Book Bits | 7.26.14

Asset Rotation: The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance
By Matthew P. Erickson
Summary via publisher, Wiley
In Asset Rotation, portfolio management pioneer Matthew P. Erickson demonstrates a time-tested approach to asset management that has worked throughout the history of capital markets, in good times and bad. Providing investors with strong participation in rising markets, but more importantly with a discipline to reduce participation in prolonged declines. Over time this revolutionary approach has yielded superior returns, with significantly reduced levels of risk; providing the engine for true, long-term sustainable growth. The investment world as we know it has changed, and the paradigm has shifted. What has worked in the past may no longer work in the future. No longer may bonds be regarded as a safe haven asset class, as for the first time in generations, investors in fixed income face losses as interest rates rise from historical all-time lows. For those adhering to a conventional Modern Portfolio Theory based investment approach to asset management, what was once regarded as safe and stable, may very well soon become our greatest impediment.

Why Moats Matter: The Morningstar Approach to Stock Investing
By Heather Brilliant and Elizabeth Collins
Summary via press release
Identifying “economic moats,” or structural barriers that protect companies from competition, is the cornerstone of Morningstar’s equity analysis. Similar to the way castles are protected by moats, companies with economic moats are great businesses that can fend off competition and earn high returns on capital for many years. Morningstar’s new book, Why Moats Matter: The Morningstar Approach to Stock Investing, helps investors find superior businesses and determine when to buy them to maximize returns over the long term. Why Moats Matter outlines the basic idea of economic moats, a concept pioneered by Warren Buffett, and gives investors a fundamentals-based framework for successful long-term equity investing.

Crisis Without End?: The Unravelling of Western Prosperity
By Andrew Gamble
Summary via publisher, Palgrave Macmillan
This major re-assessment by a leading political economist shows that the 2008 financial crash was no ordinary crisis, but the harbinger of a much deeper convulsion comparable to the major past crises of capitalism…. Andrew Gamble maps out likely scenarios in a turbulent world in which the weakening of the old western international order as a result of the decline in the capacities and will of the United States combine with internal deadlocks in both the US and the Eurozone over the management of austerity and debt and in many of the rising powers, especially China, over the management of growth and rising expectations. The path to a new era of prosperity depends on a reformed international order, solutions to budget as well as fiscal deficits, and new forms of sustainable growth. But these demand a political will so far notable by its absence at all levels without which there is little prospect of escape from a future of crisis without end.

The 5 Mistakes Every Investor Makes and How to Avoid Them: Getting Investing Right
By Peter Mallouk
Summary via publisher, Wiley
With so much at stake in investing and wealth management, investors cannot afford to keep repeating actions that could have serious negative consequences for their financial goals. The Five Mistakes Every Investor Makes and How to Avoid Them focuses on what investors do wrong so often so they can set themselves on the right path to success. In this comprehensive reference, readers learn to navigate the ever-changing variables and market dilemmas that often make investing a risky and daunting endeavor. Well-known and respected author Peter Mallouk shares useful investment techniques, discusses the importance of disciplined investment management, and pinpoints common, avoidable mistakes made by professional and everyday investors alike.

Fewer, Bigger, Bolder: From Mindless Expansion to Focused Growth
By Sanjay Khosla and Mohanbir Sawhney
News article via Kellogg University
In a new book, two Kellogg faculty members advise mindful growth on the path to enlightened profitability.
From startups to established conglomerates, companies looking to expand often go for broke—literally. They make more products, create more brands, and enter more markets with the goal of growing their market share. While seemingly reasonable, this approach used throughout the ages can often lead to fleeting gains, dismal results, or outright failure.
“The complexity of companies frequently grows faster than revenues,” says Mohanbir Sawhney, the Robert R. McCormick Tribune Foundation Clinical Professor of Technology. A strategy and innovation consultant in the start-up world, Sawhney has long observed the “unwieldiness” of companies that expand for expansion’s sake. “The paradox is that to grow, you need to cut back and do less.”

Life After Debt: The Origins and Resolutions of Debt Crisis
Edited by Joseph Stiglitz and Daniel Heymann
Summary via publisher, Palgrave Macmillan
In the last 30 years economic crises have become more frequent and expensive than ever before. This volume provides a pluralistic discussion from world-renowned scholars on the international aspects of the debt crisis and prospects for resolution. It argues that current economic policies exacerbate the problem of inefficient and unstable markets as they are based on standard economic theory which focuses on equilibrium models rather than equilibrium behaviour. It provides a comprehensive evaluation of how the debt crisis has affected Western Europe, the emerging markets and Latin America, and puts forward different suggestions for recovery.