Tim Graf (TG): This is Street Signals, a weekly conversation about markets and macro brought to you by State Street Global Markets, the Markets and Financing Division of State Street. I'm your host, Tim Graf, European head of Macro Strategy. Each week, we bring you the latest insights and thought leadership from our award-winning suite of research, as well as the current thinking from our strategists, our traders, our business leaders, and a wide array of external experts in the markets. If you listen to us and like what you're hearing, please do subscribe, leave us a good review, get in touch with us, it all helps us improve what we hope to bring to you. And with that, here's what's on our minds this week.
TG: We've come to the end of our 2024 podcasting efforts with what has become an annual tradition for the Macro Strategy Team at State Street Global Markets, our rundown of the best books and other media that we've read, listened to, or watched during the year that's just about to close.
Every year for the last 11, the team has published a document called Three Things to Read This Year. As the name suggests, each team member contributes and writes up three brief reviews of selections of media that resonated with them this year and made their best of 2024 list. These are typically books, we're all big readers, but we've also featured podcasts, papers, long form articles, and this year we even have a film to talk about.
Now, I compile and edit everything, I write a little preamble, and we usually package and put it out the week before Christmas as a gift to our readers to give you ideas of how to pass the time during what hopefully is a less hectic moment of the year. And as was the case for me this year, the document's also a great source of ideas to steal for last minute gifts.
Last year, with Street Signals going public, we decided to also do a podcast version of the document. But having 15 different people go through three books each is no one's idea of a good time. So, as we did last year, we have whittled it down and asked for one choice from each team member. And like we just did for our Year Ahead episode a couple of weeks ago, I was able to get most of the team to contribute a recording detailing their choice.
That's what follows. It's a really wide and varied mix from fantasy novels to the macroeconomic tomes we all absorb and love as strategists.
And that's where we start with Lee Ferridge.
Lee Ferridge: My chosen book this year is The Price of Time: The Real Story of Interest by Edward Chancellor. I found this to be a very useful reminder for those people who have only ever known interest rates at close to zero, anyone who joined the market post 2008, that this is not normal or indeed desirable.
Interest rates need to be thought of as the price of time and financial flexibility. In the words of ‘Fame’, time costs, and right here is where you start paying. Chancellor looks back through the history of charging interest, all the way back to the ancient world. He then brings us right up to date and explains why, with strong examples, free money is not a positive, and indeed tends to lead to very undesirable outcomes. Perhaps something for the Fed and other central banks to think about in 2025.
TG: We stick with the macro theme for our next two books. First, Hope Allard.
Hope Allard: One of my favorite reads this year was 21st Century Monetary Policy by Ben Bernanke.
In this book, Bernanke draws from his experience as Fed chair to walk through Fed history from the great inflation all the way to how the Fed responded more recently to the Global Financial Crisis (GFC) and the pandemic. He dives into the tools the Fed used, like cutting interest rates, quantitative easing, and forward guidance, and explains how they helped stabilize the economy during those events.
But it's not just a history lesson. Bernanke also explores how these policies might shape the markets and the macro backdrop moving forward.
I think what makes this book really stand out is how Bernanke makes those concepts accessible to a wide range of readers. If you're new to the topic, Bernanke does a great job of breaking down some of the more technical aspects of central banking in a way that's easy to grasp. But he also offers valuable insight around how unconventional policies are changing the game even for those who have been watching Fed policy for a while. So this is a worthwhile read regardless of how long you've been following the Fed.
TG: Fred Goodwin's choice this year looks at the price of some of the policy choices made by central bankers in recent years.
Fred Goodwin: Mr. Risk's book to read this year is called What Went Wrong with Capitalism? Very big topic. It's by Ruchir Sharma.
The author argues that capitalism has been distorted by extensive government intervention over the past century. He suggests that governments have expanded their roles in spending and regulation and financial rescues, creating a culture of socialism from the rich with bailouts and entitlements. This intervention has led to inefficiencies in financial markets, the rise of monopolies and zombie firms, and increased inequality.
Sharma contends that these actions have made capitalism less fair and efficient, slowing economic growth and fueling discontent. If you have already read DeLong’s Slouching Towards Utopia, you will find this book fascinating in how two different offers look at the same swath of economic history but come to different conclusions.
TG: Moving from macro to markets, no theme has dominated the investing world for the last two years quite like artificial intelligence. Our next set of book recommendations is all about AI.
Marvin Loh kicks us off with a book that appeared on three different lists this year, more than any other, which deals with the raw materials for AI, amongst many other areas of technology.
Marvin Loh: Chip War by Chris Miller has the app byline of fighting for the world's most critical technology. The book is important because it details what worked and what didn't in getting to US dominance of the industry. The combination of entrepreneurial grit, limited regulation and capital all played a role, but that wasn't enough. The sector needed government funding and support, along with a whole lot of luck to get it to where it is now.
Moving to the present, the Semi industry now operates the most complicated global supply chain. This includes design dominance in the US, fabrication scale in Asia, and advanced equipment that comes from Europe. Given that Semis are the most important economic and strategic tech to all countries, governments will either want to solidify their current position or disrupt it for their own benefits.
One thing is clear, the importance of Semis will only grow, and with it, it's prominence to businesses, society, governments and the financial markets. Chip War provides all of this history while examining how governments may act to either protect or get at this latest technology. This makes the book required reading from an investment and geopolitical perspective. I hope you enjoy it.
TG: The use and misuse of AI factors heavily in Noel Dixon's choice this year.
Noel Dixon: My name is Noel Dixon, and the book that I'm recommending is titled Genesis: Artificial Intelligence, Hope in the Human Spirit. This book was written by the late Henry Kissinger alongside two well-known technologists, Eric Schmidt, former CEO of Google, and Craig Mundy, former CEO and co-founder of Alliant Computer Systems.
The premise of the book is that the future of AI is in our hands as humans. And what we do next, it could be one of our greatest triumphs, or it could be one of the greatest mistakes we've ever made. It can impact things like human biology, healthcare, technology, climate, our military, so on and so forth. How we're going to deal with something that is at the top of the scale or pyramid in terms of intelligence, is going to be a question that we're going to have to answer and could determine our ultimate history.
And it brings up the concept of control, the importance of government controls and geopolitics. We essentially have to be proactive as it relates to governance. And it's going to be some safeguarding and risks associated with this technology. For example, do we really want AI in control of our weapon systems?
However, with that said, we do want so-called AI scientists to discover new technological breakthroughs on our behalf. That will just ultimately make our lives better.
So this book does, I think, a good balanced job at weighing the pros and the cons as it relates to AI. And at a minimum, I think it's a very fascinating read to get a true sense of the risks and the rewards of AI.
TG: Michael Metcalfe's selection takes us to some of the more philosophical consequences of artificial intelligence.
Michael Metcalfe: So I was lucky enough to see Yuval Noah Harari speak at TED Global in London nearly a decade ago. And to be honest, I've been hooked ever since. He's a historian, anthropologist, philosopher and futurist. And through all of those, he's a masterful communicator, whether on stage or through his books. He often highlights interest in humanity's incredible capacity to overcome challenges through cooperation, ingenuity, and in particular, shared stories.
And that's why his latest book, Nexus, is really so striking for me. It explores the history of communication, but takes a sharp turn with AI, which he argues could dominate our future. For Harari, the A in AI doesn't stand for artificial. It stands for alien. And he believes our reliance on that technology has already, and he argues, it's already crossed critical thresholds. And so it must be managed with extreme care. Care that, so far, he argues, we're not really showing.
So as always, he links historical examples, really detailed ones, to what they mean both for today and for the next hundred years. It's classic Harari perspective with a capital P.
TG: All this talk of AI and computers, it's a bit much. We are only human, after all, and that's pretty wonderful on its own. But it can be confusing, which Cayla Seder highlights in her choice, which I think is the ideal way to close out this section of the podcast.
Cayla Seder: Have you ever felt an emotion but can't identify what that feeling actually is? Maybe you think you're happy, or on second thought, maybe it's not happiness, it's actually joy. Or maybe what you're experiencing is gratitude, or perhaps the combination of all three.
The inability to precisely articulate our emotions is a very universal challenge, which is ironic given that having emotions is human nature, and we not only all have them, we all have them all the time. And so this is where Professor Brown's book Atlas of the Heart comes in. In Atlas of the Heart, Professor Brede Brown succinctly summarizes more than two decades of research to explain and define 87 of the most common emotions.
And being able to identify our emotions efficiently and with precision not only makes being a human easier, it also helps people become more effective leaders, compassionate colleagues and empowered individuals. So I hope you check out Atlas of the Heart and let me know what you think, or should I say how you feel.
TG: Moving into the second half of the podcast, we don't really have a cohesive theme for the rest of the books. These are just the general nonfiction books that tend to dominate our lists most years. But we start with a book from Ben Luk that does have a lot of linkages to the chip discussion.
Ben Luk: So the book that I would recommend everybody to take a look at going into 2025 is called The Electric Vehicle War, really talking about the rise of China's EV empire and how it disrupts the automotive world, written by both Henry Yim and Alexandra Yim.
Basically, it's important to recognize that China has really been at the forefront of the EV market, because of the way that it has dominated from sourcing materials to industrial design to effectively launching very successful global EV launches across the globe. China is simply well ahead of the West.
What this book really highlights is what they have done well on, what existing OEM carmakers, in particular in the US has to learn, and really how the government at the end of the day also needs to help in assisting the shift in consumer sentiment over time to really rely and use EV as the main source of mobility going forward.
TG: We now come to my recommendation.
But first, if you go to YouTube and search for Billy Waugh, W-A-U-G-H, you'll come across dozens of interviews with this ultimate warrior, a US Army Green Beret, who went on to work extensively for the CIA's Special Activities Division, a unit which undertakes lethal covert action on behalf of the US.
And he's the vehicle through which many of the stories are told in Surprise, Kill, Vanish: The Definitive History of Secret CIA Assassins, Armies, and Operators by Annie Jacobson. The best book I read this year, in fact, one of the best books I've ever read.
Starting out as an effort to confuse and kill Nazis during World War II, leading all the way up to the hundreds of drone strikes ordered by the Obama administration, the CIA, its forerunner, the OSS, and other paramilitary branches of the US government routinely blurred the lines between national defense and state-sponsored assassination. And Surprise, Kill, Vanish is a fascinating recap of some of the high and low lights of those efforts.
And it's incredible how much of it is based on unclassified material and on-the-record conversations with the likes of Waugh and folks like Lou Merletti, who is also a former Green Beret who ran the Secret Service during the late years of the Clinton administration. For a fascinating read on an underappreciated but often incredibly tragic part of US military history, I cannot recommend it highly enough.
[music break]
TG: Where thought-provoking books are concerned, it's pretty hard to beat Dan Gerard's choice this year.
Dan Gerard: One of my favorite books I read this year was Adam Kirsch's spirited and measured criticism of an ideology that has taken hold across the world, particularly in what could be called progressive institutions like academia. Following the reaction of many of these institutions that explicitly and implicitly embraced the violence of October 7th as justified in the unveiling of anti-Semitism across the globe, I was curious to learn more about how this could happen.
The book, titled On Settler Colonialism: Ideology, Violence, and Justice, discusses how a fringe area of academic study, one that began in the 1960s by examining countries ruled by a minority colonial power, morphed into an ideology demonizing all peoples living in a place from where they are not native.
This ideology is based on an original sin story of settler colonialism that is unique in ideological terms, given its basis as its opposition to something rather than what it stands for. The mantra of the ideology is that invasion is a structure, not an event, and creates its own myths, not to offer a better outcome for citizens like the Civil Rights Movement did, but to demonize and lay blame in people and institutions for future political gain. The book meticulously walks us through the history of the movement and how it's had such a strong impact on what is known as Gen Z.
I found the book extremely helpful in providing context as to how and why what we know as progressive institutions embrace or at a minimum tolerate this regressive ideology and its continued influence on the younger generations who are becoming more ignorant to historical study. Very much worth a read.
TG: Every year, I wind up buying a bunch of our team's book choices. And other than the books I'm giving out as Christmas gifts, Dwyfor Evans' selection might be the first one I go for.
Dwyfor Evans: So my book of the year for 2024 is The Picnic: An Escape to Freedom and The Collapse of the Iron Curtain by Matthew Longo. And it tells the story of what is really the first chink in the Iron Curtain in the summer of 1989.
It tells the story of a far more liberal, albeit still a communist administration, but a far more liberal government in Hungary, which came to an agreement to hold a pan-European picnic on the Austro-Hungarian border. And this was meant to be a controlled, joyous event between what is effectively two still opposing political sides.
But during that summer, there were, as was often the case in the summer, a very high number of East German tourists who were allowed to holiday within the Communist Bloc. Once the East German tourists heard about their picnic, they understood this to be the first potential breach of the Iron Curtain, and in very large numbers, traveled to Hungary with a view to attending this picnic, and once over on Austrian soil, effectively disperse.
It really tells the story of the desperation that many East Germans in particular had to leave the Communist Bloc. This picnic on the Austro-Hungarian border was the first opportunity that many people on the other side of the Iron Curtain had to effectively escape to the West. I'm sure one day there's a movie in this because it's quite dramatic in its telling. It is really a story of planning, of escape, and of eventual freedom from authoritarianism and made a really, really great read.
TG: As we start to make our way to the end of the podcast, we move to realms a bit more exotic and unusual. First, we have Carlin Doyle.
Carlin Doyle: My top book of the year is Pure Invention: How Japan Made the Modern World by Matt Ault. This is the story of the Japan we all know from popular culture. It's the story of Walkman, Pokemon, Pac-Ma, and Emojis, which by the way, is a Japanese word formed of two logographs, picture and character. Then there is the global success of Kawaii and its ultimate avatar, Hello Kitty.
The most interesting part is the author's exploration of the background, of the quirky, inventive entrepreneurs behind what became some of the world's best-known firms and brands, including Sony and Sanrio. It is as much a story of individual struggles overcoming hardships and the triumph of the underdog, as a description of the wonderful world of Japanese pop culture.
TG: Our next selection is from Ning Sun from our team in Boston.
Ning wasn't available to record, so I've chosen for her and gone with a film that she picked, the first time we've ever had a movie submitted as one of our recommendations.
Ning selected El Conde, a historical fantasy about Chilean dictator Augusto Pinochet, which looks like it's available on Netflix. The twist in the movie is it depicts Pinochet as a vampire who's grown tired of immortality and is ready to die, but his family urges him on because they're worried about losing their inheritance. Sounds like a great one to watch on a gloomy night between Christmas and New Year's Eve.
Finally, we have our only fictional book selection of the podcast from Marija Veitmane.
Marija Veitmane: My teenage son has been recommending Brandon Sanderson's books to me for years. It's his favorite fantasy writer. So this year, I read the Mistborn series. The first book in the series is called The Final Empire, which drew my attention.
As the name suggests, the Empire is run by an evil ruler supported by aristocratic families, while the rest of the population, called Ska or slaves, spend their entire life mining minerals and metals under the grounds that gives the rulers ruling elite ultimate power over them. Then a group of conmen and alamancers, the magicians that extract power from the metals, start to revolt and they overthrow the ruler. Unfortunately, the leader of the rebellion dies as well.
Now the ragtag of the so-called liberators need to find a way to rule the country, make alliances with friends and enemy, run the economy, support the people, give scourge freedoms, while the dark mist rises.
TG: Before we close things out for the year, I just wanted to make a final note that this is the last episode for a few weeks. And I wanted to take a moment to thank everyone who has helped make this podcast the success it now really is. The response and the growth that we've seen this year was way beyond what I thought possible. And I'm grateful for all the feedback and good ideas that people send me. Keep them coming.
Now I'll be back on January 9th with a review of what has changed in the world and in financial markets during the holiday period and where we sit after a few weeks off, all viewed through the lens of our research and unique indicator sets. And then on January 16th, we'll be returning to our normal interview format with a very special guest. You'll have to check back to hear who that is.
For now, kick back, enjoy the holidays, and we'll speak to you all again in the new year.
Thanks for listening to this week's edition of Street Signals from the research team at State Street Global Markets. This podcast and all of our research can be found at our web portal Insights. There, you'll be able to find all of our latest thinking on macroeconomics and markets, where we leverage our deep experience in research on investor behavior, inflation, risk, and media sentiment, all of which goes into building an award-winning strategy product. If you're a client of State Street, hit us up there at globalmarkets.statestreet.com.
And again, if you like what you've heard, subscribe and leave a review. We'll see you next time.
