Review: The Mystery of Money by Harlan Green

The Mystery of Money: Understanding the Modern Financial World
by Harlan Green (Turkey 1964–66)
Publishing by the Seas
126 pages
May 2014
$12.95 (paperback), $8.95 (Kindle)

Reviewed by Leo Cecchini (Ethiopia 1962–64)

This book is not about “mystery,” but about how to invest your money. The author says in the second sentence it is about “. . . how to make money work for us. . .” As such it is a very useful and reasonably priced guide to investing. The other objective of the book is to warn how financial markets are “. . . so opaque to the uninformed eye . . . that it is easy for insiders to manipulate and mislead investors.” While also useful, the author is a little too given to casting this part as a matter of “them,” the unscrupulous financiers, versus “us,” the gullible investing public.

The book starts with the “sub-prime” fiasco that caused the “Great Recession.” This is conventional wisdom which I have repeatedly explained was not the problem. I sold property with sub-prime loans, in fact all of my sales were with sub-prime loans. The values of the bonds based on collections of these mortgages were the expected pay offs over the lives of the loans. However, the mortgage backed securities analysts used the values of the mortgaged properties to value the bonds, a fundamental error that led to the collapse of the mortgage backed securities market and the recession.

The author then presents several principles that one must follow to invest money profitably. He starts with negotiating, which is fundamental to any business success. He goes on to examine “imperfect financial markets” which are the result of too much information that frustrates one’s ability to determine the true value of an asset being considered. This imperfect market leads to an inability to make “intelligent decisions.”

He then warns against “irrational exuberance” which fueled the dot.com and housing “bubbles.” This is linked to “wave and herd” behavior. In sum, he urges the investor to eschew following the crowd in a mindless mania to buy hot assets, e.g. stock in dot.com companies or mortgage backed securities. He further warns against making investment decisions based on “cults and charismatic CEO´s,” Jamie Diamond at the head does not guarantee good performance.

The author concludes by pointing to an area where we are all woefully short in understanding, how to determine “real wealth.” We are unable to calculate anything other than growth in dollar terms of an asset without any regard to how this asset may create “real wealth” otherwise. But this is a subject for volumes, not one convenient guide.

Since this is a financial book I will say the “bottom line” is buy this book as a useful guide to successful investing and ignore the brickbats thrown at the evil financiers who manipulate our money.

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Reviewer Leo Cecchini studied economics at the University of Maryland. He followed this with Peace Corps service in Asmara, Ethiopia (now Eritrea) where he taught high school geography and coached the school’s soccer team to two consecutive league championships. From Peace Corps he entered the US Foreign Service with economic-commercial posts, mainly in Europe, but also in Latin America, Africa and Asia. For the last 24 years he has been in private business in the US and abroad. He is an expert in such business details as cash flow, borrowing, creating markets, managing resources, including human resources, and last, but not least, making a profit.