November 17, 2012
Book Bits | 11.17.12
● Post Modern Investment: Facts and Fallacies of Growing Wealth in a Multi-Asset World
By Garry Crowder, Thomas Schneeweis, and Hossein Kazemi
Summary via publisher, Wiley
There have been a lot of big changes in the investment world over the past decade, and many long-cherished beliefs about the structures and performance of various investments no longer apply. Unfortunately the news seems not to have reached many thought leaders and investment professionals who persist in trying, and failing, to apply 20th-century thinking to 21st-century portfolio management. Nowhere is this more true than when it comes to the subject of alternative investments. Written by an all-star team of investment management experts, this book debunks common myths and misconceptions about most classes of alternative investments and offers valuable advice on how to develop investment management and asset allocation strategies consistent with the new realities of the ever-changing world of alternative investments.
● The IMF and Global Financial Crises: Phoenix Rising?
By Joseph P. Joyce
Excerpt via publisher, Cambridge University Press
Among the many surprising features of the global financial crisis of 2008–9 was the emergence of the International Monetary Fund (IMF) as a leading player in the response to what has become known as the “Great Recession.” The news that the IMF was “back in business” was remarkable in view of the deterioration of the IMF’s reputation after the crises of the late 1990s and the decline in its lending activities in the succeeding decade. The IMF had been widely blamed for indirectly contributing to the earlier crises by advocating the premature removal of controls on capital flows, and then imposing harsh and inappropriate measures on the countries that were forced to borrow from it. The number of new lending arrangements approved by the IMF had fallen from twenty-six in 2001 to twelve in 2007 (Figure A.2), and all but two of the latter went to the IMF’s poorest members, which had little access to private sources of finance.
● The Rise of China vs. the Logic of Strategy
By Edward Luttwak
Summary via publisher, Belknap Press/Harvard University Press
As the rest of the world worries about what a future might look like under Chinese supremacy, Edward N. Luttwak worries about China’s own future prospects. Applying the logic of strategy for which he is well known, Luttwak argues that the most populous nation on Earth—and its second largest economy—may be headed for a fall. For any country whose rising strength cannot go unnoticed, the universal logic of strategy allows only military or economic growth. But China is pursuing both goals simultaneously. Its military buildup and assertive foreign policy have already stirred up resistance among its neighbors, just three of whom—India, Japan, and Vietnam—together exceed China in population and wealth. Unless China’s leaders check their own ambitions, a host of countries, which are already forming tacit military coalitions, will start to impose economic restrictions as well.
● Pricing the Planet's Future: The Economics of Discounting in an Uncertain World
By Christian Gollier
Excerpt via publisher, Princeton University Press
Nearly fifty years ago, in 1968, William Baumol commented that “few topics in our discipline rival the social rate of discount as a subject exhibiting simultaneously a very considerable degree of knowledge and a very substantial level of ignorance.” This book aims to reduce the level of ignorance about the social discount rate, presenting recent advances in the field. Ultimately, the objective is to help build a consensus around the way society should value the future.
● The Carbon Crunch: How We're Getting Climate Change Wrong--and How to Fix It
By Dieter Helm
Review via The Economist
For many people, the great problem of climate change has been a failure of regulation and political will. If only, they say, the obligations of the Kyoto accord had been more comprehensive, the regulations stricter, or if more money had gone into renewables. Then the world might have reined in the temperature rise and the public would not have become so sceptical about climate change.
Not so, says Dieter Helm of Oxford University. It is not the failure of the regulations that is the problem but their basic design. They have caused people to focus on the most expensive ways of mitigating climate change, rather than the cheapest, imposing high costs for little gain. Moreover, by concentrating on their own carbon production, and how to reduce it, Europeans have ignored the impact of their continued demand for goods made using carbon- intensive processes. Since Chinese and Indian manufacturing is usually dirtier than Europe’s, the real upshot of Europe’s choices has been an increase in global emissions. The regulatory approach, argues Mr Helm, has got the worst of all worlds. It is expensive, it has not cut emissions and its treaties are unworkable. No wonder the public is growing sceptical.
● Managing Uncertainty: Strategies for Surviving and Thriving in Turbulent Times
Summary via publisher, Wiley
By Michel Syrett and Marion Devine
Managing uncertainty has become a new business imperative. Technological discontinuities, regulatory upheavals, geopolitical shocks, abrupt shifts in consumer tastes or behavior, and many other factors have emerged or intensified in recent years and together conspire to undermine even the most carefully constructed business strategies. Managing Uncertainty: Strategies for Surviving and Thriving in Turbulent Times addresses these new challenges, assessing the sources of business turbulence, how to classify uncertainty, and the different ways in which uncertainty can be embraced to allow greater innovation and growth. Drawing on examples from around the world, the book presents the most recent ideas on what it means to manage uncertainty, from practitioners, academics, and consultants.
● Market Liquidity: Asset Pricing, Risk, and Crises
By Yakov Amihud, et al.
Summary via publisher, Cambridge University Press
This book presents the theory and evidence on the effect of market liquidity and liquidity risk on asset prices and on overall securities market performance. Illiquidity means incurring a high transaction cost, which includes a large price impact when trading and facing a long time to unload a large position. Liquidity risk is higher if a security becomes more illiquid when it needs to be traded in the future, which will raise trading cost. The book shows that higher illiquidity and greater liquidity risk reduce securities prices and raise the expected return that investors require as compensation. Aggregate market liquidity is linked to funding liquidity, which affects the provision of liquidity services. When these become constrained, there is a liquidity crisis which leads to downward price and liquidity spiral. Overall, the volume demonstrates the important role of liquidity in asset pricing.
Posted by jp at November 17, 2012 4:43 AM