Customer Reviews

Wealth, War and Wisdom

5 star:		(12)
4 star:		(13)
3 star:		(11)
2 star:		(7)
1 star:		(5)

 

 

Barton Biggs does an excellent job of analyzing the interplay between investments and stock exchanges and events in World War II. He details the histories of countries that were victorious, as well as occupied countries and the Axis countries who were the aggressors and then the vanquished. Throughout the book he intersperses the performance of stocks and bonds as they relate to the events of the times.

His thesis is that the stock market is a great anticipator of turning points in the war. Stock prices hit their highs or lows months before conventional wisdom, the press, and even the statesmen and leaders saw a turning point. For example, British market made their lows in June 1940 whereas events were still gloomy and exceedingly pessimistic, with even the survival of Britain in doubt. On the other hand, German stocks peaked before Hitler's attack on Russia was stalled, during a time when many thought taking Russia would be a cakewalk and well before Stalingrad.

These types of correlations can only be obtained by hindsight though, and exceedingly hard for investors to catch the turning point.

The rest of the book reads like a fascinating history of World War II, the battles, the personalities, and the intrigues. Mr. Biggs also portrays the intense human sufferings, and the great loss and destroyer of wealth and livelihood that war inflicts on all its participants. In the last few chapters he gives advice on what to do to prepare for another such type of disaster in the future. Keeping a small farm stocked with food, medicine and automatic weapons that you can use; in a location easily accessible to you, but not too close to major population centers. Yet even with preparations it is unlikely for most people to escape the harm and devastation of the next major world war. If it is thermonuclear, I doubt that the farm will survive the fallout. And with transportation destroyed, you couldn't get to it anyway or fight off the people who had already arrived there ahead of you.

Biggs also offers advice on portfolio diversification, keeping some gold and jewelry, some farmland, as well as currency diversification. He also analyzes what worked and didn't work for survivors of World War II. Mostly it was luck, coupled with healthy paranoia. Those who didn't believe that things would get worse oftentimes stayed back and perished. They were too greedy, or reluctant to leave healthy businesses, or to sell at a loss, ended up losing everything, including their lives. In some sense this is the same behavior people face in a bear market. Only in the case of war, invasion and occupation by an enemy, history has shown that those who were willing to cut their losses and escape to a safer country, even with the loss of most of their wealth, were able to survive whereas those who dawdled or were in denial, lost everything.

This book is a fascinating view of World War II from the perspective of economic investment. However, this is not a technical book in the sense that it is full of charts and graphs. The author, Barton Biggs, is able to fashion his story in an interesting and compelling way that takes us through a compressed telling of the war in Europe and the Pacific while also showing us what it did to the markets here at home and abroad.

Yes, there are charts and graphs, but the text is so compelling that they don't get in the way of those who aren't technically minded, but really help those of us who want to look at the data see the economic impact in the images the author provides.

One of the problems every individual faces in the crushing periods of war is how to preserve and move one's wealth. Barton shows us how people did that in the countries being demolished during the war, as well as in the victorious nations. There is also the problem that nations and politicians face in needing supplies, but wanting to keep individuals and companies from exploiting the war for outsized personal gain.

Of course, while history is interesting in itself, there are also lessons to be learned in how turbulent markets behave and what investors, politicians, and regular folks are likely to do in reacting to the violent and tumultuous changes. Heaven forbid we should ever see such times again, but history's guide informs us that the storms will come again in some guise. This valuable book is worth having and reading for enjoyment, background, and for thinking about today and the future.

Reviewed by Craig Matteson, Ann Arbor, MI

World War II through the eyes of the stock market

The message this book conveys would have been better served if it was written as a collaboration between Mr. Biggs, a WWII historian, and an economist. Mr. Biggs, although he is a WWII enthusiast, and very successful businessman, is writing from his viewpoint, as do all authors, but with such extensive ground covered in only a few hundred pages I feel the book needs better organization, clarity, direction, and further development of his thesis.

If I could have given this book 3 ½ stars I would have in a heartbeat. The book is not deserving of 4 stars based upon the lack of glossary, lack of organization, and the mix of mediocre and outstanding writing. At times the book reads like a historical account of World War II, and at other times economics are discussed but often abruptly introduced as if the author realized he needed to momentarily throw in some economic data before continuing.

I found myself in both agreement and understanding of the authors message, and I know there was a lot of ground to cover in the book, and perhaps that is the reason for the choppiness. Twice in the book Mr. Biggs says, "whatever that means" and as a reader, I would expect that if he introduces a term that at least he would know what it meant and explain it to the readers. I thought that was sloppy writing and he would have been better off just leaving something out if he doesn't know what it means. Also once he uses his own company as his information source.

I enjoyed the historical quips, and found Winston Churchill to have a very impressive wit all throughout the book. I also learned more about Hitler as a person that I had previously known. It was fascinating to see the personal side of these and other warring leaders.

Although most of the book was predictable as far as wealth retention and distribution during the war and post-war, I was very surprised to learn the lessons of the Japanese real estate market post war. I was also encouraged by what I read especially regarding the way most stock markets were open and conducting business despite a brutal war.

I hope to see a 2nd edition of this book in the near future. It would be interesting to see a couple hundred pages added that would provide more depth and explanation than is currently presented. In a nutshell, this book follows the development of World War II including key battles, economic conditions, and the leaders decisions and ties those events to the affected stock markets in order to show that group think is a true and accurate predictor much more so than individual financial experts.

A broad-brush, very readable account of WWII, with a lot of anecdotes (the stories about Churchill are particularly entertaining) accompanied by stock charts from the main financial centres. Apart from New York and London, those charts are probably not very reliable because of high wartime inflation, administered prices (the central bank would restrict selling of securities) and the lack of a published stock index. Still, it is very interesting to put the prices of financial assets in historical perspective.

Based on these data, Barton Biggs tries to show how the market is efficient in forecasting the outcome of the war, because the market turned shortly before major defeats or victories. That reasoning is somewhat flawed in my view. It seems to me that investor expectations should be appraised based on the level of the market (prices), rather than based on changes in prices. For example, while it is true that the Dow made a low in April 1942 just before the battle of Midway, the fact remains that the level of the market was the same in February and in September 1942, suggesting equal expectations regarding the outcome of the war. Even is you assume (as some do) that the market starts going up when the last optimist sells his stock, it means that investors were still very pessimistic in April 1942.

I found the chapter about France the most interesting. It appears that the Paris Bourse gained almost 100% between the French surrender in June 1940 and the reopening of the market in July 1940, suggesting that French investors had great expectations of a German-dominated Europe, which is not to our honour. The discussion of the fate of French financial assets under German occupation is also very interesting.

Finally, there is some advice on how to protect one's wealth over long periods and difficult times, demonstrating that studying the past and preparing for the worst is more constructive than crying Black Swan.

It is an age-old notion. The investing public provides liquidity to the "smart money." A mainstay on every investor's bookshelf, Charles Mackay'sExtraordinary Popular Delusions and the Madness of Crowds, argues "men ... think in herds."

Barton Biggs, former chief global strategist at Morgan Stanley before leaving in 2003 to form hedge fund Traxis Partners, questions this conventional and pejorative notion in Wealth, War & Wisdom. Using World War II as a backdrop, he shows the equity markets in the United States, Britain, Germany and Japan identified the conflict's turning points with uncanny precision.

The stock market, he argues, represents the collective conclusion of multiple motivated judgment of a diverse, independent and decentralized sample. He joins James Surowiecki in The Wisdom of Crowds and Michael Maubossian in More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded), to plead a powerful case for paying attention to the markets' underlying message.

Biggs is no historian. He is, however, well-read and a deep thinker. He weaves military history, market action, maps and charts to illustrate his moral. Hardly radical, it is detailed and convincingly argued: A long-term strategy is the best way for ordinary investors to build and maintain wealth.

This is a book every serious investor should read and ponder. It is an original, absorbing and thought-provoking primer on wealth creation. Today's actions aggregated with others provide powerful clues to your financial future.

The first thing I do when a PR flack sends me a book is throw away their summary. Unlike other reviewers, I read the books. The publisher sent me this book, but I did not ask for it.

All that said, I thought Wealth, War & Wisdom was a great book, and I spent more time on it than I normally do for books of equivalent length. Why? It covered areas of history that I was not as aware of.

This book is really two books in one. It is a book that covers the history of WWII in an eclectic and cursory way. After that, it asks the harder question of how one can assure the preservation of wealth in a volatile world. In a lesser way, I have talked about that recently.

Regarding the history of WWII, I came away with a greater appreciation of:

* The troubles Britain faced.
* The cruelty that the people in the nations overrun by Hitler and the Soviets faced.
* The compromises many nations made to have an easier time in the War.
* The courage that it took to oppose aggression in the face of initially bad odds.

One commonality between Germany and Japan was a lack of resources, and rather than produce and trade to get them, they chose conquest.

But the greater problem is how one preserves wealth over all contingencies. The problem is almost insuperable. Even as some wealthy people today are buying farmland, that was one strategy to preserve wealth in WWII. Homely farms that were reasonably productive, but not ostentatious, were ideal to preserve wealth and lives. Away from that, investing abroad was wise for the rich. Also, commodities and TIPS, which did not exist then might preserve some wealth. Gold and other precious items, if small could also preserve wealth, or at least life.

For those who live in the US today, we live in a special time and place. We are free from the losses that come from aggression on our home soil. We largely agree with one another, much as politicians may disagree on that point. Americans are exceptional in so many ways, though not all of them are good.

Preserving wealth means owning productive land locally, and having flight capital abroad. Away from that, Biggs counsels owning stocks because good times happen more often than they should.

I liked this book, more than many.

After reading this book, I am better educated about the historical behavior of stock markets and the war polictics.

The economics of the world have drastically changed over the last few decades that some of the historical observations no longer apply to the modern world - but it does provide a hindsight in making decisions.

It was a very nice read and enjoyed reading the books and also made some notes while I read it.

For those who are planning to read this book: It is not invesment advice, but gives a historical perspective of how the markets have behaved over time.

This book has many interesting points. The parts on the markets reaction to the second world war are very interesting. Hindsight is of course 20/20, but the author gives us a very complete hindsight view of this and other instances; albeit influenced by his own opinions.

That having been said, the usefulness of this book is limited due to the lack of structure, an overarching theme, or even a key point. We are presented a plethora of information that while intriguing, fails to deliver much useful application.

The book is left without a specific category. It's not a history book, as the author makes very clear from the beginning. It makes some effort at predicting the future by "cycles", but doesn't overtly and clearly present or back up any of these cycles. It could potentially pass as a sort of memoir, but not a very good one. Instead it seems like someone told Biggs to write a book, and he did so based on whatever popped into his mind.

It is always interesting to read a book that purports to be about one subject only to realize it's really about something else entirely. Barton Biggs' "Wealth, War and Wisdom" is supposedly about the wisdom of markets, and through graphs, charts and anecdotes Biggs attempts to show that in periods of war the stock market as a whole magically anticipates the future. Because they draw on the collective knowledge of crowds, markets may have an inherit wisdom that defies predictions, but as noted in other reviews ultimately the case is not proved one way or the other here. This book is really more about wealth destruction in periods of war, and as such is an alternately disturbing and very interesting read.

Biggs is no historian, and he doesn't claim to be. He's read a lot, though, and through the work of others paints a very vivid picture of the wealthy in World War II and the Korean War. In the chaos of war, how did the rich preserve their wealth? Was it better to be a land owner, or a stock investor? Was it better to high-tail it out of town at the first sign of trouble, or try to stick it out? Would your wealth protect you if you were a member of a persecuted minority? (A hint: No.) In light of extremely unstable times (and Biggs wrote this on the cusp of the Great Recession), is it possible to take precautions now, in anticipation of anarchy and violence? Can we learn crucial lessons from the mistakes of those pre-war Europeans? Biggs doesn't give you all the answers, but he does give you stories, letting you draw conclusions for yourself.

As pointed out by others, a lot of the advice that concludes the book is for the rich. (Honestly, it's good advice: Don't flaunt your wealth, diversify, don't get complacent, and don't tell anyone you've got gold bars buried in your backyard.) But there is much here that anyone can benefit from, although you will have to read through some brutal and deeply sad incidents to get at it. Even if you like to read history, you will probably find stories you've missed, and they're good ones at that.

"Wealth, War and Wisdom" is an absorbing read, though you may find yourself arguing mentally with Biggs as you go through it. All things considered, I think that he ultimately misses the biggest wealth preserver of all. While in France I visited a gorgeous chateau that had been left untouched in the French Revolution. A Frenchman told me the people had not burned it down because the owner had always let the peasants use her bridge to cross the wide river, instead of forcing them to walk ten miles to the next bridge. And so they spared her life.

Want to save your wealth? Hide some of it in other countries. Want to save your life? Play nice.

GRADE: B/B-

Most war history books deal with physical battles. Barton Biggs' Wealth, War and Wisdom deals with financial battles instead. This is subject matter with a distinctly more limited audience than typical military history books.

Subject matter felt roughly patched together which made some portions of the book fascinating and some portions utterly banal. The basic premise of the book, that stock markets parallel military successes or failures does manage to come through throughout.