It is end of March, 2009 as I write this and the economic crisis that has gripped the US and the World shows no signs of abetting. Everyone from Wall Street to the Main Street has been transfixed by the drama unfolding in the markets and the rapid and total collapse of the financial system and repeated intrusions by the government in the private enterprise and the ballooning cost to the taxpayers has everyone worried. How did things go so wrong? Why were our institutions so reckless and fragile? The story still continues to unfold. John Bougearel recounts the history and the economic events leading upto the situation we are in today in his recently released book Riding the Storm Out.

There is always a danger in writing a historical narrative when the events are still playing out as there is no benefit of the hind-sight. In this context, John Bougearel does an excellent job of outlining the chronology of economic events that led to the worst recession since Great Depression. The book offers the authors deep insight as he explains how different events, lack of regulatory oversight, and government’s policy mistakes came together in precipitating the economic crisis. Greed and Leverage and inadequate risk control systems were part of the genesis of the economic crisis and as the author points out, the red flags had started appearing long time ago. As long as the music plays, we will continue to dance, in the words of now ex- Citi CEO Chuck Prince!

The author reaches back in history to compare the elements of the current economic crisis to the many economic crises that occurred in the past (including the Great Depression). As he points out, there are many parallels. There are also many learnings from the past crises, that apparently the regulators failed to apply in their response to the current one. I was however, disappointed that the Author did not mention the Japan’s lost decade which was also spawned out of a real-estate bubble and where the banks continue to carry toxic debt on their books for many many years hoping that the values will re-inflate. I think the Japanese deflation probably carries more learnings and messages for the US regulators on what not to do when trying to fix the real-estate and banking sectors in this country.

Overall it is a great book to read, written in a very down to earth style and probably the first book out of the gates to attempt to chronicle the current economic crisis as it is happening. Maybe some will find John’s prediction of hyperinflation and collapse of the US dollar in the future to be alarmist, but I think that these are very realistic outcomes (probably more so now, given the humongo-gargantuan deficits that we now intend to run for the foreseeable future).

The key to understanding how we should react and act in the coming economic climate is to understand what has happened in the history. In that vein, I will definitely recommend my readers to get a copy of this book and read it.

The book can be ordered at the Author’s website. John also writes several financial newsletters that you can order from his website if you are interested. You may also wish to subscribe to John’s Blog at Trading Tips with John Bougearel.

We generally have a complicated relationship with money, and for most of us, money complicates our relationships. While there are many books and articles in the market and on the internet that can help us in improving how we earn, spend and invest money, very rarely do any of these discuss the psychology of our relationship with money. I have had the pleasure of reading The Cure for Money Madness by Spencer Sherman. This is seminal work by a writer who has been described as one of the best wealth managers in the country by Worth magazine for several years running.

The book starts out by digging deeply into the reasons why we are not able to make the right choices with money. We are rational human beings and will come up with a rational advice if someone asks for it, but when it comes to our own choices, often we make basic financial errors. Many a times, some of these problems are result of what the author terms as “money messages” we receive when growing up, from our parents and people around us. Some of the common messages may be “money is too hard” or “we do not discuss money at home” or “love of money is the root of evil” or “money is to be enjoyed, life is too short”. While not judging the rightness or the wrongness of these messages, the author makes a point that some of these deeply ingrained messages in our psyche actually cloud our decisions.
And some of these messages also prevent us from being open about money at home with our partners and with our kids. We as a society are able to talk very openly about sex, but when the topic turns to money, we clam up. This lack of communication often results in bad money decisions as a couple or family. One example he cites is that a couple is often not able to live cheaper than two separate individuals because the lack of openness and inbuilt money madness works to raise the level of spending of each individual in the relationship to the higher spending one for each of the spending categories.

The “money madness” prevents us from earning the most, asking for a raise, setting correct price for our services, making right spending decisions, renting when renting may actually be a much more rational option compared to buying, setting up a boring but high return investment portfolio compared to speculating on a hot stock, making optimum business decisions as we constantly worry about making a sale at all costs, and finally living a stress free and uncluttered financial life. Conquering this ‘money madness’ allows for a lifetime of prosperity and stress free financial life.

For the all the investors out there, the book also outlines Spencer Sherman’s Rainbow Portfolio that has beaten the S&P 500 in good times and bad and puts your investing on auto-pilot and is structured so that all emotion is taken out of investing process and you will automatically make the right investment decisions without fear.

I found the book to be very easy to read with great examples. The book is meant to be read slowly to allow for the message to sink in. There are exercises in the books that the reader should spend time to complete as it is likely to bring more clarity to their own personal ‘money madness’. And finally, the book should be read by the reader’s partner/spouse and discussed together. There are some joint exercises that should be completed. One of the key arguments of the author is that wealth management needs to involve both the partners in the household, otherwise it will not be as successful. I completely agree with Spencer.

The book can be bought at Amazon. Please follow the Amazon link at the beginning of the article or you can also buy it from The Cure for Money Madness: Break Your Bad Money Habits, Live Without Financial Stress–and Make More Money!. Spencer also has a website dedicated to his wealth management philosophy. Feel free to visit and explore.
I highly recommend this book.