Commodity prices have crashed, with everything from oil and metals to grains at multi-year lows. It seems like the end of the “commodity supercycle”, the post-millennium boom when prices of all base goods were soaring.
But how did they become so expensive in the first place? Well, rising demand played a part, alongside fear that supplies couldn’t keep up. But commodity traders speculating on prices also had a role, explains Kate Kelly.
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She tells the story of the era’s new breed of traders, hidden inside global investment banks or working in notoriously secretive hedge funds. They bought futures contracts and hoarded metals, while regulators investigated the impact on prices.
At one stage, Goldman Sachs was storing so much metal in Rotterdam that the glare from the sun interfered with air traffic control. Anthony ‘Chocfinger’ Ward was vilified when his hedge fund bought up 7 per cent of world cocoa supplies, when prices were already at 30 year highs.
Kelly focuses on the elite who timed the market perfectly, and made hundreds of millions. It’s a riveting read, and really puts today’s commodity crisis into context. She’s not really joking when she calls commodity traders “the secret club that runs the world”.
Prior to the noughties, most mainstream investment managers didn’t seriously consider commodities a viable choice. The commodities boom changed investment for good. This book carves a path through it all, via billion-dollar bets that went wrong, supermodel wives, and a travelling kick-boxing tournament.
REJECTION PROOF By Jia Jang
Many people privately fear rejection but few are as candid as Jia Jiang in their efforts to combat it. He made it his mission to make 100 requests to strangers, all of which had to be so strange they would likely be rejected. Jiang filmed the challenges to learn from them, and the results are – unintentionally – hilarious. He tried to get a stranger to go halves on a lottery ticket, inquired at a fire station if he could slide down the pole, wanted to be a live mannequin in a clothes shop, and offered to deliver a pizza for Domino’s.
“By challenging myself to seek out rejection again and again, I came to see rejection – and even the world around me – very differently,” he says. “It changed my life.”
It’s worth highlighting that Jiang’s no oddball. Aged 30 he had a picture-perfect life, earning a six-figure salary in marketing at a Fortune 500 company, and had a wife and child. Despite his success, he felt rejection keenly, and it was preventing him from pursuing his calling as an entrepreneur. “When I looked in the mirror I saw an ambitious guy who couldn’t handle rejection. I’d spent years working in a safe corporate environment and hiding from risks inside a team.”
The result is an interesting tale of rejection therapy, which tackles societal perceptions around failure and humiliation too. Interestingly, Jiang found even the strangest request will be granted if it is approached in the right way. Most heartening, though, are the requests which were accommodated through the kindness of strangers. Such as when he knocked on a door in the suburbs wearing football kit and asked to play soccer in someone’s backyard. It goes to show how far we can get, if only we try.
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EFFECTIVE INVESTING By Mark Dampier
So you’ve decided to knuckle down and start investing. But where should you put your money? In funds, if you ask Mark Dampier, who alongside writing about investment is also head of research at the UK’s biggest online fund supermarket, Hargreaves Lansdown.
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This book is for those who would be serious fund investors. Sure, funds have drawbacks, such as on-going charges or “style drift” – when the manager starts investing away from where he’s supposed to.
But Dampier’s point is that choosing funds is the simplest and most effective way to go about investing.
So which are the best? Not just the ones that top the league tables this year, that’s the first lesson. Short-term performance doesn’t tell the full story.
Dampier explains how to analyse a fund. He gives sample portfolios, listing the names of funds which would work well for different kinds of investors, including for children. There’s a section on his favourites, and some detail on other ways to invest, including buy-to-let. It’s a serious book, but then investing your life savings is no laughing matter. A good choice for anyone wanting to get under the bonnet of their portfolio.
THE BIG SHORT By Michael Lewis
The clean-up job from the great financial crisis is still ongoing, and events of six years ago are discussed as if they happened yesterday. Anyone who missed the show would do well to read The Big Short, which focuses on a handful of characters who spotted the untenable rise in risky mortgage lending which caused the crisis.
The so-called subprime mortgage market, where home loans were handed out to Ninjas (that’s people with no income, no job or assets) and heavily indebted Americans, grew so wild it brought a string of global banks to their knees, requiring taxpayer bail outs.
It started with a positive, yet slightly skewed, notion that allowing people to remortgage and take equity out of their homes would give them a chance to pay off high-interest credit card loans. From there, it spiralled out of control, mostly because brokers, traders and banks loved the money they could make gaming this new market.
Mortgages were issued, then re-packaged, bundled up, sold and re-insured by a host of big players in the most complex financial operation the world has ever seen. It’s baffling and intricate, but Lewis takes the reader through step by step, exposing the greed and fraud that rotted the core of Wall Street.
It’s the line-up of personalities that makes the story enjoyable. There’s a one-eyed genius with undiagnosed Asperger’s who brings heart and warmth to the prose, a recalcitrant hedge fund manager railing against the system, and most amusingly, the three guys who set up shop as investors in a garage.
The film has been made, but the book is arguably better, and a great starting point for anyone getting to grips with the crisis.