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The 11 Books Investors Must Read to Prepare for 2013

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Our community of traders, money managers, and Wall Street experts on the books that offer the best advice and deepest insights as the New Year arrives.

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MINYANVILLE ORIGINAL Facebook (NASDAQ:FB) had the biggest tech IPO in history and was surprisingly disappointed. Hostess declared bankruptcy and put the fate of the Twinkie in question. Apple (NASDAQ:AAPL) became the most valuable company in the world, then saw its stock plummet (relatively speaking). Meanwhile the Dow Jones (INDEXDJX:.DJI) climbed from its 2009 low and may soar to an all-time high next year. Were any of these 2012 events predictable?

With the year coming to a close, investors are focused on 2013 and what it might bring. Amongst the uncertainty and chaos, all one can do is prepare by studying what has come before and what may be next. As Hamlet says, "The readiness is all."

We asked Minyanville contributors for their picks of the best books to read before January 1, 2013. Among the responses were some titles published this year and a few classics that should be on every investor's bookshelf.
Satyajit Das recommends: Tiger Head, Snake Tails: China Today, How It Got There, and Where It Is Heading, by Jonathan Fenby

On an increasingly crowded list of books purporting to explain China, Jonathan Fenby's Tiger Head, Snake Tails (Simon & Schuster, 2012) is a standout, providing very personal insights into the Middle Kingdom rarely found elsewhere. Comprehensive and provocative, some readers may find the organization of the book idiosyncratic. Some may find its density challenging, but the book's detail and richness is its strength, eschewing pat simplistic explanations. Tiger Head, Snake Tails is an antidote to the shallow narratives about China found in airport shops, usually preferred by policymakers, financial commentators on TV chat shows purveying financial porn, and corporate "leaders" seeking a China for Dummies to enliven conversations at business gatherings.

Satyajit Das has worked in the area of financial derivatives and risk management for over 30 years. He is the author of several books, including Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (FT-Prentice Hall, 2006), and In Search of Pangolin: The Accidental Eco-Tourist (New Holland, 2006). Read his articles on Minyanville, here.
Lloyd Khaner recommends: Positive Intelligence, by Shirzad Chamine

Positive Intelligence (Green Lean Book Group Press, 2012) is an education in and a reminder about how positive, clear thinking can improve your performance, your company, and most importantly, your regular, daily state of mind.

Lloyd Khaner is the General Partner of Khaner Capital, LP, a long-short hedge fund based in New York. He is also the author of Lloyd's Wall of Worry, published every Tuesday on Minyanville. Check out Lloyd's recent columns, here.
Todd Harrison recommends: Moods and Markets: A New Way to Invest in Good Times and in Bad, by Peter Atwater

Moods and Markets (FT Press, 2012) is a must read for anyone who wants to understand the "why" rather than the "what" as we prepare ourselves with a forward and proactive lens.

Todd Harrison, founder and CEO of Minyanville Media, Inc., has 21 years of experience on Wall Street. He is the author of The Other Side of Wall Street: In Business, It Pays to Be an Animal; In Life, It Pays to Be Yourself (FT Press, 2011). Read more of his work for Minyanville, here.
Justin Sharon recommends: The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust, by John Coates

The author is an ex-derivatives trader at Deutsche Bank. The Hour Between Dog and Wolf (Penguin Press HC, 2012) is a really interesting book about how basic human nature and "animal spirits" can impact financial markets. He does a fascinating experiment involving saliva samples taken from 250 traders, which correlates elevated testosterone with a heightened money making ability.
He also recommends: Wait: The Art and Science of Delay, by Frank Partnoy

Written by a finance professor, Wait: The Art and Science of Delay (PublicAffairs, 2012) turns the old assumption that procrastination is paralyzing and inherently bad on its head. Draws from several different fields, and a really easy read.

Justin Sharon authors our stock upgrades and downgrades stories every morning. He has extensive experience on Wall Street, most recently at the Private Client unit of Merrill Lynch. A 12-year spell in its research department encompassed the eras of Blodget, boom, bust, and Bank of America. Read more of his work for Minyanville, here.
Michael Comeau recommends: Barbarians at the Gate, by Bryan Burrough and John Helyar

Most books about investing or trading are pretty much useless for the simple fact that if they really had some kind of genius within, they wouldn't be for sale. There are some methodology-type books I really love, like William O'Neil's How to Make Money in Stocks (McGraw Hill, 2010) and Charles Mulford's Financial Warning (John Wiley and Sons, 1996), but by and large, there's a lot of snake oil out there.

However, learning your history will always serve you down the road.

Barbarians at the Gate (HarperBusiness; Reprint, 2009) will offer you a glimpse into one of the most interesting times on Wall Street -- the 1980s. That's when swashbuckling investment bankers with big ties and bigger egos fell in love with junk bonds and LBOs, culminating in the takeover of RJR Nabisco, a megadeal for the ages.

It's difficult to describe how well-written and detailed this book is. If it wasn't a true story, it would be one of the best novels I've ever read, given its picture-perfect illustration of the level of hubris on Wall Street. 10/10 for content, 10/10 for execution. Can't get better than that!

Michael Comeau edits Minyanville's Buzz & Banter, and is also a regular columnist on Minyanville.com, focusing on technology and consumer stocks. Read more of his work for Minyanville, here.
Pete Prudden recommends: Liar's Poker, by Michael Lewis

When I first walked onto the trading floor at Jefferies global equity desk, I was a fish out of water. Phone lights were buzzing everywhere. People were screaming at each other. It was the closest thing to controlled chaos I had ever witnessed. I sat next to the head of trading and quickly became his assistant. I was in the game. Yet I had no idea. I immediately began picking up the lights and relaying. The problem was the rhetoric, mostly unpleasant, being conveyed to me was a foreign language. It was as if being dropped into the middle of Shanghai without a map and it was the greatest time of my life. My boss threw me a copy of Liar's Poker (W. W. Norton & Company; Reprint, 2010). He told me to read the book over the weekend and welcome to the business.

Peter Prudden is the General Partner of SISU Advisors LP and the Managing Member of Prudden & Company LLC. Read more of his commentary for Minyanville, here.
Aaron Brown recommends: Risk Intelligence, by Dylan Evans

Dylan Evans is a psychologist and philosopher interested in why most people make such bad decisions about risk. He began by searching the world and the academic literature for people who handle risk well, and found, among others, horse handicappers, expert bridge players, and US (but not UK) weather forecasters. This suggested some ingenious experiments, which led him to the conclusion that risk intelligence is a specific cognitive skill that can be taught: the ability to specify accurately how much or little you know about a question. It's not what you know, it's how realistic you are about how much you know. Risk Intelligence (Free Press, 2012) is an insightful and entertaining book that will be helpful for traders and investors, along with everyone else.
Because nobody can give you wiser advice than yourself (says Cicero), Brown also recommendsRed-Blooded Risk, by Aaron Brown

I had a lot of fun writing Red-Blooded Risk (Wiley, 2011), an account of how Wall Street got where it is and also where it's going. One of the best parts was getting to work with renowned Manga artist Eric Kim who did some wonderful illustrations and comics to illustrate points in the book. I tried to pack in a lifetime's worth of experience in risk-taking.If you want to know if I've succeeded, you'll have to take a chance and read the book.

Aaron Brown is risk manager at AQR Capital Management and author of The Poker Face of Wall Street (Wiley, 2007). In his 30-year Wall Street career, he has been a trader, portfolio manager, head of mortgage securities, and risk manager for major institutions. Read his articles for Minyanville, here.
Sterling Wong recommends: Thinking, Fast and Slow, by Daniel Kahneman

In his pop psychology book Thinking, Fast and Slow (Farrar, Straus, and Giroux, 2011), Kahneman says that humans have two systems of thought processing – one is "fast," intuitive, and conscious, the other "slow," reasoned, and conscious. While many of us may think of ourselves as rational, thinking beings, he says that in fact, most of us are dominated by the "fast" system of thinking. This fact matters in stock trading, because -- as his statistics show-- individual investors who trade often actually lose money consistently.

In a 2013 economic environment that is slowly recovering and still plagued with uncertainty, his book is a great reminder for us to not buy or sell stocks based on impulse or intuition, but to be more deliberate and remember: Sometimes, the wisest decision of all is to do nothing.

Sterling is a New York City transplant from Singapore who studied economics and politics at Sarah Lawrence College and the University of Oxford. Read his work for Minyanville, here.
Michael Sedacca recommends: Den of Thieves, by James B. Stewart

Den of Thieves (Touchstone, 1992) is a historical work of art, delving into what went on with policymakers and decision makers on Wall Street.

If you believe that humans tend to make the same mistakes over and over again, this is a book you should read to get the proper historical perspective of how the financial markets have got where they are. Each time the market cycles through a boom and a bust, scars are left behind. It also will show you the aftermath of what excessive risk taking and leverage looks like from the ground up.

Michael Sedacca is the editor of Minyanville's Buzz & Banter. He comes from Orlando, Florida, and played college golf at the University of North Carolina - Chapel Hill. Read more of his work for Minyanville, here.
No positions in stocks mentioned.
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