Valuing Wall Street, written by Andy Smithers and Stephen Wright, is a work largely commenting on Nobel laureate Jim Tobin's Q-Ratio (total market capitalization as a percentage of GDP).  The Q-Ratio has been discarded for some time now by most all modern day bulls because its message is not pleasant.  The stock market current Q-Ratio is twice that seen in 1929, 1973 and 1987.  There are plenty of arguments to be made on both sides of the equation, but Smithers and Wright are well worth a listen.  As you may know, Andy Smithers has had many decades of top-flight real world stock market experience and currently runs his own investment strategy/consulting firm for global clients out his home base in the U.K.  Smithers and Wright have history on their side.  If the last ten years are the norm for market valuations, then the last three hundred years of capitalist history in this country is just one big fluke.  You decide.

Irrational Exuberance, the infamously titled new work by Yale economics professor Robert Shiller takes its name from the phrase that Shiller is alleged to have used with Greenspan prior to the Greenspan's public "outburst" of some years back.  Clearly Shiller relies on "old metrics" to prove his point of a highly overvalued market of the moment - P/E, dividends, etc.  Snot nosed, orange mohawked, dotcom zillionaires (recently lowered to mere millionaires) unfortunately will not be able to relate.  Shiller does raise good points regarding the current influence of the media, cheerleading analysts and new age market pundits on current market consensus thinking and overall psychology.  Likewise he points to the rise of the 401(k) vehicle as placing retirement fund decision making power in those possibly least understanding of long term market history.

Devil Take The Hindmost, by market academician/historian Edward Chancellor, is really a socio-economic history of finance.  Chancellor essentially charts the history of speculation from Tulip Mania right up to the recent (former?) Internet stock affection.  Chancellor presents a balanced approach in his retrospective of speculation.  He comes across as neither bullish nor bearish, but rather factual in recantation.  An excellent history of the Molotov cocktail of human nature combined with financial assets. 

                       The Money Game, by Adam Smith, is quite appropriate for the current market environment. Originally written in 1967 and reprinted in 1976, this one's a classic.  Smith probes human decision making, crowd behavior, and recounts anecdotes from the go-go years.  Because of the similarities between that period and the current environment, this one is timely. For one-half of the cost of one E*Trade execution (when the computers are working, that is), Smith provides a wealth of information.  For those boomer investors who were protesting capitalism and missed the 1974 market debacle, do yourself a favor and read The Money Game.  Those who are ignorant of history are doomed to ..... (well, you know the rest).

The Go-Go Years is also another tome that captures the spirit of the late 60's quite well.  John Brooks does a good job in pointing out modern day market parallels with the go-go period.  It's not that the current market does not also resemble the late 20's in the US, and Japan of the late 80's, in many ways, but the comparisons with the 60's bull includes the effect of the mutual fund complex.  Remember, many a mutual fund portfolio manager today has never experienced a true bear market.  These fine young men and women were in kindergarten during the go-go years.  If you do not know how this go-go "era" ended... well, on second thought, maybe you really don't want to know.  Party on!

TRADING AND THE PROCESS OF SELF-DISCOVERY

                 "A stock operator has to fight a lot of expensive enemies within himself"

                                                                                - Jesse Livermore

Reminiscences Of A Stock Operator reputedly contains the thoughts and life story of the infamous Jesse Livermore, as told to Edwin Lefevre. We have one major regret with the book, and that is that we did not read it when we first learned about it.  The anecdotes regarding trading, personal introspection, and emotional self control/discovery are worth their weight in gold (when gold was worth something).  Lefevre weaves an entertaining story around lessons every trader/investor needs to learn and then learn again. Livermore made and lost several fortunes before blowing his brains out  in the men's room of the Sherry Netherland Hotel after having two martinis at the Grill Room Bar as was his daily custom.  The verbal legacy left, as recounted by Lefevre, clearly demonstrates his life was not in vain.  In our minds, a must for any investor. A must.

Jack Schwager, a trader himself, has put together a set of interviews with some of  the top options, futures, commodities, currency and cash market traders in the country.  The reader is exposed to many different styles of trading unique to each interview participant.  We read Market Wizards first and enjoyed it.  Enough to have plowed through it twice.  The book is now a bit dated (a decade old), but it's the conceptual discussion  that counts, not the then current market environment.  The New Wizards was a bit more tedious.  The books are worthwhile from the standpoint of catching glimpses of introspection and self awareness from a good number of the interview subjects.  There are no get-rich quick trading schemes here, just personal insights and observations of the human beings behind the Wall Street trading legend masks.

Although our investment philosophy is firmly grounded in numbers oriented analysis and interpretation, we are quite open to and embrace technical analysis as another arrow in the quiver of multidisciplinary decision making.  We believe Marty Pring's Technical Analysis Explained is the veritable technician's bible.  In a market such as we find ourselves today, historical valuation guideposts and numbers oriented parameters have been discredited (for a while, at least).  Pictures can often tell a story equally as well as words.  For the novice as well as the experienced pro.  This is definitely one for the library of any serious/active investor.

Victor Niederhoffer, a trader with Soros affiliations, wrote Education Of A Speculator as a homage to himself and "lessons of his life" type of  book about one year before his trading firm blew up.  Unfortunately, Victor was heavily writing out-of-the-money S&P put contracts and got caught margined big in the steep (and of course temporary) decline in the US market during the fall of 1997 (related to the initial Asian crisis scare).  Despite his untimely trading meltdown, the book does lead the reader into typically unconventional territory.  In recounting his experiences, Niederhoffer explores the interdisciplinary relationships of trading, art, music, sports, and gambling.    There are no magical or hard-core trading secrets here.  Far from it.   It's the process of self discovery we're after.  Whether intentional or not, Niederhoffer opens the door to the question "What lessons from life can I bring to trading/investing?".  As you know, only you have the answers.

Here's a curve ball.  Influence - The Psychology Of Persuasion was a book recommended by Eric Miller in one of his DLJ market "observation" pieces.  On a whim we purchased this book and thoroughly enjoyed it.  Thank you Eric.  It has nothing to do with the market (directly).  Bob Cialdini creates an easily readable text that delves into "triggers" that motivate and help explain human response both from an individual and a social perspective.  We highly recommend it as a diversion from market-oriented reading.  Will this text help make you a better investor/trader?   Who knows.  Just maybe it will help you to know yourself a little better.      

                Especially in an ambiguous situation, the tendency for everyone
               to be looking to see what everyone else is doing can lead to a
                fascinating phenomenon called "pluralistic ignorance" . - Robert Cialdini

SOME CLASSICS FROM THE CONTRARIAN VAULT                               

Come on, now.  What ContraryInvestor's library would be complete without a copy of Charles MacKay's Extraordinary Popular Delusions and the Madness of Crowds ?   The South Sea Bubble, Tulip Mania, etc.  As Mark Twain said, "history never repeats itself exactly, but it does rhyme."  This one may be timely as tulips are making a comeback.  At least that's what we've read on the Internet.

    John Kenneth Galbraith is close to a household name for those familiar with the financial markets. This legendary economist has a good number of writings under his belt.  Two particularly suited to the current environment are The Great Crash and A Short History of Financial Euphoria.  As you would imagine, The Great Crash discusses and recounts the events leading up to and surrounding "the big one" in 1929.   As a companion, A Short History of Financial Euphoria describes the process and characteristics of how financial euphoria's come to be.  Clearly no two historical periods are exact look-alikes, but it's the underlying assumptions and characteristics that count.  According to an old Russian proverb, "Dwell on the past and you will lose an eye.  Ignore the past and you will lose both of them".  

The Crowd: A Study of the Popular Mind

Gustave Le Bon wrote The Crowd almost 100 years ago.  Truly a classic study of human nature.  Le Bon's works are not part of modern day literary paparazzi, but are quite applicable to the current market and society at large.    

The Art of Contrary Thinking

Humphrey Neill is one of the forgotten forbears of contrary investing.  The Art of Contrary Thinking will not give you the keys to investment riches, but offers commentary on the human difficulty in making decisions and taking action in a manner opposite the crowd.

Dave Dreman, one of the godfathers of contrary investing, is at it again in Contrary Investment Strategies.  We offer this selection given the general lack of availability of Dreman's earlier works.  This one contains a lot of crossover with his thoughtful works of the early 1980's.  In the current world of extraordinarily insightful investment rationales such as "it has momentum" or "it's a great company", Dreman seems like slow moving traffic.   Before you shove this "old era" thinker out of the way, remember that Dreman is one of the few authors who also happens to have one hell of a terrific long term investment track record in actually managing real money.  Any of you modern day pop-investment guru's care to share your actual investment results with us?   (Don't get so defensive.  We were just asking.)

Like father, like son?  Son Ken Fisher gets a lot of press and has topped his dad in the volume publishing wars, but Phil Fisher has always been an admired figure in our book.  Phil's early manuscripts on investing are wonderful.  The unknown Buffet?  We believe Phil's definition of long term is forever.  No kidding.  Some of the comments and important points of the book seem a bit dated.  Meeting directly with corporate management was a must for Phil.  As we know, these days, many among corporate American management's finest have the credibility level of the President (this used to be a good thing).  It's amazing the tricks stock option based pay can play on your eyes and ears.  All sarcasm aside, Phil Fisher will always be one of the great investors of modern time and deserving of our attention and respect.     

MESSAGES FROM THE DARK SIDE

    In The Bear Book, John Rothchild suggests the current market environment may be ripe for a panic (or maybe not).   Rothchild does not offer anything definitive (who could?), but takes the reader on a recantation of past market experiences that have ended other than well.  We all know it's a matter of when, not if.  Don't we?  Rothchild's entertaining style makes for smooth reading.  There are suggestions for where to invest your money (or, at least, what's left of it) in a bear market.  We suggest that investors who have "arrived" in the 1990's read the book.  Be willing to entertain an alternative outcome.  Pros may want to pass. 

    Gerald  Loeb wrote Battle for Investment Survival a number of years ago as another in a series of updates of an original book written in 1934.  This is not some reprint or outdated piece.  We believe that Loeb does a good job in provoking thought.  He questions "buy and hold" and "diversification" as standard tenets of current investment dogma.   He flirts with self assessment in discussions regarding maintaining a "distance from the crowd" and remembering that making mistakes is a big part of the human condition.  Clearly bearish, we believe Loeb is worth a listen.  Now so more than ever, as this was written over two years ago.  What's that old saying.   Oh yeah.  "Wall Street's graveyards are littered with those who were exactly correct...too early".  We suggest a timely visit to the Wall Street graveyard nearest you.  

Frederick Allen offers a very entertaining and enjoyable look at the 1920's in Only Yesterday.  With the '29 (and subsequent) crash clearly fresh in his mind, Mr. Allen wrote this in 1931 as a look back on what has proven to be a very remarkable period without subsequent precedent (until now?).  Only Yesterday portrays a real feel for the "Roaring Twenties" period.  This is not so much a book precisely about market events (although plenty are included), but rather an entertaining piece that encompasses a broader view of life with historical accuracy.        

Charles Kindleberger covers a multitude of prior era Mania's, Panics and Crashes in this quite academic text.  This is definitely not light reading.  For the discriminating reader desirous of detailed explanation, you've hit paydirt.  Kindleberger recounts the multitude of financial "disruptions" over the past few centuries.  Now that we have banished the business cycle and beaten the Kontradieff wave in the current environment, this is all ancient history.  Right?   

    Fraser Publishing.  Jim Fraser writes The Contrary Investor Newsletter and operates Fraser Publishing.  Jim isn't just any publisher, but rather offers plenty of "out of print" (except for Jim, of course) classics along with applicable modern day faire.  Do yourself a favor and visit the folks at Fraser Publishing at www.fraserbooks.com.  Jim was professionally involved with Humphrey Neill while Neill was alive.  He is also the host of a wonderful investment conference held each year during late September in Vermont.  For the thoughtful investor, visit The Contrary Opinion Library at Fraser Publishing.