It was one of those deeply frustrating times when I sorely wanted to lose myself in a good read and nothing I picked up my first week of holidays did the trick. How this happens I just don’t know. Normally I’ve several books on the go and many more I’m looking forward to. It’s predictable that as soon as I’ve all the time in the world to read, nothing makes me happy. The more disinterested I became in the choices available to me, the higher the stakes rose.
What I really wanted was an all-consuming, perhaps even life-altering masterpiece to come sweep me off my feet.
In the end I settled for Hilary Mantel’s Wolf Hall. Recently I’ve become very interested in the 16th century — but this is a topic for another day.
It was within this particular book mood, prone to dissatisfaction as I was, that I set about my latest weekly assignment which was to tackle How to Read the Financial Pages. Despite my moody fussy-ness, I can hand on heart say that it wouldn’t have mattered when I read this book, my verdict would be the same.
Do not read it. Just don’t.
While I hate to trash other people’s work, the book I downloaded onto my Kindle committed several crimes…
- It discussed important financial concepts without explaining them
- Unless I missed it, and I admit it was so frustrated, that I did skim brutally — the author never even hinted as to why the information in the financial pages might be important for the ordinary person to understand. (By the time anything serious happens, the general news section explains all things financial in plainer terms.)
- While an updated edition, the book showed its age (e.g., the fascination with a major development in information technology known as the internet.) Though this datedness was spooky in places
“In the United States the population as a whole had ceased to save, relying on its sense of prosperity on the value created by an ever-rising stock market. If the stock market fell, would this have a knock-effect on the real economy by destroying the feel-good factor, discouraging spending and putting the brakes on economic growth? If so, the effects would be felt in Britain and across the rest of the world.” Kindle Location 234
The author introduces the term derivatives, explains something of their significance but offers neither an actual definition nor any examples. I can guess from the literal meaning of the word, that these are things that are derived from other sorts of monetized stuff. But that’s pretty much it. Not only do I still not know what a derivative is, after establishing what I’d hoped would be a profitable relationship with this book, I’m now also confused about securities and equities and what makes an equity an asset. And this is just the beginning.
In fairness to the author he mentions at the outset something about a glossary, but could I find it? No. Is this is a Kindle edition defect? I feel it must be.
The author goes on to offer advice such as “when you read a tip for an Internet-related company whose share prices are soaring into the stratosphere, just work out on the back of an envelope what profits that company would need to earn to justify its market value.”
Which is like saying to someone, “when you’re about to do something stupid, stop and think about it first.”
Assuming that the reader already knows what sort of calculations to do in order to value a company, begs the question as to why this same reader would need to read an entire book on how to decipher the financial pages in the first place?!?
After losing several hours to this book, I threw caution to the wind and dove into The Financial Times clueless as I am. After the torture of the book, the newspaper was an absolute pleasure. I especially enjoyed the “head versus heart” property comparison section, but other bits too. And as for those derivatives and securities and equities, the fascinating rise of the Internet gave me a helping hand.
The London Stock Exchange’s glossary provides the least jargon-riddled explanations I found.
- Securities – General name for stocks and shares of all types.
- Derivatives – A derivative is an instrument whose value depends on the performance of an underlying asset or security, which may be a commodity or a financial instrument
- Equity – The risk-sharing part of a company’s capital, usually made up of ordinary shares.
And as for why I need to know any of these terms? This remains unclear. In theory it makes decisions about where to put my money easier, but in truth this is a decision I’m incapable of making without professional advice (at least, if we’re talking about where to put most of my money). But I continue for now in the faith that getting to grips with financial information shall serve a higher purpose in my life. Sometime soon, I hope.