Book Reviews

When Markets Collide

Author: Mohamed El-Erian


When markets collide
Mohamed El-Erian is the CEO and Co-CIO of PIMCO. Pacific Investment Management Company is specialized in fixed income products, the company is one of the biggest bond fund manager with around 1.3 trillion AUM. Before that, Mr. El-Erian served as a CEO of Harvard Management company, he also spent 15 years at the International Monetary Fund.

In 2008, When Markets Collide won the title of best business Book of year awarded by the Financial Times and Goldman Sachs. Yet this book has received a lot of critics.

Even if some critics are founded, When Markets Collide remains an interesting book. First, I will go through the major critics. In a second part, I will describe why this book is still interesting.

When Markets Collide is poorly edited, the author has written this book in an academic style using too often jargon. This book could have been shorter.

Other critics are not founded. This book is not about investing but more about global macro economic changes.

You won’t learn why and how the 2008 financial crisis has started.Don’t expect as well detailed asset allocations explained in order to protect your investment portfolio in this changing world.

Finally, don’t expect risk management techniques to be explained.

That being said, this book remains a good one, Mohamed El-Erian is truly knowledgeable when it comes to macroeconomics.

When Markets Collide provides some valuable insights about how the emerging economies are evolving and their impact on developed world and debts.

This book also delivers some interesting things about how an endowment like Harvard is working.

You will also find interesting discussions about Sovereign funds.To conclude, even if When Markets Collide suffers from poor editing and redundancy, it remains an interesting read.

Buy When Markets Collide by Mohamed El-Erian

Apr 01, 2012

The Black Swan

black swan
In his book, Nassim Taleb claims that we are taking huge risks and massive exposure to rare events. Nassim Taleb started his career as a trader. He became financially independent after the crash of 1987 and made a fortune when the financial crisis began in 2007.

In his book, Taleb describes highky improbale events: the black swans.

A black swan can be described as the following:

»It is unpredictable
»It has a massive impact.
»Ex-post, explanations are concocted that make the vent appear lesss random and more predictable than it was.

This book is more a philosophy essay rather than a finance book. This book is highly polemical. First, because the author can appear to be arrogant. Second, because Taleb attacks the established statistical model like the bell curve. Some people don’t agree with his interpretation of the bell curve (each tails of the bell curve extend to infinity, in this case the bell curve includes rare events).

Taleb explains when a bell curve distribution works and when it doesn’t. He shows how risk management is usually useless because it is based on the bell curve model. Taleb minimizes the effectiveness of statistical measures like correlation, regression coefficient and standard deviation for example. All the statistical tools are usually based on a normal distribution. Furthermore, the author indicates that it is nearly impossible to predict rare events because you can’t forecast using past information. He shows how our world perception is based on average calculation but history is full of events like these black swans.

It is a well-written book, an easy read, even if the subject matter can be complex. Taleb has an abrasive tone, some people can’t stand his approach but Taleb receives consensus for his main ideas. It is a highly recommended book, especially for students studying risk management.

Buy The Black Swan: The Impact of the Highly Improbable

Nov 10, 2011