Back in November, top Wall Street strategist Dylan Grice announced that he was leaving his post at Societe Generale.As Grice prepares to move to his new venture, he put together a series of his reports that were important to him in his “intellectual journey”.
Among the essays were book recommendations he made from 2009 through 2012. Book lists, according to Grice, became a SocGen tradition during former co-head of global strategy James Montier’s time at SocGen.
We put together all 22 recommendations which include financial books that changed the way Grice views the world and some of his recent recommended beach and rainy day reading. It also includes a fictional title.
By Charles P. Kindleberger
Kindleberger's 'history of financial calamity' is a no brainer for Grice. He says the book is great not just because of its content and structure but because it was ahead of its time in saying that markets are not rational and for fitting historical facts into Hyman Minksy's framework.
'It is the best single book on how financial markets actually behave and if I could recommend only one book to understand finance it would be this.'
Edited by Larry Cunningham
'For pure timeless investment wisdom I don't think there is a better book than this abridged version of Warren Buffett's letters to Berkshire shareholders. The healthy influence one would expect from Buffett's early mentor (Munger has had a greater influence later in Buffett's life) is ever present: a subsection is dedicated to the story of Mr. Market, Ben Graham's mental framework for dealing with the price fluctuations which are so often fatal to the best laid plans; another is called ‚Intelligent Investing.
But Buffett and Munger's thinking not only updates that of Graham and Dodd, it goes beyond it. It is therefore as pioneering in my view.'
By Edwin Lefevre
Grice who isn't comfortable with the distinction between investors and speculators and the positive and negative sentiment associated with each respectively, he says LeFevre's book articulates the founding principles of 'intelligent speculation'.
'A thinly disguised biography of legendary early 20th century speculator, Jesse Livermore, the accounts of the panic of 1907, or of the Lusitania sinking of 1915, are riveting in themselves. But the real richness of the book is in the principles it articulates. Though learned in the markets of a century ago they remain as pertinent today because they are rooted in the hardwired tendency to folly that is the human condition.'
By Nassim Taleb
'Taleb warns us to beware of confirmation bias. We focus on the seen and the easy to imagine and use them to confirm our theories while ignoring the unseen.
If we had an urn with 999 red balls and 1 black one, for example, our knowledge about the presence of red balls grows each time we take out a red ball. But our knowledge of the absence of black balls grows more slowly. This is Taleb's key insight and it has profound implications.'
By Murray Rothbard
'Rothbard's disconcertingly simple thesis is that there is no need for a central bank. There is no need for a government monopoly on the issuance of money and so no need for the monopoly issuer to set a price (i.e. the central bank sets interest rates). Heavily regulated fractional reserve banking creates a persistent bias towards unstable credit inflation and therefore economic instability, while activist central bankers merely add to the problem.'
Grice says Rothbard was too marginalized and deserved more attention.
Edited by Kahneman, Slovic and Tversky
Grice said whenever he re-reads certain chapters of this book he learns something new. This book shows that humans are flawed as rational thinkers.
''Heuristics and Biases' proves, for example, that our preferences change when the context in which they arise changes, that we see patterns in random data; that we are even more prone to see patterns in random data when in possession of a theory predicting such patterns; that we overweight outcomes we can imagine easily; that even though we prefer more information to less we are hopeless at processing it; that we are hopeless at gauging correlations until they are very obvious.'
By Leonard Mlodinow
'The Drunkard's Walk isn't just a book about how deceptive randomness can be; it's about our apparent emotional need to reject luck as an explanation for the events shaping our lives and our world. I actually found it a very uplifting book. It's not just about probability or even investing, but about life.'
By James Montier
'A brilliant summary of behavioural finance written by the guy who did more than anyone else to bring behavioural psychology out of academia and into the investing community. It's as punchy as you'd expect from anything written by Montier, and with characteristic 'Little Book‛ conciseness.'
By Bill Bonner and Lila Rajiva
'I warn you now: ‚Mobs, Messiahs, and Markets‛ by Bill Bonner and Lila Rajiva is impossible to put down once you've started it. I suppose it's a book about mob psychology, but ... that just doesn't do this wonderful book justice.
Drawing on psychology, evolutionary biology, anthropology, history, politics and economics, the authors - with trademark humility and wit -- develop, illustrate and warn with their theory of 'the Public Spectacle‛.'
By Fritz Stern
'The book is about the unification of Germany in the 19th century, and the prominent role played by the relationship between Chancellor Otto von Bismarck… This is a fascinating period in world history anyway, but one reason I found this book especially rewarding was for the parallels between events in Europe then with those we are seeing today in Asia.'
While some might be put off by the 600 page academic book, Grice says it is easy to read just the sections you want because of the way it is organised.
By Liaquat Ahamed
This is unlike any other book about the Great Depression for three key reasons. First, it is written almost 'almost as a biography of the four most prominent central bankers of the day as they struggled from one crisis to another'. Second, it starts at the beginning i.e. WW1 where the seeds to the problems of the 30s began. Third, it isn't U.S.-centered, it is looked at as a global phenomenon.
By Howard Marks
The book focuses on the downside rather than the upside. 'Much of the book is focused on conceptually isolating the types of errors which are commonly made and managing the risks accordingly. One of the most basic mistakes and one I think is most prevalent in our industry is the reliance on forecasts.'
By Antti Ilmanen
'Providing a rational framework for forming realistic return expectations is the subject of this book. …Ilmanen doesn't restrict his analysis of available risk premia to asset classes. He includes styles in his analysis too, such as value, volatility-selling, trend-following and carry-trading.'
By Carl E. Walter and Fraser J. T. Howie
'I'm not sure how the authors managed it, but they've turned frankly 'challenging subject matter' into a decent read. You really get a tantalising glimpse into the murky, haphazard and rickety edifice which is the Chinese banking system.'
By Adrian Goldsworthy
'This one is just a fantastic story, well told, about one of the most remarkable lives ever lived, and in a time so distant from our own on so many levels but identical in the most fundamental.
During the time of the Roman Republic which Caesar brought to an end, the fabric of society was both weaved and torn by the pursuit of wealth by many, the pursuit of great wealth by a few, and the subsequent divisions caused as that wealth was distributed.'
By James Grant
'In his recounting the life and times of Thomas Bracket Reed, James Grant rescues one of the most influential politicians in American history… from what had hitherto been an undeserved near anonymity.'
Grice also says that's Grant descriptions of some of the time's most famous events like the rigging of the 1876 presidential election, the debate on the Gold Standard, and the background to war with Spain are great.
By Francis Spufford
Grice picks Spufford's part fictional part historical work that centres on the failed Soviet dream of an idealistic economy. 'One thing the book very subtly gives is an appreciation of the free-market, not with any great eulogy to free exchange (it's not like reading Ayn Rand), but rather by showing how difficult it is to replicate and manipulate that most remarkable agent of self- organisation: the market mechanism.'
By Joe Roseman
A book about 'real assets' by Grice's friend who has tremendously influenced him over the years. These real assets are Silver, Wine, Art and Gold (hence SWAG). This isn't just a plug, after all Roseman made him buy a copy.
By Daniel Kahneman
A study of the dual-process model of the brain that Grice thinks is 'for anyone compiling a list of absolutely 100% necessary reads for new recruits into their firm, I'd have to put this book close to the top of that list.'
By Philip Coggan
A book about the tension between the various roles of money.
'It's a very unusual financial history book in that although it has a nice and pacey narrative (Phil writes the Buttonwood column for the Economist), in another sense it has a degree of rigour most narrative histories lack because it's told using the simple but very powerful framework of the debtors and creditor nexus.'