July - Summer Edition - CI Investments

Book reviews
Brandon Snow
Principal & Portfolio Manager
Cambridge Advisors
What I plan to read this summer
The Little Book of Behavioral Investing: How not to be your
own worst enemy (Little Book, Big Profits) by James Montie
Wiley, 236 pages
In order to better understand how other investors react in the
market, I’m reading The Little Book of Behavioral Investing,
which explores behavioural investing and the pitfalls many
investors make.
Bias, emotion, and overconfidence are
just three of the many behavioral traits
that can lead investors to lose money
or achieve lower returns. Behavioral
finance, which recognizes that there is
a psychological element to all investor
decision-making, can help you overcome this obstacle.
In The Little Book of Behavioral Investing, expert James
Montier takes you through some of the most important
behavioral challenges faced by investors. Montier reveals
the most common psychological barriers, clearly showing
how emotion, overconfidence, and a multitude of other
behavioral traits, can affect investment decision-making.
Written in a straightforward and accessible style, The
Little Book of Behavioral Investing will enable you to
identify and eliminate behavioral traits that can hinder
your investment endeavors and show you how to go about
achieving superior returns in the process.
– Wiley
The best book I’ve read in the past year
Lords of Finance: The Bankers Who Broke the World, by
Liaquat Ahamed
Penguin, 576 pages
Lords of Finance helped me understand how new and
dysfunctional central banks failed to prevent the Great
Depression. While there will be unintended consequences
from all the recent central bank actions, the world is unlikely
to face the same outcome as it did in the 1930s.
In The Lords of Finance, Ahamed, a
professional money manager, sums up
the causes of the Great Depression as a
series of economic policy blunders that
could have been avoided. He cites as
causal factors the inflationary financing
of World War I by printing money, the
insurmountable war debts of Germany and the Allies,
Germany’s plunge into hyperinflation, and the return of most
currencies to the gold standard at excessive and deflationary
prewar rates. For example, he explains that when the U.S.
stock market bubble burst in 1929 and economic activity
collapsed, the central banks were restrained in stimulating
the economy for fear of losing their gold reserves.
In an epilog, Ahamed draws parallels between the crises of
the Great Depression and those in recent times. He keeps
his history interesting by highlighting the personalities
of the heads of the major central banks, and he employs
the economist John Maynard Keynes as a one-man Greek
chorus critiquing the bankers’ actions. This erudite and
exceedingly well-written tale of financial chaos in the
1920s and 1930s is both timely and instructive for today’s
economic climate.
– Library Journal, vol. 138
SUMMER 2011 PERSPECTIVE AS AT JUNE 30, 2011 11