BOOK OF THE DAY: The Sages: Warren Buffett, George Soros, Paul Volcker, and the Maelstrom of MarketsBy Charles R Morris Public Affairs 180pp; £13.99
A TRILOGY of biographical sketches forms the backbone of The Sages,Charles Morris's attempt to lionize three "pillars" of sanity in a financial world gone mad. His pick of the bunch are Warren Buffett, the billionaire who has taken up permanent residency in either the number one or two spot in the Forbes rich lists; George Soros, "the man who broke the Bank of England"; and Paul Volcker, Alan Greenspan's predecessor as chairman of the US Federal Reserve and now a senior economic adviser to Barack Obama.
Morris asserts that all three effectively predicted the current crisis by dint of their disdain for the Friedmanite dogma of “efficient” markets. They share what he calls a “common sense” that has allowed them to remain (almost) free of that nasty credit crunch taint. These ageing stalwarts have managed to survive the “new reality” without having to give up the corporate jet, apologise to a congressional committee or wear this season’s orange jumpsuit.
Well, it’s hard to argue with all those billions, and Morris doesn’t try. A former banker, he assumes a degree of financial and economic literacy in this US-centric book that will exclude many readers looking for a jumping off point into the whole fiasco. Injecting a level of macho pomposity that would grate during even the most bullish of times, Morris describes how Buffett, Soros and Volcker “embody what the Romans called ‘virtue’ – steadfastness, consistency, devotion to principle”.
We later learn that Soros sometimes changes his position on a trade because his back has started to ache. “He literally goes into a spasm and it’s this early warning sign,” according to his son. Buffett variously dismisses such hiding-to-nothing frenzies as tech bubbles, leveraged buyout crazes and the “financial weapons of mass destruction” known as derivatives. But these apparent principles didn’t prevent Berkshire Hathaway, Buffett’s main wealth engine, from snapping up derivatives once the likely returns seemed tasty enough. Both Soros and Buffett possess “a quality of genius that can’t be captured in a textbook” – or indeed in this book, which is unfortunate. Like a pub bore recounting every kick of the ball in a 20-year-old football match, Morris gives a blow-by-blow synopsis of the 1980s investment bets made by Soros. But what Soros did or didn’t do during 1987’s “Black Monday” stock market crash is barely the stuff of legacy. His role in 1992’s “Black Wednesday”, when his large-scale speculation on the pound forced Britain’s exit from the European Exchange Rate Mechanism, is rather more notorious.
Morris does not believe the pound “coup” was “antisocial” – he dismisses the question as soon as he raises it, on the grounds that the economic consequences of Britain’s departure from the ERM were ultimately positive. Never does he consider that, regardless of the outcome, the idea that one private individual might possess so much power might not be such a good thing.
We learn little of the odd man out – Volcker – save that he remained heroically incorruptible by Reaganite adherents to the purist monetarist conviction that controlling the money supply will control inflation and never mind about all that tinkering with interest rates. Volcker did tinker with interest rates and eventually the cycle of inflation broke.
Ten pages of quotes directly from Buffett's shareholder letters comprise the highlight of The Sages.Any man who fulminates against executive excesses and then buys a corporate jet is certainly displaying evidence of a certain sense of humour. Buffett is quite the wit. He called his corporate jet The Indefensible.
Laura Slattery is an Irish Timesjournalist and co-author with Caroline Madden of The Money Book:Everything you ever wanted to know about your finances but were afraid to ask