Reaping the fruits of globalisation

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: international (9%) domestic (5%) and inflation-protected bonds (5%).

As for the remaining 31% of your assets, he recommends that they be divided among commodities, real estate, infrastructure — water and road authorities, for instance — and special opportunities, which range from carbon credits to investment in distressed debt. These recommendations flow from El-Erian’s forecast for the economic landscape’s evolution in coming years.

For example, he expects “a reduction in global trade and payment imbalances, the return of more pronounced inflationary pressures and a more diversified allocation of investible funds around the world.” But while his recommendations for where to put your money are clear, it can be hard to follow the logic that led to them. El-Erian spent 15 years at the International Monetary Fund, where, among other things, he did policy and strategy work. The book seems to assume that readers will have considerable understanding of global finance.

And the writing style does not help. On more than one occasion, he lapses into Alan Greenspanesque circumlocutions. Here, from the chapter on investing, the most accessible in the book, is a sentence that is more representative than a reader might like: “The ideal situation is to come up with a small set (three to five) of distinct (and ideally orthogonal) risk factors that command a risk premium.”

Later on in that same paragraph the reader is confronted with this: “The end product is a more robust and time-consistent combination of asset classes that map clearly to the underlying factors.”

As for the policy recommendations, it is hard to quibble with calls for greater transparency, a need for officials to be willing to “seek new sources of policy-related information” and comments like this: “governments will need to develop a better understanding of the new realities of the financial system and respond accordingly.” But respond how? The book doesn’t say. And as for what, if anything, policy makers should do about income inequalities, his answer is less complete than you might like. He says that “the vast majority of people are better off in the world with the important qualification that, within most countries those that are already well-off are gaining at a better rate than the poor.”