Wall Street 101

Wall Street, and finance in general, is a subject that can be not only confusing to the untrained ear, but overwhelmingly intimidating as well. It comes, as any specialty does, with its own private lexicon; terms like “credit default swap,” “backwardation,” and “volatility.” For insiders, phrases such as these serve as a familiar set of signifiers, used to navigate their way through newspapers and discussions and deals. For those of us on the outside, however, the jargon can oftentimes represent a foreboding barrier to the finance universe.

This does not have to be the case. Even if the keys to an understanding of high finance lie behind years of education and practice, there are things that an individual with no knowledge of the industry can do to further his investment in the field.

For one thing, a healthy summer reading list can work wonders when attempting to penetrate the seemingly puzzling world of Wall Street. It doesn’t have to feel like summer school, either; books like Andrew Ross Sorkin’s “Too Big To Fail” inform while they interest, making them easy to read and useful as tools of learning. The book, which begins in the midst of the recent credit crisis and follows several investment banks on their way to bankruptcy or buyout, is built on the endless detailing of countless behind-the-scenes conversations between top government officials and financial executives, giving it the feel of cliffhanger drama. Written for a broad audience, Sorkin’s book is exceptionally approachable for the economic newbie, with the need to look up a key term or phrase arising only occasionally.

“Too Big To Fail” is not alone in this respect; Michael Lewis’s “The Big Short” represents another work that is both informative and fun to read, according to Duke professor Emma Rasiel, a former executive director of the London office of Goldman Sachs. She also recommended to me in an e-mail “Random Walk Down Wall Street” by Burton Malkiel and “Devil Take the Hindmost” by Edward Chancellor as two books that provide more general overviews of the market and are not as closely linked to recent financial developments. “Liar’s Poker,” again by Michael Lewis, and “Monkey Business” by John Rolfe and Peter Troob are both good for an entertaining take on Wall Street, but come with the warning of providing a heavily biased picture.

Of course, there are other places to turn for information on the economy, newspapers probably being the most obvious alternative. Rasiel pointed me in the direction of The Wall Street Journal, which she cited as a strong reference due to the fact that it is one of the key sources used by Wall Street itself. For a more global perspective, try The Financial Times, which is especially pertinent now given the recent economic developments in Europe. The Economist, though not a newspaper but a magazine, is both very well written and well researched, according again to Rasiel.

A beginner may want to be wary, though, when making the move past print and publications. Sources like television talk shows and news programs, probably the most easily digestible form of media in any sense, oftentimes advertise their positions as simple, definitive stances that are prepackaged for the viewer’s benefit. Rasiel warned me that these are among the most biased of sources, and that they also tend to incorporate a large amount of the “in-crowd” lingo that deters novices in the first place. As far as the project of a self-made familiarity with Wall Street goes, then, television is most likely best left out of the picture, or at the very least taken with a hefty helping of salt.

Of course, to alienate one form of media from the others based solely on an accusation of bias is a little like the pot calling the kettle black. It’s true that the television programs can be more slanted than most, but that’s certainly not to say that the aforementioned books and papers, even the best of them, don’t have their leanings. After all, most of these works were conceived by their authors with purposes or messages to send, so naturally many of them will tend toward the thinking that created them. The trick is to spread your study across a wide smattering of the starting points listed here, and any others you might find, in order to cultivate from them a varied and diverse beginner’s understanding of Wall Street.

Eventually, expertise will inevitably trump these fundamental lessons, and at some point a formal education in finance is the only practical gateway to higher and more advanced understanding. For now, though, it’s vacation and time exists in abundance, and so a little summer reading is a good place to start.