I've always had an interest in economics, but still don't understand it to the level I wish I did. I suppose im most interested in economics from a stock market standpoint. Not a trading book, but rather how markets interrelate: interest rates, pricing of the us dollar, inflation etc.
I feel like a solid understanding of the basics would help me make better trading decisions. Any great book recommendations?
06-23-2013 03:10 PM
Brodiaga
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I'm not an expert, but here are the books I found interesting:
- 3 books by Nassim Taleb: The Black Swan, Fooled by Randomness and Antifragile. These books aren't about Economics, but they help understand how markets generally work and how people make decisions. The key subject of these books is randomness and the fact that people, including the author, are not mentally equipped to completely understand it. By the way, Taleb has a very strong opinion about economists and the science of Economics in general, but I won't spoil the fun for you.
- Freakonomics. I know it's old and too simplistic, but it helps understand what Economics is about. To me, it's about people responding to incentives.
With regards to how markets interrelate, I'm sure there are many textbooks and more engaging popular books out there, can't recommend anything specific. I read The Economist regularly and find it very useful and interesting.
06-23-2013 03:42 PM
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n0000
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Economics in One Lesson by Henry Hazlitt. It will teach you not only how to think economically but also how to consider the subtle realities of human interactions. You will realise the benefits of thinking with a mind towards a subtle, nuanced and accurate view of reality in all your intellectual endeavours.
(06-23-2013 03:10 PM)_DC_ Wrote: I feel like a solid understanding of the basics would help me make better trading decisions. Any great book recommendations?
I don't know about this part cause most econ majors don't beat the market (cause most people don't beat the market)
Tyler Cowen, prominent economist, has an online university
This is a textbook that I used for an business economics class in college: http://www.amazon.com/Capital-Markets-In...b_title_bk . It covers some of the theories of how prices are derived and how interest rates and inflation affect the stock market.
(This post was last modified: 06-23-2013 05:13 PM by jmoney29.)
My favourite of the popular introductions to economics are 'The Armchair Economist' and 'Economics in One Lesson'.
After that I would check out 'Capital Ideas' by Peter Bernstein and 'The Myth of the Rational Market' by Justin Fox if you want to learn more about the theory underpinning alot of the thinking about finance and the stock market.
Lastly - check out Milton Friedman's 'Free To Choose' if you want an excellent TV series laying out the fundamentals of economics.
Below is an introduction by Arnold Schwarzenegger - and the first episode:
After that you can jump in a thousand different directions. Economics is a very interesting subject. One of the best blogs in the world happens to cover alot of subjects related to economics. So - the following might be worth adding to your bookmarks:
Zerohedge.com is good with some doomsday predictions about the public markets. They post a lot of stuff, read through, and you will start connecting the dots.
Nassim Nicholas Taleb is worth reading definitely, but it's more about the world.
There is no right or wrong in economics (apart from the supply and demand laws), it's not like biology, so it's pretty useful to explore the most contradicting points of view.
06-23-2013 06:17 PM
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babelfish669
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After that, read The Great Rebalancing, if you specifically are interested in the US Dollar and interest rates, because they directly relate to the international balance of payments between nation http://www.amazon.com/gp/product/0691158681/
Between those two you will have a better grasp on what is going on than 99.9% of the world's population. I'm not saying either author is correct, but together they it will go a long way to helping you out.
After that, I would suggest biographies of actual traders, like Marc Rich, to give you an idea of how all of this stuff translates in to profit.
06-23-2013 06:37 PM
TheBulldozer
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I learned more from Taleb than I did from Micro and Macro theory in school.
(06-23-2013 03:42 PM)Brodiaga Wrote: I'm not an expert, but here are the books I found interesting:
- 3 books by Nassim Taleb: The Black Swan, Fooled by Randomness and Antifragile. These books aren't about Economics, but they help understand how markets generally work and how people make decisions. The key subject of these books is randomness and the fact that people, including the author, are not mentally equipped to completely understand it. By the way, Taleb has a very strong opinion about economists and the science of Economics in general, but I won't spoil the fun for you.
- Freakonomics. I know it's old and too simplistic, but it helps understand what Economics is about. To me, it's about people responding to incentives.
With regards to how markets interrelate, I'm sure there are many textbooks and more engaging popular books out there, can't recommend anything specific. I read The Economist regularly and find it very useful and interesting.
06-23-2013 07:26 PM
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Brodiaga
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Economics today is where chemistry was 400 years ago. Back in the days when alchemists were still trying to find the Philosophers Stone in order to turn lead into gold.
With that said. It is still an interesting subject to study.
My favourite columnist touched on this a couple of days ago:
Lombard Street : A description of the money market
by Walter Bagehot. Other books, like freakonomics and black swans, are fashionable overtures, developments of theory in accordance with trends. Lombard Street is an economic bible, timeless.
Most people who read this swear by it afterwards for 2 reasons....
a) it speaks of finance and money and banking and credit and debt in simple terms. That's not to say that it understates or lacks precision. Far from it. It is the credo and go to manual for central banks the world over.
b) It doesn't hold a holier than though attitude and, between the lines, speaks quite earnestly of the case.....the case being that the world of finance and money is, frankly, a charade based on trust and the vernacular that the topic cloaks itself in is, basically, a method of immunisation.
Walter Bagehot was the first editor in chief, and de facto founder, of The Economist magazine way back in the 1860's.
He was also the writer of the English Constitution, a summary of the de facto English Constitution, even though, de jure, England doesn't have one.
Beyond the explanations pertaining to economics, finance, banking and money, Bagehot has some timely views on the tendencies of Europeans and why their economies always end up repeating the same cycles - are economies consequences of people? or are people consequences of economies?
(This post was last modified: 06-23-2013 08:40 PM by Mersault.)
06-23-2013 08:38 PM
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The Wealth of Nations by Adam Smith is a good place to start. Anything by Milton Friedman. Austrian Economics was at one time a particular interest of mine.
Then again, if I stand firmly in black swans and you believe in markets and central banks then this conversation is moot.
(06-23-2013 08:38 PM)Mersault Wrote: Lombard Street : A description of the money market
by Walter Bagehot. Other books, like freakonomics and black swans, are fashionable overtures, developments of theory in accordance with trends. Lombard Street is an economic bible, timeless.
Most people who read this swear by it afterwards for 2 reasons....
a) it speaks of finance and money and banking and credit and debt in simple terms. That's not to say that it understates or lacks precision. Far from it. It is the credo and go to manual for central banks the world over.
b) It doesn't hold a holier than though attitude and, between the lines, speaks quite earnestly of the case.....the case being that the world of finance and money is, frankly, a charade based on trust and the vernacular that the topic cloaks itself in is, basically, a method of immunisation.
Walter Bagehot was the first editor in chief, and de facto founder, of The Economist magazine way back in the 1860's.
He was also the writer of the English Constitution, a summary of the de facto English Constitution, even though, de jure, England doesn't have one.
Beyond the explanations pertaining to economics, finance, banking and money, Bagehot has some timely views on the tendencies of Europeans and why their economies always end up repeating the same cycles - are economies consequences of people? or are people consequences of economies?
(This post was last modified: 06-23-2013 08:51 PM by TheBulldozer.)
(06-23-2013 03:51 PM)n0000 Wrote: Economics in One Lesson by Henry Hazlitt. It will teach you not only how to think economically but also how to consider the subtle realities of human interactions. You will realise the benefits of thinking with a mind towards a subtle, nuanced and accurate view of reality in all your intellectual endeavours.
Hazlitt is a great introduction to economics, but I think if you study economics in order to improve your trading then you're going to get slaughtered.
06-23-2013 09:08 PM
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(06-23-2013 08:50 PM)MaleDefined Wrote: Black swans are hardly fashionable overtures.
Then again, if I stand firmly in black swans and you believe in markets and central banks then this conversation is moot.
Indeed. Black Swans aren't fashionable overtures. Writing about them as though they are something new and not known about before is. That's what Taleb did.
The premise of the book, that surprising things happen and afterwards they are rationalised and explained away, is nothing new. It's merely a slight extension and abstraction of the Chinese cracker wisdom 'benefit of hindsight' and all that. It's as old an idea as waiting for the banana to turn yellow before eating it. Retitling the phenomena as 'a black swan event' and using it as a method of describing the financial crisis that started 2007 onwards (well, not the seeds) is a fashionable overture. By 2050 somebody else will repackage the idea with another analogy and sell it again.
About you saying about you standing firmly in black swans and me believing in markets and central banks therefore this conversation is moot, well, i have no idea what you were attempting to say.
(This post was last modified: 06-23-2013 09:11 PM by Mersault.)
06-23-2013 09:09 PM
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I think Taleb takes a step forward in trying to quantify rather than philosophize black swans.
I generally find that people who are rooted in traditional economics see ideas that Taleb talks about as irrelevant. Perhaps I misread you in that regard.
(06-23-2013 09:09 PM)Mersault Wrote:
(06-23-2013 08:50 PM)MaleDefined Wrote: Black swans are hardly fashionable overtures.
Then again, if I stand firmly in black swans and you believe in markets and central banks then this conversation is moot.
Indeed. Black Swans aren't fashionable overtures. Writing about them as though they are something new and not known about before is. That's what Taleb did.
The premise of the book, that surprising things happen and afterwards they are rationalised and explained away, is nothing new. It's merely a slight extension and abstraction of the Chinese cracker wisdom 'benefit of hindsight' and all that. It's as old an idea as waiting for the banana to turn yellow before eating it. Retitling the phenomena as 'a black swan event' and using it as a method of describing the financial crisis that started 2007 onwards (well, not the seeds) is a fashionable overture. By 2050 somebody else will repackage the idea with another analogy and sell it again.
About you saying about you standing firmly in black swans and me believing in markets and central banks therefore this conversation is moot, well, i have no idea what you were attempting to say.
06-23-2013 09:18 PM
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(06-23-2013 09:18 PM)MaleDefined Wrote: I think Taleb takes a step forward in trying to quantify rather than philosophize black swans.
I generally find that people who are rooted in traditional economics see ideas that Taleb talks about as irrelevant. Perhaps I misread you in that regard.
Taleb's overview of economics is the result of a very philosophical approach. I don't in any way deny that what he is saying is important. It's just that it isn't original or said in a particularly interesting way. It's an old idea regurgitated, with a rather catchy title, that rode a fashionable wave.
(06-23-2013 09:21 PM)T and A Man Wrote: Wealth of nations is the only one that can't be contested as a must have.
It should be on everyones e-reader.
After that, it's really, REALLY hard to get a source that isn't ideologically laced.
Because the Wealth of Nations isn't ideologically laced? Get out of here.
I agree the latter half has some descriptive elements, Smith's ideological bias, but compared to the ideology lacing the hayek/von mises stuff, it's nowhere near it.
I would have put Keynes, the descriptive stuff is probably the closest thing to being correct, the prescriptive stuff is easily misconstrued, thus best to leave it out for the layman.
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