Customer Reviews

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

5 star:		(12)
4 star:		(15)
3 star:		(8)
2 star:		(11)
1 star:		(15)

 

 

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."

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.

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.

El-Erian's publisher McGraw-Hill badly let down the author, and his readers, with a poor to nonexistent copy-edit. The book is full of jargon and poorly written paragraphs--to illustrate, here is a rather typical one-sentence paragraph: "The challenge of how to deal with consequential and volatile endogenous liquidity relates to another policy issue that I will discuss in Chapter 7: how to refine the traditional instruments of monetary control and ensure more meaningful and sophisticated supervision on a range of activities, with volatile leverage, that have been enabled by the ongoing structural transformations and yet are outside meaningful oversight."

This is technocratic obfuscation at its worst, and El-Erian, who is no lightweight, could have better been served by a heavier edit.

Perhaps the worst feature of the book is its attempt to reach three entirely different audiences--individual investors, policy-makers, and institutional investors. If you are an individual investor, realize that 75% of the book is written for others.

If you find your way through the jargon and infelicitous structure, some solid, thought-provoking ideas gleam in the darkness. Be prepared to dig, though, and bring your headlamp!

The style is very similar to El Erian's monthly articles, but there is nothing really new or original. If you are familiar with Bretton Woods II, have some training in economics and/or have worked in structured finance you will find this book slow at times, but if you are new to the structured finance world or you are trying to find out what went wrong with the financial system this should be an excellent overview. I agree with the other reviewers it reads like a newspaper article, but it is a good overall review of the most recent economic cycle.

This book reads like three articles and a lot of filler: an article from an economics journal, another from a popular investment magazine and finally a foreign policy review article. Unfortunately, these three articles only fill about 1/10th the space, so a lot of repetition and filler is added to bring it to the full length. It does have a number of good points, but, in spite of the excessive verbiage, they seem to be poorly elaborated. The author seems to repeat, rather than elucidate.

It is also difficult to determine the audience the author is addressing - especially since he commonly refers to 'investors'. At times 'investors' seems to reference retail investors who buy index funds. At other times 'investors' are investment bankers managing large funds. Sometimes, I found myself midway through a section before realizing it was a different "investor" he was talking to. And just to confuse matters even more, we spends a good portion of the book addressing desired changes to national and international policy.

In spite of the very poor writing, there are some interesting ideas, especially as they relate to the changing economic landscape with the 'emergence' of emerging economies. Perhaps the author will choose to reduce the book to a few well-written articles.

Remember how research analysts at Goldman Sachs sold you all those worthless internet stocks. Well now they have given their annual book award to a useless tiresome book. The author makes ominous statements about current "structural transformations" and then disappoints with factoids so mundane and commonplace that even Bloomberg talking heads would be disgusted. Furthermore the author chooses to recycle wisdom from a smattering of recently popular authors (like the combustible, but also pointless, Nassim Nicholas Taleb) and some oldies like Keynes at inappropriate moments throughout his book in a losing battle to seem relevant. Finally, if you read this book you will constantly be baited with phrases like "as I will discuss in Chapter 7". This technique serves to lure readers into thinking that if only they are more patient with the current inanities they are reading, readers will be rewarded with great insights later on. However they are later greeted by phrases like "as I discussed in Chapter...". In the introduction the author talks about detecting signals in market noise. Alas, this book is more noise than signal.

If you find the present global economic situation to be confusing and filled with conflicting signals and noise, this excellent book by Mohamed El-Erian, the CEO of PIMCO and the former President of the Harvard Management Company where he managed Harvard's $35 billion endowment, should be on your reading list.

El-Erian brings a unique perspective to the task of separating the signal from the noise in today's volatile global markets. Having spent 15 years at the International Monetary Fund and the rest of his career in the trenches in emerging market research and investment at leading investment banks, he has a deep understanding of both the public policy side and the realities of global investing.

His premise could not be more timely: Global markets are undergoing profound changes and the present turmoil is neither the beginning nor the end of the transformation that is shaking up investors around the world. This bumpy process is nothing less than the collision of markets in which the markets of yesterday collide with those of tomorrow

The book offers analytical anchors for identifying the key elements of what, for some, have become key drivers in an unusually fluid environment. In addition to offering targeted, well written, explanations of some of the key sources of confusion and dislocation (U.S. national debt, new sovereign wealth funds and emerging, developing countries now funding the debt of the developed nations), El-Erian also provides some invaluable advice for personal investors.

Given his contention that most U.S. investors have not fully grasped the impact of the changes going on in global markets and the impact of higher commodity prices and shift to accelerating inflationary trends around the world, he provides a new sample asset allocation model for correcting some of the imbalances in most U.S. investors' portfolios.

His asset allocation table on pg. 198 provides an illustrative neutral asset mix for long term investors that is well worth the cover price of this book and was featured recently in an excellent article and interview in Barron's in the June 2, 2008 issue.

His writing style is fluid and command of the material impressive. Like most great authors and thinkers, he will have you challenging your present views and investment positions. This book is an outstanding companion to Unconventional Success: A Fundamental Approach to Personal Investment by David Swensen on the personal investment front and The Age of Turbulence: Adventures in a New World by Alan Greenspan on the public policy front.

In addition to raising the big issues, El-Erian provides a clear action plan for both investors and policy makers, a truly outstanding achievement in a field where leaders are too often focused on selling investment products rather than educating the investment public on the changes in global economic conditions.

It is difficult to understand why the Financial Times would select this book for special recognition. It is also difficult to add anything significant to the many reviews which have already been posted.

The book is self-serving and so full of jargon that it is almost impossible to read. There are probably insights here, El-Erian is undoubtedly a wise and clever man, but the lack of a strong editorial hand has kept the insights well hidden.

This is not the book to read to understand today's financial problems.

I purchased this book at an airport while waiting for a flight. It was prominently displayed in the business section of the bookstore (perhaps that should have been a warning). The book includes endorsements from such august figures as Alan Greenspan, Seth Klarman and Michael Spence, yet I doubt if any of them actually read the book in its entirety. Moreover, Mr. Greenspan works as a consultant for PIMCO (also the employer of the author).

The book makes some decent macro-orientied observations but none of them are really new or unique. Moreover, the writing style is ponderous and prolix. The typical, individual investor can skip the first five chapters and go directly to chapter six, where you will find a recommended portfolio. However, there is nothing especially enlightening about the portfolio he recommends. (He also fails to mention the tax issues surrounding TIPS).

I was surprised at how he rather cavalierly addressed index funds vs. actively managed funds when discussing equity allocations. I understand that he didn't want to get into the active vs. passive debate, but I was expecting more from someone with his background and expertise. For example, he suggests that retail investors use Lipper and Morningstar (bottom of page 203) to gain "insights" into this process. However, he doesn't say how using these services will lead one to pick a superior actively managed fund.

In addition, although the book was published in 2008, it would have greatly benefited the reader if it had included more discussion and insight into the events and implications surrounding Bear Stearns, Fannie and Freddie. At times (and I realize that this is not directly the author's fault) the book sounded outdated. While hindsight is 20-20, both the author and the reader might have been better served if the book was released later to allow Mr. El-Erian to include more of his candor and insight on these important developments.