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Capital in the Twenty-First Century
Capital in the Twenty-First Century
Price: CDN$ 18.05

5.0 out of 5 stars A Capital Contribution to Economics and Public Policy, Nov. 19 2014
Have you wondered if "the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands?" Many have, though until now most have answered the question based on either their station in life (I worked hard to get here / I can't seem to get ahead...) or their political views (government should stay out of citizens' lives / government should play a redistributive role and should help people who fall on hard times....) Thomas Picketty, a French economist, attempts to answer the question definitively, using rich but previously untapped historical data - data which has been long available as economic snapshots, but which he links together to form for the first time an illuminating and comprehensive time series.

Picketty spent fifteen years assembling the data for use in his longitudinal study, and though the longest series are for England and France, Picketty includes additional countries, such as the US, Germany, Japan, Italy, Australia, and Canada, as statistical records become available. The central conclusion drawn from the data is that capital grows more quickly than the broad economy (in economists' terms `r > g'), so those with capital - either self-made or inherited - maintain a natural and ever-widening gap over wage earners, who seldom are able to save enough to ride the capital growth train upwards.

The book is a curious mix of primary research and broad conclusions, directed at both professional economists and a lay audience. It is long - just under 700 pages including tables and notes - and divided into four sections: Income and Capital; The Dynamics of the Capital/Income Ratio; The Structure of Inequality; and Regulating Capital in the Twenty-First Century. The first three sections are an expansive discourse of the data, some underlying theory, and the logical economic conclusions that can be drawn from the data. The fourth section offers prescriptions for policy makers' consideration, including a global tax on capital, an estate tax, higher progressive income tax rates, and some consideration of the role of public debt in the distribution of wealth. Lest lay readers fear the book is too technical, there are only two short equations in the book, and Picketty explains both well.

The first equation (First Fundamental Law of Capitalism) links a country's capital stock (excluding human capital) to the flow of income from that capital. If we know the capital/income ratio, we can also determine the portion of per capita income from labor and from capital. For example, Picketty tells us that the average wealthy country had a per capita GDP in 2012 of about 30,000 Euros, with about 21,000 from labour and 9,000 from capital. Of course, some receive far more than 9,000 from capital, and many receive nothing - even having a negative income from capital once rent and other payments are considered. What is true as an average for the aggregate economy can produce wildly different incomes from capital amongst the populace - a much wider distribution (i.e. concentration) than could ever be true for income from labour.

The second equation (Second Fundamental Law of Capitalism) relates the capital/income ratio to the savings rate and the growth rate. "A country that saves a lot and grows slowly will over the long run accumulate an enormous stock of capital (relative to its income), which in turn can have a significant effect on the social structure and distribution of wealth." In other words, "in a quasi-stagnant society, wealth accumulated in the past will inevitably acquire disproportionate importance." A very thought provoking equation for economies such as Japan and Western Europe where growth has slowed significantly and the average person has access to neither current wealth nor to significant growth opportunities.

Picketty explores the importance of both equations, including the evolution of capital and labour over time and their role in a modern economy. He includes some wonderful literary references (mostly Jane Austin and Honoré de Balzac, though with other literary and even some contemporary pop culture references), which highlights the central points for readers without a background in economics.

With the theory and history established, Picketty examines its impact, including the inequality of labor income, the inequality of capital ownership, and the conundrum of merit and inheritance. For example, Picketty spends a full subchapter on inherited wealth, and after examining the historical data he notes that "... it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime's labor by a wide margin, and the concentration of capital will attain extremely high levels - levels potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies." An interesting conclusion in light of the two equations noted above. Inheritance tax policies vary both amongst countries today and within a country over time; Picketty shows that the choice each makes has an impact on the dynamics of inequality.

Picketty also highlights the concentration of wealth (the share of a nation's wealth that the richest 10% or 1% own) over time. Compared to other points in history the US now has a particularly high concentration in the hands of the wealthy, which Picketty shows is in part due to the very generous pay of the top wage earners today. Top executives in the US, and to a lesser extent Britain, now earn such outsized wages compared to the average worker that they have leap-frogged into the capital class eschewing their historic role as part of a broader continuum of wealth distribution and instead ensconcing themselves at the rich end of a barbell. Slow economic growth or not, a very small subset of labour has found a way to beat their economic odds.

Those on the political right might be dismissive of the book - it's just a few sentences into the Introduction that the author references Karl Marx - but the work is so robust and comprehensive that they ignore the analysis at their peril. To be sure, Picketty uses Marx as a bit of a touchpoint, with sympathy for his sentiment but a critical eye to the areas he either ignored or got wrong. And while some of the author's array of policy prescriptions to counter capital's natural advantage will be anathema to current capital coddlers, they bear consideration because an ever-widening gap between rich and poor is unstable, and instability also threatens the monied class.

Like economists Galbraith and Hayek, Picketty writes with an engaging style, and his inclusion of occasional charts and graphs highlights the data and supports well his conclusions. The book is aptly titled, for it is about the role of capital in society, but if Picketty had chosen to emphasize the book's prescriptive fourth section, he might have chosen to call it "Stabilizing and Unstable Society", echoing economist Hyman Minsky rather than Marx. Like Minsky's seminal work thirty years earlier, this book takes some effort to read, but unlike Minsky's it is written with a lay audience in mind. An important work that will reward persevering readers, and that inevitably will add rigor to policy debates in all countries.

Divergent (Divergent Trilogy, Book 1)
Divergent (Divergent Trilogy, Book 1)
Offered by HarperCollins Publishers CA
Price: CDN$ 11.99

2.0 out of 5 stars hi, July 27 2014
This was a really short book. It also started in the middle of a story. It needs way more work!

Flash Boys: A Wall Street Revolt
Flash Boys: A Wall Street Revolt
Price: CDN$ 15.90

33 of 34 people found the following review helpful
5.0 out of 5 stars Wall Street Trades Integrity for Profit, April 1 2014
Achat vérifié(Quest-ce que cest?)
In his first book, Liar's Poker, Michael Lewis sketched colourful and entertaining characters to show us the excesses of a Wall Street titan - Salomon Brothers - at the peak of its game. Later, in The Big Short, he used his considerable storytelling abilities and yet more colourful and entertaining characters to help explain the financial collapse of 2007. With his latest book, Flash Boys: A Wall Street Revolt, Lewis again weaves a compelling story with still more wonderful characters, but rather than chronicling a market excess or explaining post hoc a financial crisis, this time Lewis investigates, uncovers and reports on systematic Wall Street shenanigans by a small group of High Frequency Traders (HFT), their complicit and enabling stock exchanges, and the perverse regulations that permit or encourage the activity.

While the book is enjoyable and entertaining to read, what Lewis reports will anger and sadden most readers, for it becomes very clear as the book progresses how enormously the odds are stacked against most investors. In the beginning even "the most sophisticated investors didn't know what was going on in their own market. Not the big mutual funds, Fidelity and Vanguard. Not the big money management firms like T. Rowe Price and Janus Capital. Not even the most sophisticated hedge funds."

Flash Boys engages readers immediately with a story; the laying of a new and secret fibre optic cable between New Jersey and Chicago. The cable's sole purpose is to be straighter, and therefore shorter and faster, than the existing phone company links used by futures traders. Time is money, and the prohibitively high cost for the new fibre line is more than offset by the financial advantage (via an edge in trade execution) to the few firms who lease the line.

From this Lewis shifts to the integrity of programmed and algorithmic trading, then on to dark pools and several other trading strategies. Readers should not be put off by the industry jargon or the esoteric corner of finance that Mr. Lewis exposes. Each concept is introduced in turn and in the most concise and entertaining way possible. As both a liberal arts major and a former Wall Street insider, Lewis bests all other financial authors in taking complex issues and distilling them into memorable and understandable passages.

It seems no exposé of Wall Street's shortcomings is complete without an appearance by Goldman Sachs, and Lewis doesn't disappoint. Goldman's role, however, is modest. First, like all of the major investment banks, they employ `dark pools' where clients can trade anonymously and ostensibly for better execution, but where either the investment bank or, for a fee, an HFT firm will game the system to deliver poorer execution. The difference between good and poor execution is a small profit to the bank or HFT firm, repeated millions of times per day.

Second, Goldman saw there was even more profit in speedier execution and HFT, and to this end hired a Russian born computer programmer. Unfortunately, Goldman's systems were built atop years of antiquated and bloated code, and they never did realize the profits of smaller, sleeker HFT firms with all new coding. In any case, the Russian left Goldman and was subsequently convicted of stealing trade secrets. Just as Bob Dylan sang about Hurricane Carter, Lewis waxes poetic about the injustice, the ineptitude of investigators, and perverseness of Goldman's position in the matter.

The heroes of the book are Canadians: the Royal Bank of Canada in general, and Brad Katsuyama in particular. Of RBC, their `nice guy' image, and their desire to enter Wall Street, Lewis says "It was as if the Canadians had summoned the nerve to audition for a role in the school play, then turned up wearing a carrot costume." An inauspicious start to RBC's Wall Street push, but a perfect setup to Katsuyama's role in exposing the HFT inequities and eventually setting up his own rival stock exchange where investors cannot be fleeced.

Forty years after Bernstein and Woodward's investigative journalism changed the American political landscape, perhaps Lewis' sleuthing will foment change in capital market structure. An excellent book by a master at the top of his game.

Deep Risk: How History Informs Portfolio Design (Investing for Adults Book 3)
Deep Risk: How History Informs Portfolio Design (Investing for Adults Book 3)
Price: CDN$ 5.20

1 of 1 people found the following review helpful
5.0 out of 5 stars Deep Thinking on Deep Risk, Jan. 29 2014
This is the third installment in Bernstein's series of monographs for experienced investors. Looking back at a century of economic and financial data, Bernstein identifies four deep risks: inflation, deflation, confiscation, and devastation. These risks are different from the shorter term volatility of markets; they are the unlikely risks that traditional investors and ordinary folk will not recover from. In particular, he feels the Weimar Republic's hyperinflation is instructive - recall the images of German citizens hauling wheelbarrows of currency in order to buy bread - and the most relevant to today's potential inflationary pressures. Bernstein dedicates most of his effort to this risk.

Triumph of the Optimists: 101 Years of Global Investment Returns, an excellent but expensive book covering a hundred years of market data for 19 developed nations forms the basis of Mr. Bernstein's inflationary worries. The sweet spot for stock valuations - a P/E of about 17 - is when inflation is between 0% and 4%. Bernstein wisely cites correlation rather than cause and effect, during years "with the highest inflation, stocks did badly, losing an average of 12%, but bonds did even worse, losing 23%."

Looking at multi-year periods of high inflation though, the two major asset classes' returns couldn't be more different, with stock returns actually turning positive. "Although suffering from inflation in the short term, [stocks] protect against it in the long run." "Put another way, stocks protect against deep risk, but exacerbate shallow risk."

Stocks bring short term pain for long term gain, and the added bonus of a long term hedge against inflation. But as Bernstein points out in the first book in this series, The Ages of the Investor: A Critical Look at Life-Cycle Investing, holding stocks is easier said than done. The 83% drop in the market during the Great Depression would have been a numbingly deep risk for those going through it at the time. But that's Bernstein's point, after all, that we've been through enough of this before that thoughtful investors can step back and use history to guide them in guarding against certain risks.

Deflation, a second risk identified by Bernstein, is a terrible deep risk as central banks and governments have few tools to combat it, but thankfully its only real manifestation has been the 20 plus years of stagnation in Japan. Counter to conventional wisdom, Bernstein states that "although gold bullion provided little protection against inflation, it did superbly with deflation." It seems that investors hoarding the precious yellow metal may be hedging a different risk than they think.

The third and fourth risks, confiscation and devastation, have happened many times in the past, though there is little investors can do about it other than owning assets and businesses in foreign jurisdictions. Americans' restrictive tax reporting requirements on foreign bank accounts has acted as a sort of soft capital control, dissuading foreign banks from serving American clients, so in Bernstein's view real estate is likely the most practical hedge, though it requires ongoing upkeep. Bernstein notes that the US has confiscated assets in the past, for example in 1933 when citizens were required to turn in almost all gold holdings for $20.67 per ounce, and that today's ultra low interest rates are a form of confiscation for net savers who own any fixed income (i.e. almost every retiree).

There are a few typographical errors, at least one of which is substantive. In addition to gold as a deflation hedge, Bernstein recommends "treasury bills and bonds," which for some may conjure images of short term instruments, but what he means, as becomes clearer in the following paragraph, is long dated bonds. While the monograph is well written and concise, the author loves to use his own acronyms as shorthand, which can send readers flipping to previous pages to remind themselves of the meaning.

After his excellent analysis, Bernstein concludes that while all should be aware of the deep risks, many of the potential mitigating actions are impractical to implement or require an extremely long time horizon. Food for thought, and though many will be unable to dine, it is worthwhile to peruse the Deep Risk menu.

Skating Where the Puck Was: The Correlation Game in a Flat World (Investing for Adults Book 2)
Skating Where the Puck Was: The Correlation Game in a Flat World (Investing for Adults Book 2)
Price: CDN$ 3.27

5.0 out of 5 stars Bernstein Scores With Timely Insight, Jan. 20 2014
The second monograph in Bernstein's series of for experienced investors takes its title from Wayne Gretzky, who took his father's advice to "skate where the puck's going, not where it's been" to become the greatest hockey player of all time. Very few have been able to follow the same advice to investment success - Sir John Templeton and Yale's David Swensen are two examples - and sadly most end up skating to where the puck was, accepting market risk and market performance (less fees). The dual goals of market outperformance and lower risk are available in theory but not practice.

Bernstein explains why this is naturally so. Templeton with international investing and Swensen with non-traditional asset classes were pioneers who had considerable first-mover advantages. As others copied their successes the higher returns were whittled away, and the diversification benefits were eroded as the formerly non-correlated assets became more and more correlated. Swensen, who in his pioneering years enjoyed outsized returns for Yale's endowment, suffered just as much as the rest during the recent financial crisis as all asset classes - traditional and non-traditional alike - became highly correlated. In the words of MIT professor Andrew Lo, over time "alpha becomes beta". Any innovation leading to outperformance (alpha) eventually becomes widely available and part of regular market performance (beta).

Bernstein includes some very interesting perspective on commodities and precious metals futures, which have been used as both inflation and deflation hedges. Investors may want to rethink both their strategies and their convictions. With respect to investors' ability to take risk at all, he notes that it "may be a matter of character rather than training," and that those who can't stick with the market-based portion of their investments in downturns are part of the natural pendulum of asset prices, as they swing from unknown to popular to undesirable. Though he doesn't spend much time on it, his points will have readers reflecting on the merits of value and contrarian investing.

Still, the conventional wisdom about diversification is much better than the alternative (i.e. not diversifying), but it is unlikely to insulate portfolios from downturns (short-term risk, in Bernstein's words) in the way investors hope (see Swensen above). In a prelude to his third monograph, Deep Risk, Bernstein cautions investors to resign themselves "to the fact that diversifying among risky assets provides scant shelter from bad days or bad years, but that it does help protect against bad decades and generations, which can be far more destructive to wealth.

The Ages of the Investor: A Critical Look at Life-Cycle Investing
The Ages of the Investor: A Critical Look at Life-Cycle Investing
by William J. Bernstein
Edition: Paperback
Price: CDN$ 13.46
20 used & new from CDN$ 7.65

4.0 out of 5 stars Bernstein Bares Strategies for Retirement, Dec 16 2013
Achat vérifié(Quest-ce que cest?)
The first book in Bernstein’s “Investing for Adults” series is for those already “familiar with Gene Fama, Zvi Bodie, Jack Bogle, and Burton Malkiel, and understand that a mean variance optimizer does not blend vegetables.” At 43 pages it is more of a monograph than a book. It is not intended for the general public, but rather for practiced investors, financial practitioners, financial theorists, and perhaps some regulators and policy makers. Of the aforementioned groups, financial practitioners will find it most useful.

Bernstein focusses on three ages: young investors; middle age; and retirement. Because of their considerable human capital, “it’s virtually impossible for young workers to employ their capital too aggressively," he says. Bernstein then highlights various methods to actually increase risk above that of a 100% equity portfolio: leverage and leveraged funds; options; and tilting equity holdings to small value stocks (following Fama & French), plus some exposure to emerging markets.

Using historical data, the strategies would have worked well, but Bernstein cautions that beginning investors are more risk averse - they have less experience and less wealth (greater wealth increases risk tolerance, Bernstein claims) - and are unlikely to stomach his prescription.

Bernstein also spends some time on the math involved, and unfortunately, even with a long time horizon the strategy he recommends is not foolproof. "Risks experienced in multiple time periods over a long time horizon multiply, not cancel out." “The probability of semi-bad outcomes decreases over time, but the probability of very bad outcomes increases.”

For those who are truly risk averse, Bernstein notes that it is likely impractical for them to save using purely risk-free assets. "If you want 30 years of retirement, and you want to do it with ... Treasuries ... you'll need to save half of your salary during the three decades you are working." Yikes - an even worse outcome than the uncertainty and volatility inherent in the leveraged equity prescription.

Further, most return scenarios work best starting with a lump sum rather than an ongoing series of periodic investments (in particular when there’s a high equity risk premium). Alas, large lump sums are, inheritances aside, beyond the reach of most young investors. As Churchill is reported to have said, “saving is a very fine thing, especially when your parents have done it for you,” but even then the inheritance often comes in middle age.

Bernstein tackles retirement next, leaving the middle years to last. Those preparing for retirement should first look to hedge as much risk cash flow as possible (liability matching) beyond any defined benefit pension plans they may already have, using annuities and TIPS, and by deferring social security (an incredible deal, Bernstein says).

As for the balance of retirees’ investments, in volatile markets the need for regular withdrawals poses a challenge opposite to the ‘dollar-cost-averaging’ opportunity presented to young investors. Bernstein warns "If you've counted on your stock holdings to see you through retirement, you're likely to be seriously disappointed." Even balanced investors need to take note. “The theoretical retiree who began to draw down on his or her nest egg at a real rate of 7% on January 1, 1966 ran out of money in about 13 years, no matter what his or her stock/bond mix was." Yikes again.

The middle years are harder to pin down, and Bernstein wisely leaves advice to this group to the end. So much depends on the results of the earlier years (excess or deficiency of savings) and one’s target retirement age and life expectancy - in essence a residual of the younger and older plans.

Bernstein draws on the good work of other authors, and cites frequently from CFA Institute’s Financial Analyst Journal. His retirement scenarios are illustrative and draw together well much of the work presented earlier in the book.

Despite the book’s many strengths, Bernstein unfortunately ignores the impact of taxes on different asset classes and the significant impact this will inevitably have on compound growth or spending. As well, he is selective with his input numbers in order to underscore points. In one example he shows the impact of three different real yields on the depletion rate of a portfolio. In another, he cites the impact of a 3% inflation rate. Why three variables in the first example and one in the next, emphasizing variability in the first case but certainty in the second.

Ages of the Investor is thought provoking, and a reminder of how capricious are many of our modern retirement assumptions. The sobering reality is that many, many people will not save even close to what they need to retire in the manner they've become accustomed to. And like our early years’ risk aversion, Bernstein notes that in our accumulation years we succumb to hedonistic needs - a desire to ‘keep up with the joneses’ - which makes it even more difficult to forgo current spending and save enough for retirement. With the vagaries of future inflation and market returns, striking an optimal portfolio mix is a challenge for even the most thoughtful investors. Bernstein’s book, at least, will help set readers on the best possible path.

Happy City: Transforming Our Lives Through Urban Design
Happy City: Transforming Our Lives Through Urban Design
by Charles Montgomery
Edition: Hardcover
3 used & new from CDN$ 81.76

4 of 5 people found the following review helpful
5.0 out of 5 stars Path To Happiness; Road to Ruin, Dec 9 2013
Achat vérifié(Quest-ce que cest?)
It’s been almost a decade since journalist and author Charles Montgomery published his debut book, the Charles Taylor Prize winning The Last Heathen: Encounters with Ghosts and Ancestors in Melanesia. Fortunately for us he has spent much of that time researching and experiencing urban life at its best and worst, and in focussed, insightful, and engaging prose he tells us how urban design enhances or detracts from our daily lives. Happy City is not about the environment, healthy living, or meeting our neighbors, though these subjects are covered. Happy City is about us, about how we live our lives and why, which makes it inherently fascinating. Why do we do the things we do, especially those things which detract from our happiness? It turns out our grand urban design may have us traveling - literally - in the wrong direction.

A few quotes from the first half of Montgomery’s book outline his thesis. "A city can be friendly to people or it can be friendly to cars....” "The way we organize most cities actually encourages individuals to make choices that make everyone's life harder." “The most dynamic economy of the twentieth century produced the most miserable cities..." which shows "...just how dangerous it can be to leave the design of public life to private hands."

Like bestselling financial author Michael Lewis (Moneyball), Montgomery populates his story with colorful characters, such as Enrique Penalosa, the mayor of Bogota, Columbia, who is introduced on his bicycle “jumping curbs and potholes, riding one-handed, weaving across the pavement, and barking into his cell phone while his pin-striped trousers flapped in the breeze.” Riding his success with Bogota's urban renewal, Penalosa becomes important as “one of the central figures in a movement that is changing the structure and soul of cities around the world,” and Montgomery returns to him and others like him throughout the book.

Like the best travel writers - Paul Theroux, for example - Montgomery has a poetic sense of place, transporting readers along with him to countries, cities, towns, and intersections. It is here - in New York, Paris, Vancouver, Main-street Disneyland and dozens of other places - that successful urban design springs to life, and we imagine ourselves standing in traffic-free Times Square or sipping coffee in a Copenhagen street cafe. (The first chapter alone made me want to visit Bogota to see Penalosa’s civic transformation firsthand.) The photographic examples - especially the before and after pictures - are captivating, and act as repeated exclamation marks to the narrative. Sadly, most of us live in the ‘before’ side of the photos, which makes their inclusion all the more riveting.

Montgomery’s impeccable and exhaustive research is woven so well into his narrative that the book reads more like a novel or travelogue than the important work it is. In fact, Montgomery synthesizes others’ works so well that his book may become a primary source in future. Very few authors - especially non-academics - can claim this mantle.

In his concluding chapters, Montgomery tries to answer the question of what holds us back from happier cities. Our frustration with long commutes is reframed to have us pondering why we want larger (suburban) homes, why there is no employment in our neighborhoods, why transit works in some areas and not others, and for whom cities are designed.

Zoning, Montgomery says “organizes the system of a city, and thus the lives led in it .... It is not market-based, nor is it democratic.” Anti-planning groups such as the Tea Party in the US are acknowledged as “quite natural in a nation that holds its sense of liberty close, but they are not based on a clear view of reality. For one thing, they ignore the fact that their tax dollars are already being used to massively subsidize the sprawl model.” With respect to bike lanes, which also are often sub-optimally designed, Montgomery singles out cycle enthusiasts who push for their needs at the expense of other cyclists. And finally, outside interests such as the auto industry (the history of the introduction of jay-walking laws is thought provoking) and even international aid agencies (Penalosa thankfully nixed a proposal by car-exporting Japan to build elevated freeways in Bogota) are discussed.

Happy City is thought provoking and a call to thoughtful action. It should be read by citizens who want to be informed about the forces that shape their daily lives and routines, and by those who want to make a difference in their neighbourhoods.

Foucault's Pendulum
Foucault's Pendulum
by Umberto Eco
Edition: Paperback
Price: CDN$ 15.12
36 used & new from CDN$ 0.68

1 of 1 people found the following review helpful
5.0 out of 5 stars Eco Reverberates in the Canyons of History, Nov. 19 2013
Ce commentaire est de: Foucault's Pendulum (Paperback)
Umberto Eco, bestselling author of The Name of the Rose (later made into a movie starring Sean Connery), has continued his success with this even more erudite and convoluted story.

Eco has constructed an elaborate maze, this time spanning millennia. The labyrinth is complex and replete with mysticism and myth from around the world: South American rituals, Nordic magic, Greek mythology, Templars, Order of the Golden Fleece, Masons, Illuminati, Order of the Garter, Spencer, Shakespeare, Francis Bacon, Druids, Egyptians, Jesuits, Napoleon, and more. In addition to its geographic sweep, the book spans heaven and hell - sort of a four dimensional (time is the fourth dimension) Rubik's Cube.

In Eco's own words, the book is like "a coded message to be read by superimposing them on a grid, a grid that left certain spaces free while covering others." Eco, one of the world’s foremost semioticists as well as an historian and philosopher, provides just enough explanation of both the codes and the messages to keep the plot moving along. He gradually reveals the grid upon which the story unfolds, even as he uncovers spaces on the grid, revealing both the puzzle and its solution. An unparalleled journey, but one which does require both concentration and effort by readers.

The core of the plot is simple: three friends - editors of a small occult fanzine - on a lark begin feeding small pieces of seemingly random information into a computer, so that the computer might connect the information in interesting ways. The invented facts prove to have some bearing on history - fact and fiction become quickly entwined - and the protagonists find themselves caught up in a conspiracy that has been unfolding for millennia. The plot is so intricately designed and its execution so fantastically complex that readers will end up appreciating the artistry as much as the storyline.

Despite its rich historical setting, Eco sprinkles his text with modern references: as in The Name of the Rose, a nod to Argentinian author Jorge Luis Borges, the master of labyrinthine short stories; a similar nod to Arthur C. Clarke’s Nine Billion Names Of God, another short story featuring religion, technology, and seemingly innocent actions leading to big trouble; smile inducing cinematic references to The Pink Panther, Rick’s Cafe American, and Rhett & Scarlett; and similar literary references to Dr. Zhivago, George Eliot’s Middlemarch, and Alice in Wonderland.

Eco’s sense of fun spills over into the narrative on occasion, too. For example, after referencing Sam Spade and Phillip Marlowe a few times, he has fun with a couple of paragraphs in hard boiled detective language. He offers throwaway puns, too, calling Sir Francis Bacon a pig, and in a discussion on automobiles using the terms fiat, firestone, and she’ll (shell).

Readers may want to purchase the book on an electronic device with built in dictionary, as Eco’s lexicon will otherwise have them swinging between a dictionary on one knee and the book on the other. An outstanding novel that will will be heralded for generations as one of the finest literary puzzles ever crafted. Truly a marvel to behold; readers will be richly rewarded for their effort.

Investing: The Last Liberal Art, Second Edition
Investing: The Last Liberal Art, Second Edition
by Robert G. Hagstrom
Edition: Hardcover
Price: CDN$ 16.60
33 used & new from CDN$ 15.99

2 of 2 people found the following review helpful
5.0 out of 5 stars Renaissance Learning Leads to Investing Excellence, Nov. 3 2013
Achat vérifié(Quest-ce que cest?)
Investing: The Last Liberal Art contains no direction on how to read a balance sheet, or on how to project earnings into the future and discount them back to today’s value, nor are there arcane financial terms to send readers scrambling for dictionaries. Still, Investing is an essential book for professional and amateur stock pickers who want to excel, portfolio managers preparing to interview prospective analysts, and investors trying to choose amongst the many advisors ready to serve their needs.

Hagstrom takes his central premise that a broad education will pay dividends in investment performance from Warren Buffett’s quieter partner, Charlie Munger. Munger, through several speeches and in his book Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, Expanded Third Edition (Hardcover), contends that to be successful in stock picking “you’ve got to have models in your head ... and you’ve got to array your experiences - both vicarious and direct - on this latticework of models.”

Hagstrom takes Munger’s latticework idea and provides both the ‘why’ and the ‘how to’ in a concise, straightforward and entertaining format - a bit like Bill Bryson’s A Short History of Nearly Everything through an investment lens. He covers physics, biology, sociology, psychology, philosophy, literature, and mathematics, and concludes with a chapter on decision making. Hagstrom helpfully appends the reading list for the Maryland’s St. John’s College, where “the entire curriculum is devoted to discussing the great books of Western civilization; [where] there are no separate disciplines or departments, no electives,” and his bibliography is even broader - another excellent source for those wishing to take up his challenge.

There is, of course, information directly relevant to investors. In his chapter on Psychology, Hagstrom ponders the question ‘How often should investors review their holdings to be “indifferent to the historical distribution of returns on stocks and bonds?” From pioneering work of behavioural economists Richard Thaler and Shlomo Benartzi, the answer is once per year. When smartphones come pre-loaded with apps allowing us second by second stock valuations, and when larger market swings generate headlines in all media, our instinctual “myopic loss aversion” kicks in and we are driven to suboptimal investment decisions. Without knowing our own psychological predispositions - we feel losses about twice as intensely as gains - it is impossible to correct for them and to achieve superior returns. We should be strategic rather than tactical with our investment portfolios.

In his chapter on Philosophy, Hagstrom shifts from individual traits to those of the broader market. “One reason we have such difficulty understanding markets is that we have been locked into an equilibrium description of how they should behave.” “We must remain open minded to accepting new descriptions of systems that appear complex.” Hagstrom’s first point harkens to his chapter on physics, while the second relates to his chapter on biology. Markets are complex systems with many feedback loops, and “the only way to do better than someone else, or more importantly, to outperform the stock market, is to have a different way of interpreting the data that is different from other people’s interpretations. To that I would add the need to have sources of information and experiences that are different.” A broader reading list rather than more Google alerts.

For investors trying to sort through investment advisors’ credentials and experience, Hagstrom offers some considerations in his final chapter on decision making. “Having been schooled in modern portfolio theory and the efficient market hypothesis, will [they] quickly and automatically default to [the] physics-based model of how markets operate, or will [they] slow down [their] thinking and also consider the possibility that the market’s biological function could be altering the outcome? Even if the market looks hopelessly efficient, will [they] also consider that the wisdom of the crowds is only temporary?” The latticework that advisors use is just as important as their technical education.

“Reading this book requires both an intellectual curiosity and a significant measure of patience,” cautions Hagstrom, perhaps underestimating his audience, but readers will be well rewarded and very likely more successful with their investing. Despite its broad relevance, unfortunately, Investing will likely find audience only with those already inclined towards the Gatsby ideal - “that most limited of all specialists, the ‘well-rounded man’.” (With apologies for Fitzgerald’s gender bias).

Winter of the World: Book Two of the Century Trilogy
Winter of the World: Book Two of the Century Trilogy
by Ken Follett
Edition: Hardcover
Price: CDN$ 34.20
60 used & new from CDN$ 6.01

4 of 4 people found the following review helpful
3.0 out of 5 stars Follett's Century Trilogy Gathers Steam, Oct. 31 2013
Achat vérifié(Quest-ce que cest?)
The second book in Follett’s Century Trilogy continues with similar style to his first: worldwide setting; light character development; simple writing; and a plot that weaves together major historical events. Light but enjoyable reading; the literary equivalent of prime time network television.

Follett starts Winter of the World with the rise of Nazi Germany and concludes twenty six years later in 1949, with World War II wrapped up and the beginning of the Cold War. Readers are eased into the era with characters - or their progeny - from book one, plus some new characters to fit the age (nuclear physicists, for example). For those who have read the first book, Fall of Giants, this second volume will be a bit richer, as characters from the earlier book come with both a past and plenty of surprise developments. No doubt those born in this book will emerge as characters in the trilogy’s third volume, and those who graduate to the third will encounter their own surprises.

As with the first book, the plot unfolds chronologically, which makes the vast expanse of the action easy to follow, if somewhat predictable. When characters find themselves in Hawaii in early December 1941, it’s not hard to imagine that Pearl Harbour will commence a few pages later. What we do not know, however, is the impact the event will have on the characters, and how this in turn will drive the plot and themes forward.

Both a strength and weakness of Winter of the World is its massive scope. At times the plot seems forced, with world events connected repeatedly by the book’s characters; a device used to advance most novels, but stretched to such a scale and over such a long time period, and so often, it seems, well, a stretch.

Fortunately, Follett has researched the facts well, and the result is much more than just a pastiche of historical events, as he manages to weave broader social themes such as homosexuality, mixed race marriage, children out of wedlock, communism versus capitalism, women’s rights, social stratification and other themes into the story.

At times, Follett’s writing is clichéd - “Most physicists were geeks but Oppie, like Greg himself, was an exception: tall, handsome, charming, and a real lady-killer.” - but it does not detract from the book’s enjoyment. Follett inserts occasional humour too, for example when he writes “the man in charge was called the returning officer, as if he had been away for a while.”

Fans of Follett and of historical fiction will enjoy Winter of the World.

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