When Markets Collide: Investment Strategies for the Age of Global Economic Change [Hardcover]

Mohamed El-Erian (Author)

Book Description

Publication Date: May 23, 2008

SELECTED AS A 2008 BEST BUSINESS BOOK OF THE YEAR BY THE ECONOMIST

"ONE OF THE SMARTEST INVESTORS ON THE PLANET."--MONEY MAGAZINE

“This book is an essential read for those who wish to understand the modern world of investing.”
—Alan Greenspan

Winner of the 2008 Financial Times and Goldman Sachs Business Book of the Year Award

When Markets Collide is a timely alert to the fundamental changes taking place in today's global economic and financial systems--and a call to action for investors who may fall victim to misinterpreting important signals. While some have tended to view asset class mispricings as mere “noise,” this compelling book shows why they are important signals of opportunities and risks that will shape the market for years to come. One of today's most respected names in finance, Mohamed El-Erian puts recent events in their proper context, giving you the tools that can help you interpret the markets, benefit from global economic change, and navigate the risks.

The world economy is in the midst of a series of hand-offs. Global growth is now being heavily influenced by nations that previously had little or no systemic influence. Former debtor nations are building unforeseen wealth and, thus, enjoying unprecedented influence and facing unusual challenges. And new derivative products have changed the behavior of many market segments and players. Yet, despite all these changes, the system's infrastructure is yet to be upgraded to reflect the realities of today's and tomorrow's world. El-Erian investigates the underlying drivers of global change to shed light on how you should:

• Think about the new opportunities and risks
• Construct an appropriately diversified and internationalized portfolio
• Protect your portfolio against new sources of systemic risk
• Best think about the impact of central banks and financial policies around the world

Offering up predictions of future developments, El-Erian directs his focus to help you capitalize on the new financial landscape, while limiting exposure to new risk configurations.

When Markets Collide is a unique collection of books for investors and policy makers around the world. In addition to providing a thorough analysis and clear perspective of recent events, it lays down a detailed map for navigating your way through an otherwise perplexing new economic landscape.

Editorial Reviews

From the Back Cover

The #1 New York Times and #1 Wall Street Journal Bestseller

“Mohamed A. El-Erian is one of the most gifted and successful risk management practitioners in the world. In this book he combines an academic’s insight into advanced risk analysis with a portfolio manager’s grasp of real world economics. This book is an essential read for those who wish to understand the modern world of investing.”
—Alan Greenspan

"Few people are as well positioned to understand markets as Mohamed El-Erian. He is almost unique in being able to attack the credit crisis from the perspectives of academic economist, policy official, investment banker and fund manager...Mr. El-Erian's insights are as valuable as ever."
--Financial Times

"El-Erian is a doer and a thinker and someone who understands the risks of rare events. [Never before, have] I seen such a combination. Read this book."
—Nassim Nicholas Taleb, author The Black Swan

“This extraordinary book portrays the future with a powerful and trail-blazing illumination of the past.”
—Peter L. Bernstein, author Capital Ideas Evolving

“Brilliantly written, easy to understand—a forceful explanation of our changing global economy.”
—Bill Gross, Managing Director, Founder and CIO, PIMCO

“Mohamed El-Erian, with his deep grounding in economics and his profound knowledge of financial markets, has written a book that no one else could write.”
—Seth A. Klarman

“Mohamed El-Erian’s book is an important, wise and insightful analysis….”
—Michael Spence, recipient of the Noble Prize in Economics (2001)

“I can think of no better guide to the terrifying yet exhilarating new world of global finance….”
—Niall Ferguson, William Ziegler Professor at Harvard Business School

“Mohamed El-Erian is a deep thinker of the global financial and economic scene.”
—Arminio Fraga, Founding Partner, Gavea Investimentos and Former President, Central Bank of Brazil

“Mohamed El-Erian is that rare creature: a skillful participant in financial markets who is also a brilliant analyst of them. He has written a book that is important and urgent.”
—Fareed Zakaria, editor, Newsweek International

"Mr. El-Erian . . . offers extremely detailed advice.”
--Paul B. Brown, The New York Times

“El-Erian...specializes in spotting trends amid the blur and clanging noise of markets in motion. He steps back to consider the big picture and offer tips on how to allocate your assets in his new book, When Markets Collide: Investment Strategies for the Age of Global Economic Change. El-Erian does offer something valuable for investors seeking to benefit from the global economic realignment: a road map. In a chapter on asset allocation, he provides an illustrative mix for a long-term U.S.-based investor.”
--Bloomberg News

“The recent turmoil in financial markets is a symptom of realigning economic power around the world, promising investors more rough times ahead, prominent fund manager Mohamed El-Erian writes in a new book.”
--Reuters

About the Author

Mohamed A. El-Erian is co-CEO and co-CIO of PIMCO, one of the largest investment management companies in the world. He formerly served as president and CEO of Harvard Management Company, the firm that manages the university's $35 billion endowment. He spent 15 years at the International Money Fund, working on policy, capital market, and multilateral economics issues. El-Erian has been featured by Bloomberg, Forbes, Financial Times, Latin Finance, CNBC, The New York Times, and The Wall Street Journal. In 2004, Fortune named him a member of its eight-person “Mutual Fund Dream Team.”

Product Details

• Hardcover: 304 pages
• Publisher: McGraw-Hill; First Edition edition (May 23, 2008)
• Language: English
• ISBN-10: 0071592814
• ISBN-13: 978-0071592819
• Product Dimensions: 6.3 x 1.1 x 9.4 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 3.0 out of 5 stars  See all reviews (66 customer reviews)
• Amazon Best Sellers Rank: #89,086 in Books (See Top 100 in Books)

More About the Author

Mohamed A. El-Erian is co-CEO and co-CIO of PIMCO, one of the largest investment management companies in the world. He formerly served as president and CEO of Harvard Management Company, the firm that manages the university's $35 billion endowment. He spent 15 years at the International Money Fund, working on policy, capital market, and multilateral economics issues. El-Erian has been featured by Bloomberg, Forbes, Financial Times, Latin Finance, CNBC, The New York Times, and The Wall Street Journal. In 2004, Fortune named him a member of its eight-person 'Mutual Fund Dream Team.'

Most Helpful Customer Reviews

522 of 544 people found the following review helpful

1.0 out of 5 stars With this book, I give up my remaining trust in cover blurbs. November 8, 2008

By David R. Harper VINE™ VOICE

Format:Hardcover

I bought this book because it won the Financial Times Book of the Year Award (not a top ten winner or something, #1 mind you). Historically, a reliable guide (e.g., the masterpiece China Shakes the World, and theoretically dubious but highly provocative Friedman's World is Flat). It has dawned on me belatedly that advance praisers probably don't read their books. All these absolutely glowing endorsements by serious people...for a book that *clearly* isn't top notch.

T. Bojko's review may seem harsh, but it's spot-on. I can live with the ponderous writing style. I initially thought the big words concealed some new or profound thinking...but not at all.

The problems are: 1. there's almost nothing new or inspired about the "markets of tomorrow," and 2. there is nary a sliver of new, actionable advice about investing. The whole thing is a compendium of the superficial. Seeking to cut a swath a mile wide, it is everywhere one inch deep.

In regard to the first, the following are superficially summarized: global trade/capital flows (rightly footnoted to Martin Wolf, but Wolf's own columns are better on this); a cocktail of snippets on behavioral finance - called a "cocktail" - just read Shiller straightaway; some stuff on global trade and commodities, see latest Economist; a paraphrase of Taleb's colorful insights (just read Taleb directly); a woefully weak primer-not-really on securitization; a brief primer on asset classes that repeats everything I've got in a dozen other finance books; and too much material on IMF (e.g., not a single mention of Basel). I agree the topics per se are important, but most of them here are superficially derivative of other, better works.

Here are the four insights from Chapter 2: we are coming from a period of aberrations, many puzzles; too many dismissed them as noise; the inability to distinguish signal from noise is a bad thing; the adjustment caught people off guard. I'm not kidding. The blinding insight is: take care to distinguish signal from noise! Noise bad, signal good....

Strangest of all, in my opinion, is that the author appears to have nothing to add to the field of risk management, which stuns me given his unique vantage point. Risk management is reduced to a few catchphrases: tail risk, moral hazard, principal-agent. Say it ain't so...

Finally, T. Bojko is right about the mundane asset allocation plan: "the author just lays out a pretty mundane asset allocation plan (which is available for free on any number of websites) and then fills a couple dozen pages with worthless blather. Seriously, that's it." That's exactly right.

The book boils down to: big "structural" change is coming, try to sort signal from noise, here's pointers to a bunch of good reading material, I worked at the IMF, start with this generic plan.

I saved you a few bucks. More to the point, I wasted my time reading this book so you don't have to. Since that time is lost to me forever, the least you can do is vote my review "helpful."

269 of 288 people found the following review helpful

1.0 out of 5 stars My Worst Investment in a Long Time August 23, 2008

By T. Bojko

Format:Hardcover

This book was awful. Part of the problem is that the author couldn't decide who his audience was and, as such, probably bored the pants off finance people and left regular folk scratching their heads at his absurdly opaque writing "style".

A couple quick points if you are considering buying this book:

1. It you read the newspaper most days, are reasonably intelligent and realize there is a big world with lotsa money beyond America's shores, this book will give you no new information on "when markets collide".

2. If you have some (I mean A MINIMAL AMOUNT) of investment knowledge, you will be painfully disappointed by the lame chapter on how to profit from future "collisions". Really, the author just lays out a pretty mundane asset allocation plan (which is available for free on any number of websites) and then fills a couple dozen pages with worthless blather. Seriously, that's it.

3. The writing really sucks. Others have commented on this so, rather than gives examples, I'll just reinforce what others have noted: the writing sucks. Whatever happened to editors?

4. If you really want some ideas about investing internationally, try The World is Your Oyster by Jeff Opdyke (2008). Heaven forbid, he writes in plain ole' English and gives a lot of worthwhile advice. If you really want to understand where the world is headed, read Billions of Entrepreneurs, How China and India are Reshaping Their Futures and Yours, by Tarun Khanna (2008).

5. If you really want some ideas about investing in general Peter Lynch's classics are still every bit as instructive (and humorous...and nicely written) and the biography of Warren Buffett, "Buffett", is incredibly instructive. Jeremy Siegel's "Stocks for the Long Run" is also pretty handy, although el-Erian makes some snide comments about it...but never quite gets around to justifying them...hmmm...some petty Harvard - Wharton rivalry?

6. el-Erian's shout-outs to colleagues here and there get more tedious as the book goes on, particularly as he never seems to articulate how the work of these experts is relevant to creating an investment portfolio. Gee, thanks.

7. Let me say it one more time: When Markets Collide is a worthless read.

64 of 78 people found the following review helpful

1.0 out of 5 stars Not worth reading August 5, 2008

By Gentry L. Watson

Format:Hardcover

I do not believe that this book is worth buying or reading
because of three factors:

1. It contains minimal advice for investors wishing to
change their investment strategies.

2. It is written for an audience for professional economists
with advanced degrees.

3. The editing of the text is very poor. Each chapter contained
multiple references to something "that I will deal with in
the next chapter" or "that I covered in previous chapter."
A few of these references is understandable, but the text
is so poorly written and edited that these references quickly
became a distraction and a nuisance.

I would strongly advise prospective readers to avoid this book.