Showing posts with label economic conditions. Show all posts
Showing posts with label economic conditions. Show all posts

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization Review

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization
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I read Jeff Rubin's book because I invest in energy stocks and like to know the broad societal implications of energy issues. I was fascinated by his major premise that high energy costs will end the global marketplace. It is the opposite of Tom Friedman's World is Flat premise. Rubin's basic argument is that high energy prices will trump low labor costs of developing countries. That will mean we will re-industrialize and start making things again in America. That may make us look more like 1950's America. Most economists say globalization is irreversible but Rubin disagrees. Globalization is only possible when cheap energy allows shipping anything at low cost.
There are two other books that have the same end of cheap energy theme. One is Stephen Leeb's Game Over and the other is $20 a Gallon by Chris Steiner. Leeb's book is more of an investment survival guide while Steiner's $20 a Gallon is more of a sociological portrait of America in the age of prohibitive gas prices. Leeb is rather depressing in positing the end of cheap energy and commodities in general. Leeb sees global insecurity as countries fight for resources.
Steiner sees high energy as an opportunity to re-urbanize America with close in dense communities without cars. Steiner does a great job of predicting how escalating gas prices will change our lives. He says we may be happier living a simpler less consumption oriented lifestyle.
Rubin's book is the best all round book for it covers both economics and sociology. If you want to know how to make money from energy shortages, Leeb has some valuable and practical advice. Steiner will leave you hopeful for a simpler, more community minded America. I recommend all three books without hesitation as helpful guides to an America facing a dearth of resources in the next 20 years. They certainly reinforce the need for a national energy policy now while we may be able to extend resources.

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An internationally renowned energy expert has written a book essential for every American–a galvanizing account of how the rising price and diminishing availability of oil are going to radically change our lives. Why Your World Is About to Get a Whole Lot Smaller is a powerful and provocative book that explores what the new global economy will look like and what it will mean for all of us.In a compelling and accessible style, Jeff Rubin reveals that despite the recent recessionary dip, oil prices will skyrocket again once the economy recovers. The fact is, worldwide oil reserves are disappearing for good. Consequently, the amount of food and other goods we get from abroad will be curtailed; long-distance driving will become a luxury and international travel rare. Globalization as we know it will reverse. The near future will be a time that, in its physical limits, may resemble the distant past.But Why Your World Is About to Get a Whole Lot Smaller is a hopeful work about how we can benefit–personally, politically, and economically–from this new reality. American industries such as steel and agriculture, for instance, will be revitalized. As well, Rubin prescribes priorities for President Obama and other leaders, from imposing carbon tariffs that will increase competition and productivity, to investing in mass transit instead of car-clogged highways, to forging "green" alliances between labor and management that will be good for both business and the air we breathe.Most passionately, Rubin recommends ways every citizen can secure this better life for himself, actions that will end our enslavement to chain-store taste and strengthen our communities and timeless human values.

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Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance Review

Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance
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On a forum such as Amazon, book readers are free to write whatever reviews they like; but when they completely miss the point, throw in quotes out of context, and mistakenly ignore important sources of data used in a book, authors feel compelled to respond. In response to the review and exchange by "nycreader1", we suggest that readers should consider our clarifications below and also look at what we believe are more balanced and accurate book reviews provided in the Financial Times and Bloomberg:
[...]
The title "Guaranteed to Fail" refers to the fact that the GSEs took on the credit risk of almost 50% of the mortgage market with very little capital. It is also an intended pun as they were for all practical purposes guaranteed by the government.
With respect to the reviewer ("nycreader1")'s points concerning gaps and omissions, we beg to differ:
(1) The fact that the GSE mortgages were higher quality than others is discussed in the book, but unfortunately those mortgages were not sufficiently high given that the GSEs held less capital (much higher leverage), as confirmed by their eventually facing losses in the range of (at least) $200 billion.
(2) The government-sponsored hedge fund reference is only meant to describe their risk taking, with the focus on "government-sponsored" not just on hedge fund, nor to say that they were actually organized as a hedge fund. Their extensive use of derivatives to hedge some of their interest rate risk is consistent with that terminology.
(3) The reviewer's comment on interest rate risk is taken out of context. The book explains how analysts and academics missed the boat by not focusing on the credit risk of the GSEs' holdings and guarantees -- i.e., by not realizing that the mortgages were not sufficiently safe relative to the GSEs' (far too thin) capital levels.
(4) Our reference to the accounting scandals is made in passing and is used just to explain why their mortgage portfolios didn't grow. We are unsure why these scandals should be necessarily have been called "frauds". More importantly, we do make a compelling case that there were portfolio and leverage issues at the GSEs even post-accounting scandals.
(5) We do describe the GSE loan performance. The data used are primarily those of Fannie and Freddie themselves, and their regulator (the FHFA). We in fact went to great lengths to ensure our conclusions were consistent with their own data. We don't "rely" on Pinto's data (which the reviewer claims in a response to a comment) but offer it only as corroborative evidence (see pp. 37-38).
Of course, we had to rate the book to post this review and we have rated it as 5-star, but the point was to convey that we have researched hard on the GSEs before putting this book out,
unlike what the review by nycreader1 (mistakenly) asserts.
- Viral Acharya, Matthew Richardson, Stijn van Nieuwerburgh and Lawrence J. White, authors of Guaranteed to Fail

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