Interest Rates Alone Are Not Enough To Manage The Economy; The Stock Market Matters Too.
Focusing on one thing is risky, just ask the Boston Celtics
In Game 5 of this year’s NBA Finals the Celtics went all out to stop basketball’s greatest shooter, Steph Curry. They won that narrow battle - Curry only scored 16 points. But they still lost the game.
A myopic focus on one thing is risky in economics too. A new book by British economist Andrew Smithers explains the benefits of expanding the focus of policy makers to include stock market valuation - smaller bonuses for corporate managers, higher levels of investment in real assets and more sustainable growth.
Full disclosure…I’ve stretched the basketball analogy a bit. But let’s face it, a “hook” about the replacement cost of corporate assets isn’t going to attract the clicks.
I’ve been reading Andrew’s work for 25 years. His first book Valuing Wall Street is always on the recommended reading list I give to my students at Cal. His work is challenging though. I often have to circle back and reread to make sure I’ve fully taken it in. That’s good for me - it’s a check on what I really understand, compared to what I just thought I knew.
But since this isn’t for everyone, I’ve summarized his key points in my Forbes book review. If you want a bit more detail check out our conversation on Top Traders Unplugged.
My review of The Economics Of The Stock Market for Forbes
Conversation with Andrew Smithers on Top Traders Unplugged
All the best,
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