Mobs, Messiahs, and Markets : Book review

Book Review: by Atim Kabra

Mobs, Messiahs, and Markets : surviving the Public spectacle in Finance and Politics

Authors: William Bonner and Lila Rajiva

 

I have a confession to make. Twice while reading this book, I felt a compelling need to refer to the first few pages and refresh my memory on when the book was published. For your information, it was published in the year 2007 (I believe August) and well before the mega crisis and financial blowup of second half 2008 unfolded. If not for anything else then you got to read this book for its clairvoyance alone.

The authors have been bang on target painting what was then a potentially scary scenario which ended up becoming of the biggest blowups in the financial history of the world as it unfolded. They deserve credit for having faith in their contrarian doomsday vision when everyone else was going all out buying mortgage originator companies and expanding prop desks funded by Bank’s leveraged books without any due regard for the inherent risks.

 I ended the book wanting some more insights into the future but I guess that even the authors would not have imagined the scale and speed of the ensuing blowup. Besides a bit of Japan and a bit of gold on the long side and the need to stay away from the US Dollar on the short side, I am sure a lot more insight into what might work as an investment or hedge in case their views come true would have been helpful.

That said, this is one witty book which delights in taking the pants off almost everyone. Alan Greenspan is one such obvious target but I enjoyed the authors ripping off the sweeping generalizations made by the likes of Thomas Friedman.  The canvas of quotes is indeed wide and travels all the way from ancient philosophers to modern day pundits. It is clear that the author’s value the insights provided by history and he who ignores a historical perspective does so at his own peril and loses his rear view mirror. .

In the last 10 years, we have lived through the real estate mania and the internet bubble. Easy money and massive systemic liquidity played a crucial part in creating the irrational exuberance. Even now, to my amazement, I am reading pundits wishing away the fundamental shift that should happen worldwide as profligate US based spenders turn into savers leading to a slowdown in overall consumption impacting a consumer driven USA to a production driven China to a commodity supply  driven Australia, Canada and Indonesia. Successful money making in the new environment requires, in equal measures, an understanding of the interlinked gears driving a global market place as well as the psychology of the investors financing the mechanics through their participation in various markets. The authors do a yeoman service in baring these correlated and complex processes and highlighting the role played by the politics of decision making.

It is natural to expect the authors take a negative stance towards an inept government which turned a benevolent blind eye to the unbridled speculation and actually ended up promoting and exacerbating the crisis in part by creating excessive liquidity flows. As always it is the public (tax payers in today’s environment) who are suckered and left holding the bag in the end. A question that is still unanswered is the culpability of the regulators and their accountability for failing to stem the rot in time. Who polices the police is not clear. I do wish that the book was a bit more structured though. At times I did find myself questioning the extension of certain thought processes which kept going in a loop. The canvas of the chosen subjects is so wide that even 424 pages turn out to be inadequate to addresses the issues. I would strongly recommend this book to everyone with an interest in Markets and investing and also make it a compulsory read for the regulators in charge of minding these markets.