2016 Favorites

2016 Favorites

We live in amazing times.  The amount of content available at our fingertips is seemingly limitless.  20 years ago, access to such wide-ranging, diverse ideas would have been nearly impossible.  Today, finding a new (or old) idea is always few keystrokes aways.  Pretty awesome.

Anyway, here are my favorite books, articles and podcast episodes of 2016.  I’ve grouped my picks into two lists: Best of Finance and Best of the Rest.  Enjoy…

Best of Finance

Books

Winning the Loser’s Game (Charley Ellis) – One of the best books on investing I have read.  It helps investors set realistic objectives and have realistic expectations.  If you can only read one book about investing in your entire life, this would be a great choice.

Laws of Wealth (Daniel Crosby) – Early in the year I saw a video of Crosby presenting his “10 Laws of Wealth” to a group in Calgary.  It was awesome.  Watch it.  His book is a more in-depth exploration of how mastering our own behavior is the biggest key to investment success.

Quantitative Momentum (Wes Gray & Jack Vogel) – The much anticipated (by finance geeks) long-form version of Alpha Architect’s Quantitative Momentum Investing philosophy (first outlined here).  In the face of the “active vs passive” debate, the guys at AA have carved out active, robust, evidence-based active strategies with promise.  In recognizing that these “active” strategies will only work by minimizing behavioral errors, Jack and Wes stay true to their mission of empowering investors through education.  Great book.

Podcast Episodes

Interview with Jack Bogle (Masters in Business) – “Bloomberg View columnist Barry Ritholtz interviews Jack Bogle, Founder of the Vanguard Group, Inc., and President of the Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as Chairman and Chief Executive Officer until 1996 and Senior Chairman until 2000.”  Bogle is a legend and Barry did a great job with the interview.

Wes Gray – Even God Would Get Fired as an Active Investor (The Meb Faber Show) – “What if you had perfect foresight and knew ahead of time which stocks would be the best performers? The reality is even if you knew this and invested accordingly, you’d still suffer gut-wrenching drawdowns along the way so painful (around 75%) that “even God would get fired as an active investor” if he was managing other peoples’ money. That’s the result of one of Wes’s studies which he and Meb discuss.”

Michael Mauboussin – Active Asset Management (Invest Like the Best) – “Michael Mauboussin and Patrick O’Shaughnessy discuss everything about asset management: the state of the industry, the active investment process, and Michael’s simple but genius “input/output” method for daily life. This is a full seminar on asset management. It was an awesome conversation.”  Mauboussin is the Head of Financial Strategies at Credit Suisse and was an early guest on Pat’s podcast.  He’s one of the smartest guys I’ve heard interviewed.

Articles (non-geeky)

A Bored Investor is a Dangerous Thing (Jason Zweig) – “If the stock market feels too quiet for your tastes, don’t try to spice it up with your portfolio. Try to spice up the rest of your life instead. You’ll be happier — and less likely to lose money when the market gets exciting again.”

How Investors Develop Bad Habits (Ben Carlson) – “One of the hardest parts about investing is that prudent advice doesn’t always work. Risk management doesn’t always add value. Legitimate strategies can go long stretches where they don’t work very well. Diversification means you’ll always hate something in your portfolio. Junk stocks can outperform high-quality companies depending on the starting prices and valuations.”

How Much is Enough (Ron Lieber) – “Giving children an allowance to budget and practice with can help get them started. How much is enough pocket money? Just enough so that they have the things they need and some of what they want, but not so much that they do not have to make hard choices. Tradeoffs are what we adults do each day, after all, and all parents are ultimately in the adult-making business.”

Articles (geeky)

Alpha or Assets (Patrick O’Shaughnessy) – “More and more investors are buying “factor” based strategies which invest using measures like valuation and low volatility, but the most popular strategies are applying factors in the wrong way. Strategies should be built for alpha, not scale—but the asset management industry has gone in the opposite direction.”

Index Investing makes Markets and Economies More Efficient (Philosophical Economics) – Anonymous blogger Jesse Livermore argues that the trend towards passive management is not only sustainable but that it actually increase the accuracy of market prices. “It does so by preferentially removing lower-skilled investors from the market fray, thus increasing the average skill level of those investors that remain. It also makes economies more efficient, because it reduces the labor and capital input used in the process of price discovery, without appreciably impairing the price signal.”

Optimal Lifetime Asset Allocation with Goals-Based Glide Paths (Peter Mladina) – “Assets should serve a purpose—to fund a lifetime of financial goals. At the highest level, goals can be categorized as either consumption or gifts. Outside of consumption and gifts (including planned and unplanned bequests), assets serve no purpose other than funding taxes and expenses. Therefore, a rational and informed investor should identify lifetime goals and intentionally allocate assets to fund them efficiently. If assets serve the purpose of funding lifetime goals, it naturally follows that optimal lifetime asset allocation should be goals-based and multiperiod.”

Best of the Rest

Books

+ The Go-Giver: A Little Story About a Powerful Business Idea (Bob Burg)- A short business parable about a young man trying to be successful.  He learns that changing his focus from “getting” to “giving” — putting others’ interests first and continually adding values to their lives–ultimately leads to unexpected returns.

Sapiens – A Brief History of Humankind (Yuval Noah Harari) – I got tired of hearing about how great this book was so I finally read it.  The book did not disappoint.  This was one of the most fascinating books I’ve read in years (maybe ever).  It reminded me of how small we are in this universe and challenged my understanding of why we think and act the way we do.

When Breath Becomes Air (Paul Kalanithi)- A chronical of Paul Kalanithi’s transformation from a naïve medical student “possessed,” as he wrote, “by the question of what, given that all organisms die, makes a virtuous and meaningful life” into a young neurosurgeon at Stanford, guiding patients toward a deeper understanding of death and illness, and finally into a patient and a new father to a baby girl, confronting his own mortality.  Incredibly sad, but incredibly inspiring.

Podcast Episodes

Eric Maddox – The Ace of Spades (Invest Like the Best) – Eric is a former U.S. Army and Defense Intelligence Agency interrogator.  During his six-month tour with this Delta Force team, he conducted over 300 interrogations and collected the intelligence which directly led to the capture of Saddam Hussein.  This podcast is about how to listen to others, with care and empathy, in the age of distraction.

Tony Robbins – On Achievement Versus Fulfillment (Tim Ferris Show) – A few years ago if you asked me about Tony Robbins I’d tell you he was crazy/weird.  I didn’t know much about him and I was wrong.  Tony is an incredibly fascinating and inspiring guy.  If you haven’t watched the documentary “I Am Not Your Guru”, you should (available on NetFlix).

Cal Newport – Deep Work (The Art of Charm) – “Cal talks about the difference between shallow work — what most of us experience — and deep work — a focused approach that makes us happier, healthier, and more productive — as outlined in Deep Work: Rules for Focused Success in a Distracted World, his latest book.” 

Articles

The Difference Between a Statistic and a Fact (Morgan Housel) – “A statistic is just a number. And numbers are as easily manipulatable, incomplete, and misleading as words are. But they’re more dangerous than words, because numbers are associated with math, and math is associated with fact.”

Growth Without Goals (Patrick O’Shaughnessy) – “[E]xplore for the sake of exploration, without expectation. Discover essence in your surroundings and in yourself, free from external conditioning (stories) and expectations. Build from the inside out and bottom up. Great habits and practices make a great and successful life. Cultivate those and the rest will take care of itself.”

The Pot-Belly of Ignorance (Shane Parrish) – “What you eat makes a huge difference in how optimally your body operates. And what you spend time reading and learning equally affects how effectively your mind operates. Increasingly, we’re filling our heads with soundbites, the mental equivalent of junk. Over a day or even a week, the changes, like those to our belly, are barely noticeable. However, if we extend the timeline to months and years, we face a worrying reality and may find ourselves looking down at the pot-belly of ignorance.”


Tim Brennan

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