Book Bits | 29 April 2017

Adaptive Markets: Financial Evolution at the Speed of Thought
By Andrew W. Lo
Summary via publisher (Princeton University Press)
Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe—and as financial bubbles, crashes, and crises suggest. This is one of the biggest debates in economics and the value or futility of investment management and financial regulation hang on the outcome. In this groundbreaking book, Andrew Lo cuts through this debate with a new framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist.

The Clean Money Revolution: Reinventing Power, Purpose, and Capitalism
By Joel Solomon with Tyee Bridge
Summary via publisher (New Soceity Publishers)
From Boomers to Millennials, the largest intergenerational wealth transfer in history is underway and the ramifications will remake the world. The dirty money of “business as usual” is on the brink, wedged between catastrophic climate change and the demographic tidal wave of Millennials pounding the consumer table for real change. These forces are transforming the very nature of capitalism into something different and powerful— towards a clean money revolution. Joel Solomon, pioneering clean money investor and change agent, lays it on the line. The revolution is underway, the opportunities are everywhere, and the challenges and rewards are immense.

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite
By Duff McDonald
Review via The New York Times
The marriage of Harvard’s prestige and intellectual pedigree to overtly moneymaking pursuits has yielded an institution that not only teaches the fundamentals of business education but also provides its soon-to-be-wealthy graduates with “unrivaled opportunity,” and has become a “money machine unto itself,” as Duff McDonald puts it in his sweeping survey of the school’s history and influence.
But how and why that might be the case isn’t really what interests McDonald, the author of previous books about McKinsey, the consulting firm, and JPMorgan’s chief executive, Jamie Dimon. In “The Golden Passport,” he’s determined to call the Harvard Business School to account, citing its founding doctrine, which was to develop “a heightened sense of responsibility among businessmen” (and eventually women) who “will handle their current business problems in socially constructive ways.” In that regard, McDonald is scathing in his critique: Harvard Business School has not only “proven an enormous failure,” but its very success has made it positively “dangerous.”

Common-Sense Income Strategies
By Michael Eastham
Podcast interview with author via The Korelin Economics Report
I was sent Michael’s new book last week and had a chance to review his overall message. The first section, which is based on a big picture look for the markets and economy is discussed with Michael. We also touch on some of the products and investment that he likes for his clients.

Deviate: The Science of Seeing Differently
By Beau Lotto
Review via The Guardian
Beau Lotto is a gung-ho neuroscientist. “[The] great minds of history,” he says, “had theories, but now neuroscience has an answer.” The latest research has, it seems, established that everything you experience “takes place in the brain” and that “you never, ever see reality!” (Lotto loves his italics and exclamation marks.) Your brain may be beautiful, but “what makes it beautiful is that it is delusional” and you should therefore get shot of your inhibitions and summon the courage to “deviate!”

Burn Out: The Endgame for Fossil Fuels
By Dieter Helm
Review via Prospect Magazine
There is much to admire in Dieter Helm’s latest book, Burn Out. It is a characteristically dyspeptic account, by the professor of energy policy at Oxford, of multiple policy failures on the road to the beginning of the end of the fossil fuel age. Yet he saves most of his scorn for NGOs and European politicians. He argues they promoted the expensive and ineffective remedies of intermittent renewables and carbon trading, while failing to anticipate the rise of China. His evidence? Emissions continued to rise throughout the period of the Kyoto Protocol. His solution? Use gas while waiting for better technology.

The Origins of Asset Management from 1700 to 1960: Towering Investors
By Nigel Edward Morecroft
Summary via publisher (Palgrave Macmillan)
This book explores the origins and development of the asset management profession in Britain as a distinct activity within financial services, independent of banks and stockbrokers. Specifically, it identifies the main individuals and institutions after 1868 who established the profession. The book draws a distinction between banks (short-term deposit-taking) and asset management (an investment service with longer-term objectives). It explains why some banks fail but asset management businesses generally do not. It argues that asset management has been socially useful and has had a beneficial impact on the development of securities markets by offering choices to savers as an alternative to banks, improving the efficiency of capital allocation, re-cycling excess savings productively and enabling a range of investors – from institutions to individuals – to benefit from thoughtful, long-term investing.

The Elements of Financial Econometrics
By Jianqing Fan and Qiwei Yao
Summary via publisher (Cambridge University Press)
Financial econometrics is an interdisciplinary subject that uses statistical methods and economic theory to address a variety of quantitative problems in finance. This compact, master’s-level textbook focuses on methodology and includes real financial data illustrations throughout. The mathematical level is purposely kept moderate, allowing the power of the quantitative methods to be understood without too much technical detail. Wherever possible, the authors indicate where to find the relevant R codes to implement the various methods. This book grew out of a course at Princeton University which is one of the world’s flagship programs in computational finance and financial engineering.