Financial Reckoning Day: Surviving the Soft Depression of the 21st Century

Rating:
Summary: No new info for those who are already Bears/Austrians
Review: The authors write a free daily commentary called The Daily Reckoning (www.dailyreckoning.com) which rounds up todays financial news from the perspective of Ludwig von Mises Austrian School of economics theory. This book is more of the same. If you are already a "bear" who reads either DailyReckoning.com, PrudentBear.com, LewRockwell.com, or FinancialSense.com, you won't learn anything "new" from this book.

It does give a good bit of info on financial history, particularly in regards to how the current U.S. situation compares to previous "bubble" economies, such as Japan's in the 1990's, the US in the 30's, and going back to the South Sea Bubble and the Mississippi Scheme. But again, if you're already familiar with the functions of bubbles, you already know that the U.S. is completely following that historical pattern.

The most interesting info in this volume is the comparison of the U.S. to Japan in the 1980's/90's. Now THERE I learned something, but it can be summarized in three sentences: The U.S. has, for the last 12 years, followed almost exactly in the Japanese footsteps. In almost all categories of financial and demographic events, we are exactly 10 years behind Japan, Inc. Which means we've got a really tough 10 years ahead of us with an incredible bear market.

Another interesting section of the book is the indictment of Alan Greenspan (aka, "The Devil") and his disasterous policies, who us bears consider a "serial bubble blower" who will one day be credited for destroying our economy instead of saving it. Turns out Greenspan was once a disciple of Ayn Rand and he has long believed in a currency based on gold instead of thin air. Too bad he doesn't practice what he believes in. But, again, I read about this truth of Greenspan on various bear web sites before I read this book.

The authors aren't terribly good writers, unfortunately... the "one star" reviewer elsewhere here has that right. But the message they have to tell does need to be told (to those who don't already know it.)

Even for those new to the Austrian "hands off the market economy" school of economics, this wouldn't be the book I'd start with. Consider "Economics for Real People" by Gene Callahan instead. And, for an introduction to why we're heading into a soft depression, consider Robert Prechter's "Conquer the Crash."

My last criticism of this book is the title, "Surviving the Soft Depression of the 21st Century." The authors actually don't give you any tips at all for surviving the next 10 years, save for one: "Buy Gold." So, those words shouldn't even be part of the title, frankly.

My advice: Skip this book, visit the Web sites I've mentioned and read the articles there (including the author's), and BUY GOLD NOW.

Rating:
Summary: Heads Up
Review: Using historical examples and perspective, Bonner explains why the U.S. dollar will eventually become worth less, potentially a lot less. He points out some stunningly simple things, like how 3% annual inflation (caused by printing money) results in a 50% reduction in buying power over a 14 year period. Buy the book. Its a quick read and is pretty engaging.

Rating:
Summary: Great History Book, Slim on advice
Review: I really enjoyed reading the "history" and "Political Science" aspects of this book. Unfortunately, I was emotionally damaged when the author added no valuable conclusions on where things are going and what to do about it. Now I am kidding about the emotionally damaged part, but was disappointed with the lack of conclusion. Lastly, I would *highly* suggest this book for anyone wanting a deep understand of "why we are where we are" and why the future is going downhill. If you are expecting a "what to do book", this is not it.
1929-1946 - 17 year BEAR market
1946-1965 - 19 year BULL market
1965-1982 - 17 year BEAR market
1982-2000 - 18 year BULL market
2000-2017? - 17 year BEAR market?

Cheers,

Brian

Rating:
Summary: Another Good Informative Perspective Worth Reading
Review: The reviews the book got were mixed. I think one of the important gripes was that the book doesn't offer advice on what to do going forward like the title implies. It appears that gold may be a worthwhile investment, but the authors make it clear throughout the book that wealth just doesn't come out of thin air and that the US has been heading in a bad direction for a long time. Stocks, they say, are still overpriced and the market will (as always) return to the mean.

One of the things the authors illustrate is a chart showing the cycle of bear and bull markets, and how they tend to last 15-18 yrs. If that trend holds, then we've got another decade or so before we see another bull market. Another point they make that I found interesting is that a person's maximum salary occurs at an average age of 46. Up to that point, those people are buying stocks and consumer goods, pushing the stock market up. After age 46, those people begin to start selling stocks more than buying them. Plus, they begin to make fewer and fewer purchases. Where this comes into play is with the Baby Boomers. The beginning of the BB age was mid-1950's. When you add 46, you get roughly year 2000. That's when our market peaked. The implication is that our aging population will no longer be contributing to the stock market's push upward, just the opposite. And when you consider that there are 70-80 million BB, then that's an incredible force to be reckoned with.

While I was disappointed in the lack of direction the book offers, it was a worthwhile read. The authors did a good job researching the material, and the chapters were easy enough to read once each night. The book is mostly a historical account of monetary systems and it isn't until the last few chapters that the here-and-now stuff is discussed. The authors do tend to make simplistic arguments which I thought was an oversimplification of the problem. They also make a comparison with Japan, which I keep hearing the finance types talking about, so it was educational to read more about why a comparison is warranted.

Another good book is "Rational Investing in Irrational Times." It's premise is that diversification is the only way to make money in the market, especially when you can diversify using index funds. "Rational Investing" makes the important point that there are only a few days in the year that make a difference in a stock's price, so you'd better be in the market when those days occur. "Rational Investing" looks at the market from a purely statistical perspective and presents a methodical approach to investing. In contrast, "Final Reckoning Day" looks at the market from a centralized money management and demographics perspective.

Overall, the authors resign to the fact that we simply don't know what will happen next. And each time we try to do something, we change the system somehow, creating new variables. If anything, what I've gotten out of these books is that (1) the buy and hold strategy is a myth, (2) history repeats itself in almost predictable cycles, (3) our monetary systems are incredibly complex when you try to make forward projections, and (4) finanical analysts are making guesses at best. Books like these really should be made part of the high school curriculum so young people can start developing opinions on the matter and be better prepared to make the right financial decisions in their lives.

Rating:
Summary: nice bit of fluff
Review: This book is a very quick and light read. It is entertaining and somewhat informative. However it does not contain anything new or profound. It's mostly fluff, but would be useful for a young person or for someone who has little background in economics/investing/politics/history.

The authors are from Agora Publishing which puts out many, many newsletters. A large amount of the book is rehash of the material that has been published in their free e-mails.

For a book that can really impact your thinking, read " The Sovereign Individual " by James Dale Davidson and William Rees-Mogg. They are former writers for Agora Publishing. Unfortunately Davidson is no longer with Agora and Rees-Mogg only rarely writes for them.

Rating:
Summary: Highly Recommended!
Review: This book is an intellectual tour de force. The breadth of the authors' accomplishment is impressive, drawing on sources from Emerson to Einstein to Freud to Adam Smith and more. Whether their analysis is correct, however, is highly debatable. One could build a small mountain out of books that have declared prematurely that the American economic miracle is over. This volume draws heavily on the Japanese model to predict continued economic doldrums in the U.S., and the comparison seems a poor fit. Its over-reliance on a continental historical perspective - Americans are naïve, overly optimistic fools whose prosperity is the result of dumb luck - seems fairly dubious. None of that takes away from the authors' keen perspective. Right or wrong, they bring intellectual light to the question, 'Just what is going on with the American economy?' Because of this volume's range and insight, we very strongly recommends it, especially to those seeking historical and cross-cultural context for alternative views about the U.S. economy.

Rating:
Summary: Provocative and Alarming
Review: I think Bonner and Wiggin artfully present an alarming and important idea: that American consumer capitalism may doom the stock market and the economy. However, in making their case, they favor metaphors and provocation over tightly organized logic. The authors are truly right to call their approach "literary and historical," for many of the book's facts and hard data are attached to historical stories and anecdotes. The first two-thirds of the book is an epic-and sometimes meandering-sweep of selected economic themes and characters. Against broad themes, the writing is often ponderous but sometimes it is simply brilliant and poetical. The tone was a bit overwrought and patronizing for my taste. I winced a few times when, writing from their offices in Paris, they compare America to Rome before the fall, seeming to bask in their self-described spectator role, and taking glee in the perceived plight of the average investor, "bless their greedy little hearts."

I found the first three chapters hard trudging. Chapter One rehashes the bursting of the internet bubble and blames the Internet for amplifying the hasty judgments of the mob. Chapter Two aims to show us that every binge must be followed by a hangover, economically speaking. To prove this, they indulge in many, many military metaphors, like the Japanese "expansion" into Pearl Harbor that led to the hangover at Midway. I'm not much for military history so this was of passing interest to me, but I was interested in the introduction of Hyman Minsky and his theory that "stability [itself] is destabilizing." The idea is that when everything is going well economically, the banks and other "merchants of debt" will inevitably market their liabilities and send the economy into a vicious cycle of credit. Chapter Three tells the story of John Law's early attempt to create a paper currency and the ensuing speculative bubble; but mostly it a broadside against central banks who think they can save an economy merely by printing more money.

After this, with the exception of the Chapter Six, the book really started to grab my attention. Chapter Four presents the comparison between our economy today and Japan's ten years ago. Sure, the metaphor isn't perfect (e.g., American capital markets are arguably more nimble and ruthless) but I bet it will spook you if you have money in the stock market. Chapter Five dethrones Alan Greenspan and laments his reversal from a "gold bugger" (i.e., money should be backed by gold) to a devotee of managed paper currency whose overconfidence helped fuel the bubble, and who, the authors plainly believe, cannot save us with interest rate cuts. Regarding Chapter Six, I'm with another reviewer who thought this part was tough. It's an abstract philosophical treatise on why the masses are, you know, bunk. Maybe they needed to make a place for the obligatory Nietzsche quotes? I would have much rather they elaborated on their all-to-brief discussion of fiscal policy, where they start to make a case for the dangers of a Bush-inspired expansion of fiscal spending.

Chapter Seven (The Hard Math of Demography) is a great chapter and is the heart of the matter. Whereas in the earlier Chapter they drew the cosmetic analogy to Japan ten years back, here they outline the causes that doom us to repeat Japan's performance. Drawn largely from a study by the Cowles Foundation, they show that the stock market has historically trended along with demographics. Specifically, when the proportion of people who are "peak-investors" (i.e., people in their 40s) is high relative to spenders (in their 20s) and retirees (who pull money out of the market), then demand for equities runs high and the market rises. But this ratio has recently peaked, and we are looking at two decades where the proportion of investor-aged population is going to decrease as more people move into retirement and will be selling, not buying, stocks. This is the authors' concern: that as American depends increasingly on debt-financed consumer consumption, fewer investors will demand equities, so we will have less investment capital. Compelling, but the authors did not cover all their flanks. For example, they do not seem to acknowledge that consumer spending provides companies with revenue and retained earnings that can be a source of investment capital; they seem to imply throughout that the only investment capital comes through savings which are invested in the equity markets. Also, you can argue that the historical comparison between U.S. Equity markets and domestic demographics is challenged going forward given increasing globalization. In other words, the US stock market hardly depends only on domestic investors for demand; as we mature, other economies are supplying plenty of prime-aged investors.

So this is a worthwhile debate for any long-term investor and this book is sure to make you think about the risks in holding equities into the next decade. I was not at all disappointed that the authors' go-forward advice amounted to "sell equities, buy gold, we think." It was a welcome bit of humility from them. But the book is really a case for selling equities, it is not by itself a very persuasive argument for buying gold, unless you simply believe that historical inverse relationships between the two asset classes is going to hold up.

Rating:
Summary: Excellent analysis of our current economy & what's to come
Review: The first few chapters were rather boring and too a long time to get to the point, but the information and predictions are based on well-developed history and documented evidience. A must-read for a long-term investor.

Rating:
Summary: Do not judge a book by it's cover (or title)
Review: The title of the book "Financial Reckoning Day: Surviving the Soft Depression of the 21st Century"
is misleading. The title implies that the authors have advice for "Surviving the Soft Depression of the 21st Century". While it can be argued that the book does indeed contain advice for surviving the "Soft Depression". I was very dissapointed to find out that the advice was:
1. It is better to be a spectator when the world as you know it comes crashing down.
2. Buy gold.
For 20 rapidly devaluing American dollars, the reader gets almost useless "advice".
I would suggest a third item of advice; sell financial doomsday books to gullible people (lumpen?) and tell them that men never learn from history and that the complete truth of anything is too complicated for anyone to understand and thats why the authors know better than you.
If a person says "it will rain tommorow" long enough, it will be true one day.
Save your money you're gonna need it.

Rating:
Summary: Reckoning day is here... take warning
Review: This is a good book. While the title should be changed to "why our world is slowly falling apart and why you can't do a thing" is beside the point. That title might not have sold as well.I like Mr. Bonner, and he writes with good wit, like a modern day Erasmus. The thing is he should rename this book...because it's a very important read for everyone not just investors... to find out why our world is full of illusion and built on sand. And let me add... probably always will be, sorry to say... because freedom is not only scary to us humans, but since when does a mass of people embrace reason and common sense? Not even the declaration of independence could save us. It's funny to read Thomas Jefferson and see that way back then he knew all the stupidity of a central planning bank. Good work, Mr. Bonner... and I too will smile at the fall of the new Rome.... the U.S.A., not because it was bad, but because what it has become is.