Book Bits | 8.09.14

Unmasking Financial Psychopaths: Inside the Minds of Investors in the Twenty-First Century
By Deborah W. Gregory
Summary via publisher, Palgrave Macmillan
As financial markets expand globally in response to economic and technological developments of the twenty-first century, our understanding and expectations of the people involved in these markets also change. Unmasking Financial Psychopaths suggests that an increasing number of financiers labeled “financial psychopaths” are not truly psychopathic, but instead are by-products of a rapidly changing personal and professional environment. Advances have been made in identifying psychopaths outside of situations accompanied by physical violence, yet it is still difficult to differentiate psychopaths in cultural settings that have adopted psychopathic behavioral tendencies as the norm. Within the investment sector, a fundamental transformation has occurred: the type of person employed by financial firms and the environment within which finance is conducted have both changed. Society’s expectation of financiers adapted to these subtle, behind-the-scenes shifts, resulting the public at large perceiving more individuals in the financial sector as acting in a psychopathic manner. Being able to distinguish the truly psychopathic financier from individuals who conform to behavioral expectations is the first step towards a cultural shift away from accepted psychopathic behaviors in the financial sector.

Asset Management: A Systematic Approach to Factor Investing )
By Andrew Ang
Review via CFA Institute
Ang is a fan of rebalancing and provides new insights even to those who have thought long and hard about this process. For example, most observant practitioners realize that rebalancing provides excess returns when asset class returns are similar (as with US stocks and bonds over the past decade) and that rebalancing loses money when asset class returns vary widely (as with US and Japanese equities since 1990). Rebalancers, Ang reminds us, are providers of liquidity and, more subtly, are short volatility, earning a premium when risky asset classes behave as expected and paying out insurance when outcomes are extreme, on the upside as well as the downside.

Europe on the Brink: The Sovereign Debt Crisis – A Memorandum from the Periphery
Edited by Tony Phillips
Summary via publisher, Zed Books
Europe is suffering from a bipolar economic disorder. Financial journalists divide the continent into two groups of nations – centre and periphery – not by geography but by credit rating. Europe on the Brink is a critical investigation of the root causes of this sovereign debt crisis, and the often misguided policy choices made to resolve it. Nobel Laureate Joseph Stiglitz, together with two other finance experts, compares debt contagion in Europe with regional financial crises elsewhere, while Roberto Lavagna, former economics minister in Argentina, provides a poignant comparative analysis with his own country’s experience. Crucially and uniquely, Portuguese, Greek and Irish economists provide hard-hitting case studies from the perspective of the periphery. This much-needed book offers a heterodox economic perspective on the causes, symptoms and solutions of the biggest economic issue currently facing Europe.

Immigration Economics
By George Borjas
Review via Real Clear Books
It’s basic economics: When supply expands, prices fall. So one might think that when immigrants increase the supply of labor, the price of labor — that is, employee compensation — will decline. But it’s “suprisingly difficult” to demonstrate that this actually happens, according to the famed Harvard labor economist George Borjas.
Borjas’s new book, Immigration Economics, spans a mere 215 pages (excluding appendices and notes), and yet it stands as a testament to the immensity of this challenge. Reading Borjas — or, more accurately, wading through his intricately woven thicket of economic models and the theoretical justifications for them — one can’t help but suspect that the entire enterprise is doomed.

The Real Cost of Fracking: How America’s Shale Gas Boom Is Threatening Our Families, Pets, and Food
By Michelle Bamberger and Robert Oswald
Review via Kirkus Review
A primer on unconventional fossil fuel extraction, with convincing evidence as to its deleterious nature, from veterinarian Bamberger and Oswald (Molecular Medicine/Cornell Univ.). Two significant questions loom over this study: “[W]hat degree of risk and environmental degradation are acceptable to obtain [fossil fuel] energy? Who should be asked to sacrifice, and who should profit?” At issue here is the contested practice of fracking, the hydraulic shattering of shale to extract trapped energy through the administration of chemicals that are known to be carcinogenic and have mutation and endocrine disruptor issues. The authors are not only lucid writers on scientific topics—the appendix on gas drilling should be required reading on the subject—but also warm storytellers, despite the contentious subject matter. They believe the burden of proof should not rest on the victim but on the company wishing to deploy fracking. Since that is not the case, they took to the field to document instances of what appear to be serious air, water and soil pollution caused by the fracking process.