This recommended reading list of sorts includes some of the most thought provoking and interesting books we know of at Attain focusing on (or at least touching on) alternative investments. The list doesn’t include hands on, how to, books which tell you to buy here and sell there. We frankly find those pretty boring. These are actually stories in their own right, whose interesting characters just happen to be real life traders/investors mixed up in one way or another with the world of investing.

Our favorites:

I’m not sure who gets the credit for the line, but we’ve all heard in one form or another that growing as a person (or investor) is to learn from one’s mistakes. Well, this book details the very large mistakes that were made by one of the biggest (and supposedly smartest) hedge funds ever, Long Term Capital Management and their pair of Economics Nobel Prize Laureates. Their collapse nearly crippled the financial system, resulting in an unprecedented bailout from the US fed (sound familiar to current times). Just how such smart people who literally wrote the book on risk got it so wrong is truly an intriguing story which helps the every day investor understand there is much more to risk than meets the eye. The sheer size of the numbers of dollars being made or lost in this book make it a compelling read.

One of my personal favorites, Fooled by Randomness stands a lot of conventional wisdom on its head by questioning the very fabric of skill and success. Are traders/investment managers actually good? Or just lucky? Mr. Taleb would have you believe there is a lot more luck to it than one would think, and not really even luck as you or I would think about it, but luck in terms of not yet having experienced an outlier event such as a 1 in 100 year storm or black swan, as he would call it. The end result for Mr. Taleb is a market that is much more random and crazy than can be modeled or predicted, leading those who believe it can be modeled or predicted down a dangerous path. Warning for option sellers — Mr. Taleb is wholeheartedly against option selling, and in fact runs his own hedge fund which specializes in option buying in hopes of profiting from the impending outliers he believes the rest of us aren’t thinking about.

Continuing on with his theories from his first book — Mr. Taleb’s follow up book gets into a few more specifics about how the world (and especially the financial world) is comprised of rare events he calls black swans, which are so rare as to not even be considered as a risk. The tragedy on 9/11 is a prime example of a Black Swan. The stock market crash in October 1987 is another. This book quickly became his most famous work due mostly to its timing, coming out in early 2007 (just monthly before the real life black swan of the credit crisis started to show), and some passages blasting bankers as little more than lemmings following the herd without a clue as to the risk and leverage they are employing.

Quite the opposite of the book above, this book details the trials and tribulations of a group who actually did believe the markets could be modeled and profitably predicted. If you have ever thought of writing your own trading system — these guys sure did, and took it to a whole new level. The title is a little misleading, as they were mainly dealing with derivatives markets, not Wall St. stocks and bonds — but it is an interesting read on just how far some will go to beat the market. And just how much big money or banks are willing to believe that such beating of the market is possible, even if the proof isn’t exactly there. The beginning of this book paints a great picture of the now nearly defunct, controlled chaos that is/was futures trading pits in Chicago, and is worth the price of admission just for those few dozen pages.

While this is more of a textbook than a narrative like the other books listed here, and rather statistically heavy, this is a great book for learning the different types of alternative investments, along with the benefits and dangers of each. The many different types of hedge funds, commodity and managed futures, private equity, credit derivatives, and corporate governance are all covered. Anson is the former Chief Investment Officer of CalPERS, the huge California Pension which is the largest Pension fund in the US with nearly $250 Billion in assets, and as such one of the largest investors into alternative investments. With that type of experience, it is worth hearing what he has to say.

For anyone who gets excited whenever the prices at the pump go up and down, or takes a peek at the news or online to see what Crude Oil prices did each day — this book is for you. It is the history of the modern world, in a way, told through the eyes of the oil industry. Did you know the first oil wells in the world were in Pennsylvania, that the rights to Saudi Arabia’s oil was first secured for just $175,000, or where the name Shell Oil came from. The Prize is a Pulitzer Prize winning must read that puts you behind the scenes at important cross roads in history where oil was often the main character. With the current state of affairs in the world regarding oil, seeing how we got there is a great exercise.

But life isn’t all markets and statistics, or so they tell me, and the following two non-market related books are good reads we felt belonged on this list.

This may be the most well known book on this list, and at its base level is about putting together a winning baseball team with a shoestring budget. But there is a very interesting corollary to assembling a winning portfolio. In the book, Billy Beane figures out that poring through massive amounts of statistical data can be a more reliable method for building a team than going with high priced past performers. What could that mean for a portfolio — not picking household names that may be overvalued? Taking a chance on a relatively unknown manager, etc. that has the statistics to back it up? This book will get you thinking about your portfolio in a different way.

This is required reading for every Attain Capital employee on their first day, and is the basis of our old fashioned customer service culture at Attain. Know your customer, and do whatever you can (and them some) to help them are the basics for author Jack Mitchell, who runs two men’s clothing stores in two of Manhattan’s most affluent suburbs. For anyone who has customers, and wants to take care of them, this quick read is for you. Although, Nassim Taleb of ‘Fooled By Randomness’ (above) might just say that Jack Mitchell was merely lucky, in the right place at the right time.

We hope you found a book or two on our short list which piqued your interest, and look forward to hearing your thoughts on any of the above. Hopefully some friendly debates on statistical randomness, whether oil really started this war or that, or whether Long Term Capital Management would have profited on their positions will surface.

IN THE MEANTIME, IF YOU HAVE SOME MUST READS OF YOUR OWN THAT TOUCH ON ALTERNATIVE INVESTMENTS — WE WOULD LOVE TO HEAR WHAT THEY ARE. EMAIL YOUR FAVORITES TO INVEST@ATTAINCAPITAL.COM OR CALL US AT 800.311.1145