MM’s top 20 financial books of 2011

23rd December 2011

Bonds: The Unbeaten Path to Secure Investment Growth by Marc Freedman.                                                                                  

"There's no such thing as risk-free investing, but Bonds, Second Edition gives investors practical advice on ways to minimize risk while growing their assets." Bill D'Alonzo

 

Boomerang: The Meltdown Tour by Michael Lewis.

Michael Lewis's bravura journey through Europe's economic underbelly brilliantly charts the consequences of a world plagued by debt…highly enjoyable…nicely politically incorrect, often very funny, and shot through with genuine insight. Robert Harris, Sunday Times

 

Grand Pursuit: The Story of Economic Genius by Sylvia Nasar

 "Nasar is a superb writer. . . . The book is a kind of portrait gallery of economic thinkers, each artfully set down in his or her time and place. . . . You can't help becoming engrossed in their lives." Wall Street Journal

 

Currency Wars: The Making of the Next Global Crisis (Portfolio) by James Rickards

"Put on your flak vest and helmet and enter the dangerous battlefield of global finance. Jim Rickards takes you through a captivating roller- coaster ride-the past, the present, and a look at the problematical future of our ongoing currency wars."  Rear Admiral (Ret.) Stephen H. Baker

 

Keynes vs Hayek: The Clash that Defined Modern Economics by Nicholas Wapshott

In Keynes vs Hayek, Nicholas Wapshott sets himself the formidable task of explaining important and abstruse ideas clearly, reliably and entertainingly. He succeeds well. Oliver Kamm, The Times

 

Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise by Carl E. Walter and Fraser J. T. Howie

‘An eye-opening look at how Communist Party bosses control China′s economy.' In
dependent

 

Back to Work: Why We Need Smart Government for a Strong Economy by Bill Clinton

More than any living American politician, Clinton has a knack for reading the public mood. Edward Luce, Financial Times

 

Money and Power: How Goldman Sachs Came to Rule the World by William D. Cohan

A rollercoaster account of how Goldman Sachs does business, and the best analysis yet of its increasingly tangled web of conflicts, by a master-storyteller. The Economist Books of the Year 2011

 

Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL by Roger L. Martin

"A lively, intricate but accessible argument, neatly stitched together with references to the NFL and other sports when analogies are helpful."  Globe & Mail

 

Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier by Edward Glaeser

'A life-enhancing celebration of high-density city living… Resistance, he argues, is futile and it's this very provocation that makes this hymn to the city sing' Metro

 

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

"Jeff Madrick's devastating biography of greed is rife with carefully documented cautionary tales of the rich, greedy and unregulated, which collectively constitute the definitive answer to Milton Friedmanesque laissez faire economics." Victor Navasky, author of Kennedy Justice

 

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit Banerjee and Esther Duflo

"A new book by Duflo and co-author Abhijit Banerjee will once more turn the spotlight on actions to tackle poverty. The book aims to make 2011 the year that the "economics of poverty" become a key part of international political discussions." The Guardian Online

 

Common Sense Investing: Ten Simple Rules to Finance Your Dreams by Rick Van Ness

There was a song a few years ago, "Pennies from Heaven." If one follows the very understandable and readable ten rules to accumulate riches in this book, you will be showered with riches, not just pennies. Gustavo A. Mellander, Ph.D (George Mason University)

 

The Investment Answer by Daniel C. Goldie and Gordon S. Murray

"Wow! If I could give only one book on investing to my friends, this would be it." Bob Waterman, bestselling co-author of In Search of Excellence

 

The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better by Tyler Cowen

"As Cowen makes clear, many of this era's technological breakthroughs produce enormous happiness gains, but surprisingly little economic activity."  David Brooks, The New York Times

 

The Smartest Portfolio You'll Ever Own by Daniel Solin

Solin lays out sensible ways of constructing safe portfolios that are customized to where you are in life. As with his other advice, Solin favors low-cost, passive portfolios that are diversified and tempered for risk.  John Wasik, Reuters

21 thoughts on “MM’s top 20 financial books of 2011”

  1. The_forbin_project says:

    Hi Shaun

    it falling real wages in the UK and rest of Europe that worries me , how are the middle classes going to spend more with less money? Since the housing  stagnation we’ve got no auto ATM any more , and debt is not real wealth anyway , is it?

    Thats why I think we will not have a recovery – a service based economy needs excess wages to run

    would should have had and orderly , or semi orderly reduction in house prices  to match our wage levels thus freeing up monies that can be spent ( buying plastic  Chinese tat of course…)

    Only the rich are doing well – they have had increased wages ( and for what ? )  and there’s only so much they can buy – I’m in favour in taxing those who have as those that don’t don’t have anything to tax . Nor does trickle down work either when a flood is needed !

    And if there’s no growth – what happens next , apart from more can kickin of course.

    Forbin

    1. Keithdhinde says:

      Hi Forbin.

      House prices within a lot of the developed world are over-valued.  The masses have been hood-winked into believing they can created wealth by owning a house.  I’ve lost count of the discussions I’ve had with people trying to explain the problems with the current situation in to UK.
      Overvalued house prices.
      Demographic time-bomb.
      Expectations of state provided services, paid for either by taxing ‘somone else’ or on the ‘never-never’.
      The ‘celebrity’ lifestyle culture.
      Older generation expecting to retire at 55-60, on an index-linked pension.
      Politicians are scared to be honest knowing they won’t get elected for being honest, so we’re going to reap what we deserve.

      1. Anonymous says:

        Yes, absolutely right. It’s high time that house owners were told that owning a property is not a one-way ticket to great wealth. You have to earn that, in the long term. You have to maintain your house, too, not an inexpensive activity. Only during bubbles can prices soar above the economy’s long term growth rate, to slump to the average later. In future we will have to work for our wealth, and all those who pray for a return of the housing market to ‘normality’ are deluded.

    2. Alexwild says:

      The Great Crash of 1929                     The Credit crunch of 2008
      Currency wars                                    Currency wars
      Trade wars                                         Trade wars
      Real Wars – WWII                              Real Wars – Syria/ Iran / China
                                                                    and Russia =WWIII

    3. Hi Forbin

      I entirely agree about the falling real wages situation. In essence it virtually guarantees that we will see further economic weakness particularly if we combine it with deleveraging. If one adds austerity into the mix then there is really only one answer I think. However not everybody thinks that as Adam Posen of the UK Monetary Policy Committee predicted 2% economic growth from the UK in 2013! Mind you the MPC predicted that for 2012….

      What we are seeing is ever more twisting of the numbers and an example of that was JP Morgan from yesterday as it pulled increased profits from an alchemists hat. I expect this trend to continue….

  2. James says:

    Shaun,
    Slightly off topic, but very relevant to yesterday’s blog about Spain needing to devalue. Did you see the ex-Prime Minister of Spain, Mr Zapatero, no less, in the Times today.
    He says:
    1. The Euro is the EU
    2. The EU is the greatest political project in civilisation (this is a direct quotation)
    3. The refusal of countries to share indebtedness is nationalism

    I know that you don’t do politics, but I think that this neatly encapsulates the lunacy at the top of the EU, which will not even let dirty things like economics into the discussion. No wonder we are in such a mess if people like this are in charge.

    1. Anonymous says:

      Remember that much of Spain is heavily socialist, and that Zapatero was PM for quite a while during the spend, spend, spend phase that also saw massive immigration from the EU, Latin America and Morocco to work on construction sites. Of course he is in favour of the EU. We too would be unanimously in favour if we were receiving the sort of cash that Spain receives – estimated at $180bn in development funds alone since they joined the EU. Without those funds Spain would be in a dire state, and the socialist dream would be over.

    2. Anonymous says:

      Hi James,

      Nobody is in charge, as every national leader has a veto. Yes this can include nice people like bunga bunga Berlusconi, Moscow educated commie Sergei Stanishev and the Hungarian & Romanian politicians who are neutering their courts judicial independence and prosecuting their political opponents.

      If anyone has a method allowing European taxpayers to hold the European commission bureaucrats accountable, I’d love to know it.

  3. Anonymous says:

    I wonder if the puzzle of why investors are willing to buy bonds that guarantee them a loss is connected to the fact that many of the investors are using other people’s money and that they get their percentage regardless.

    1. Hi Ian

      It is a spreading problem as for example French Treasury Bills have had negative yields and her one year is right on the threshold at 0.02% having fallen from 0.2% a month or so ago and over 1% a year ago.

      Interestingly though we in the UK do not seem so far to be joining the club or at least be slow joiners as our 2 year is at 0.23%.

  4. David Lilley says:

    Shaun,
     
    Robert Peston pointed out at the beginning of the year that Italy had E400b of gilts to pay and therefore needed to raise E400b and that would be a problem.
     
    Robert then pointed out that Spain was in a worse position because it had far greater combined debt (personal + corporate + sovereign). The first commenter on Robert’s blog asked if anyone could state the UK position on combined debt and several pointed out that ours was the worst in the world. Robert’s very next blog was entitled “The UK has the worst debt in the world”. This was first pointed out at Davos four years ago by McKinsey or similar.
     
    Going forward.
     
    I like the term “going forward” because it gets us to the most important perspective “how shall we solve the problem?”
     
    Robert Peston and Stephanie Flanders have never offered solutions but rather explained the problems to the viewer. Evan Davis used to make predictions for the year and this was brave.
     
    I consider the credit rating agencies brave to at least state their position but then it is only what they are paid to do. They certainly got it wrong before the “debt balloon” when they were giving AAA to everything but since everyone got it wrong they can be forgiven.
     
    But the problem is wages, uncompetitive wages especially in the public or big state sector. About four years ago the Chiness were making most of our clothes and electronics on 50p per day, and not a 7.5 hour day, when a US car worker could earn $36 per hour.
     
    You have often bravely pointed out that an answer for the PIIGS is an exit from the EZ and devaluation. This would possibly be the best thing for them but it is the advise “walk away from your debt, default and dump it on your neighbour, devalue and become competitive and further hurt your neighbour”.
     
    There is a less selfish alternative and that is “internal devaluation”. This is what “austerity” is. But it isn’t austerity when you are simply being asked by your benefactor to live within your means. He is, after all, chucking you E100b at a time to help you through and therefore “internal devaluation” beats the hell out of devaluation. He, your benefactor, is borrowing every day to help you out, even if he can borrow at negative interest rates.

    1. Anonymous says:

      The banks of the ‘benefactor’ made bad investments to badly managed economies by corrupt governments and now the ‘benefactors’ have created a monster sceme to save their banks. This is a scam by the so called ‘surplus’ countries. It won’t end nicely, people in the south will take the matters in their own hand before too long. At least Greece will default big before too soon. I believe that it cannot be contained to Greece. Portugal, Spain and Italy will also leave Euro and default. The is no way that the debts can be paid back. Extreme austerity kills the economies of the south. These economies are very different to the north. Current policies do not work. They lead to a depressionary spiral of death and they make things worse. The best that can be done (as real fiscal and political union is not really on the table) is massive defaults and exits from Euro. Then and only then we can face reality, live within our means (no new stupid ‘bail-out’ loans please) and have some growth. With a cheap national currency the south can return to what knows to do best and earn its living. Currently within euro, we depend on subsidies and we will continue to  depend on subsidies. Current situation has created a very bad feeling. South blames north, north blames the south, EU was for harmonisation, for convergence, for smoothing relations. The opposite has happened, north dictates policies to the south (bad policies that lead to catastrophe). Economies and mentalities diverge even further. EZ is sustained only by fear and won’t last for long. Situation will deteriorate and at some point people will stop fearing the fear. Then EZ will implode.

    2. Zak. says:

      Hi David, a comment similar to yours was made here before, though I dont think it was written by you. I asked this question then and I’ll ask it of you again now if I may.

      If I cannot afford to pay the debts that I already owe, then how are you “helping” me by lending me even more? Surely, a true friend would “give” me the money, not lend it?

      If you are not such a friend then maybe I can afford to be a little selfish, eh!?

      1. David Lilley says:

        Zak,

        I think it was me.

        I don’t disagree with you, Vassillis or Shaun. And even if I did I would nevertheless be grateful for your contribution to the debate which is far better than no contribution.

        I should have mentioned that Robert Peston thought Italy would have a big problem in May as it had to roll over E400b of gilts. I don’t know how they managed. If you remember one of the characteristics of our debt was that it was mostly long term. We didn’t have big debts to pay tomorrow like Greece had.

        Giving is not the answer. Certainly not giving E100b again and again. That wouldn’t be tolerable. A haircut and a renegotiation of the repayment term for Greece is inevitable. But these have to be considered at the same time as the EZ must also plan for help for Spain and Italy. And remember that Germany has its own debt and deficit and must borrow to make its 44% contribution to the bailout funds.

        The Greek challenge is also the EU, UK, Japan and US challege; “How to survive in the new global economy” with an ageing population when there are highly educated young populations with personal, corporate and sovereign aspirations in the Far East and emerging economies.

        The average age in old Europe is 60.

        Maybe Lord Wolfson could offer a prize for the solution of this problem. Unfortunately we have not been facing up to the problem and this has led to massive debt in the last decade and as a consequence anything sound like living within your means and deleveraging is austerity by comparison.

  5. David Lilley says:

    New subject.

    One of your regular commenter always points out that “it is energy stupid” we are running out of oil and gas. Today Lord John Brown pointed out that the US has almost infinite supplies of shale gas and will not need to import oil from 2030.

    This is proper good news because anything that is free will help. Japan gets nothing free but gets reward from work. The UK gets nothing for free but has a core of excellence that means its FTSE 100 companies bring home 70% of their earnings from abroad and float the NHS and the 20% of our workforce that work in the public sector and earn 43% more than the private sector and the one in three of our working age males who don’t work.

    1. Hi David

      After his tenure at British Petroleum and subsequent events there I have to confess my concerns as to exactly how he became Lord Browne! However the underlying point that shale oil and gas may well be a boon for the US and indeed the UK is I agree significant.

      I am not an expert on it but when the shale gas/oil debate was discussed on here before those who are said that it is extracted at an energy deficit as in you have to use more than one barrel of oil equivalent to get one barrel. So we need another energy source to use it (nuclear? solar?).

      I would be interested in others thoughts on this.

      1. Rods says:

        Hi Shaun,

        Like many new technologies, techniques will be refined and improved which will reduce costs. 

        My understanding is that it is tar sands that require significant energy input due to the viscous nature of the material and the need to mix it with lighter elements to produce commercially usable crude oil. In Canada about 15 to 25% energy input is required, with the 15% figure due to improved technology.

        With fracking it is the cost of the drilling and fracking that are major costs, not energy input to recover the oil or gas. The UK has very significant potential on and off shore reserves, which if it is extractable and commercially viable it will make us one of the top oil and gas producing countries in the world. As extraction costs come down and oil and gas prices go up at some point they will commercially viable, if it is not banned in Europe on climate change or environmental grounds!

        The US fracking industry has developed quickly as US landowners rather than the US government own the mineral rights. In Europe it is the reverse with Governments owning the rights, so while they pontificate and have steering committees followed by committees and sub committees etc., etc., the US are getting on with it! France and Bulgaria have banned fracking over ground water pollution concerns, even though my understanding is that most fracking and extraction is done at much deeper depths than any ground water is extracted from! Anyone would think France has a major Government owned nuclear energy sector to protect!

      2. David Lilley says:

        Shaun,

        I am sorry to be highjacking your blog. Your great blogspace.

        Every new field development in the UK sector of the N Sea has been a marginal field development since the start of N Sea oil in 1975.

        Following the Yon Kippor war OPEC (formed in 1969) got real and made those supporting Isreal pay for oil. Added to this the Suez cannal was closed and oil tankers had to go the long way round.

        All of our oil was imported and the cost went up four fold in early 1974 and five fold by the end of the year. We had the three day week etc. But the artificially high cost of oil made exploration and production possible from the N Sea and the first oil was landed from Forties and Argyle in 1975. By 1982 we were self sufficient at some 2m BBLs per day. At about that time it cost $20 per BBL to produce versus $2 per BBL in Saudi. Everytime Saudi turned on the taps to control other OPEC members persistent breach of quota the price of oil would fall to about $8 per BBL and everything on the drawing board would stop in the N Sea.

        OPEC would run full page ads in the oil journals pointing out that many oil importing countries were getting more out of oil than the exporters. At the time of our refinery blockades the state was getting 75% of what we paid at the pump and yet Gordon Brown would point the finger at OPEC.

        In something like 1979 80% of UK investment was in N Sea oil and it floated a non performing country for about a decade.

        Believe it or not, but the oil exporting countries, who had no contribution to their sustenence other than selling a natural resource found and produced by others, were seeking a subsidy from the oil importers who were going green and reducing their imports before the great Chinese naked capitalism gave them a new market.

    2. The_forbin_project says:

       infinite – the man has shares to sell !

      although not quite to the point of no returns on investment it can be said that Ethanol meets the  less than 1 EROI, Shale oil and oil shale ( oil and kerogen – precursor to oil ) are better , take you pick on EROI but at about 3-5:1 . and with oil prices averaging above 100$  then they are profitable to extract  or mine – yes mine!

      take look at this

      2001 . 2002 . 2003 . 2004 . 2005 . 2006 . 2007 .     2008 . 2009 .

      24.46 $24.99 $28.84 $38.26 $54.57 $65.16 $72.44 $96.94 $61.74
      2010 . 2011      . 2012
      $79.61 $111.26 $112.68

      average price of oil

      at those averages more difficult oil , and oil shale/shale oil has been known about  since the seventies becomes economic to extract – well some it….

      but can you run the American economy on such oil prices?

      I suggest not

      Forbin

      Ps: the geology of those oil wells means they peter out quickly – so you need to keep drilling an fracking – this costs a lot money to keep going

      PPs: perhaps he meant infinite in that we will not be able to extract this oil because we couldn’t afford the price!! :-)

  6. JW says:

    Hi Shaun
    Whereas its not clear to me that Spain would be better off outside the warm embrace of the EZ and all those lovely freebies from Germany, it is very clear that Italy would be incomparably better off with its own currency. 

    1. Hi JW

      Ah, but will the freebies continue as we go forwards? There may well be less to go around. Germany has quite a few decisions to make (and to an extent so does the UK as we are a net contributor to the EU).

      Putting personal issues aside (my holiday would have been cheaper) then running her own currency and monetary policy would be a benefit for Italy I agree. After all she is too big to bail…..ESM/EFSF 700 billion Euros compares to Italy’s national debt of 1.9 trillion or so rather badly…

      The most obvious case is Ireland who if she cut her banks adrift and went to her own currency could easily have a “with one bound I am free” moment. After all she is the most analagous to Iceland.

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