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Fearful Rise of Markets, The: Global Bubbles, Synchronized Meltdowns, and How To Prevent Them in the Future

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Fearful Rise of Markets, The: Global Bubbles, Synchronized Meltdowns, and How To Prevent Them in the Future

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  • Copyright 2010
  • Edition: 1st
  • eBook (Watermarked)
  • ISBN-10: 0-13-263909-2
  • ISBN-13: 978-0-13-263909-5

“This enjoyable, fast-moving book is concise, relevant, and perceptive. My bottom line is a simple one: This book should be read by all those interested in the way markets operate, be they investors, analysts, or policy makers.”

From the Foreword by Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of When Markets Collide

“This book is a must-read for anyone concerned about how we can avoid recurring debt-induced busts in the years ahead, or anyone who wonders how to invest if (when!) the crisis returns. Authers’ insights on the global financial crisis are profound.”

Robert D. Arnott, Chairman, Research Affiliates, LLC, and author of The Fundamental Index: A Better Way to Invest

“This book illustrates the dangers to investors who fail to recognize that global asset markets have become more synchronized over time. In a crowded field of works on the financial crisis, Authers’ work is unique in both its insight and style.”

Robert R. Johnson, Ph.D., CFA, Senior Managing Director of the CFA Institute

“John Authers has combined his journalistically honed FT skills with great insights. Serious investors and policymakers should read this book.”

David R. Kotok, Chairman and Chief Investment Officer of Cumberland Advisors

“John masterfully drives a stake through the myth of global economic decoupling one chapter and example at a time. A must-read in today’s economy.”

Vitaliy Katsenelson, Director of Research at Investment Management Associates, Inc, author of Active Value Investing: Making Money in Range-Bound Markets

Are we barreling toward another massive global financial catastrophe?

How can so many bubbles form all at once? Why are so many “disconnected” markets now capable of collapsing in unison? In this remarkably readable book, award-winning Financial Times columnist John Authers takes on these critical questions and offers deeply sobering answers.

Authers reveals how the first truly global super bubble was inflated--and might now be inflating again. He illuminates the multiple roots of repeated financial crises: a massive shift in investing power from individuals to big institutions; the migration of key decisions from banks to capital markets; the wholesale financialization of many asset classes; and fundamental failures of both theory and policy.

The Fearful Rise of Markets presents a truly global view, avoiding oversimplifications and ideology as it outlines how we got here and where we stand. Even more valuable, it offers realistic solutions--for decision-makers who want to prevent disaster and investors who want to survive it.

The herd grows ever larger--and more dangerous

How institutional investing, indexing, and efficient markets theory promote herding

Cheap money and irrational exuberance

Super fuel for super bubbles

Too big to fail: the whole story of moral hazard

Banks, hedge funds, and beyond

Danger signs of the next bubble

Forex, equity, credit, and commodity markets move once more in alignment

Sample Content

Table of Contents

Acknowledments     ix

About the Author     xii

Foreword     xiii

Timeline     xvi

Chapter 1: The Fearful Rise of Markets     1

Part I: The Rise

Chapter 2: Investment Becomes an Industry     9

Chapter 3: Indexes and Efficient Markets     16

Chapter 4: Money Markets Supplant Banks     25

Chapter 5: From Gold Standard to Oil Standard     32

Chapter 6: Emerging Markets     40

Chapter 7 Junk Bonds     48

Chapter 8: The Carry Trade     55

Chapter 9: Foreign Exchange     62

Chapter 10: Irrational Exuberance     69

Chapter 11: Banks Too Big to Fail     76

Chapter 12: Hedge Funds     83

Chapter 13: Dot Coms and Cheap Money     90

Chapter 14: BRICs     97

Chapter 15: Commodities     104

Chapter 16: Credit     112

Part II: The Fall

Chapter 17: Ending the Great Moderation     120

Chapter 18: Quant Funds     127

Chapter 19: Trust     133

Chapter 20: Bank Runs     139

Chapter 21: Bastille Day: Reflexive Markets     145

Chapter 22: Lessons from Lehman     152

Chapter 23: Politics and Institutions     158

Chapter 24: The Paradox of Diversification     163

Part III: The Fearful Rise

Chapter 25: Decoupling     171

Chapter 26: Banks Bounce     179

Chapter 27: A New Bubble?     186

Conclusion: 2010 and After     194

Notes     202

Bibliography     215

Index     222


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