A great deal of the financial press, and the corporate announcements and press releases made available for investors, can be impenetrable if you don’t understand what you are reading, watching, or listening to. The business world is full of strange jargon and alien concepts that simply make no sense to most folks. “How to Read the Financial Pages”, by the financial journalist, Michael Brett, was written to help solve this problem.
### Health warnings
The book was written for a UK audience, and focusses on UK markets. Many of the topics covered are transferrable across borders, people being much the same the world over, but if you don’t live in the UK, and are primarily focussed on your home market, then this may not be the book for you.
The book is also old. It went through multiple editions, but the latest one is from the turn of the 21st century. It was published in digital form in 2011, but that release is merely the earlier edition in digital form.
Some of the included material, for example tax rates mentioned, were probably out of date even by the time the book was published. Facts and figures were as accurate as they could be, but only at the time of writing. The Introduction inadvertently highlights this point by focussing on the merger between Vodafone and Mannesmann, a massive tech deal of the time, but irrelevant to today’s readers.
The book was written prior to the financial crash of 2008. This undoubtedly brings into question much of its coverage of the financial system. It had a number of other crises to draw on, such as Britain’s withdrawal from the European Exchange Rate Mechanism, the asian debt crisis of 1997, and even the latin debt crisis of the 1980s, to learn from. However, every crisis is different and brings something new to the table.
### About the book
The book is an introductory text, aimed at the novice or layman, though it could also be of use to some professionals as well. A major theme that runs through the text is the globalisation of money and finance and the disruptive effect that the internet was having on the financial world.
The first third of the book broadly focusses on the terms and concepts used when discussing companies and shares. The kinds of concepts covered are things like return on investment, how to calculate Interest rates, and the difference between short and long term rates. This section also covers things like the opportunity cost of money, expected rate of return, and the fact that stock markets discount future events and always look forward.
Parts of these early sections, such as the explanation of how the UK stock market works in chapter 2, are now very out of date. However, the explanation of company accounts remains very useful. Accounting practises have changed in the intervening years since the book was written, e.g. profit and loss accounts are now almost always known as income statements, but in terms of understanding the basics the book is a decent read.
Brett provides an example of a couple of articles that highlight the difference between a tip and a well researched piece of analysis that is as relevant today as it ever was: maybe more so.
He then goes on to examine some of the more established ratios, such as price to earnings, net gearing, and net asset value, in a clear and concise manner. He also provides a good explanation of how shares work, how to calculate their values following splits and rights issues etc.
He covers debts, banks, and the money markets in much more detail in chapters 13 14 and 15. The discussion of recent development in the banking sector, such as the massive increase in derivatives trading, the collapse of Bearings bank in the 1990s, and the expansion of the large banks into a whole host of other financial activities is particularly interesting, since we know how it all turned out.
In chapter 7 Brett examines what moves shares in normal times, then follows this with an examination of the 1987 crash. Written before the dotCom crash, the financial crisis, and covid, some of this stuff is obviously out of date. That being said, many of the principles remain the same, based as they are on human nature. In some ways all technology has done is speed everything up.
Currencies and the international markets are covered in chapters 16 and 17. Though many of the mechanisms may be out of date the chapters provide some good basic examples of how floating exchange rates work, what moves them, and why they are so important in our globalised world. The same goes for derivatives, options, and commodity trading, covered in chapter 18.
The absence of crypto currencies is notable, but understandable, since they hadn’t been invented yet.
The same goes for the lack of any mention of REIT’s in chapter 21 on commercial property.
### Allan’s view
The aim and scope of this book is incredible. If this review covered the seventh edition from 2024, or even the sixth edition from 2017, I would be recommending this hands down, and constantly referring back to it myself.
There is still some really useful stuff in it;
Unfortunately, given its age, there is too much stuff that is out of date, irrelevant, or just plane missing;
Chapter 6, Equities and the stock exchange, chapter 21, Savings, pooled investments and tax shelters, and chapter 22, Supervising the city
Are not worth reading
Flicking through all the recommendations in Chapter 23, Print and internet, is an interesting exercise. They were all great resources in their time. Some of the resources still work but plenty don’t, or have changed beyond recognition.
But the basic problem with the book is that, the target reader, who is going to the book because they don’t understand, is wholly unqualified to work out where the book might lead them astray. They can guess that rules around the banking system, covered in chapter 14 have changed since 2000, but they have no idea which ones. Since the chapters on government bonds, currencies, and the money markets were written prior to the financial crisis and the euro debt crisis, they have no idea what they, and the wholesale march of technology have had on the structure or working of the bond markets, the currency markets, and the short term money markets.
### Conclusion
Some investment books are ever green, and remain worth reading years after they were written. This one, while having some ever green stuff in it, no longer offers the practical help that it once did.
If you see it going cheap, I recommend buying a copy and reading it on holiday by the pool. It is actually really interesting and covers some stuff that has now been forgotten. But don’t waste your investing budget on it, and certainly don’t rely on it as a practical guide, because, totally unintentionally, it might just lead you astray.
If a new edition is ever released, then I will be snapping it up. But, as it stands, I think this is now one for the historians and the enthusiasts.
