Wealth, War and Wisdom

The first thing I do when a PR flack sends me a book is throw away their summary. Unlike other reviewers, I read the books. The publisher sent me this book, but I did not ask for it. All that said, I thought Wealth, War & Wisdom was a great book, and I spent more time on it than I normally do for books of equivalent length. Why? It covered areas of history that I was not as aware of. This book is really two books in one. It is a book that covers the history of WWII in an eclectic and cursory way. After that, it asks the harder question of how one can assure the preservation of wealth in a volatile world. In a lesser way, I have talked about that recently. Regarding the history of WWII, I came away with a greater appreciation of: * The troubles Britain faced. * The cruelty that the people in the nations overrun by Hitler and the Soviets faced. * The compromises many nations made to have an easier time in the War. * The courage that it took to oppose aggression in the face of initially bad odds. One commonality between Germany and Japan was a lack of resources, and rather than produce and trade to get them, they chose conquest. But the greater problem is how one preserves wealth over all contingencies. The problem is almost insuperable. Even as some wealthy people today are buying farmland, that was one strategy to preserve wealth in WWII. Homely farms that were reasonably productive, but not ostentatious, were ideal to preserve wealth and lives. Away from that, investing abroad was wise for the rich. Also, commodities and TIPS, which did not exist then might preserve some wealth. Gold and other precious items, if small could also preserve wealth, or at least life. For those who live in the US today, we live in a special time and place. We are free from the losses that come from aggression on our home soil. We largely agree with one another, much as politicians may disagree on that point. Americans are exceptional in so many ways, though not all of them are good. Preserving wealth means owning productive land locally, and having flight capital abroad. Away from that, Biggs counsels owning stocks because good times happen more often than they should. I liked this book, more than many.

It is an age-old notion. The investing public provides liquidity to the "smart money." A mainstay on every investor's bookshelf, Charles Mackay'sExtraordinary Popular Delusions and the Madness of Crowds, argues "men ... think in herds." Barton Biggs, former chief global strategist at Morgan Stanley before leaving in 2003 to form hedge fund Traxis Partners, questions this conventional and pejorative notion in Wealth, War & Wisdom. Using World War II as a backdrop, he shows the equity markets in the United States, Britain, Germany and Japan identified the conflict's turning points with uncanny precision. The stock market, he argues, represents the collective conclusion of multiple motivated judgment of a diverse, independent and decentralized sample. He joins James Surowiecki in The Wisdom of Crowds and Michael Maubossian in More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded), to plead a powerful case for paying attention to the markets' underlying message. Biggs is no historian. He is, however, well-read and a deep thinker. He weaves military history, market action, maps and charts to illustrate his moral. Hardly radical, it is detailed and convincingly argued: A long-term strategy is the best way for ordinary investors to build and maintain wealth. This is a book every serious investor should read and ponder. It is an original, absorbing and thought-provoking primer on wealth creation. Today's actions aggregated with others provide powerful clues to your financial future.

This is a review of the events of World War II (WWII) and its impact on the stock market worldwide. This work is of great interest since we live in post 9/11 era filled with conflict, threat of another world war and increasing scarcity of resources. The book chronicles the history of death, destruction and the grim realities of WWII in great detail and its impact on stock market in both losing and winning countries. Stock markets were always one step ahead of actual events in estimating, analyzing, and deciphering the economic future through changing stock prices. The author suggests that investor crowd always had a great intuitive wisdom and imagination: Stock markets are like voting machines. There are some very interesting tales of how stock markets performed during critical stages of the war. Just before the battle of Britain in 1940 the British markets bottomed out; the German market peaked after the attack on Russia; and in October 1937 the American markets collapsed and exactly 50 years later in Oct 1987, the same fate engulfed the stock market. Part of problems in 1937 may be due to President Roosevelt's attempt to pack the Supreme Court and his agenda of balanced budget when the country was still reeling from Great Depression. This is quite an interesting study of history and vividly describes the strategies and attitudes of leaders like Hitler, Churchill, Stalin and President Roosevelt. Stalin's ruthlessness against his own people resulted in the loss of four-and-half million lives between 1936 and 1939. There is also an interesting tale of how President Harry Truman's letter to Washington Post music critic Paul Hume when he gave unpleasant review of his daughter's concert. President Truman's letter gave the stock market a great scare which goes to prove an apparently insignificant incident could foolishly impact the investor's decisions. What is the take home message of this review? According to the author, diversify your fortune and anticipate troubles and pay close attention to stock markets. Equities are the place to be in the long run because of their proven ability to increase the purchasing power of capital. Another part of your diversification strategy is to own a farm or a ranch as an insurance policy. The control of food producing land is a basic instinct of mankind. Stockpiling some essentials like canned food, wine, medicine, and clothes is not a bad idea if you have learnt something from the events of WWII in Germany, Russia and elsewhere in Europe. The author is vivid in depicting the grim realities in metaphor; when Four horsemen of the Apocalypse; Pestilence, War, Famine, and Death visit this planet again. Imagine the possibilities, in fact there is a great deal to learn from the history. 1. The Great Crash 1929 2. The Stock Market Crash of 1929: Dawn of the Great Depression (American Disasters) 3. The Second Great Depression 4. The Great Depression: America 1929-1941 5. Daily Life in the United States, 1920-1940: H

Barton Biggs does an excellent job of analyzing the interplay between investments and stock exchanges and events in World War II. He details the histories of countries that were victorious, as well as occupied countries and the Axis countries who were the aggressors and then the vanquished. Throughout the book he intersperses the performance of stocks and bonds as they relate to the events of the times. His thesis is that the stock market is a great anticipator of turning points in the war. Stock prices hit their highs or lows months before conventional wisdom, the press, and even the statesmen and leaders saw a turning point. For example, British market made their lows in June 1940 whereas events were still gloomy and exceedingly pessimistic, with even the survival of Britain in doubt. On the other hand, German stocks peaked before Hitler's attack on Russia was stalled, during a time when many thought taking Russia would be a cakewalk and well before Stalingrad. These types of correlations can only be obtained by hindsight though, and exceedingly hard for investors to catch the turning point. The rest of the book reads like a fascinating history of World War II, the battles, the personalities, and the intrigues. Mr. Biggs also portrays the intense human sufferings, and the great loss and destroyer of wealth and livelihood that war inflicts on all its participants. In the last few chapters he gives advice on what to do to prepare for another such type of disaster in the future. Keeping a small farm stocked with food, medicine and automatic weapons that you can use; in a location easily accessible to you, but not too close to major population centers. Yet even with preparations it is unlikely for most people to escape the harm and devastation of the next major world war. If it is thermonuclear, I doubt that the farm will survive the fallout. And with transportation destroyed, you couldn't get to it anyway or fight off the people who had already arrived there ahead of you. Biggs also offers advice on portfolio diversification, keeping some gold and jewelry, some farmland, as well as currency diversification. He also analyzes what worked and didn't work for survivors of World War II. Mostly it was luck, coupled with healthy paranoia. Those who didn't believe that things would get worse oftentimes stayed back and perished. They were too greedy, or reluctant to leave healthy businesses, or to sell at a loss, ended up losing everything, including their lives. In some sense this is the same behavior people face in a bear market. Only in the case of war, invasion and occupation by an enemy, history has shown that those who were willing to cut their losses and escape to a safer country, even with the loss of most of their wealth, were able to survive whereas those who dawdled or were in denial, lost everything.

This book is a fascinating view of World War II from the perspective of economic investment. However, this is not a technical book in the sense that it is full of charts and graphs. The author, Barton Biggs, is able to fashion his story in an interesting and compelling way that takes us through a compressed telling of the war in Europe and the Pacific while also showing us what it did to the markets here at home and abroad. Yes, there are charts and graphs, but the text is so compelling that they don't get in the way of those who aren't technically minded, but really help those of us who want to look at the data see the economic impact in the images the author provides. One of the problems every individual faces in the crushing periods of war is how to preserve and move one's wealth. Barton shows us how people did that in the countries being demolished during the war, as well as in the victorious nations. There is also the problem that nations and politicians face in needing supplies, but wanting to keep individuals and companies from exploiting the war for outsized personal gain. Of course, while history is interesting in itself, there are also lessons to be learned in how turbulent markets behave and what investors, politicians, and regular folks are likely to do in reacting to the violent and tumultuous changes. Heaven forbid we should ever see such times again, but history's guide informs us that the storms will come again in some guise. This valuable book is worth having and reading for enjoyment, background, and for thinking about today and the future. Reviewed by Craig Matteson, Ann Arbor, MI