Saturday, August 01, 2009

Appreciation: Morris on Soros, Buffett and Volcker

Charles R. Morris' The Sages: Warren Buffett, George Soros and Paul Volcker (2009) really should not be a good book at all. To all appearances a quick-and-dirty threefer bio of a trio of finance celebreties, you might expect something more or less on the level of Us Magazine. What saves it are two things: one, Morris' remarkable feel for the treacherous landscape of some important financial issues, particularly macro policy The other is his extraordinary skill at exposition. Here, for example, Morris summarizes what Soros called "the Imperial Circle"--the unstable state of the macro-world in the mid-80s:
After runaway inflation was crushed in 1982, the economy veered into a peculiar growth stage that most economists regarded as highly unstable. ... an unusual blend of strong growth and a strong dollar, but with big trade and budget deficits. According to conventional wisdom, it was unsustainable--strong currencies don't coexist with big deficits. But the circle was squared by high American interest rates. High rates sucked in capital from abroad, so financed the U.S. trade deficits. At the same time, the depressive effect of high interest rates at home was offset by ... big bueget deficits. So, while high dollar interest rates imposed crushing burdens on developing countries like Brazil and Mexico, they hepled America live comfortably beyond his means.

-- Charles R. Morris The Sages:
Warren Buffett, George Soros and Paul Volcker
If you think this is ho hum, let me tell you--as one who, as a penny-ante investor, lived through the time while trying to figure out this maelstrom from himself, I think Morris has captured in a paragraph more than any other commentator could capture in no less. He is able to do that for just about every critical macro juncture in the book.

Aside from sheer celebrity, it may be difficult to understand why one would bother to put these three in the same book. Soros and Buffett are both investors but Volcker is primarily the creator of an investment climate. As an investor, Buffett has made his billions by ignoring (as far as he can) the transitory swirls and eddies of the market, while Soros has succeeded in bringing off what so much investment advice tells us we should not do: trying to identify trends and to ride them for all the are worth.

Even the likeability factor may require some justification. Buffett and Volcker probably pass the test--they are two of a tiny number whose reputations remain largely undiminished by the late uproar. Soros is a somewhat different matter. At least in part because of his involving himself in American domestic politics, he has had to bear a certain amount of demonization as a foreigner and a "speculator" (= a Jew?). This line of critique clearly does not impress Morris, who gives it scarcely a glance. He is much more impressed by a Soros who broke as government monopoly on information surveillance in Hungary by flooding the place with copy machines.

But I shouldn't make this review longer than the book. It is a decent evening's read, and a pleasure on every page. Highly recommended.

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