Recommended Reading

I am filing this under books, though really it is a recommended reading list. Will also probably make this a dedicated page so I can add to it over time.

 

General Business / Finance / Economics

FT Alphaville – Alphaville is the markets blog of the Financial Times. Access is free if you register. In addition to original research and reporting the team assembles very nice link lists. One of my first stops every morning.

Stratechery – Deep analysis of tech industry businesses, products and trends.

 

Investing (Mass Appeal)

These are websites and blogs with an investing focus that are likely to appeal to “normal people” as well as professionals and serious amateurs. 

 

The Ritholtz Wealth Management Crew

The Reformed Broker (Josh Brown)

A Wealth of Common Sense (Ben Carlson)

The Irrelevant Investor (Mike Batnick)

The Big Picture (Barry Ritholtz)

The Ritholtz crew (self-described as “The Wu-Tang Clan of Finance”) tackles topical issues in investing and personal finance in a way that is honest, accessible, and fun.

 

Not Affiliated With Ritholtz Wealth Management

Of Dollars And Data – Nick Maggiulli explores topics in finance and investing through the power of R and data visualization. PS – He is right on about DataCamp.

The Aleph Blog – Longtime writer and money manager David Merkel explains complex topics simply. David has been writing a long time so going back through his old posts is like a treasure hunt. He has done some fantastic series on his experiences managing money over the years. David would also fit in on the Investing (Wonkish) list.

Morningstar – Lame, I know. But there are occasionally some real gems here. Especially from Russ Kinnell, John Rekenthaler and Jeff Ptak.

 

Investing (Wonkish)

These are websites and blogs with an investing focus that are likely to appeal more to professionals or serious amateurs than “normal people.”

Bronte Capital – Commentary and the occasional investment thesis from hedge fund manager John Hempton. John runs a long/short portfolio.

Musings on Markets – Blog of NYU Professor Aswath Damodaran. I have heard Damodaran called “the father of valuation.” A must-read for DCF and modeling junkies. Professor Damodaran also puts together phenomenal data sets that are freely available to the public.

Philosophical Economics – Deep dives into issues such as capital market forecasting and Bayesian updating. If you you are the kind of person who likes to brew up coffee and settle in for an hour of meaty reading, man oh man is this the blog for you.

Alpha Architect – Wes Gray and his various contributors are all quant, all the time.

Fundoo Prof – Sanjay Bakshi will probably end up being remembered as the Ben Graham of India.

Cable Car Capital – Similar to John Hempton at Bronte Capital, Jacob Ma-Weaver provides commentary alongside investment theses. Runs a long/short portfolio.

Enterprising Investor – CFA Institute blog geared toward investment professionals.

SIRF – Investigative reporting on financial fraud and various and sundry other shenanigans by Roddy Boyd. Also, you should read Roddy’s book about AIG.

Base Hit Investing – Similar to Bronte and Cable Car, John Huber provides occasional commentary and investment write-ups. Runs a concentrated portfolio of high quality names.

 

Personal Finance

These are websites and blogs that primarily deal with the accumulation and management of personal wealth, rather than security selection and portfolio management.

Mr. Money Mustache – In MMM’s own words: “Early Retirement Through Badassity.”

Gen Y Finance Guy – In Dom’s own words: “My big hairy audacious goal is to build a net worth of $10M by the time I am 48 (you can keep track here).”

Book Review: The Tao of Wu

Tao_of_Wu
The Tao of Wu by The RZA

If you haven’t picked up on it in other posts, I have a moderate interest in eastern philosophy and religion (Taoism, Buddhism, etc.). I also enjoy listening to Wu-Tang Clan. So when my girlfriend bought me The Tao of Wu by the RZA for Christmas I read it in about two hours.

The RZA’s life journey has been truly extraordinary, taking him from the projects of Staten Island to Manhattan sound studios and even Hollywood (among his producer credits is the soundtrack for Kill Bill: Vol. 1). The Tao of Wu describes his spiritual journey.

Summary

The Tao of Wu is structured as an autobiography, with occasional digressions into areas as diverse as the theology of the Nation of Islam and its various derivatives, the interpretation of Buddhist koans and chess strategy. To the casual observer this might seem like a gimmick, but I found many of the anecdotes to be thought provoking and evocative of the cyclicality emphasized in Buddhism and Taoism.

Early on there is an anecdote about how, when RZA was young, his family moved into a new home and was almost immediately robbed. The robbery was devastating. However, there was some consolation in that the move allowed RZA to make a great friend–an older neighbor boy. After a couple of years of friendship came a surprising revelation:

‘When y’all first moved in, I robbed your house maaan. I never knew you was going to be a cool family.’ When he told me, there wasn’t much I could do about it, and by then he was my best friend–or as they say in the hood nowadays, my big homie–so in a way it was cool.

That’s just one lesson: Your allies can arrive as enemies, blessings as a curse.

Each chapter of the memoir is devoted to a particular “pillar of wisdom.” These are followed by brief meditations or words of wisdom. At the end of the first chapter, for example, comes a passage discussing the importance of solitude.

“I advise everyone to find an island in this life,” RZA writes. “Find a place where this culture can’t take energy from you, sap your will and originality.”

Who Should Read This Book

Literally everyone. Obviously Wu-Tang fans should read it, and it’s worth a look by anyone interested in eastern philosophy and religion. But beyond those obvious audiences the subject matter is accessible to everyone. If you read fast, you can take a first pass through the book in two or three hours. Given its meditative tone, The Tao of Wu is also worth keeping on the shelf to revisit from time to time.

Book Review: HBR Guide to Buying a Small Business

HBR_Buying_Small_BusinessI read the HBR Guide to Buying A Small Business after listening to the authors, Richard Ruback and Royce Yudkoff, interviewed on the Invest Like The Best podcast. The firm I work for does some private equity investing in exactly the types of companies discussed in this book.

Summary

Ruback and Yudkoff teach a course at Harvard called “Entrepreneurship Through Acquisition.” This book draws on many of their students’ experiences. Rather than go out and start up a brand new company from scratch, one can go out and buy an existing business to become an owner/operator. This is less risky than launching a startup.

Many of the entrepreneurs who go this path are highly skilled and motivated, but for whatever reason do not want to work in a large corporate environment. Maybe it’s a desire for control and flexibility. Maybe it’s a dislike of institutional politics.

This book is a guide to the process, from deciding whether to become an entrepreneur through acquisition up through raising capital and closing a deal. In fact, it works pretty well as a private equity primer. Ruback and Yudkoff are basically walking you through a leveraged buyout, though I don’t think they ever explicitly call it that.

Worth mentioning are the key characteristics entrepreneurs should look for in a business:

  • “Enduringly profitable” businesses with EBITDA margins of 15-20%
  • “Boring” businesses with modest growth prospects
  • Businesses with sustainable competitive advantages (a.k.a “moats”), such as high customer switching costs or market dominance in a local or regional niche

The idea is to buy the business for 3-5x EBITDA and structure the transaction so you are targeting an annual return of about 25% to the equity investors. Structurally, this is a very attractive area of the private markets for smaller institutions and high net worth individuals to invest. Big piles of money can’t flood into the space and drive up prices because the deals are too small, in the $2 million to $5 million range for the most part. Imagine SoftBank’s $100bn Vision fund trying to move the needle on performance investing in deals like these!

Who Should Read This Book

Anyone seriously interested in owning, running, or selling a small business would benefit from reading this book. Even if not going the acquisition route it is useful for understanding business models, competitive advantage and strategic financing decisions, as well as the basic principles of financial modeling and valuation. The book is written for a broad audience and is accessible to readers without a finance background.

This book would also be useful for fundamental investors interested in backing an entrepreneur operating a small business, or investing in small public market companies. It is especially helpful in exploring how a small firm can build and maintain competitive advantages over time (a common misconception is that only large cap companies can possess competitive advantages).

Book Review: Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond

Cryptoassets_CoverI pre-ordered this book on Amazon after seeing it mentioned on Josh Brown’s blog, The Reformed Broker. I was intrigued because it purported to be a rigorous treatment of cryptocurrency and cryptoassets written from the perspective of a relatively sophisticated investor.

Burniske and Tatar state their goal was to produce a book that is the equivalent of Benjamin Graham’s Intelligent Investor for cryptoassets. That is kind of like Dennis Rodman saying he wanted to do for rebounds what Michael Jordan did for dunks. To the authors’ credit I think they have done an admirable job of approaching a fast-evolving space in a balanced and rigorous way.

Summary

The book is well-organized. It is segmented into three parts: What, Why and How.

What: Discusses the theoretical underpinnings of cryptoassets and provides background information on the history and evolution of several major cryptocurrencies: Bitcoin, Ethereum, Ripple, Monero, Zcash and Dash (I may have omitted a couple). Burniske and Tatar take pains to distinguish between cryptocurrencies, cryptocommodities and cryptotokens.

Why: This section provides an overview of Modern Portfolio Theory (MPT) and the use of mean-variance optimization in constructing an investment portfolio. The authors argue for the inclusion of cryptoassets in an investor portfolio based on their potential to improve overall portfolio efficiency, similar to more “traditional” alternative investments such as hedge funds, private real estate and commodities. I skipped most of this section as I am very familiar with MPT.

How: This section was really what attracted me to the book as it lays out a framework for performing due diligence on a prospective cryptocurrency investment. The authors address issues of custody, valuation and trading, as well as some of the nuances of trading in fragmented markets with the potential for wide fluctuations in trading volumes. The valuation model they float for cryptoassets is more or less the Equation of Exchange (MV = PY or in this case P = MV/Y). One issue I don’t think they adequately address is the issue of reflexivity in the “velocity” of crypto transactions (speculative trading activity drives up network activity which in my view creates a kind of feedback loop).

Who Should Read This Book

Anyone looking for a comprehensive introduction to cryptoassets would benefit from reading this book. It would be particularly useful financial advisors looking to educate themselves in order to address client questions or advisors considering cryptoassets for inclusion in client portfolios. The book is very much written in the language of the financial professional.

Who Should Not Read This Book

This book does not contain any secret sauce for getting rich quick. People who are looking for “hot tips” or “hacks” will be disappointed. While the authors are clearly bullish on the long-terms prospects for cryptoassets, they emphasize the need for investors to educate themselves, conduct thorough due diligence and develop an investment discipline. The due diligence concepts outlined in the book are applicable to any asset class or investment opportunity.

My comments on this book should in no way be taken as a recommendation to buy or sell any cryptoasset. If you are wondering whether you should own cryptoassets as part of your investment portfolio you should consult with a financial advisor who can advise you based on your unique financial circumstances.