What are you reading this summer? Our Global Strategist shares a curated list of books that address some of the biggest issues facing investors today, from politics to disruption.
With much of Europe and the US on their summer holidays, many of us are planning to spend time “chillaxing” on the beach or in our gardens – that is, when we’re not being entertained by the Olympic Games in Brazil. So I have once again curated a list of books that I’ve enjoyed and that address some of the key issues facing investors today, grouped into themes so you can “pick and mix” accordingly.
Crippled America: How to Make America Great Again, by Donald J. Trump
The business and political phenomenon that is Donald Trump presents the key issues he believes are facing America today – issues that he has clearly managed to turn into soundbites to capture US voters’ attention as they head to the polls this November.
Winter Is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped, by Garry Kasparov
Kasparov outlines how the West has acquiesced in the ascent of President Putin and his cronies, giving Russia’s leader the ability to grow into an ever more powerful threat to local, regional and global affairs.
World Order: Reflections on the Character of Nations and the Course of History, by Henry Kissinger
This insightful book identifies how European Islamic, Chinese and American “world orders” have distinct views that have evolved over time, offering a particularly interesting perspective on how recent digital advances are shaping relations between nations.
The Silk Roads: A New History of the World, by Peter Frankopan
Frankopan carefully details the history of the Silk Roads, from Eastern Europe to China and India – a region that is still mysterious to many in the West yet is once again at the centre of the world’s attention.
Clean Disruption of Energy and Transportation: How Silicon Valley Will Make Oil, Nuclear, Natural Gas, Coal, Electric Utilities and Conventional Cars Obsolete by 2030, by Tony Seba
Seba passionately believes that the current industrial age will be over by 2030 as a clean-disruption phenomenon radically alters economies – a convincing argument for investors stress-testing their portfolios for the future.
The Rise of the Robots: Technology and the Threat of a Jobless Future, by Martin Ford
Almost any job can be automated, creating frightening implications for a civilized society. Ford says that with so many kinds of “robots” putting capitalism itself at risk, we need to rethink everything from our economic structures to our politics.
The Bitcoin Big Bang: How Alternative Currencies Are About to Change the World, by Brian Kelly
The transformative blockchain technology that underlies digital currencies has the potential to affect anyone who pays for goods and services; this book helps investors appreciate not just the technology, but its potential for disruption.
Squirrel Inc.: A Fable of Leadership through Storytelling, by Stephen Denning
The business metaphor of "burying nuts for squirrel clients" is under threat as humans cut down trees and landscape their gardens, emphasizing the need for new methods of “storage”. Perhaps it’s time for a new model for business and corporate leadership?
Essentialism: The Disciplined Pursuit of Less, by Greg McKeown
Facing a world filled with too much information, McKeown champions what he calls the “disciplined pursuit of less”. Instead of trying to have it all, Essentialists pursue “the right thing, in the right way, at the right time”.
Team of Teams : New Rules of Engagement for a Complex World, by General Stanley McChrystal
As the leader of America’s special forces, McChrystal transformed an organization that was once mechanically efficient into one focused on adaptability. Could more organizations meet today’s challenges by providing the freedom to experiment and share information?
Superforecasting: The Art and Science of Prediction, by Philip E. Tetlock and Dan Gardner
The authors explain how “superforecasters" use special methods and tools – not computing power – to accurately assess what the future holds. Investors and analysts alike can benefit from these insights to improve their investment processes and risk-assessment strategies.
Black Box Thinking: The Surprising Truth About Success, by Matthew Syed
Syed says “black box thinking” is a new approach to high performance that provides an edge in a complex and fast-changing world. His exploration of how success really happens has powerful implications for business, politics, families – in other words, all of us.
GDP: A Brief but Affectionate History, by Diane Coyle
In this entertaining book, Coyle shows why the idea of “gross domestic product” – a widely used term that hardly anyone truly understands – was a helpful metric for simpler times, but it is woefully inadequate for today’s more complex global economy.
Books I’ll be reading this holiday
While I’m away from the office, I’ll continue to explore books about topics that fascinate me – politics, finance, leadership, self-improvement and more. Here are just a few:
- Conspiracies of the Ruling Class: How to Break Their Grip Forever, by Lawrence B. Lindsay
- Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, by Douglas Rushkoff
- Pebbles of Perception: How a Few Good Choices Make All the Difference, by Laurence Enderson
- The Power and Independence of the Federal Reserve, by Peter Conti-Brown
- Duty: Memoirs of a Secretary at War, by Robert M. Gates
- The Most Wanted Man in China: My Journey from Scientist to Enemy of the State, by Fang Lizhi
- The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World, by Pedro Domingos
- Players: The Story of Sports and Money, and the Visionaries Who Fought to Create a Revolution, by Matthew Futtermann
Now that the initial volatility has passed, the UK is in a better post-Brexit position than Europe – at least for now, says our global strategist. But an overall feeling of uncertainty will make the hunt for income a key theme for the rest of 2016.
Global markets have been regaining some much-needed poise in recent weeks as the volatility of the unexpected Brexit decision has begun to subside, with regions around the world responding to their own particular rhythms while singing a similar overall tune. At the same time, global economic uncertainty – which, in keeping with our financial repression theme, was already high – has been exacerbated by a range of factors beyond Brexit, including terror attacks in Europe and an attempted coup in Turkey.
It would therefore seem prudent to expect more political uncertainty on the horizon, especially given Europe’s upcoming referendums and November’s US elections. Factor in this uncertainty with dull economic growth globally, and it becomes clear why investor attention is shifting toward the stability that income generation can provide. This “hunt for income” is a long-term trend that should primarily benefit assets in the US and Asia for the rest of the year.
The hunt for income is a long-term trend that should primarily benefit assets in the US and AsiaEurope and the UK
As we expected, Brexit has been affecting Europe more than the UK, which is regaining its balance as it puts a new government in place. Britain’s new leaders have a clear mandate to leave Europe as smoothly as possible while, for the first time in 40 years, engaging more constructively with the rest of the world. With the pound sterling moving lower in a post-Brexit world, the UK’s economy will face headwinds, yet it should also benefit from additional proactive monetary stimulus measures and investments from the central government. Sterling’s downward trend has given solace to UK-based international corporations, which has helped the UK outperform Europe so far.
Europe, meanwhile, faces a period of political uncertainty as Brexit takes its toll, but the region should be less affected economically by any serious consequences even as it remains very sensitive to the dull global growth environment.
Both markets have experienced a flight to safety as investors reallocated toward sovereign bonds, which were already moving higher in Europe thanks to the European Central Bank’s policies. This boost for bonds comes at the expense of equities, with financial companies in particular hurt by the uncertainties that Brexit has created for regulation, “passporting” and economic growth. Overall, it appears that equities in the UK and Europe look undervalued in a global context, but they are also now “cheap for a reason”. This environment may last for a few years, unless or until negative interest rates force Europe’s cash and bond holders to seek higher equity yields.
Equities in the UK and Europe look undervalued, but they are also now “cheap for a reason”Asia Pacific
Now that the initial shock has subsided, Asia has been generally unaffected by Brexit; instead, more significant local situations have been developing:
- China continues to stabilize as it enacts its next five-year plan.
- Prime Minister Modi of India is continuing to make positive legislative progress; he is also recovering from the impacts of a poor start to the monsoon season and the loss of the Reserve Bank of India’s governor.
- Japan has re-elected Prime Minister Abe, who now seems ready to move to “Abenomics 2.0”, although it is unclear if this shift will include actual structural reforms rather than just more QQE from the Bank of Japan and more fiscal stimulus from the government.
With Europe clouded by uncertainty, Asia and emerging markets offer a combination of alluring factors
At the same time, Asia remains very sensitive to the strength of the US dollar and to global trade activity, which remains in the doldrums. With Europe still clouded by uncertainty, Asia and emerging markets now offer a combination of alluring factors:
- For equity investors, Asia has undervalued markets that also provide the potential for some earnings growth.
- For investors who feel unwilling or unable to take equity risk, Asia offers high-yielding local and hard-currency sovereign bond investments.
The US has become the post-Brexit world’s default “safe haven”, with the US dollar getting stronger and global buyers of US Treasuries driving yields lower. Hard-currency high-yield bonds are still attractive and, despite the United States’ dull but solid economic progress, the US Federal Reserve still wants to move US interest rates higher. As a result, while US equity valuations are stretched and earnings expectations are still muted, the US has become the safest place to take a moderate amount of risk in exchange for modest return potential.
Of course, political risks are clearly rising in the US, and that will add to the overall market volatility that we anticipate will peak in November. Nevertheless, when compared with ongoing difficulties in Europe, the challenges the US is facing may begin to seem increasingly manageable to a growing number of investors.
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