Cocktail Economics: Discovering Investment Truths from Everyday Conversations

Cocktail Economics: Discovering Investment Truths from Everyday Conversations

by Victor A. Canto


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Cocktail Economics: Discovering Investment Truths from Everyday Conversations by Victor A. Canto

“Successful investors are those who can pick the right investments for different economic conditions. It’s like matching wine with food. In this book, Victor Canto is both your star chef and sommelier. Don’t be afraid to put Cocktail Economics to work today. You’ll find that two-star investing has become a four-star endeavor.”

–Charlie Parker, financial maven and former Chief Financial Officer of Continental Insurance

“Victor Canto’s insight and uber-rational approach will forever change the way you look at risk and return. Perhaps equally important, he’ll make you a better economic and political thinker. No one has a greater understanding of how marginal changes in world economics and politics impact portfolio holdings.”

–Neil Rose, CFA, CIO Cadinha & Co.

“I count Victor Canto among today’s best and smartest investment advisors. He has made money in both the good times and bad for many a satisfied client. With this book, he has now done all investors, including myself, an important service: He has written a widely accessible book about the marriage of economics and investing, and the crucial ties that bind the two. It’s the story of how big ideas make the investment world go round.”

–From the Foreword by Dr. John Rutledge, Chairman, Rutledge Capital, LLC

What can moonshine, mountain climbers, power plants, salmon, football players, and well-known celebrities teach you about investing? More than you ever imagined!

Through entertaining, easy-to-understand anecdotes, analogies, and examples, Canto reveals why the most successful investment strategies reflect a balance of active and passive approaches. You’ll learn how to “read” economic cycles, identifying the specific asset classes most likely to outperform in tomorrow’s business environment.

Construct and optimize your winning investment plan, step-by-step, from start to finish!


The case for predicting, forecasting, and timing


Why you need to take both sides in the never-ending debate


Putting industry behavior to work for you


Investing internationally in the age of globalization


Making the most of publicly available price data


Anticipating and responding to regulations and taxation


Build your benchmark portfolio, then optimize it for changing environments

Victor Canto reveals exactly how the economy affects markets and how to “read” business cycles so you can profit from every shift in the business cycle. Among the topics covered: investing internationally in the age of globalization; transforming price data into usable market “signals”; anticipating the impact of regulations and taxation; and more. From start to finish, Canto’s focus is practical, and his focus is simple: outstanding investment results.

Foreword xii

Preface xvii

Introduction: The Above-Average Opportunity xxi

Chapter 1: The Buy-and-Hold Connection: Investing Fundamentals, Courtesy of the American Homeowner, the American Dream–or Reality? 1

Chapter 2: Leaping the Transaction-Cost Hurdle: Sometimes It’s Easy, Other Times It’s Not 19

Chapter 3: Dressing Appropriately for the Stock Market: The Potential Payoffs of a Switching Strategy 31

Chapter 4: Catch Elasticity If You Can: An Introduction to Industry Behavior 47

Chapter 5: Putting High-Beta to Work: Industry-Based Portfolio Strategies 67

Chapter 6: California Is a Country: An Introduction to the Location Effect 83

Chapter 7: …And France Is a State: How to Invest Internationally in the Age of Globalization 99

Chapter 8: Pipelines to Our Investment Returns: How We Get What We Want, in the Amount We Want, and When We Want It 113

Chapter 9: Who Are You? Investor Profiles and the Case for Asset Allocation 131

Chapter 10: Your Benchmark Portfolio. . .and Beyond 145

Chapter 11: Turning Smoke into Signals: How to Make the Most Out of Price Data 157

Chapter 12: Making Hay While the Sun Shines: The Case for Predicting, Forecasting, and Timing 173

Chapter 13: The Fight Is On: How to Invest Properly Relative to Regulations, Inflation, and Taxation 195

Chapter 14: Ending the Never-Ending Debate: Active vs. Passive Investing and Why You Can Take Both Sides 217

Chapter 15: A Rational Walk Down Wall Street: Darting Between Passive and Active When the Odds Are in Your Favor 233

Chapter 16: Alpha Bets: The Case for Hedge Funds and a Greek Letter You’ll Want in Your Portfolio 247

Chapter 17: Tilting Toward Success: A Step-by-Step Guide to Above-Average Asset Allocation 265

Index 291

Product Details

ISBN-13: 9780132432733
Publisher: FT Press
Publication date: 05/21/2007
Pages: 302
Product dimensions: 6.40(w) x 9.28(h) x 1.02(d)

About the Author

VICTOR A. CANTO is Chairman and Founder of La Jolla Economics, an economic consulting firm located in La Jolla, California. He served as tenured Associate Professor of Finance and Business Economics at the University of Southern California (USC), and as Visiting Professor at both the Universidad Central del Este (Dominican Republic) and UCLA.

Dr. Canto has been published in The Wall Street Journal and Investor’s Business Daily, and in many leading economic journals, including Economic Inquiry, Journal of Macroeconomics, The International Journal, Journal of Business and Economic Statistics, The Southern Economic Journal, Applied Economics, Weltwirstchaftliches Archiv, The CATO Journal, Public Finance, and The Journal of International Money and Finance. His series on portfolio strategy appeared in the Financial Analysts Journal.

He holds a M.A. and Ph.D. in Economics from the University of Chicago (1974, 1977).

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