A. Andrew Ross Sorkin is one of the most important financial journalists in the United States today. His new book 1929 on the Great Crash is now out: The Guardian has reviewed it. Sorkin is able to draw on archival and other new records to present a new analysis of how the roaring 1920s led to the Great Crash and what the economic / social impacts were.
B. Sorkin’s book is a sign that major trade publishers sense that we are at the financial market peak: a financial crash in the next year is both plausible and is possible. One of the worst assets to be invested in at this time is to be overconcentrated in terms of your portfolio construction of being heavily asset allocated in property / real estate. Former derivatives trader and philosopher Nassim Nicholas Taleb also foresees a financial crash. Taleb’s Incerto is well worth your time to read and to reflect pragmatically on.
C. United States pensions are underfunded. Most people now have a 401(k) defined contribution plan rather than a defined benefit plan. The latter is a legacy of the Keynesian New Deal period: DB recipients usually face a haircut. A 2022 thesis on US pension underfunding finds a key problem in corporate governance: the hiring of pension fund managers and the internal controls (oversight) to prevent fraud. These research findings can apply to unethical managers and to organisational misbehaviour in a broad range of industries that have highly leveraged capital structures and assetised intellectual property (where cashflow forecasts will face various kinds of volatility shocks and time series stochastic jumps).
D. I mentioned Kathryn Bigelow’s A House of Dynamite yesterday. The New Republic’s review focuses on Bigelow’s depiction of US missile defence. The United States Army’s FM-3-01 Air and Missile Defense Operations is the key doctrinal document (see PDF and audiobook versions).
E. Today’s MIT OCW free course is on Financial Crises. Professor Alp Simsek is now at Yale.
F. Associate Professor Tuomas Malinen (University of Helsinki) has written an introduction to a new volume on forecasting financial crises that explains why banks have a crucial role in the meso-level transmission of contagion shocks to the macroeconomy. This is a definitional and historical piece. Malinen’s Google Scholar profile and his Substack.