Book review: 'Mobs, Messiahs and Markets', by William Bonner and Lila Rajiva
An irreverent take on the world of finance
Tuesday 11 September 2007
The recent market turmoil stemming from concerns about loans in the so-called subprime mortgage market in the United States makes this book extremely timely. As markets around the world reacted first to the sudden emergence of doubts about the availability of credit associated with this lending policy and then to each other's reaction, observers were treated to a typical example of the mania of crowds.
None of it would have surprised William Bonner, head of Agora, one of the world's largest financial newsletter companies. The easing of credit that was a characteristic of Alan Greenspan's long spell as head of the US central bank, the Federal Reserve, was a disaster waiting to happen in his view.
He has long been a maverick commentator on the financial world and you get an idea of his world view from the titles of his previous books: Financial Reckoning Day and Empire of Debt. With Lila Rajiva, a contributing editor and writer at Agora, he has - rather like the historian Barbara Tuchman, whom he name-checks early on - decided to look at the present through the past. The result is an irreverent but thought-provoking examination of the goings on in international finance today.
Growing businesses have been less than impressed with the idea of gaining stock market listings for some time. This is a marked change from just a few years ago, when seeking a listing was a key ambition and sign that they had "made it". Now, the level of scrutiny from both outsiders and market analysts, and the perceived inability to make the quick decisions necessary to succeed in an intensely competitive environment have combined to make it much less attractive than it once was. Anybody still contemplating seeking a listing - on either side of the Atlantic - who reads this book is likely to come away with serious doubts.
Though the book is light-hearted in tone, it packs a serious punch. One particular target is globalisation, as described by Thomas Friedman's best-selling book The World Is Flat. Mocking this view in a chapter entitled "The Flat Earth Society", Bonner and Rajiva write: "We are all one: one people, one world with one idea - to get rich. And in this new flat earth, we can all get rich, too. It is as if the world had been flattened into a kind of United States of Earth, where people in Mississippi can live as well as those in New Guinea - competing for the same jobs, trading, co-operating and schlepping their way toward a new world order that is better for everyone".
It is all very tongue-in-cheek, but you get the point. The idea that globalisation is good because it enables people in less developed countries to buy the same clothes as those in industrialised ones has become pretty well accepted by most people, at least those in business, largely because it has been repeated so often. As Bonner and Rajiva point out, just a few don't get this sort of "United States of Earth". They are "losers, who think religion is more important than material progress; insurgents, who defy the empire; and protectionists, who want to push a stick into the wheels of history".
Of course, it is not as simple as that. Not only is the spread of huge companies across the world not all good for people in less developed places it is also certainly not good for many workers in developed countries, who are suddenly seeing their jobs threatened by low-cost competition from the same sort of places that are being sold goods they never knew they wanted.
Though there will be many victims, this might be a fad that passes. More worrying is when the crowd or mob mentality takes over the stock markets. In a chapter towards the end of the book that advises on "how not to be chumped by Wall Street", Bonner and Rajiva make the obvious point that investments should be bought when they are down and sold when they are up. Of course, the uninitiated do the exact opposite. "The lumps get excited about an investment when everybody else is excited about it - which is precisely the time not to buy".
This is straightforward enough, but how does an individual know when a stock is up and when it is down? They tend to seek answers from the so-called experts in newspapers and elsewhere. But such commentary is part of the general noise. Without such sources of information, investing would be more of a private matter, more a question of an individual making his or her own assessments and acting accordingly - and it would be better for it, the authors assert.
Perhaps that is why owner-managers who know their own minds and have an instinct for what will work often see opportunities that larger organisations with all their strategists and analysts and advisers do not.
(John Wiley, £19.99)
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