Book Bits | 8.11.2012

The Clash of the Cultures: Investment vs. Speculation
By John Bogle
Excerpt via publisher, Wiley
When I entered this business in 1951, right out of college, annual turnover of U.S. stocks was about 15 percent. Over the next 15 years, turnover averaged about 35 percent. By the late 1990s, it had gradually increased to the 100 percent range, and hit 150 percent in 2005. In 2008, stock turnover soared to the remarkable level of 280 percent, declining modestly to 250 percent in 2011.
Think for a moment about the numbers that create these rates. When I came into this field 60 years ago, stock-trading volumes averaged about 2 million shares per day. In recent years, we have traded about 8.5 billion shares of stock daily—4,250 times as many. Annualized, the
total comes to more than 2 trillion shares—in dollar terms, I estimate the trading to be worth some $33 trillion. That figure, in turn, is 220 percent of the $15 trillion market capitalization of U.S. stocks.

The Little Book of Stock Market Cycles
By Jeffrey Hirsch
Blog post by author
In my upcoming book, The Little Book of Stock Market Cycles… I compare and contrast the performance of cyclical bull and bear markets within secular bull and bear markets. Cyclical markets were defined in last September’s post.
Defining secular bull and bear markets requires a less regimented and more outside-the-box line of thinking. By my reckoning, secular markets span a period of about 8-20 years. I classify secular bulls as an extended period of years, when the stock market produces successive new highs and higher lows. Secular bears are often impacted by protracted military campaigns, financial crisis and the market is unable to reach a significant new high.
Four secular bull markets ran from 1896-1906, 1921-1929, 1949-1966 and 1982-2000. The four bears span 1906-1921, 1929-1949, 1966-1982 and 2000 to the present. I prepared the below graphic for my new Little Book. By lining up all the cyclical bulls and bears within the secular bull markets and comparing them to those in secular bear markets the nature cyclical bull and bear markets within secular bull or bear markets is revealed.
Strategic Capitalism: The New Economic Strategy for Winning the Capitalist Cold War
By Richard D’Aveni
Summary by publisher, McGraw-Hill
The United States and its economic allies are under attack by a force unlike any they have ever faced. China and other emerging nations are competing for markets around the world using their own versions of capitalism—and, thus far, they are winning handily. In Strategic Capitalism, one of the world’s leading authorities on global business strategy, Richard D’Aveni, describes how the “economic cold war” began, how it is being played out now, and how the West can change the course of events in its favor.
The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
By Ludwig B. Chincarini
Summary via publisher, Wiley
Financial markets are not immune to the human tendency to group together. Investors follow popular trends or latch onto profitable new strategies with herd-like single-mindedness. In The Crisis of Crowding, finance veteran and professor Ludwig Chincarini explores how this dramatic overcrowding has yielded terrifying results and contributed to recent financial crises. “Modern risk-measurement models generally ignore the presence of copycats and the resulting crowded spaces. As a result, a shock to the system can lead to sudden, sometimes large asset price moves, which can cause panic and failure among the institutions involved in that investment space,” explains Chincarini. “In the past 20 years, globalization, technology, and increased leverage have made the effects of overcrowding more apparent and dramatic. In fact, market crashes are happening more regularly than in the past.”
Inflation-Proof Your Portfolio: How to Protect Your Money from the Coming Government Hyperinflation
By David Voda
Summary via publisher, Wiley
The Petersen/Pew Commission on Budget Reform recently warned that the national debt was expected to grow from 40 percent of the gross domestic product (GDP) in 2009 to 85 percent in 8 years, 100 percent in 12 years, and 200 percent by 2038. In other words, in just a few years the U.S. will owe twice as much as it produces. Since no conceivable level of taxes and borrowing will enable the country to service such an enormous debt, it is inevitable that government will turn to the same tricks its antecedents have been playing since Ancient Rome: debasing the dollar and letting inflation run rampant. Inflation-Proof Your Portfolio: Protect Your Money from the Coming Government Hyperinflation is your guide to understanding the debt crisis and rising inflation, packed with the key tools you need to protect yourself from the fallout.
Spreading the Wealth: How Obama is Robbing the Suburbs to Pay for the Cities
By Stanley Kurtz
Adapted excerpt by author via National Review
President Obama is not a fan of America’s suburbs. Indeed, he intends to abolish them. With suburban voters set to be the swing constituency of the 2012 election, the administration’s plans for this segment of the electorate deserve scrutiny. Obama is a longtime supporter of “regionalism,” the idea that the suburbs should be folded into the cities, merging schools, housing, transportation, and above all taxation. To this end, the president has already put programs in place designed to push the country toward a sweeping social transformation in a possible second term. The goal: income equalization via a massive redistribution of suburban tax money to the cities.