Book Bits For Saturday: 4.2.2011

Government’s Place in the Market
By Eliot Spitzer
Summary via publisher, Boston Review Books
As New York State Attorney General from 1998 to 2006, Eliot Spitzer successfully pursued corporate crime, including stock price inflation, securities fraud, and predatory lending practices. Drawing on those experiences, in this book Spitzer considers when and how the government should intervene in the workings of the market. The 2009 American bank bailout, he argues, was the wrong way: it understandably turned government intervention into a flashpoint for public disgust because it socialized risk, privatized benefit, and left standing institutions too big to fail, incompetent regulators, and deficient corporate governance. That’s unfortunate, because good regulatory policy, he claims, can make markets and firms work efficiently, equitably, and in service of fundamental public values.

Expected Returns: An Investor’s Guide to Harvesting Market Rewards
By Antti Ilmanen
Excerpt via publisher, Wiley
We should humbly recognize the limits of our understanding. Realized returns are dominated by randomness, structural uncertainty, and rare events. Expected returns are unobservable, at best estimated with noise. We should resist hindsight biases wired in us—the outcomes that materialized seem more inevitable or predictable than they truly were. It is worth recalling that experts can only explain a fraction of realized return variation afterwards, and this is an inherently easier task than predicting. Any observed return predictability is mild, possibly spurious, and rarely robust. Therefore I stress humility in interpreting empirical results and even more in making predictions and in trading based on them.
Somebody in Charge: A Solution to Recessions?
By Pierre Lemieux
Review via Laissez Faire Books
Could the 2007-2009 recession have been prevented or stopped if somebody – some authority – had been in charge? Can public authorities prevent recessions and tame the business cycle? In this book, Pierre Lemieux argues that the answer is emphatically no. The fact is that there was somebody in charge as state power and regulation had grown basically non-stop over the early 20th century. The recession was a product of too much government authority, not too little. This is not surprising for ‘public authorities’ are nothing but politicians and bureaucrats.
The Ten Trillion Dollar Gamble: The Coming Deficit Debacle and How to Invest Now: How Deficit Economics Will Change our Global Financial Climate
By Russ Koesterich
Review via Reading The Markets
Russ Koesterich, iShares chief investment strategist and global head of investment strategy for BlackRock Scientific Active Equities, anticipates a rather bleak economic future for the United States. In The Ten Trillion Dollar Gamble: The Coming Deficit Debacle and How to Invest Now (McGraw-Hill, 2011) he explains why we should expect higher interest rates and slow growth. He then offers solid practical advice for the investor… The picture Koesterich paints of the future is familiar. Barring major reform of entitlement programs, especially health-care spending, the U.S. structural deficit will only get worse. And “in the not-too distant future, it will start to push rates higher and economic growth lower, and it eventually may set off an inflationary spiral.” (p. 22)
The Crash Course: The Unsustainable Future Of Our Economy, Energy, And Environment
By Chris Martenson
Excerpt via Business Insider
In 2008 and 2009, economic activity in the United States and most other developed nations tumbled off a cliff. At several points there was real panic in the air. Stock markets around the world fell to levels that wiped out more than a decade of gains. Trillions evaporated in the housing market, and global trade plummeted.
Questions remain: What happened? Where did all our money go? How did 10 years of wealth accumulation evaporate so quickly? More important,when can we expect a recovery?
In truth, our predicament goes far deeper than even these recent, disquieting economic events might suggest. It’s time to face the facts: A dangerous convergence of unsustainable trends in the economy, energy, and the environment will make the “twenty-teens” one of the most challenging decades ever. The Crash Course explains this predicament and provides sufficient context to support the idea that it is well past time to begin preparing for a very different future.