This gem is the Bible for Bubblists. This is the essential and definitive source for the devout, the agnostic as well as for the atheists of capitalism. Penned (literally) in 1841 by Charles MacKay's the first three chapters each track one of the three most widely recogized incidents of mass financial delusion:Tulipomania, The South Sea Bubble and the Mississippi Land Scheme. As timely as ever, this is a must-read for the beginner as well as the expert of financial crises. Never, ever invest a penny of your money with someone who hasn't read the first three chapters at least five times.
Required Reading
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A true treaure! This brilliant work from Sydney Homer (no relation to the classic Greek Odyssey's Homer), first written in 1963, chronicles the history of interest rates across four Millennia. This fourth edition with an update to 2005 from Richard Sylla (no relation to the monster Scylla as in Scylla and Charibdus in Homer's Odyssey) updates the epic research of Sidney Homer, a partner in fixed income at Salomon Bros. during the 50's and 60's, dating from ancient Mesopotamia , Greece and Rome throughout Midieval times, the Renaissance, the Colonial period to the the mid-1900's. Sylla fills in the rest. It is clear using Homer's tracking of interest rates from the early 1600's the Dutch dratically overpaid the Indians for Manhattan! The Indian's $26 proceeds conservatively invested at at historically prevailing global interests would have compounded to reach over 90% of the total world's wealth . A must-read for the advanced, fun to skim for the beginner.
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from WSJ Top Five Books on Irrational Decision Making "Judgment Under Uncertainty" was ranked #2
By Daniel Kahneman, Paul Slovic and Amos Tversky
Cambridge, 1982It's hard to overstate the influence of this academic volume, which revealed many of the hard-wired flaws that shape human behavior. For one thing, authors Daniel Kahneman, Paul Slovic and Amos Tversky -- all of them psychologists -- almost single-handedly dismantled the assumption of "rational man," which had been the standard view of human nature since Plato. In experiment after experiment, the psychologists demonstrated that, unlike the hypothetical consumers in economics textbooks, real people don't treat losses and gains equivalently, or properly perceive risks, or even understand the basic laws of statistics -- with sometimes severe consequences. For example, the failure of many investors to properly weigh losses -- people are irrationally loss averse -- makes these investors much more likely to sell stocks that have gone up in value. This leads, over time, to a portfolio composed entirely of shares that are declining in value, which is why the stocks that these investors sell tend to significantly outperform the stocks that they keep
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Harvard Business School Icon and father of Disruptive Innovation Theory puts forth a paradigm-busting prescription to overhaul healthcare. Christensen's recent work "Disrupting Class" (see separate entry) is also a paradigm-shifter.