When the going gets tough, says Société Générale’s Dylan Grice, “the tough find a quiet beach and some good books… hoping the situation will have resolved itself by the time they get home”.
It’s a pretty vain hope this year. But that doesn’t mean we can’t still do the ‘good books’ bit of the dream.
Grice has a clear favourite: The Most Important Thing: Uncommon Sense for the Thoughtful Investor, by Howard Marks. He heard Marks speak, went straight out to buy his book, and didn’t put it down until he had finished it. I suspect the rest of us should do the same – not least because of this recommendation from US money guru Jeremy Grantham: “If you take an exceptional talent and have them obsess about value investing for several decades, include deep thinking about its very essence with written analysis along the way, you may come up with a book as useful to value investors as this one – but don’t count on it.”
On the current financial crisis, most people have two clear favourites: The Big Short, by Michael Lewis; and Too Big to Fail, by Andrew Ross Sorkin.
However, Francis Brooke, manager of the Trojan Capital Fund, swears there is another must-read for the list. For its plethora of anecdotes and historical context, he recommends The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, by Charles Gasparino.
If you are worrying about the global financial system (and if you aren’t, you might not deserve your holiday!), you can’t ignore China. I’ve been reading work by John Lee and would recommend his Will China Fail? for those who want to understand why it probably will.
Failing that, Red Capitalism, by Carl E Walter and Fraser JT Howie, sums up the mess that is China’s banking system nicely, too.
Still in Asia, an oldie (2001) but goody on the absurdities of post-crisis Japan is Dogs and Demons, by Alex Kerr. It is all fascinating but, for a real insight into how the odd banking crisis can turn into a disaster for public finances, turn to chapter 11. Here you will learn about how “the Ministry of Finance’s support for banks and industry through the manipulation of financial markets has had high costs. Interest rates of 1% or lower have dried up the pools of capital that make up the wealth of ordinary citizens; insurance companies; pension funds; the national health system; savings accounts; universities; and endowed foundations. The prognosis is for skyrocketing taxes and declining social services.”
That should have a familiar ring to it – it is a glimpse into our own futures.
If you are (like me) going somewhere where rain will prevent reading on the beach, download the film Inside Job before you go. This Oscar-winning documentary, starring the FT’s US managing editor, Gillian Tett, is as shocking as any exposé of the vested interests of the financial industry should be. Make a note to be horrified by the cosy relationships between America’s academic economists and its big banks, if nothing else. But so brilliant is the interviewing technique, that you are likely to find it as funny as you are shocking. If you are holidaying with derivative specialists, save it to giggle over when they have gone to bed!
Not so funny is Democracy and the Fall of the West, a polemic by Tom Miers and Craig Smith – it’s a mere 128 pages, so you should get through it in the time it takes Ryanair to get you from Stansted to Carcassonne. It attempts to throw some light on just why our deficits have become so entrenched – and points out that, thanks to the political practice of buying votes with voters’ own money, democracy has driven an explosion in the cost of government.
Next, you should make sure you have read Adam Fergusson’s When Money Dies. I’ve pushed readers towards this already this year, but it is important. You won’t be reading it to see how hyperinflation develops; you know that bit – all that is necessary for money to lose its value is for people to lose faith in the idea that it has value. But you will be reading it to see what happens once it arrives. If it doesn’t spoil things for you, I can tell you that the answer is nothing good!
Finally, for those of you who can’t bear to be seen reading economics books, some fiction ideas. Grice likes Consipracy of Paper, by David Liss, a detective story that plays out against the background of the South Sea Bubble. It’s a nice reminder that we aren’t the only generation to have to deal with bankrupt sovereigns and market bubbles. Another is Other People’s Money, by Justin Cartwright – a readable comic novel about the financial crisis.
Otherwise, you might amuse yourself with a re-read of Babbitt, by Sinclair Lewis (on the battle between materialism and meaning in 1920s America), or F Scott Fitzgerald’s The Great Gatsby, which picks up another of this year’s themes: greed and fraud among the super-rich.
• This article was first published in the Financial Times