A History of Interest Rates (Rutgers University Press, Third Edition, 1996). OK, so the first edition of this book was first published in 1963 by Salomon Bros. research pioneer Sidney Homer, but the third edition was updated in the 1990s by NYU Professor Richard Sylla and remains a classic. Although one wouldn't want to try to read this from front to back, it is still good to peruse. This book offers a comprehensive history of the cost of money from ancient Babylonia and Rome (where, during the peace of Augustus, interest rates fell to as low as 4 percent) to the major economies through 1994.
A Random Walk Down Wall Street (Norton, 2003). Princeton University Professor Burton Malkiel is now well known, since he, along with John Bogle, the founder of Vanguard, is considered the intellectual father of indexing. But when Malkiel first published this book in the 1970s, comparing stock price movements to the zigzag walk of a drunken man, it made quite a sensation. Agree with him or not, it's a great (albeit cranky) overview of the major investing strategies.
Irrational Exuberance (Princeton University Press, Second Edition. 2005). Yale University Professor Robert Shiller pretty much called the stock market drop when this book was first published in 2000. In this fact-packed book, Shiller describes the psychological origins of volatility, among other things. And in the newest edition, Shiller compares the recent housing boom to the stock market bubble of the 1990s.
Winning the Loser's Game (McGraw Hill, Third Edition, 1998). Originally published in 1985, this book by Charles Ellis, a partner of Greenwich Associates, the legendary institutional consulting firm, would make a good gift for clients. Ellis is one of the legends of the pension consulting business, and he brings that technical experience down to a simple level.
Advisors might suggest to their clients that they turn to Ellis' “ten commandments” for the individual investor: “Number Four — Don't think of your home as an investment. Think of it as a place to live with your family, period. Except when inflation surges…owning residential real estate is not a great investment.” But one wonders if he would change his mind about always avoiding commodities? A fourth edition of Winning the Loser's Game was published in 2002.
Capital Ideas: The Improbable Origins of Modern Wall Street (The Free Press, 1992). Peter Bernstein is best known for Against The Gods (about risk). Capital Ideas describes the affect that academics had on Wall Street, from MPT to options pricing. “Had it not been for the crisis of 1974,” he writes, “few financial practitioners would have paid attention to the ideas that had been stirring around in the ivory towers for some twenty years.”
Liar's Poker (W.W. Norton, 1989) Former Salomon Bros. bond trader and Money Ball author, Michael Lewis penned this wickedly funny bestseller about the culture of high-stakes gambling and deceit that pervaded the bond-trading desks of Wall Street's biggest firms in the 1980s. Many people became filthy rich by taking daring risks during one of the biggest bull runs in history. Liar's Poker is a brilliant cautionary tale about how easily hubris can take hold in a highly competitive environment like Wall Street.
Den of Thieves (Simon & Schuster, 1991). Pulitzer-prize winning Wall Street Journal reporter James Stewart chronicles the machinations of some of Wall Street's greatest villains — “junk bond king” Michael Milken, arbitrage giant Ivan Boesky, as well as Martin Siegel and Dennis Levine — and regulators' struggles to trap and convict them. All four individuals were involved in the insider-trading scandals of the 1980s, when a takeover frenzy fueled by junk bond financing exploded and everyone wanted a piece of the action.