In 2021, five-time FIFA World Player of the Year Cristiano Ronaldo triggered a $4 billion collapse in Coca-Cola’s stock market valuation. At a press conference as a part of a tournament sponsored by the soft drink manufacturer, he replaced two bottles of cola with a bottle of water.
Relatively recent events corresponding to the Ronaldo/Coca-Cola affair are combined with venerable events already well-known to students of economic history on this highly readable and academic book. Foerster, a professor of finance on the Ivey Business School at Western University in London, Ontario, provides insights that will probably be latest to most readers, even on a story as familiar because the South Sea Bubble.
He cites Andrew Odlyzko’s latest findings about Isaac Newton’s involvement within the infamous bubble, published in 2019. Readers conversant in the outlines of the Panic of 1907 and Bernie Madoff’s Ponzi scheme will learn vital details from Foerster’s account.
Likewise, many investors who experienced the U.S. stock market crash of October 19, 1987 are probably unaware of the crucial role the relatively unknown Major Market Index played in the following recovery.
You also may not know that Fed Chairman Alan Greenspan was aboard a flight from Washington, DC to Houston when the market collapsed. Greenspan breathed a sigh of relief When he was told (on the exit and after the market closed) that the Dow Jones Industrial Average was down “five to eight,” the speaker thought he meant 5.08 points as a substitute of 508 points.
As the title suggests, the book not only covers famous scams and debacles, but in addition inventors like Warren Buffett, Charles EllisAnd Hetty Green. They appear alongside lesser-known but perhaps equally colourful characters corresponding to Leo “The Moon” Rugendorf and John “Donkey Ears” Wolek, supporting players within the series 1963 American Express salad oil scandal. Foerster’s heroes include Paul Revere, famous in history for engraving the limit of inflation-indexed bonds issued by Massachusetts in 1780.
At the identical time, Foerster points out the pitfalls that arise from the abdication of responsibility by resorting to the widely used goal date funds. He calls them “autopilots” because they never update asset allocations in light of latest details about individuals’ risk preferences or tolerances. (As recently noted by Elizabeth O’Brien in One solution is to decide on a fund that matches your selected asset mix, relatively than based on a planned retirement 12 months.
The writer’s goal of helping laypeople doesn’t stop him from highlighting topics that experienced analysts and portfolio managers can profit from examining. For example, he points out how a confounding variable can undermine efforts to regulate the geographic composition of a portfolio through using country indices. For example, a change from a US to a Canadian stock index also leads to a major shift in industry concentration.
In summary, Stephen Foerster draws lessons from extraordinary episodes in financial history that each strange investors and seasoned professionals can profitably use. The bonus is that it’s immensely entertaining from start to complete.
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