BUSINESSWEEK ONLINE : AUGUST 30, 1999 ISSUE
BOOKS

Future Money


MARKET SHOCK
9 Economic and Social Upheavals that will Shake Your Financial Future--
and What To Do About Them
By Todd G. Buchholz
HarperBusiness 297pp $26

Looking for a lighthearted economics opus to stretch your mind under the beach umbrella? Try Market Shock: 9 Economic and Social Upheavals that will Shake Your Financial Future--and What To Do About Them. Forget the title--it's hyped to draw sales. The only shock is how well author Todd G. Buchholz is able to break down complicated socioeconomic and technical theories into fresh, understandable terms. And the economic and social upheavals he writes about are really just smart connecting-of-the-dots by this former Harvard economics professor who managed the Tiger hedge fund during the mid-'90s. The result is a surprisingly enjoyable read.

The value isn't so much in the author's many rules, which frankly have a kind of ''in case you forgot'' quality. For example, Rule No.1 for finding winners in the biotech industry: Focus on technologies that will aid large groups of people. Or Rule 3 for investing in mutual funds: Pay attention to fees. Thanks, professor. Will there be a quiz?

What gives the book its zip is Buchholz's talent for imaginative, sometimes funny writing, spiced with quotes from the Talmud, Shakespeare, Henry Ford, Alan Greenspan, and Saturday Night Live. Buchholtz also uses weirdly gripping Twilight Zone-style fictional vignettes to make his points. For instance, imagine Margaret Thatcher launching a mock ''invasion'' of France to rally her countrymen to pull out of the European Union. Or the Japanese buying General Motors Corp. It could happen, Buchholz argues.

Buchholz' best advice is his main theme: ''The point of investing is not to guess the future, but to act on new information before the whole world pounces on the idea.'' Buchholz thus spins nine global megatrends and tells which way to lean as an investor. America is going gray--and ''baby boomers will set new standards for energetic retirement.'' So look for growth stocks in drugs and vacation homes. Japan? Think of the whole country as ''Leisure Village.'' Soon, just like Grandma's vast condo complex in Florida, that country will import practically everything. That's good news for exporters of health care. Beware of mutual funds. Many will implode. Stick with index funds.

Buchholz' most provocative ideas: Rising interest rates, which reduce the value of the dollar, make people less concerned about the future--and more likely to turn to crime with its potential quick payoffs. And bet on global warming, Buchholz says. Even if you are wrong, you'll be ahead of a stampede in the years ahead. Already, many property insurers are factoring rising oceans into coastal insurance rates. Many companies will leave the business. ''To an investor, those insurance companies that get through the exit doors first will look like relative winners.'' Financial firms that create and sell ''weather derivatives'' will profit.

Sometimes Buchholz wanders far afield. But even when he meanders, he brings a good teacher's verve to the exercise. It's a worthwhile journey.

By DOUGLAS HARBRECHT

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PHOTO: Cover, ``Market Shock''



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