizon. If you don't need to sell your stock in next 15 years, don't hold cash.