Top critical review
Very disappointing given the price
on July 14, 2003
This is a very handsome book with lovely graphs etc. However I was after a useful summary of historical market performance.
This book was lacking in several respects:
1. The numbers behind the graphs are not provided and are not available so you cannot do any further analysis yourself. The graphs themselves are also drawn in such a way that it is hard to extract the numbers using a ruler.
2. The problem of survivorship bias. They claim that while the 16 countries analysed are an incomplete list (only 70% of world GDP in 1900), this is not a big problem, they feel. Their message that stocks do well in the long run supposedly remains intact, however they do not provide any solid evidence of this. The countries left out of course suffered terrible performance, with total confiscation of assets in most cases and major losses in others.
The countries left out include: Russia, China, Eastern Europe, Latin America. As an example, Argentina was the wealthiest country 100 years ago but was left out. They claim that their criterion for inclusion was the availability of data, but Switzerland was included even though the data is incomplete.
In my opinion, some attempt should have been made to adjust for this problem.
3. No assessment is made of the issue of capital controls etc as an impedement to implementing the world indexing strategy. It is simply assumed that equal dollar indexing could be implemented without any costs, and with no taxes.
All in all, this book fails to provide a realistic and convincing assessment of global investment returns in the real world.
Victor Niederhoffer uses this book to justify his bullishness on stocks, Sorry Vic, no cigar.