Book Bits | 6 October 2018

Mastering the Market Cycle: Getting the Odds on Your Side
By Howard Marks
Adapted excerpt via Bloomberg
Every once in a while, when the economy and the markets are humming, there arises another belief that things are now different: that cycles have been put to an end, such that we no longer have to worry about the upswing turning into a downswing. For example, in pre-Depression 1929, an auto company president declared, “There will be no interruption of our present prosperity.” In 1996, while the tech bubble was building, the Wall Street Journal reported, “The big, bad business cycle has been tamed.” And former Treasury Secretary and New York Federal Reserve President Tim Geithner wrote in his autobiography, “Stress Test: Reflections on Financial Crises,” that in 2003, on the way to the global financial crisis, “There was growing confidence that [financial innovations and better monetary policy] had made devastating crises a thing of the past.”
In other words, the assumption was that good times in the economy can roll on forever; assets can appreciate without end; and investors needn’t worry about a correction, bear market or crash. Such “different-this-time” thinking is sorely wrong and potentially dangerous.

The Fifth Risk
By Michael Lewis
Review via USA Today
From its beginning to its final line (“It’s what you fail to imagine that kills you”), Michael Lewis reveals so much, and writes so insightfully, as he tackles what would seem to be the most mundane of his many magnificent investigations. The federal bureaucracy?
But, instead of dull and wonkish, his new book “The Fifth Risk” (Norton, 219 pp., ★★★★ out of four) is a spellbinding, alarming analysis of the most serious threats to Americans’ safety happening now from inside the U.S. government. And, Lewis nails the most catastrophic threat to your continued existence.

The Next Millionaire Next Door: Enduring Strategies for Building Wealth
By Thomas J. Stanley and Sarah Stanley Fallaw
Summary via publisher (Lyons Press/Rowman & Littlefield)
Over the past 40 years, Tom Stanley and his daughter Sarah Stanley Fallaw have been involved in research examining how self-made, economically successful Americans became that way. Despite the publication of The Millionaire Next Door, The Millionaire Mind, and others, myths about wealth in American still abound. Government officials, journalists, and many American still tend to confuse income with wealth. A new generation of household financial managers are hearing from so-called experts in personal financial management due to the proliferation of the cottage industry of financial blogs, podcasts, and the like. In many cases, these outlets are simply experiences shared without science, case studies without data based on broader populations. Therefore, the authors decided to take another look at millionaires in the United States to examine what changes could be seen 20 years after the original publication of The Millionaire Next Door.

The Gift of Global Talent: How Migration Shapes Business, Economy & Society
By William R. Kerr
Summary via publisher (Stanford University Press)
The global race for talent is on, with countries and businesses competing for the best and brightest. Talented individuals migrate much more frequently than the general population, and the United States has received exceptional inflows of human capital. This foreign talent has transformed U.S. science and engineering, reshaped the economy, and influenced society at large. But America is bogged down in thorny debates on immigration policy, and the world around the United States is rapidly catching up, especially China and India. The future is quite uncertain, and the global talent puzzle deserves close examination.

A History of America in Ten Strikes
By Erik Loomis
Summary via publsher (The New Press)
Powerful and accessible, A History of America in Ten Strikes challenges all of our contemporary assumptions around labor, unions, and American workers. In this brilliant book, labor historian Erik Loomis recounts ten critical workers’ strikes in American labor history that everyone needs to know about (and then provides an annotated list of the 150 most important moments in American labor history in the appendix). From the Lowell Mill Girls strike in the 1830s to Justice for Janitors in 1990, these labor uprisings do not just reflect the times in which they occurred, but speak directly to the present moment.

Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves
By Anthony C. Infanti
Summary via publisher (MIT Press)
Most of us think of tax as a pocketbook issue: how much we owe, how much we’ll get back, how much we can deduct. In Our Selfish Tax Laws, Anthony Infanti takes a broader view, considering not just how taxes affect us individually but how the tax system reflects our culture and society. He finds that American tax laws validate and benefit those who already possess power and privilege while starkly reflecting the lines of difference and discrimination in American society based on race, ethnicity, socioeconomic class, gender, sexual orientation and gender identity, immigration status, and disability. Infanti argues that instead of focusing our tax reform discussions on which loopholes to close or which deductions to allow, we should consider how to make our tax system reflect American ideals of inclusivity rather than institutionalizing exclusion.

Poor Representation: Congress and the Politics of Poverty in the United States
By Kristina C. Miler
Summary via publisher (Cambridge University Press)
Tens of millions of Americans live in poverty, but this book reveals that they receive very little representation in Congress. While a burgeoning literature examines the links between political and economic inequality, this book is the first to comprehensively examine the poor as a distinct constituency. Drawing on three decades of data on political speeches, party platforms, and congressional behavior, Miler first shows that, contrary to what many believe, the poor are highly visible to legislators. Yet, the poor are grossly underrepresented when it comes to legislative activity, both by Congress as a whole and by individual legislators, even those who represent high-poverty districts. To take up their issues in Congress, the poor must rely on a few surrogate champions who have little district connection to poverty but view themselves as broader advocates and often see poverty from a racial or gender-based perspective.

Energy Follies: Missteps, Fiascos, and Successes of America’s Energy Policy
By Robert R. Nordhaus and Sam Kalen
Summary via publisher (Cambridge University Press)
Conversations about energy law and policy are paramount, undergoing new scrutiny and characterizations. Energy Follies: Missteps, Fiascos, and Successes of America’s Energy Policy explores how a century of energy policies, rather than solving our energy problems, often made them worse; how Congress and other federal agencies grappled with remedying seemingly myopic past decisions. Sam Kalen and Robert R. Nordhaus investigate how misguided or naïve energy policy decisions caused or contributed to past energy crises, and how it took years to unwind their effects. This work recounts the decades-long struggles to move to market supply and pricing policies for oil and natural gas in order to make competition work in the electric power industry and to tame emissions from the coal fleet left to us by the 1970s coal policies. These historic policies continue to present struggles, and this book reflects on how future challenges ought to learn from our past mistakes.

Volatility: Practical Options Theory
By Adam S. Iqbal
Summary via publisher (Wiley)
The main challenges in successful options trading are conceptual, not mathematical. Volatility: Practical Options Theory provides financial professionals, academics, students and others with an intuitive as well as technical understanding of both the basic and advanced ideas in options theory to a level that facilitates practical options trading. The approach taken in this book will prove particularly valuable to options traders and other practitioners tasked with making pricing and risk management decisions in an environment where time constraints mean that simplicity and intuition are of greater value than mathematical formalism.

An Introduction to Econometric Theory
By James Davidson
Summary via publisher (Wiley)
An Introduction to Econometric Theory offers a text to help in the mastery of the mathematics that underlie econometric methods and includes a detailed study of matrix algebra and distribution theory. Designed to be an accessible resource, the text explains in clear language why things are being done, and how previous material informs a current argument. The style is deliberately informal with numbered theorems and lemmas avoided. However, very few technical results are quoted without some form of explanation, demonstration or proof.