Book Bits | 28 February 2015

Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies
By Meb Faber
Summary via Amazon
With all of our focus on assets – and how much and when to allocate them – are we missing the bigger picture? Our book begins by reviewing the historical performance record of popular assets like stocks, bonds, and cash. We look at the impact inflation has on our money. We then start to examine how diversification through combining assets, in this case a simple stock and bond mix, works to mitigate the extreme drawdowns of risky asset classes. But we go beyond a limited stock/bond portfolio to consider a more global allocation that also takes into account real assets. We track 13 assets and their returns since 1973, with particular attention to a number of well-known portfolios, like Ray Dalio’s All Weather portfolio, the Endowment portfolio, Warren Buffett’s suggestion, and others. And what we find is that, with a few notable exceptions, many of the allocations have similar exposures.

A Political Economy of American Hegemony: Buildups, Booms, and Busts
By Thomas Oatley
Summary via publisher (Cambridge University Press)
In A Political Economy of American Hegemony, Thomas Oatley explores how America’s military buildups have produced postwar economic booms that have culminated in monetary and financial crises. The 2008 subprime crisis – as well as the housing bubble that produced it – was the most recent manifestation of this buildup, boom, and bust cycle, developing as a consequence of the decision to deficit-finance the wars in Afghanistan and Iraq. Earlier instances of financial crises were generated by deficit-financed buildups in the 1980s and the late 1960s. The buildup, boom, and bust pattern results from the way political institutions and financial power shape America’s response to military challenges: political institutions transform increased military spending into budget deficits, and financial power enables the United States to finance these deficits by borrowing cheaply from the rest of the world. Oatley examines how this cycle has had a powerful impact on American and global economic and financial performance.

Inheriting Wealth in America: Future Boom or Bust?
By Edward N. Wolff
Essay by author via Project Syndicate
The buzz over Thomas Piketty’s book Capital in the Twenty-First Century may have subsided somewhat, but the analysis of its conclusions is far from complete. Consider its discussion of inheritance, which emphasizes its rising share in household wealth over time. This seems like a shocking revelation, implying ever-rising wealth inequality. But is it correct?…
In short, the overarching claim that the share of wealth transfers in household wealth is rising is not accurate in all cases – and certainly not in the world’s richest economy. Even if it were true, it would not be particularly problematic, given that, in the long term, inheritances and gifts help to reduce wealth inequality. In fact, we might all be better off if people transferred more of their wealth to others, if just to members of their own families.

The Disinherited Majority: Capital Questions – Piketty and Beyond
By Charles Derber
Summary via publisher (Paradigm Publishers)
Thomas Piketty’s blockbuster 2014 book, Capital in the 21st Century, may prove to be a game-changer, one of those rare books such as Friedan’s The Feminine Mystique, which helped spark a new feminist movement. The worldwide flood of commentary suggests Piketty’s book has already opened a new conversation not only about inequality, but about class, capitalism, and social justice. Inherited wealth is at the heart of Piketty’s book, and Derber shows how the “disinherited majority” is likely to affect the future. Derber shows that there are actually “two Pikettys,” different voices of the author on the 1%, inheritance, and capitalism itself that create a fascinating and unacknowledged hidden debate and conversation within the book. Drawing on Piketty’s discussion, Derber raises fourteen “capital questions”—with new perspectives on caste and class warfare, the Great Recession, the decline of the American Dream, and the Occupy movement—that can guide a new conversation about the past and future of capitalism.

Future Crimes: Everything Is Connected, Everyone Is Vulnerable and What We Can Do About It
By Mark Goodman
Summary via publisher (Doubleday)
With explosive insights based upon a career in law enforcement and counterterrorism, Marc Goodman takes readers on a vivid journey through the darkest recesses of the Internet. Reading like science fiction, but based in science fact, Future Crimes explores how bad actors are primed to hijack the technologies of tomorrow, including robotics, synthetic biology, nanotechnology, virtual reality, and artificial intelligence. These fields hold the power to create a world of unprecedented abundance and prosperity. But the technological bedrock upon which we are building our common future is deeply unstable and, like a house of cards, can come crashing down at any moment.

Six Capitals, or Can Accountants Save the Planet?: Rethinking Capitalism for the Twenty-First Century
By Jane Gleeson-White
Summary via publisher (W.W. Norton)
This is the story of a twenty-first-century revolution being led by the most unlikely of rebels: accountants. Only the second revolution in accounting since double-entry bookkeeping began, it is of seismic proportions, driven by the 2008 financial crash and our ongoing environmental crisis. The changes it will wreak are profound and far-reaching and not only will transform the way the world does business but also will alter the nature of capitalism. While the wealth of nations and corporations has been vital to the global economy, increasingly the world is coming to realize that such endless growth is limited by the earth’s resources and comes at a huge price to the planet and to human well-being. It simply cannot be sustained.

Capitalism by Gaslight: Illuminating the Economy of Nineteenth-Century America
Edited by Brian P. Luskey and Wendy A. Woloson
Summary via publisher (University of Pennsylvania Press)
While elite merchants, financiers, shopkeepers, and customers were the most visible producers, consumers, and distributors of goods and capital in the nineteenth century, they were certainly not alone in shaping the economy. Lurking in the shadows of capitalism’s past are those who made markets by navigating a range of new financial instruments, information systems, and modes of transactions: prostitutes, dealers in used goods, mock auctioneers, illegal slavers, traffickers in stolen horses, emigrant runners, pilfering dock workers, and other ordinary people who, through their transactions and lives, helped to make capitalism as much as it made them.