Book Bits | 8 November 2014

The Forgotten Depression: 1921: The Crash That Cured Itself
By James Grant
Review via The Economist
The economic slump that afflicted America in 1920 and 1921 was a nasty affair. Real output fell by some 9% and unemployment may have soared as high as 19%—the statistics are patchy—making it easily twice as bad as the so-called Great Recession of 2007-09.
Yet the slump is barely remembered, largely because it was eclipsed by the Great Depression a decade later. In his aptly titled book, James Grant, the founder of a well-regarded financial newsletter, has two missions: to bring this fascinating chapter of economic history back to life, and to demonstrate that a laissez-faire approach can cure slumps better than government activism managed in the 1930s—or indeed in 2008. He is more successful in his first aim than the second.

Managing Equity Portfolios: A Behavioral Approach to Improving Skills and Investment Processes
By Michael A. Ervolin
Review via Reading The Markets
Investing, stripped to its bare essentials, involves three skills: buying, selling, and position sizing. “Familiar as these terms are,” the author writes, “few professionals know with any degree of confidence how much of their portfolio alpha comes from just the buying.” Or the selling, or the position sizing. “Not knowing how effective each skill is means that any attempt to improve is, at best, based on a hunch.” The author advocates adopting an analytical framework that regards performance as “a portfolio of decisions, rather than holdings. … The goal is to rigorously measure skills, process, and behaviors so that managers can do more of what they do well and have the necessary information to make small refinements that have a high likelihood of helping them improve.”

Across the Great Divide: New Perspectives on the Financial Crisis
Edited by Martin Neil Baily and John B. Taylor
Summary via publisher (Hoover Institution Press)
The financial crisis of 2008 devastated the American economy and caused U.S. policymakers to rethink their approaches to major financial crises. More than five years have passed since the collapse of Lehman Brothers, but questions still persist about the best ways to avoid and respond to future financial crises. In Across the Great Divide, contributors from academia, industry, and government analyze the financial crisis of 2008: its causes, effects on the U.S. economy, and the way ahead.

Speed Limits: Where Time Went and Why We Have So Little Left
By Mark C. Taylor
Summary via publisher (Yale University Press)
We live in an ever-accelerating world: faster computers, markets, food, fashion, product cycles, minds, bodies, kids, lives. When did everything start moving so fast? Why does speed seem so inevitable? Is faster always better? Drawing together developments in religion, philosophy, art, technology, fashion, and finance, Mark C. Taylor presents an original and rich account of a great paradox of our times: how the very forces and technologies that were supposed to free us by saving time and labor now trap us in a race we can never win. The faster we go, the less time we have, and the more we try to catch up, the farther behind we fall. Connecting our speed-obsession with today’s global capitalism, he composes a grand narrative showing how commitments to economic growth and extreme competition, combined with accelerating technological innovation, have brought us close to disaster. Psychologically, environmentally, economically, and culturally, speed is taking a profound toll on our lives.

Understanding Central Banking: The New Era of Activism
By David M Jones
Summary via publisher, Routledge
Never in history has central banking been more important or the activities of central bankers more creative and daring. The Bank of Japan’s efforts to raise the inflation rate to stimulate a long deflated economy, the European Central Bank’s response to the sovereign debt crises of Eurozone members, and U.S. Fed chairman Ben Bernanke’s targeting of a 6.5 percent unemployment rate–these topics and more are covered in this essential book

Citizen Coke: The Making of Coca-Cola Capitalism
By Bartow J. Elmore
Summary via pubilsher (W.W. Norton)
An absorbing history of how Coke’s insatiable thirst for natural resources shaped the company and reshaped the globe. How did Coca-Cola build a global empire by selling a low-price concoction of mostly sugar, water, and caffeine? The easy answer is advertising, but the real formula to Coke’s success was its strategy, from the start, to offload costs and risks onto suppliers, franchisees, and the government. For most of its history the company owned no bottling plants, water sources, cane- or cornfields. A lean operation, it benefited from public goods like cheap municipal water and curbside recycling programs. Its huge appetite for ingredients gave it outsized influence on suppliers and congressional committees. This was Coca-Cola capitalism.