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| When Markets Collide: Investment Strategies for the Age of Global Economic Change | 
 enlarge | Author: Mohamed El-erian
Publisher: McGraw-Hill
Category: Book
List Price: $27.95
Buy New: $14.98
You Save: $12.97 (46%)
Buy New/Used from $13.41
Avg. Customer Rating:  (35 reviews)
Sales Rank: 1021
Languages: English (Original Language), English (Unknown), English (Published)
Media: Hardcover
Edition: 1
Number Of Items: 1
Pages: 304
Shipping Weight (lbs): 1.5
Dimensions (in): 9.1 x 6.4 x 1.3
ISBN: 0071592814
Dewey Decimal Number: 381.101
EAN: 9780071592819
ASIN: 0071592814
Publication Date: May 23, 2008
Availability: Usually ships in 1-2 business days
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| Customer Reviews:
 In the eye of the reader -- Eclectic or a muddle? November 8, 2008
1 out of 3 found this review helpful
The author risked a muddle and he at least partially succeeded by targeting very different audiences at the same time in the same book. He creates this confusion intentionally. "I'm addressing both investors and national and international policy makers." Very few pages are devoted to specific investment that an investor my actually be able to use (see page 203 "Implementation Vehicles"). The average IMF Economist will get much more out of this book than the average stock and bond investor.
 Terrible November 1, 2008
6 out of 10 found this review helpful
Wow, what a disappointment. The book is poorly written and turns simple ideas into convoluted muck. For example, everyone knows that you can sometimes get a bargain in a pool of assets that are generally considered "lemons" such as the used car market. In this book, the "market for lemons" becomes "MFL" and allegedly was originated in 1970 with George Akerlof, a professor and winner of the 2001 Nobel Prize in economics. Huh? Another staggering glimpse of the obvious: people have trouble absorbing the reality of a sudden, unexpected event (e.g., 9/11, Kennedy assasination (my examples which, incidentally, are better than his)). Wow! and let's cite Nassim Nicholas Taleb and his insights about Black Swans for that astounding revelation! Jeez. I'm not going to bore you with examples of the dense and turgid writing. Also, if you are not a fan of "impact" used as a verb, avoid this book, it occurs in almost every paragraph. If you want clear, crisp writing and good analysis about the economy, skip this leaden tract and read The Economist or The Financial Times.
Overhyped October 21, 2008
3 out of 10 found this review helpful
The book is an ordinary piece of work that does not deserve the prominence it is getting in the media. While I would not term it as a Sub-Prime CDO masquearading as a AAA credit, at best it is an Alt-A. We need better.
 A Must Buy Book For The Chaos Ahead.. October 13, 2008
4 out of 8 found this review helpful
This new world order of financial chaos scares me to death. It is certainly not about me personally but rather my family and what I will leave behind for them.
I bought Mohamed El-Erian's book around the same time I bought Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books). I found both of them to contain very valuable (and timely) advice, which helped, calm some of my fears and anxiety. With that said, I would have to rank Mr. El-Erian's book a little higher than Crash Proof.
Mr. El-Erian has written a very important book. Very few people understand markets as Mohamed El-Erian. He is able to analyze and develop strategies for the continuing credit crisis. His background in economics, government policy and investment banker help him to mold this chaos into a manageable entity. His insights are worth the price of the book. Believe me.
I hope you found this review helpful.
Michael L. Gooch, SPHR - Wingtips with Spurs: Cowboy Wisdom for Today's Business Leaders.
 Analysis of the Current State of Financial Markets in 2008 October 13, 2008
10 out of 12 found this review helpful
When Markets Collide, by Mohamed El-Erian, describes the ongoing evolution of the world's financial markets in terms of both the current path and likely destination. His approach is very much in the "Big Picture" style; don't look for specific investment recommendations or specific predictions of market behavior. That said, Dr. El-Erian provides a very good overview of the current state of the financial markets as of early 2008 and overall direction in the future.
Dr. El-Erian's background includes a doctorate in economics from Oxford, long service on the IMF, followed by a transition to the private sector, first at Salomon Smith Barney, then as CEO for the Harvard University endowment, and currently as CEO at PIMCO. The major themes he sees in the current financial situation include the following.
The Mortgage Mess
Over the last decades, mortgage originators (primarily banks and S&Ls) have moved away from issuing mortgages for their own long-term investment portfolio. Instead, they have written mortgages to capture the loan origination fees and then sold the mortgages for inclusion in packages that were marketed to other investors. The logic of this "securitization" process was that by pooling many mortgages in a single package, the risk of any one mortgage holder defaulting on a loan would be greatly reduced. In the process, the mortgage originators shifted their focus from the borrowers' long-term credit worthiness to the short-term.
In tandem with the shift in focus to the short term, the extensive use of derivatives, especially credit swaps, designed to mitigate the risk of default, tended to obfuscate the true risk in a securitized package of mortgages. The result was that many investors were lulled into the belief that their mortgage investments were low in risk when they really had no clear idea of how to evaluate the risk in a pool of mortgages and the associated derivatives.
These patterns lead me, a non-specialist, to suspect that any effective resolution of the mortgage mess must include either a shift back toward mortgage writers holding the loans for their own long-term investment or some other means of increasing the long-term financial responsibility of the originators for the loans they have approved.
Emerging Markets
As recently as 1998 financial crisis, the emerging markets as a group were subject to dramatic inflows and outflows of capital that dwarfed their domestic savings and investments. Their overall economic performance was also highly dependent on exports, dwarfing domestic demand and consumption. This situation has changed. Many of the emerging markets have emerged in several respects. The largest and most advanced (Brazil, Russia, India, China, Mexico, South Africa) are characterized by significant domestic demand and consumption that are able to at least partially sustain their economies even when the developed world's demand for their exports decreases. They generate significant domestic savings and investment, both private and public, the latter often in the form of Sovereign Wealth Funds (see below).
Many of these newly emerged markets (Russia and China may be the exceptions) are also less burdened by the demographics of an aging work force, suggesting that they may be better positioned to continue their growth over the coming decades than many of the industrialized nations.
Sovereign Wealth Funds
Sovereign Wealth Funds (SWFs) originated in the oil producing states (Kuwait, Abu Dhabi, Norway, Alaska) and some of the early developers in Southeast Asia (Singapore). The SWFs hold oil royalties or earnings from foreign trade in long-term investment funds to spread the benefits of the cash inflows into future years for future generations. To date, they have tended to be very conservative investors, placing most of their capital in short- to medium-term debt instruments of the governments of the industrialized world, especially the US.
In a way, this situation presents a potential role reversal between the emerging markets and industrialized nations. The industrial nations may now be subject to significant capital inflows and outflows controlled by the SWFs. As Dr El-Erian observes, the response of the industrialized nations to this role reversal should not be to institute controls on capital flows or other protectionist measures. These approaches would be self-defeating, hurting the industrialized nations more than the uncontrolled capital flows. Rather, the best prescription is the same one that the West advocated to the emerging markets in the past: Sound monetary and fiscal policies.
In the coming years, as the SWFs managers gain experience, expertise, and confidence, we can expect to see them change their focus from conservative short-term debt instruments to investments that offer higher long-term returns. This switch is likely to decrease the overall demand for government debt, increasing the interest rate on these instruments, and increase the demand for equities, driving up share prices.
Monetary Policy
Monetary policy has become harder to implement over the last 30 years. The money supply, once defined as currency in circulation plus demand deposits, has become almost impossible to define, let alone control. Once, only commercial banks could "create" money, concerting a dollar in deposits into several dollars by means of the reserve requirement ratio. Now, all manner of "shadow banks", hedge funds, private equity funds, investment banks, some domestic, some foreign, can use small amounts of equity capital to raise large amounts of debt capital, mimicking the prior role of the commercial banks. The difference is that these entities are not subject to the same regulations, such as reserve requirements, as commercial banks. We seem to be in the midst of a major evolution of the financial regulatory system in the US. The roles of the Fed, FDIC, Treasury, and other agencies will undoubtedly change. Let's hope that the changes are intelligence and for the better.
Reviewer's Comments
I found Dr. El-Erian's book both interesting and insightful and recommend it to readers looking for a broad overview of the current state of financial markets and their likely evolution in the future. Don't expect concrete investment advice; that wasn't his intent. (I suspect he saves such advice for his PIMCO clients.) My only criticism is that the style of writing is typical of many academic economists, somewhat convoluted and obtuse. The more complicated the concepts become, the simpler the sentences must be to convey them clearly. Still, I found the style a minor price to pay for what I think I gained.
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