I get asked often about what books I would recommend for getting a better handle on behavioral finance, markets, macro, pattern recognition, etc.
Back in 2012 I posted The Book List that covered a lot of ground–especially on the behavioral side. But I got asked again today, and I boiled it down to three books, one on behavior, one on central banking, and one on patterns and markets. This is where I recommend someone start.
Here are the books:
On the behavioral side, Thinking Fast and Slow–help you realize the extent to which our judgements are thoroughly damaged by emotions/cognitive biases. If you haven’t been exposed to Daniel Kahneman, it will blow you away. You’ll understand how there is no way markets can be rational or efficient–not even in the aggregate.
On central banking, Angel Ubide’s Paradox of Risk really gets you into the heads of the major CBs in the crisis and past-crisis period. You don’t have to agree with all of his prescriptions for this book to help you get past cynical market myths and aphorisms to see how CBs really think about equities, inflation, moral hazard. It also has excellent color on the debates the major CBs had at critical points in time. Angel has spent enough time in both policy circles and markets to see the whole picture in way few do. (Sorry, Jim Grant.)
On patterns/markets, Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets. Ignore the old and cheesy cover, it’s a great introduction to patterns and stock cycles. Yes, the world has changed since then, but basic building blocks of patterns and cyclical tendencies have not.