Woodford turns book reviewer as he surveys the summer through literary musings
Fund manager Neil Woodford has turned book reviewer for the day for a fun literary review aimed to give those in the financial services industry a glimpse into his summer holiday reading list.
In his blog, published on the Woodford Investment Funds website, Woodford reveals some of his current market views whilst reviewing some of the books he is reading at the moment.
Woodford said: “As we move into the summer holidays, I thought I would share with you a few of the books I have bought recently. I wouldn’t classify any of them as ‘light-reading’ but there are some thought-provoking books out there currently which touch on some of the themes we have regularly discussed on this blog. So if anyone is wondering what book to take on holiday this summer, take a look at my list of ideas below.
The Rise and Fall of American Growth by Robert J Gordon
“I have been talking for some time about secular stagnation – we are mired in a prolonged period of lacklustre growth for the global economy. Looking back through history, Gordon argues that our current economic stagnation is the product of a hiatus of meaningful innovation in key industries, which has halted the economy’s ability to deliver productivity advances.
“The author makes the case that not all inventions are equal and that innovation is cyclical. He explains how massive breakthroughs in energy, health care and infrastructure helped the US economy to rapidly grow and develop. In the current context, we need innovation in these areas more than ever, in order to propel a productivity-driven return to economic prosperity – not just in the US, but globally.”
How Good We Can Be by Will Hutton
“Despite all the talk about rebalancing the UK economy that we heard from policymakers in the immediate aftermath of the financial crisis, the UK economy is more unbalanced today than it ever has been. In this book, Hutton explores why that is the case and what can be done about some of the challenges that the UK faces. He argues that one important element for revitalising the UK’s economic and social harmony is to reform the capitalist system, making the case that the free market has failed to deliver the better living standards and economic prosperity that society has come to expect.
“I’m not sure I agree with all of its conclusions but the idea of a conflict between short-term incentives and the long-term needs of the economy certainly chimes.”
The End of Alchemy by Mervyn King
“With the aftermath of the financial crisis still reverberating through the global financial system, banks are still not behaving normally across much of the western world. Mervyn King was, of course, the Governor of the Bank of England throughout the crisis and his book explores how and why money – and banking more generally – has become the ‘Achilles Heel’ of the global economy.
“Among other themes, King argues that markets are inefficient, that the banking system amplifies those inefficiencies and that, ultimately, a serious reform of the global banking system and financial markets are required before we can expect to see a sustainable recovery in global growth.”
Science, the State and the City by Geoffrey Owen and Michael M Hopkins
“The UK needs a knowledge-based economy in order to successfully rise to the challenges of the future. Developing a strong, world-leading biotech sector that can compete internationally is, therefore, a must. Thus far, however, Britain has failed to capitalise on its world-leading academic research and science, and remains firmly in the shadow of the US when it comes to industries such as biotechnology.
“This book offers an assessment of why this is the case and, although I fundamentally disagree with some of the book’s conclusions, it provides an interesting perspective on the history of Britain’s biotechnology successes and failures.”
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
“Lastly, here’s one from the history shelf. Published in the 19th century, the book provides a brilliant analysis of market psychology and tackles topics such as economic bubbles, herd behaviour and the root causes of financial mania. By focusing on three historically important economic episodes – John Law’s Mississippi Scheme (1), the South Sea Bubble and Tulipomania (2) A period in the Dutch Golden Age during which contract prices for bulbs of tulips reached extraordinarily high levels and then suddenly, Mackay illustrates that the sentiments of greed and fear have always lurked in the dark corners of financial markets, becoming dominant in the right, frenzied conditions.
“For me, this book was massively important because I read it in the market madness of the late 1990s – it helped keep me sane in those really challenging market conditions by convincing me that the dotcom bubble was indeed a bubble and that sooner or later it would burst. I was fortunate enough to retain my job at Perpetual long enough to see that bubble burst and the rest, as they say, is history…”
- An 18th century event that began with the consolidation of trading companies of Louisiana into a single monopoly and ended with their subsequent collapse↩
- A period in the Dutch Golden Age during which contract prices for bulbs of tulips reached extraordinarily high levels and then suddenly collapsed↩