Recommended reading

Below is my list of what I consider the best books about trading, commodities, economics and psychology. My list covers everything from trading them, to commodity specific books, to insights into key players in the industry and more general reference books. This page will be a live page so I’ll be adding reviews as I go. Got a book you can recommend then send me a tweet @PeterSainsbury7.

Economics

The Great Economists: How Their Ideas Can help Us Today by Linda Yueh (US) (UK): This could be seen as a very dry subject, yet the author expertly weaves information about the economists background into how and why they made their breakthroughs. She then delves into why their ideas are still so relevant for the economic and social problems of today. Really enjoyed this book, its very readable and gives you an easy way of understanding the ‘toolkit’ of options that policymakers have on their table.

Talking to My Daughter About the Economy: A Brief History of Capitalism by Yanis Varoufakis (US) (UK): This is one of the best books I have read about macroeconomics for a long time. The author outlines how money and the financial system more broadly has evolved since the start of agrarian societies, how politics is in separable from money and the economy and how we will all have to make a decision on what is important in the future – competition and commodification on the one hand and democratisation on the other. Recommended for anyone looking to understand why the economic system is the way it is now and how it may evolve in the future.

The Fourth Turning: An American Prophecy by William Strauss and Neil Howe (US) (UK):  Published in 1998 The Fourth Turning provides a compelling explanation of generational cycles through the ages and importantly what it would mean for the early part of the 21st Century. Reading it now in 2018 there is plenty there regarding their prophecies for the fourth turning that have come true. And yet I’m always reminded of the caution over tarot card readers that there will always be something that you recognise as being true when viewed in hindsight or in the context of your own life experiences. From an investors point of view its always difficult to know what asset classes would benefit under different geopolitical scenarios even if you could see the future with perfect foresight. This book offers few clues in that respect. Nevertheless, the book is recommended reading for anyone wanting to understand different generations. As the cycles turn one prophecy I will make is that I will be coming back to this book may times in years to come – the events may be different, but people don’t change.

Trading

Positioning Analysis in Commodity Markets: Bridging Fundamental and Technical Analysis – Mark Keenan (US) (UK): Positioning analysis is a vast area of research that bridges both fundamental and technical analysis and can be used to understand commodity price dynamics, risk and sentiment. Mark’s book is a practical guide to understanding commodity price dynamics from a different viewpoint from most other books on the subject. A great book for both beginners and experts alike and useful for both commodity consumers (manufacturers for example) and speculators to understand commodity risk in more detail.

Technical Analysis and Stock Market Profits – Richard W. Schabacker (US) (UK): If you were going to start anywhere to understand technical analysis this should be the book. It was written just after the crash of 1929 and despite its age is very well written. The example charts are even more interesting given it provides you with the framework for understanding how you might have forecasted that a sharp drop in share prices was forthcoming.

Timing Techniques for Commodity Futures Markets – Colin Alexander (US) (UK): This book has really opened my eyes to technical commodity trading. The author gradually builds up the tools you need to understand how commodity futures prices move. At the very least it will help you analyse what the balance of risks are – potential loss vs potential gain. Central point is to have a short, medium and long term view of charts to gauge support, resistance and trends. Definitely one to re-read.

Market Wizards: Interview with Top Traders – Jack D. Schwartz (US) (UK): The book is exactly what it says on the cover, a series of interviews with traders of commodity futures, stocks and other assets. The book delves into what factors they look for when making trades or investments. A familiar theme that stretches through the interviews is that its more important what you do out of the market than in it, i.e. take your time doing the research and waiting for the right opportunity that fits your strategy and risk profile. As with all of these kind of books they only ever review the sample of successful traders that used these measures and won. No doubt there are plenty that did the same and lost. But of course no one wants to interview the losers.

The Complete Turtle Trader: How 23 Novice Investors Became Overnight Millionaires – Michael W. Covel (US) (UK): The book tells the story of how a group of random people signed up to an advert to learn how to trade. The ad was placed by Wall Street legend Richard Dennis as an experiment to see whether nature or nurture would influence whether the traders sink or swim. All of the recruits did well during the course, but it was in the outside world where nature (individuals characteristics like grit) marked the difference between those that went onto great success. If you are only interested in the trend following lesson that skip to chapter 5 and just read that.

Oil

Oil 101 – Morgan Downey (US) (UK): A very detailed reference book for anyone wanting to understand how crude and product markets work. This is not a light book – either in terms of weight or writing – but very useful nonetheless.

Agriculture

The Sugar Casino – Jonathan Kingsman (US) (UK): Jonathan takes you through the history of the sugar market, over-rated concerns about obesity, the controversial role of speculators, how companies are implementing sustainability, the way governments interfere in the market etc. The author puts each chapter in context with a story from his own experience being involved in sugar trading and an interview with prominent people involved at different points in the sugar supply chain.

Commodity Conversations by Jonathan Kingsman (US) (UK): This book is a great introduction to the physical and financial trade in agricultural commodities. It includes interviews with physical grain traders, hedge fund managers and futures exchanges that delve beneath the surface of how agricultural commodities end up on your dinner plate. The author does a good job of dispelling the frequent concerns that erupt over the impact that speculators have on the price of food. Often vilified, speculators provide a valuable service in transferring risk away from physical buyers and seller while also helping to anticipate potential deficits or surpluses.

Minor metals

The Elements of Power – David Abraham (US) (UK): Focusing on rare earth metals David delves into what happened in China to drive the price of these metals to stratospheric heights. Lots of good insight in the book about how opaque the markets are, shadowy characters aplenty. A worthwhile read given our dependence on these metals (as well as many other ‘minor’ metals) in things like smartphones and wind turbines.

General books on commodities

Commodities: 50 Things You Really Need To Know – Peter Sainsbury (US) (UK): I hope you like it. I’ll let you read what other readers have had to say about it. (link)

Hot Commodities – Jim Rogers (US) (UK): A very well written introduction to commodities and commodity markets. It was published in the early 2000’s so you need to consider that when reading it, but even so it’s full of useful insight. I particularly liked the chapter about lead – a hated commodity because of its health impacts, yet prices can still go up if supply falls faster than demand. Bear in mind that Jim Rogers is a long-term commodity bull – he has is own commodity index – so beware the presumption that prices can only go one way. Note that he also makes no mention of how contract expiries can erode returns.

The Economist Guide to Commodities: Producers, Players and Prices; Markets, Consumers and Trends – Caroline Bain (US) (UK): The book goes through the major commodities in turn, focusing on base and precious metals, energy and agricultural commodities highlighting the main trends in demand, supply and price followed by an outlook for the future. The book includes an introduction to commodity market fundamentals, introducing the basic economics of commodities and commodities as a financial asset. However, the book misses out on any discussion of the longer term impact of high commodity prices and the financial crisis on demand destruction and measures to improve efficiency. Finally the book fails to recognise climate change as an emerging trend affecting both price volatility in agricultural commodities and also potential future supplies of a broad range of other commodities.

Commodity trading houses / people

The King of Oil: The Secret Lives of Marc Rich – Daniel Ammann (US) (UK): A great autobiography about the commodity trader Marc Rich. A fascinating story of how his family emigrated to America and charts Rich’s rise and fall. Some fascinating stories about how Rich saw opportunity wherever he went from inventing the modern day crude spot market to finding a way for Iran to sell its oil while under sanctions.

Forecasting

Crude Forecasts: Predictions, Pundits & Profits in the Commodity Casino by Peter Sainsbury (US) (UK): This book will help you make better investment decisions in commodity markets. Find out which pundits and forecasters really know what they are talking about and track them. Understand the factors you can use to hold the ‘experts’ to account. My second book – click here for more information including some great reviews

Superforecasting: The Art and Science of Prediction – Philip Tetlock and Dan Gardner (US) (UK): Want to be better at forecasting the future? Then this book at least tells you how to think about it in a better way and how you can train yourself to get better. Key insight is the use of Bayesian analysis to estimate a probability based on outside evidence (past occurrences) and then constantly adjust your outlook based on inside intelligence (based on the thing you are trying to forecast).

The Signal and the Noise – Nate Silver (US) (UK): A book I’d been meaning to read for some time. Although some of the chapters were a bit difficult to follow (I don’t know anything about baseball) there are some good insights in this book and overall its a good read. Especially worth noting the Bayesian path to less wrongness.

Future Babble: Why Expert Predictions Fail and Why We Believe them Anyway – Dan Gardner (US) (UK): Builds on previous work of Tetlock and others to explain why we really should know better than to trust the pundits that grace our TV screens. The author outlines why pundits such as Paul Ehrlich and others are so compelling, but at the same time need to be given a wide berth. Although the book feels a bit repetitive towards the second half as examples are dug up and used again, overall this book is a great read. The kind of critical thinking required to guard against being taken in is hard, indeed very hard to do all the time. This book will get you started.