John P. Calverley is Chief Economist and Strategist at American Express Bank.
Bubbles and How to Survive Them
John P. Calverley
Financial bubbles occur where prices rise faster than usual and attract increased investment, further fuelling those increases. These phenomena provide difficult periods for financial strategists as the outcome is not easily predictable. Bubbles can burst, as with the dot com bubble of the 1990s, or they can subside more slowly, but have become common in world economies in the last few decades. Rather than being one-off events, bubbles are increasingly becoming the norm. Learning to survive them and the tumultuous economic times they produce is crucial and involves identifying and tackling key elements of bubble formation.
This book provides an in-depth look at the anatomy of financial bubbles as well as the tools to identify and survive the worst financial effects they can have. Using an insider's robust knowledge, John Calverley expertly investigates widespread examples from The Great Depression in the 1930's to Japan's 1980's bubble. He places the investigative work in today's context, post 1990's internet stock bubble and the current global issues surrounding house prices.
The book aims to identify the causative factors that precede a bubble or those seen as it is happening. This comes from a close scrutiny of markets and Calverley's own checklist of factors. These include high expectations for continuing rapid price rises, overvaluation, considerable investor and popular/media interest, increase in indebtedness, relaxed monetary policy and a strong exchange rate. Calverley argues that in our asset-backed economy, spending decisions directly affect overall debt. With asset bases in constant cycles of boom and bust, the constant threat of recession is always there. The book covers the following areas:
- An Anatomy of Bubbles
- The Great Depression, Japan and The Greenspan Bubble
- Housing: The Next Crash?
- A US Bubble
- The Pathology of Bubbles
- Valuing Markets Sensibly
- New Policy Approaches
- Strategies for Investors
- Living with Bubbles
Providing simple and jargon-free help to individuals, companies, banks and policy makers, Calverly steps through enlightening examples, delivering targeted advice and solutions for all. Not only adequate for financial policy-makers, strategists and investors, Bubbles and How to Survive Them has practical guidance and sound advice that will be greatly appreciated by the non-financial individuals. It gets to grips with the key issues raised by bubble economics: understanding the causes that generate them, the factors that end them and, most importantly, how they can be prevented.
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