Perhaps of Interest……….

One thing about retiring is all the time you find yourself burdened with—-and the old Puritanical guilt of feeling the need to do something “constructive” with this bonanza.  Problem is I doubt my orthopedic surgeon would approve my training for a marathon on my replacement knee…….

So I’ve been reading about a book a week on average.  And this past week I read two that I consider well worth any reader’s time——-Animal Spirits by George Akerlof and Robert Shiller and All the Devils Are Here by Bethany McLean and Joe Nocera.

Animal Spirits is a discussion of human psychology’s effects on markets and economic modeling.  Even if you aren’t interested in economics, the book will still fascinate.  The authors, one an economist at UC Berkeley and the other at Yale (Shiller as in Case-Shiller housing index), define the “animal spirits” and then discuss their effect on economic problems.  Written at the height of the latest financial melt-down, it leaves a few issues unresolved.  But the discussions are so timely, e.g.,

“There is then a fundamental reason why we differ from those who think the economy should just be a free-for-all, that the least government is the best government, and that the government play only the most minimal role in setting the rules….Indeed if we thought that people were truly rational, and that they acted almost entirely out of economic motives, we too would believe that government should play little role in the regulation of financial markets, and perhaps even in determining the level of aggregate demand.”(pg.173)

Remind you of any recent political debates?????????

The other book is a fascinating history of the latest financial crisis.  Nocera is a business columnist for the N Y Times. McLean is the co-author of The Smartest Guys in the Room, a best-seller about the Enron implosion.  The authors establish the characters and personalities of the business leaders whose companies’ foibles precipitated the financial melt-down at the close of the first decade of the 21st century.  They also explain the CDOs and CDOsquared and the other alphabet soup of financial “products” that bamboozled so many of the “Masters of the Universe”, from the CEO of Countrywide to the decision makers at AIG to the Secretary of the Treasury who tried to contain the explosion.  A very readable book that does not require an MBA in Finance to understand:

“Financial innovation? Collateralized debt obligations? Synthetic securities? What had been the point of that?…As Paul Volcker [former Fed chair] said…’I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy.'”(pg 362-3)

 When you finish it, you’ll understand the phrase “I’m short your house.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s