Cocktail Economics: Discovering Investment Truths from Everyday Conversations

I majored in Econ many years ago. It was fun catching up. It would also be a good place to start for the many who have no understanding of basic economics.

I'm on my second read of this book. Canto writes a very easy read and he keeps it fun, for an econ. book. I asked a few of my financial adviser friends a few basic econ. questions and got the deer in the headlights look. His claim that this book will help you get better than average returns is spot on. If you own any kind of investment vehicle, I can't think of a reason to not read this fun and enlightening short book. He makes simple what appears to be complex. The analogy of home ownership to investments in PanAm are simple and compelling. I will say I am a little over-sensitive to looking for "economic shocks." Maybe I should have been all along?

Finally a book that covers economic principles and investment implications. Cocktail Economics combines Levitt's economic thinking with Jim Crammer's stock picking. Canto does a fantastic job in reviewing the basic economic theories and how to implement them into successful portfolio strategies. Themes such as inflation, taxes, globalization, regulation, elasticity, are presented clearly and shown how they can affect your investment decisions. There is even a whole chapter dedicated on how to successfully generate alpha. There is no need to have a background in economics or mathematics. Canto's writing style is very easy to follow with tons of real life examples. For example in chapter 12 Canto gives you a seven point strategy on how to read, analyze and act on data for whatever investment vehicle you use. Cocktail Economics achieves what few text or investment books have been able to achieve; linking economics to investing. This is a must have for all MBA's and investment professionals. In particular, I highly recommended it for all those that enjoy reading the editorial pages of the WSJ, but are not sure on how to act on what they read. Overall a great buy!

It seems that many recent books on economics, while no doubt entertaining, pertain less and less to our everyday lives. Sure, it is fascinating learning that sumo wrestlers cheat in Steve Levitt's Freakonomics, but how can I apply this newfound economic knowledge for my personal benefit? It is here that Victor Canto's Cocktail Economics scores big where many contemporary economic books miss the mark. The book applies sound economic principals to where many of us need the most help: our investment portfolios. Not only are we sold on the importance of investing, but we are taught how to use economics to improve our investment performance at the margin. Topics like inflation, taxes, globalization, regulation, technological advances, and more are presented clearly and shown how they can affect our investment decisions like stocks vs bonds, large-cap vs small-cap, value vs growth, and investment choices among various industries. As an example, in Ch. 4 Canto provides a fascinating case study of changes in the airline industry over the past few decades. With deregulation in the late 1970s, airlines moved from an inelastic industry to elastic one, a change that investors watching beta would have missed. The business model of companies like Pan Am would no longer be as successful as it was in the past. As it played out, in the decade that followed deregulation airline stocks gained 36% compared to 181% for the market as a whole. This book is especially relevant in today's world of ETF where individual investors can quickly and cheaply modify their portfolios to profit from a changing economic environment. An easy read with examples you will both remember and be able to employ in your portfolio, this book makes a great buy.