Below are books that I’ve recently read related to investing, the economy, and/or financial planning. Perhaps you can add one to your own reading list.
Countdown 1945, Chris Wallace. Countdown 1945 is the story of the Manhattan Project that aimed to develop a nuclear weapon and end World War II. Admittedly, this is not a book on investing or financial planning. It was, however, a fascinating read with a parallel to today’s Operation Warp Speed, which is the current public-private partnership aiming to deliver 300 million doses of Covid-19 vaccine by the end of 2020. When the U.S. is faced with grave danger, our people have a way to rising to the occasion. Our unique ability to succeed seems to be getting lost in today’s media hysterics and bitter politics. Harry Truman was at the time a rather pedestrian pick for Vice President in the 1944 election. And shortly after taking office, Roosevelt died thrusting Truman into the Presidency. Truman was unaware of the Manhattan Project and was quickly faced with a most vexing choice of whether to usher in the age of nuclear weapons by dropping the new bombs on Japan. Chris Wallace takes us through the lives and personalities of the soldiers, politicians, engineers, and a Japanese girl (who is still alive) and her family. The girl lived through Hiroshima and is alive today. It was a monumental success story – yet a grotesque and cynical story of how depraved humanity can be. It’s difficult to know how war is ever glorified when you really read about it. Truman’s generals were forecasting up to one million American casualties should the U.S. invade Japan. There were deep moral misgivings among many of those working on the Manhattan Project, but there were simply no easy answers. Chris Wallace takes us through the final days, hours and minutes of suspense as hell was unleashed on earth.
Big Business, Tyler Cohen. It seems rather fashionable to despise big business these days in America, especially among young people. That’s not necessarily anything new, but it seems to have taken on a more visceral tone in recent years. Mr. Cohen argues quite the opposite: that we don’t love business enough. He concedes that not all is perfect, but that it’s the humans working in the businesses, not the business form itself, that leads to problems. It’s an interesting book full of myth-busting facts about big business. I certainly found some of my own biases exposed and challenged – and I’m a huge fan of capitalism! He takes on the following controversial topics and argues: CEO pay is justified, Wall Street plays a very beneficial role in the economy, why our biggest companies do not have monopoly power – competition is alive and well, and how big business doesn’t have much power over government (I could find a couple of points to disagree with here, but I digress). He also says that businesses are great for workers, too: they provide jobs (a major source of satisfaction and social standing), many of our social connections, and of course, our compensation and other benefits. In summary, it was an interesting read and counters the media narrative that big business is harmful or even evil. The only place the book got a little, shall we say, strange was the last chapter on how we “anthropomorphize” corporations – we think of them as people. He contends this is not an appropriate way to think of business and leads us to think negatively about businesses. You can probably safely skip the last chapter. But on balance, I would highly recommend the book.
Mastering the Market Cycle, Howard Marks. Mr. Marks probably could have written this as a 60-page primer instead of a 315-page book – too much repetition for my tastes. However, every investor should embrace the concepts that Mr. Marks sets forth. As an advisor, I am always reminding clients that the secret to investing is keeping emotions out of investment decisions – this is when people tend to misbehave and make mistakes. Fear of loss and fear of missing out can be powerful emotions. Mr. Marks comes at it a little differently, but it’s the same theme. Mr. Marks counsels that emotions can cause you to overpay for an investment in buoyant markets– or cause you to miss opportunities in despondent markets. Every investor can improve if he or she focuses on where we are in any given market cycle and asks: “How much optimism or fear is priced into this investment?” He suggests investors focus on the underlying “secular trend” and not the oscillations around this trend. Changes in productivity and birth rates (that drive GDP) happen gradually, but psychology can cause markets to move quickly. These quick market movements oftentimes knock investors from their strategy. He suggests that investors have the fortitude to go against the crowd and spot the unloved opportunities. Sometimes, the smart investor must be willing to be wrong…for a long time.
The Land of Free Enterprise, Benjamin C. Waterhouse. This is a good book for someone who wants a primer on the history of business in the United States from the late 1700’s to the present. For me, a couple of points stood out. First, globalization of world economies was in full swing in the late 1800’s into the early 20th century. “Corporations operated and financial institutions invested across national and imperial boundaries at a rate, if we hold global economic output constant, not seen again until 2004.” World War I ended globalization, and it wasn’t until after WW II that we embarked on a process of globalization again. Second, I came away with a greater appreciation of the economic role slavery played in the business development of the south. Cotton became a huge international business in the 1800’s, and the south used slave labor to make it run. As the author notes, “By the eve of the Civil War, historians estimate that the total cash value of the 4 million slaves in the American South was $3.5 billion in 1860 money…$13.8 trillion today.” That’s an overwhelming number, especially for the population back then. Given the enormous value of slave labor, it makes more sense why the country had to fight a bitter war to end this heinous practice.
Modern Money Theory, L. Randall Wray. Over the last several months, I keep reading about “Modern Monetary Theory” (MMT), so I had to find out what the buzz is about. MMT apparently is the imprimatur for expensive government projects, such as the “Green New Deal.” However, this “primer” by Professor Wray does not sanction endless spending, as it seems some of our politicians are hoping. He fully admits that too much spending by government can lead to inflation and/or a devaluation of the currency (though he argues that these are relatively rare events that were caused by unique circumstances). Professor Wray argues that a sovereign government that allows its currency to float (not pegged to another currency or commodity), like the U.S., can spend a great deal of money in its own currency – greater than is oftentimes realized – before inflation and currency devaluations take place. Proponents of MMT cite Japan as an example. The book is quite dense in places, but there are certainly many interesting and helpful concepts that he explains. For me, the idea of “sound money” backed by some extent to gold has been attractive, but this book has caused me to think a little further on that. He provides a brief history of commodity-based money and the problems associated with it. The U.S. “fiat” money system does not have any commodity or other value behind it, but Professor Wray argues that our system works because taxes drive the system. In other words, you need the currency – the U.S. dollar – to pay your taxes…or else. Therefore, people demand the currency, and the currency is accepted, precisely because it’s needed to pay taxes.
Predicting the Markets, Ed Yardeni. Clocking in at 546 pages, this book is not for the reader who simply wants the highlights. Mr. Yardeni is one of the most respected names in the investment world, and his book lays out his methodology and resources that he uses to generate his insights and to advise institutional clients. Speaking for myself, it was mostly a fascinating read with some good historical context (especially around the so-called Great Recession). Mr. Yardeni is a sober voice who is bullish on the future for investors. The book is dense in places. But if you can hang in there, it’s worth the read.
It’s Better than it Looks, Gregg Easterbrook. Mr. Easterbrook comes off as unabashed, unapologetic optimist. My kind of guy! We are constantly bombarded with negative images and stories in the media. Bad news sells because it happens fast while good news happens slow. Mr. Easterbrook tackles a variety of thorny issues and lays out a compelling case why the world isn’t going to hell like it so oftentimes feels. In fact, things are actually quite good compared to this past. Do we have problems? Yes, of course, but the human race has risen to the challenge time and again despite setbacks. I would highly recommend this one.
Any opinions are those of Kirsch Wealth Advisors, and not necessarily those of LPL Financial. LPL Financial is not affiliated with and does not endorse the services or opinions of the various listed publications. These materials are being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.