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When Markets Collide

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When Markets Collide

Investment Strategies for the Age of Global Economic Change

McGraw-Hill,

15 min read
10 take-aways
Text available

What's inside?

Understanding the new global economy requires a fresh view of risks and opportunities.


Editorial Rating

8

Qualities

  • For Experts
  • Insider's Take

Recommendation

Mohamed El-Erian is a major name in global money management, and his insights once guided the Pacific Investment Management Company (PIMCO) – one of the world’s largest investment managers – into profitable territory. Given his background at the International Monetary Fund and at Harvard Management Company, you won’t be surprised that his global perspective and practical applications of behavioral psychology are well informed, interesting and helpful – to the right audience. His advice applies mainly to institutional investors seeking a new global vision that will identify the forces affecting today’s markets. El-Erian’s stories about high-level macroeconomic policies will appeal to those big investors and economic decision makers, as well as to individual investors who are searching for new ideas. Though some parts of this analysis have become slightly dated, the overall message remains smart and valid. While never offering investment advice, getAbstract recommends El-Erian’s valuable text to policy makers and investment professionals.

Summary

Dealing with Transformations

Investors today have to cope with a constantly changing environment. Economic transformations are unpredictable and difficult to identify because they develop quickly, but investors can suffer financial losses if they fail to recognize when shifts are coming and what they portend.

Fundamental alterations in the global economy precipitated the 2007 US mortgage market collapse. This far-reaching event involved a complex convergence of novel financial instruments, types of investors and investment entities, as well as shifting demographics. These conditions still prevail, and their myriad repercussions remain hard to spot. However, investors who understand these shifts can hedge against the risks of rapid change and can earn profits.

Market participants may first detect “noise” – that is, unusual irregularities that shake traditional, long-term connections or ways of doing business. Observers often make the common error of perceiving noise as temporary and, therefore, they mistakenly ignore it, even though noise can indicate impending, fundamental change.

Traders with instinctive street smarts, a formal grounding in economics and...

About the Author

Mohamed El-Erian, former CEO and co-CIO of PIMCO, is chief economic adviser at Allianz.


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