The Hindu Business Line : In the post-bubble era

Much like dogs on a tight leash, soothsaying authors can only do so much. They voice their messages of concern about impending disasters. And after the inevitable happens, they bark again. The revised edition of Financial Reckoning Day Fallout: Surviving today’s global depression by William Bonner and Addison Wiggin ( www.wiley.com ) is one such example.

“The mob screams: ‘The worst is over!’ ‘We’ve seen the bottom.’ ‘Hoorah for the feds!’ But it is not likely to be so. The bubble époque cannot be revived,” they write in the preface to the new edition.

‘Fish gotta swim, birds gotta fly, and bubbles gotta blow,’ the authors chime. “The bubble in the financial sector — including subprime debt, housing prices, bonuses on Wall Street, and derivatives — hit the fan in 2007. And what a mess!”

Of course, bubbles always blow up, without exception, they agree. And, quite eerily, even the bubble-making machine seems to have blown up. When the dot-com bubble exploded in 2000, at first we thought that was the end of the bubble era, recount Bonner and Wiggin.

“But the biggest bubbles were still to come. The bubbles in housing, art, emerging markets, oil, and commodities — all blew up. Then the biggest bubble of all — the bubble in credit — blew up, too, bringing the bubble époque to a close.” We are now in the post-bubble era, they sombrely observe. “The financial industry has been bombed out. It can no longer create bubbles.”

Of value in the book are the four dicta that the authors distil from their three decades of experience of writing about the stock market and economy. One of these is the dictum that capitalism doesn’t always take an economy where it wants to go; but it always takes an economy where it ought to be.

Capitalism operates by a process that the great economist Joseph Schumpeter called ‘creative destruction,’ the authors explain. “It destroys mistakes to make room for new innovations and new businesses. Unfortunately, this puts it at odds with government and what most people want.”

The worst-possible reaction, as the authors explain, is what we see the government now doing. “Leave the mismanagers in place. Keep the brain-dead companies alive — along with the zombie banks. Let the government take ownership of major sectors of the economy. And stick a debt-ridden society with even more debt!”

Alarming read.

Value investing insights

Accurate as the markets are, they cannot claim infallibility, reads a nugget of wisdom in Benjamin Graham on Investing: Enduring lessons from the father of value investing, edited by Rodney G. Klein ( www.tatamcgrawhill.com ). “Economists picture a thousand buyers and sellers congregating in the market place to match their keen wits and finally evolve the correct price for each commodity. In the securities market particularly, the word of the ticker is accepted as law, so that one often thinks of prices as determining values, instead of vice versa.”

These are times of rapidly shifting values, and security owner should be on the alert to acquaint himself with new conditions affecting his holdings, nor hesitate to modify them when favourable opportunities are present, cautions Graham, as if about the current reality, but in an essay published by The Magazine of Wall Street on September 1, 1917. He would confess in his memoir that writing had been his ‘early love’ and that he enjoyed ‘combining literature with finance.’

For instance, Graham notes that bonds have their mysteries no less than stocks. “Nearly a thousand different bond issues are listed on the Daily Quotation Sheet of the New York Stock Exchange. If armed with a microscope and a set of Security Manuals, the statistician plows valiantly through this wilderness, he is certain to uncover a bargain or two in passing.”

Elsewhere in the book is this snatch, again with a ring of immediate relevance: “In the midst of general commercial gloom, optimists have found much encouragement in the relatively few important failures recorded. To a great extent, however, this condition reflects not so much underlying financial strength, as a new technique in handling business troubles.”

Recommended addition to the investors’ shelf.

Coping with stressors

These scenarios perhaps sound familiar: Stress and overload at work, excess responsibility, late working hours, making way through daily traffic jams…
If you cannot cope with your anger at these day-to-day stressors at work, a job can be a most unpleasant experience, warn Swati Y. Bhave and Sunil Saini in Anger Management ( www.sagepublications.com).
“The most common causes of anger at workplace are: delay and absenteeism of both co-workers and employees; inefficiency, slacking, intentional poor work, pilfering, or stealing; unnecessary arguments, and hostility.” Also, if you hold a grudge against various people in the office, that can reduce your job performance and job satisfaction, the authors add.
Among the many anger management tips listed in the book are these: Practise active listening. Many times there are conflicts due to miscommunication; these are better solved through calm, one-to-one discussion. Avoid talking through a third person. Focus your attention on the major work on hand, ignoring the minor unimportant things and thus avoiding irritation. Develop good interpersonal relationships with your colleagues so that when there are problematic situations, communication channels are always open. And, always remember that everyone is likely to make a mistake, including you!
Instructive study.

D. MURALI
BookPeek.blogspot.com

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