The lessons my professors taught while studying economics need revision. Heavily influenced by Keynes, the rising star of Japan and Western Europe in the post World War II era, ideas were prone to optimism. The pig cycle was there in sectors like agriculture, energy and FMCG, but in the long term we would all be dead (rich). Recent developments in the world economy where the idea of living in a permanent crisis triggers populism, anti-globalism, and a great divide between haves and have-nots, the underlying paradigms must be changed. Instead of steady rises, violent swings have become the norm.
David Kauders explains in Bear Markets: When finance turns upside down how a bear market in equities differs from a bull market. What lessons can be learned from events of the past quarter century in Japan? Have the norms of financial strategy changed. Using his concept of the financial system limit Kaunders shows that the monetary and political measures still taken by central banks and governments actually harm the repair process, and keep defaulting banks and nations afloat. Financial services industry has grown too large, short-term focused and insular. Prices became detached from reality. Traditional 7-15 year cycles have been supplanted by a new economic cycle.
There are many books offering to help you make money in rising (bull) markets; few spell out the risks of a prolonged falling (bear) market. There are few winners. The outlook isn’t that positive, as long as capital preservation isn’t becoming our priority 1. The book has European and International editions, differing regarding the attention given to London and New York stock markets.
About the author
David Kauders was educated at Latymer Upper School, Jesus College Cambridge and Cranfield School of Management. He is an investment manager and also contributes occasional articles to the UK financial press.