The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How To Prevent Them in the Future
“This enjoyable, fast-moving book is concise, relevant, and perceptive. My bottom line is a simple one: This book should be read by all those interested in the way markets operate, be they investors, analysts, or policy makers.”\ From the Foreword by Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of When Markets Collide\ “This book is a must-read for anyone concerned about how we can avoid recurring debt-induced busts in the years ahead, or anyone who wonders how to invest if...
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“This enjoyable, fast-moving book is concise, relevant, and perceptive. My bottom line is a simple one: This book should be read by all those interested in the way markets operate, be they investors, analysts, or policy makers.”From the Foreword by Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of When Markets Collide“This book is a must-read for anyone concerned about how we can avoid recurring debt-induced busts in the years ahead, or anyone who wonders how to invest if (when!) the crisis returns. Authers’ insights on the global financial crisis are profound.”Robert D. Arnott, Chairman, Research Affiliates, LLC, and author of The Fundamental Index: A Better Way to Invest “This book illustrates the dangers to investors who fail to recognize that global asset markets have become more synchronized over time. In a crowded field of works on the financial crisis, Authers’ work is unique in both its insight and style.”Robert R. Johnson, Ph.D., CFA, Senior Managing Director of the CFA Institute“John Authers has combined his journalistically honed FT skills with great insights. Serious investors and policymakers should read this book.”David R. Kotok, Chairman and Chief Investment Officer of Cumberland Advisors“John masterfully drives a stake through the myth of global economic decoupling one chapter and example at a time. A must-read in today’s economy.”Vitaliy Katsenelson, Director of Research at Investment Management Associates, Inc, author of Active Value Investing: Making Money in Range-Bound MarketsAre we barreling toward another massive global financial catastrophe?How can so many bubbles form all at once? Why are so many “disconnected” markets now capable of collapsing in unison? In this remarkably readable book, award-winning Financial Times columnist John Authers takes on these critical questions and offers deeply sobering answers.Authers reveals how the first truly global super bubble was inflated—and might now be inflating again. He illuminates the multiple roots of repeated financial crises: a massive shift in investing power from individuals to big institutions; the migration of key decisions from banks to capital markets; the wholesale financialization of many asset classes; and fundamental failures of both theory and policy.The Fearful Rise of Markets presents a truly global view, avoiding oversimplifications and ideology as it outlines how we got here and where we stand. Even more valuable, it offers realistic solutions—for decision-makers who want to prevent disaster and investors who want to survive it.• The herd grows ever larger—and more dangerousHow institutional investing, indexing, and efficient markets theory promote herding• Cheap money and irrational exuberanceSuper fuel for super bubbles• Too big to fail: the whole story of moral hazardBanks, hedge funds, and beyond• Danger signs of the next bubbleForex, equity, credit, and commodity markets move once more in alignment
Acknowledments ixAbout the Author xiiForeword xiiiTimeline xviChapter 1: The Fearful Rise of Markets 1Part I: The RiseChapter 2: Investment Becomes an Industry 9Chapter 3: Indexes and Efficient Markets 16Chapter 4: Money Markets Supplant Banks 25Chapter 5: From Gold Standard to Oil Standard 32Chapter 6: Emerging Markets 40Chapter 7 Junk Bonds 48Chapter 8: The Carry Trade 55Chapter 9: Foreign Exchange 62Chapter 10: Irrational Exuberance 69Chapter 11: Banks Too Big to Fail 76Chapter 12: Hedge Funds 83Chapter 13: Dot Coms and Cheap Money 90Chapter 14: BRICs 97Chapter 15: Commodities 104Chapter 16: Credit 112Part II: The FallChapter 17: Ending the Great Moderation 120Chapter 18: Quant Funds 127Chapter 19: Trust 133Chapter 20: Bank Runs 139Chapter 21: Bastille Day: Reflexive Markets 145Chapter 22: Lessons from Lehman 152Chapter 23: Politics and Institutions 158Chapter 24: The Paradox of Diversification 163Part III: The Fearful RiseChapter 25: Decoupling 171Chapter 26: Banks Bounce 179Chapter 27: A New Bubble? 186Conclusion: 2010 and After 194Notes 202Bibliography 215Index 222
\ From the PublisherAs seen on C-Span Book TV, CNBC Street Signs, and in the Financial T imes , The Wall Street Journal, Forbes, The Motley Fool and The Globe and Mail .\ “ Authers has the curriculum vitae and the confidence to go where no other author has thus far been . His goal … is to make understandable why financial markets failed, how investors should protect themselves and what national authorities should do to correct some of the problems. His mission is happily met.” - Financial Times\ Carmen M Reinhart, co-author with Kenneth S Rogoff of ‘This Time is Different: Eight Centuries of Financial Folly’\ “This new book is a must-read for every investor....I'd urge anyone with any interest in investing to read it as soon as possible. It may well stop you losing your shirt in the next meltdown!” Cliff D’Arcy, The Motley Fool\ \ \
