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Austrian School for Investors: Austrian Investing Between Inflation and Deflation
Insanity seems to rule the financial markets and many investors are driven by delusion and anxiety. May everything you thought you knew about investing be wrong? The Austrian School's approach provides the needed respite for investors caught in inflationary treadmills.
Conventional investment experts often overlook economic developments which may become a hazard for mainstream investors. Instead, the Austrian School of Economics has proved itself as an independent approach beyond the interests of politicians and bankers. The financial system is shaking. This book presents new paths through the shaky grounds between the tectonic plates of inflation and deflation to both private and professional investors.
"This book is a must-have for every responsible investor!" (Felix W. Zulauf, Investor)
"I am grateful to the authors of this book for not only highlighting the fundamental principles of the Austrian School but also for showing how investors can make practical use of them. " (Dr. Marc Faber, Investor)
"For the first time an extensive compendium has been published in which the theoretical foundations developed by the 'Austrians' have been made useful for the investor's practical needs. The authors develop a remarkable 'Austrian investment philosophy'." (Prof. Guido HUlsmann, University of Angers)
"The Austrian School's perception helps us to see long-term patterns and opportunities that today are often hidden. [...] For the authors and their important work I hope for the widest possible audience of a bestseller." (Prince Philipp von und zu Liechtenstein, Chairman LGT Group)
Conventional investment experts often overlook economic developments which may become a hazard for mainstream investors. Instead, the Austrian School of Economics has proved itself as an independent approach beyond the interests of politicians and bankers. The financial system is shaking. This book presents new paths through the shaky grounds between the tectonic plates of inflation and deflation to both private and professional investors.
"This book is a must-have for every responsible investor!" (Felix W. Zulauf, Investor)
"I am grateful to the authors of this book for not only highlighting the fundamental principles of the Austrian School but also for showing how investors can make practical use of them. " (Dr. Marc Faber, Investor)
"For the first time an extensive compendium has been published in which the theoretical foundations developed by the 'Austrians' have been made useful for the investor's practical needs. The authors develop a remarkable 'Austrian investment philosophy'." (Prof. Guido HUlsmann, University of Angers)
"The Austrian School's perception helps us to see long-term patterns and opportunities that today are often hidden. [...] For the authors and their important work I hope for the widest possible audience of a bestseller." (Prince Philipp von und zu Liechtenstein, Chairman LGT Group)
366 pages, Hardcover
First published June 13, 2014
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261 people want to read
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Displaying 1 - 9 of 9 reviews
December 3, 2017
I'm glad this book exists, along with other Austrian-School-oriented investment books like The Dao of Capital. However, I did find it a bit long on the "Austrian School" part and a little short on the "For Investors" part. I was kind of hoping for an investing strategy book based on Austrian principles / ABCT, but instead to me it seemed more of a recap of Austrian principles with a little general value investing knowledge tacked on to the end. Valuable, yes, but not groundbreaking.
August 20, 2018
Macroeconomic equilibrium models – be they classical or Keynesian – often feel unnatural for investors who have to cope with a world that rarely shows any signs of stable equilibriums. Because of this the Austrian School of Economics has long attracted certain types of investors. Austrian theory takes its starting point in the entrepreneur and looks to the constantly changing investment cycle that inevitably leads to periodic under- and overinvestments in productive capacity.
This book aims to take the reasoning of giants like Carl Menger, Ludwig von Mises and Friedrich Hayek and makes it applicable for investors. The text is a collective effort by Rahim Taghizadegan an economic philosopher, Ronald Stöferle an investor specialized in precious metals, Mark Valek an investor focused on alternative assets and the independent trader and blogger (acting-man.com) Heinz Blaznik.
About three quarters of the book is a description of the philosophical implications of Austrian economic theory on the governance of economies and financial markets. The authors try to build a philosophical base that will allow the reader to form a point of view of investing that builds on the theories of Mises and the others. The last quarter of the text then discusses how to invest in accordance with such a view.
Similar to many who use Austrian investment principles the authors prefer portfolios with fixed asset allocations that one rebalances to periodically. A long list of investable assets are described and analyzed from an “Austrian view”. Gold is often an important asset for Austrian economic thinkers as they often have a focus on capital preservation and – with a grim view of monetary politics – on inflation protection. However, with the view that the economy is too complex to predict with precision, the portfolio allocation should preferably be able to cope with any type of economic environment. Here the authors present Harry Brownes “permanent portfolio” from the 1970s that contains one quarter each of gold, cash, bonds and stocks.
With an economic theory that builds on investment in productive capital through a capital cycle it should surprise few that, with regards to stocks, long-term investments in companies that earn a high return on invested capital is advocated. Valuation measures that relate the market price to the replacement value of companies’ productive capital has long been used by Austrian theorists and today’s Tobin’s Q fits well into this category. According to the authors Austrian investing and value investing are relatively parallel when it comes to stocks but the former puts more emphasis on macroeconomic factors.
I have a few objections to the book. They shouldn’t be seen as objections to Austrian economics in general which I hold in high esteem. Some of the earlier chapters are painfully idolizing when describing the founding fathers of Austrian economics. Yes, they were groundbreaking and genius thinkers and stand for a sane view of economics in today’s perverted monetary environment but they were hardly semi-gods.
Further, I find it hard to understand the target audience for the book. A private investor could appreciate the asset allocation advice but does he really want to read 250 pages of political philosophy first? Economists could find the philosophical section interesting but for them the investment part feels somewhat too short and simple with a lot of emphasis of explaining the basics of various asset classes and financial products. It is almost as if Austrian School for Investors were two separate books – one long on economic philosophy and one short on asset allocation and investing.
For the reader interested in Austrian economic philosophy this is a good book. As a primer on Austrian investing it could have been better.
This book aims to take the reasoning of giants like Carl Menger, Ludwig von Mises and Friedrich Hayek and makes it applicable for investors. The text is a collective effort by Rahim Taghizadegan an economic philosopher, Ronald Stöferle an investor specialized in precious metals, Mark Valek an investor focused on alternative assets and the independent trader and blogger (acting-man.com) Heinz Blaznik.
About three quarters of the book is a description of the philosophical implications of Austrian economic theory on the governance of economies and financial markets. The authors try to build a philosophical base that will allow the reader to form a point of view of investing that builds on the theories of Mises and the others. The last quarter of the text then discusses how to invest in accordance with such a view.
Similar to many who use Austrian investment principles the authors prefer portfolios with fixed asset allocations that one rebalances to periodically. A long list of investable assets are described and analyzed from an “Austrian view”. Gold is often an important asset for Austrian economic thinkers as they often have a focus on capital preservation and – with a grim view of monetary politics – on inflation protection. However, with the view that the economy is too complex to predict with precision, the portfolio allocation should preferably be able to cope with any type of economic environment. Here the authors present Harry Brownes “permanent portfolio” from the 1970s that contains one quarter each of gold, cash, bonds and stocks.
With an economic theory that builds on investment in productive capital through a capital cycle it should surprise few that, with regards to stocks, long-term investments in companies that earn a high return on invested capital is advocated. Valuation measures that relate the market price to the replacement value of companies’ productive capital has long been used by Austrian theorists and today’s Tobin’s Q fits well into this category. According to the authors Austrian investing and value investing are relatively parallel when it comes to stocks but the former puts more emphasis on macroeconomic factors.
I have a few objections to the book. They shouldn’t be seen as objections to Austrian economics in general which I hold in high esteem. Some of the earlier chapters are painfully idolizing when describing the founding fathers of Austrian economics. Yes, they were groundbreaking and genius thinkers and stand for a sane view of economics in today’s perverted monetary environment but they were hardly semi-gods.
Further, I find it hard to understand the target audience for the book. A private investor could appreciate the asset allocation advice but does he really want to read 250 pages of political philosophy first? Economists could find the philosophical section interesting but for them the investment part feels somewhat too short and simple with a lot of emphasis of explaining the basics of various asset classes and financial products. It is almost as if Austrian School for Investors were two separate books – one long on economic philosophy and one short on asset allocation and investing.
For the reader interested in Austrian economic philosophy this is a good book. As a primer on Austrian investing it could have been better.
July 10, 2019
Despite the title, the book did not describe well how to apply Austrian Economic principles to investing. It included a large overview of Austrian Economics and a very simple overview of investment instruments, like bonds and mutual funds. You would think that people intrigued about The Austrian School of Economics do not need an explanation on how a bond works! Few gold nuggets in there (pun intended).
April 27, 2020
“Due to the open nature of the future, we cannot deliver unambiguous forecasts. Anyone who is absolutely certain what is going to happen tomorrow is either a fool or a scammer. What we can do, however, is share our personal assessment. This is not the result of calculations based on a model, the secret formula of which is hidden away somewhere by economists, but a subjective consideration of the currently visible patterns, which economic theory allows us to recognize and interpret.”
May 22, 2017
I'm an Austrian. still gave it a mediocre grade.
October 16, 2021
A very useful book to understand the bigger picture (macro economics) of investments and understanding how to invest in different types of environments such as inflation, deflation, and stagflation with historical evidence showing what has been used in the past to preserve wealth over time and slowly build wealth. This books combines both economic theory with some examples of possible investments to hedge and do well under various economic environments. Useful for new and seasoned investors to get both the economic theory and investment advice together to see how they fit and cooperate with each other unlike most news that is hyped up without any substantial backing or explanation for why the investment is a good risk/reward that ends up being FOMO (fear of missing out) such as “buy it now, its at all time highs!”, which to an Austrian investor should give some red flags that it is probably an investment bubble and better to invest in a cheaper asset class.
Here are some quotes to see some of the perspective provided by the book from the summary in the last chapter:
“The theory of the Austrian School helps us to recognize long-term patterns. We can reject numerous portfolios and investment strategies on the basis of economic theory, such as for instance the “extremely conservative” portfolio that is highly vulnerable to a bursting bubble in the bonds. The task of the Austrian school is to point us to additional options- especially those that are not immediately discerned nowadays” (pg. 350).
“The speculator often pays for his good sense of timing by being shaped too strongly by the spirit of the times, while the economist can easily let time pass him by, esconced in his ivory tower. The Austrian School therefore emphasizes the importance of the one actor who is able to combine theory and practice: the visionary entrepreneur. It is also this entrepreneur’s “fault” that the future is neither certain nor destined to be negative. Capable entrepreneurs similar to capable theoreticians are often ahead of their time, they see the world as it should be, not only as it appears to be at the moment, and are taking cautious risks on the basis of critical criteria...For practical entrepreneurs, those who create the world of tomorrow, this tradition can provide a valuable way of setting things straight, and a necessary deliverance from deception. Not because it is “Austrian”, but because economical thought has survived under this label throughout the turmoil of history, thought that has withstood the madness of the 20th century” (pg. 351).
“Mistakes have been and are committed in the tradition of the Austrian School as well. It is not even a uniform and closed tradition. The old Viennese economists and their successors have no secret knowledge, their methods are not the only correct ones and reading them will not straighten out all of today’s problems overnight. Nevertheless, the best advice one can give someone today who is concerned about his savings is: take your eyes off the news ticker and direct them towards the books of this “Austrian” tradition - even if that is likely to initially increase your worries” (pg. 351).
Here are some quotes to see some of the perspective provided by the book from the summary in the last chapter:
“The theory of the Austrian School helps us to recognize long-term patterns. We can reject numerous portfolios and investment strategies on the basis of economic theory, such as for instance the “extremely conservative” portfolio that is highly vulnerable to a bursting bubble in the bonds. The task of the Austrian school is to point us to additional options- especially those that are not immediately discerned nowadays” (pg. 350).
“The speculator often pays for his good sense of timing by being shaped too strongly by the spirit of the times, while the economist can easily let time pass him by, esconced in his ivory tower. The Austrian School therefore emphasizes the importance of the one actor who is able to combine theory and practice: the visionary entrepreneur. It is also this entrepreneur’s “fault” that the future is neither certain nor destined to be negative. Capable entrepreneurs similar to capable theoreticians are often ahead of their time, they see the world as it should be, not only as it appears to be at the moment, and are taking cautious risks on the basis of critical criteria...For practical entrepreneurs, those who create the world of tomorrow, this tradition can provide a valuable way of setting things straight, and a necessary deliverance from deception. Not because it is “Austrian”, but because economical thought has survived under this label throughout the turmoil of history, thought that has withstood the madness of the 20th century” (pg. 351).
“Mistakes have been and are committed in the tradition of the Austrian School as well. It is not even a uniform and closed tradition. The old Viennese economists and their successors have no secret knowledge, their methods are not the only correct ones and reading them will not straighten out all of today’s problems overnight. Nevertheless, the best advice one can give someone today who is concerned about his savings is: take your eyes off the news ticker and direct them towards the books of this “Austrian” tradition - even if that is likely to initially increase your worries” (pg. 351).
June 2, 2019
Austrian business cycle theory in brief together with many illustrations from history and current practice, together with tips what indicators and metrics to monitor. Rather for advanced readers (at least basics in Austrian economics) and investors who like Benjamin Graham (investing before speculating).
January 4, 2016
Will be writing a review and blogging through the contents throughout the coming weeks.
Displaying 1 - 9 of 9 reviews