'When markets collide'

Mohamed El-Erian is a managing director and member of PIMCO's Portfolio Management and Investment Strategy Group. He also has other businesses and plays very important role in PIMCO’s work. In may 2008 his book ‘When markets collide’ was published and he won the Financial Times Goldman Sachs Business Book of the Year for it. So what this book is about?

In the book author shares with his thoughts about present and future economical situation and shows analysis of the reasons why some serious global economists make such a strange mistakes sometimes and can’t say right subsequences of economic decisions. Mohamed El-Erian wrote this book for individual investors, economists and policy makers, “It provides readers with insights on how best to exploit new opportunities and minimize exposure to changing patterns of risks.”

As there are always a lot of transformations in global economy, market and policy infrastructures can’t always cope with all the problems and a good example of it is a series of collapses in US mortgage market and present turmoil in all over the world which affected almost all social communities. And all these inconsistencies show us that present economy is changed and now we can see that some countries start dominating while previously they didn’t have any influence on the global economy. Also El-Erian attaches significance to such thing as a market noise. People in market tend to miss noise and react only to different transformations while noise plays very important role in economy; they believe there is little point in thinking about the longer-term implications for investment strategies, business models, or national and multilateral policies. The author shares with us with his experience about studying and importance of this noise and says that now people started to notice noise and think about all the consequences beforehand.

Mohamed has investigated the present market and its future and says that now policy makers became data-dependent and still mostly react to transformations. Also the author explains present economical situation and shows that in future “due to the difficulties in being able to rapidly identify and adapt to multiple structural changes” some firms may fail, some investors may become relevant instead of popular now.

The author gives us appropriate ways of behavior in present economic situation, shows the a new big influence of SWF, risks which we can have now, ways of protecting our own portfolio and advices not think only about present transformations but also listen to the noise in markets.