Update No. 33: Understanding and Keeping Track of the Financial Markets
Post summary: I provide a resource to track the main financial markets and I provide resources to better understand the economy.
Understanding how the economy works and keeping track of the financial markets is essential not just for profiting in business, but also for understanding the world.
Be you an investor in the financial markets, a businessman, or simply a person interested in understanding the world better, an understanding of the economy and keeping up to date is one of the best investments you will ever make. At best, you profit wonderfully, at worst, you can have something to talk about with others.
A couple of weeks back I created the webpage “Nornir
” for personal use, both as an exercise in programming and to keep track of certain markets. The page tracks five indexes and is updated regularly. I track the S&P 500 Index (USA), the Nikkei 225 Index (Japan), the Hang Seng Index (Hong Kong), the DAX Index (Germany) and the Rogers International Commodity Index.
It is very interesting to see in the graphs how the previous financial bubbles built up and exploded. Readers will also see how, even though booms and busts have occurred throughout history, every financial bubble is bigger than the last.
I updated the page regularly, so if you want to track those five indexes, I recommend bookmarking the page.
I am planning on either building more into the webpage or creating a separate website. I will be adding more resources to track (among other things) crude oil, natural gas, gold, copper, the junk bond vs. investment-grade yield spread, high-yield bond issuance and Debt to GDP. Depending on whether readers are interested in it or not, I may keep it private or share it publicly once finished.
Tracking the financial markets can benefit investors in multiple ways. For those focused on domestic markets, it can help them anticipate booms and busts in particular sectors. This can be useful in multiple ways: (a) investors could plan for buying low and selling high (or simply not losing money in a predictable downturn), and (b) investors could short a looming bust. As a recent example, many investors who understood and kept track of the energy sector were able to short energy stocks as the downturn unfolded; others were able to hold off buying.
Another relatively recent example is the 2008 crisis. Some investors who tracked the real estate sector were able to short securities and bank stocks and profit from the downfall. Some were also able to go long institutions that the government publicly stated would protect. Billions were made.
Below I will provide resources to better understand the economy, understand how booms and busts occur, and be better prepared to profit from the markets.
For a basic introduction to understanding the economy, I recommend Ray Dalio’s “How the Economic Machine Works
This document is free to download and was authored by renowned fund manager Ray Dalio. It introduces the reader to how the economy works and discusses the past and future.
If you don’t want to read the full file or would like a “fast preview”, you can also watch the video
. It explains the economy in a simple manner, in less than 31 minutes.
For understanding how economic booms and busts occur, I recommend reading “Manias, Panics and Crashes
It is a great book for understanding how previous financial bubbles came to be and the factors behind them. You will not only learn history, but you will also learn how to explore for signs of financial bubbles and looming busts.
For an even better understanding of economic history and financial markets, I recommend the books “The Wealth and Poverty of Nations
” and “The Ascent of Money
Both of these books are excellent. They provide the reader with an in-depth understanding of the economy, financial markets and the world. The book “The Ascent of Money” also has a very nice video series, which readers might opt for.
An understanding of economics and the financial markets is beneficial for everyone, even if they do not invest in financial securities. People who understand and follow the financial markets will understand when prices in X go up and down. Stocks, real estate, gas prices, interest rates. The price movements of these can be understood, at least in a functional manner, by simply doing a little reading. The resources I have shared above will provide you with a basic, yet useful understanding of how our world works.