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Trading Book Reviews

Book Review: On the Brink by Hank Paulson

[easyazon-link asin=”0446561932″][/easyazon-link]I was asked earlier in the academic term if I would act as a 3rd-party reviewer of an independent study project being done by a student at the University of Rhode Island. The project has as its core former US Treasury Secretary Hank Paulson’s book [easyazon-link asin=”0446561932″]On the Brink[/easyazon-link]. Figuring that I probably should know what Mr. Paulson said prior to making any comment or reaction to the student’s project, I’ve gone ahead and given the book a read. Since it’s something very market-related, I figure it might be of interest to readers of this blog, so here are my thoughts.

[easyazon-link asin=”0446561932″]On the Brink[/easyazon-link] is basically a diary of Paulson’s time as Treasury Secretary, which ran from 2006 to 2008. That, of course, encompasses the most dramatic period of the financial crisis, running from when things started coming unglued in 2007 to the point at the end of the Bush administration when the financial markets were just about finally stabilized. The book details the sequence of events which covers the Bear Stearns take-over, the Lehman collapse, the receivership of Fannie Mae and Freddie Mac, the AIG bailout, TARP and just about everything in between.

This is NOT a history of the financial crisis. Paulson doesn’t really get into the “How did we get here?” in any dedicated or focused fashion (for something more along those lines you may want to read Financial Shock by Mark Zandi). This book is Paulson telling the story of how Treasury, the Fed, the FDIC, the SEC, Congress, the President and others worked together to try to resolve the problems facing the financial markets during the time frame in question from his perspective. As such, one may be inclined to think of it as an individual trying to establish his legacy. Perhaps it is, but I also found it to be a very honest telling. The book doesn’t shy away from Paulson’s insecurity at different points, or the impact the long hours and intense stress had. I didn’t come away from the book thinking Paulson had portrayed himself as the hero of the tale. If anything, he spends considerable time talking about the tireless work of the numerous people involved.

From a reading perspective, I found the book well-paced and fairly easy to get through in general terms. I think Paulson does a very good job of reflecting the uncertainty and rapid development of events during the time span in question. He also presents an interesting view of some of the major political movers of the time, many of whom are still involved in things today. We in the public don’t often get that sort of thing, as we mostly see the made-for-TV moments of press events and committee testimony.

On the negative side, my guess is that some subjects might trip up the reader who isn’t familiar with the deeper elements of the financial markets. The book could have probably done with explanations at a few points to make things more clear for the lay person – like why short selling was so bad, why AIG was bleeding cash, etc. The lack of such explanations does not detract from the main narrative, but no doubt some readers would find them useful in helping understand why things were the way they were.

Overall, I think [easyazon-link asin=”0446561932″]On the Brink[/easyazon-link] is a very worthwhile read for those interested in understanding how things developed and progressed during the financial crisis.

Make sure to check out all my trading book reviews.

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Trading Book Reviews

Book Review: Popes and Bankers by Jack Cashill

[easyazon-link asin=”1595552731″][/easyazon-link]Here’s a book that really isn’t about trading, but may be of interest to those who like history and/or are interested in how we got to the point we are at today having gone through a nasty financial crisis. Actually, fundamental traders may get some use out of it in terms of learning some things to look for in their analysis. The book is [easyazon-link asin=”1595552731″]Popes and Bankers: A Cultural History of Credit and Debt, from Aristotle to AIG[/easyazon-link] by Jack Cashill. I just finished it, having made it my commute reading over the last couple of weeks.

My impression of this book is that it is a history lesson combined with a morality statement. The author goes back through history to show how we reached the modern view, particularly in the US, toward banking and borrowing, and demonstrate that recent events in the financial markets and economy are most definitely nothing new. Wrapped around the history he seems to be making a statement that we need to return to traditional Christian morality where debt and lending are concerned. I’m not sure if he’s quite advocating a return to the “lending at interest is usury and thus a sin” view of things or a somewhat toned down “neither a borrower nor a lender be” recommendation is unclear. His discussion as to the interpretation of biblical texts by both Jews and Christians over the years doesn’t really come to a conclusion as to where the right point on the spectrum should be. Similarly, his discussion of anti-Semitism over the centuries, generally as related to the usury question, leaves one wondering whether the author himself is expressing a personal anti-Semitic view.

That aside, the author does do a pretty good job of highlighting the array of disparate elements which contributed to the financial crises (and how others like it came about in the past). He demonstrates a decidedly conservative bent in attacking those individuals who took out loans they clearly could not afford and those in the media and elsewhere who see them as victims. At the same time, however, he does not hesitate to highlight the failures in government and the financial sector as well. It is one of the more even-handed discussions of the subject I have come across thus far.

For me the bottom line with this book is that it’s a good history lesson, with a moral view intertwined that’s never really clearly defined.

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Trading Book Reviews

Book Review: The Power of Gold

[easyazon-link asin=”0471003786″]The Power of Gold[/easyazon-link]I just completed a book entitled [easyazon-link asin=”0471003786″]The Power of Gold: The History of an Obsession[/easyazon-link]. It was lent to me by a colleague at work. He and I talk monetary policy on a fairly regular basis, so he thought I’d like to give this book a read.

In brief, this is a book which tracks the use of gold from a monetary perspective through most of human civilization. If you’re at all interested in history, then this book is definitely right up your alley. It takes a look at world events from a perspective that you won’t find in many other sources. Primarily that means focusing on how gold was (or was not) the main focal point of money and trade. I personally didn’t care for the author’s occasional forays into discussions of the decor of various palaces and whatnot, but they weren’t too distracting. Beyond that, it was a very well written book, and a pleasant read.

The really interesting stuff from a trading perspective, of course, is the latter part of the book where it gets to modern times. I personally found the whole discussion of the 20th century, which was probably the last third or more of the book, to be the most meaningful. The author really presents an excellent discussion of various perspectives and efforts related to different countries being on or off the gold standard and how that all played out in both domestic and global economies. Even the technicians out there could find this a really interesting book, if not really something which will contribute much to their trading strategies.

One of the things which has come up in modern political, social, and economic discussions is the idea of going back on the gold standard. There have been some very prominent proponents. If you want to get an idea of what that might look like, how that might play out in the global trade and economic modern environment,  you’ll definitely want to give [easyazon-link asin=”0471003786″]The Power of Gold[/easyazon-link] a read. It will really have you thinking about the complexity of it all, and the implications.

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Trader Resources

Trader Wish List – Twelfth Installment

Well, this is it. The final installment of my Trader’s Wish List is here to wrap up the series.

This is a bit of an eclectic collection. I’ve read all of these books at one point or another in my personal trading development. Each has contributed in some way to my development as a trader and market analyst, either that or I’ve just simply enjoyed reading them.

Well, with that large bunch, I think I’ve just about covered it all. I hope you have enjoyed this collection of suggestions and recommendations. I know it’s been fun putting them together for you. 🙂

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Trader Resources

Trader’s Wish List – Fifth Installment

This today’s installment of my wish list recommendations for traders.

The featured wish list items for today focus on some of the darker stories of trading and the financial markets. The first on that list is the story of the notorious Nick Leeson as he outlined in his autobiography Rogue Trader. Leeson was responsible for a trading fraud so enormous it brought down one of banking’s oldest and most prestigious institutions, Barrings Bank. The book was made in to a movie starring Ewan McGregor. Personally, I found the book more worthwhile than the movie, but the latter isn’t bad.

The second book on the list of those featuring Wall Street’s notorious is The Predators’ Ball. This is the story of Michael Milken and the activities of Drexel Burnham Lambert during the 1980s. The tale of Milken and the junk bond market of the time can be viewed in parallel to the drama surrounding Enron and other episodes of corporate fraud seen around the market of the early 2000s. Read the book and judge for yourself whether you think Milken actually did anything wrong, though.

The third book I want to mention is Black & White on Wall Street. During the early 1990s, Joseph Jett was at the center of a huge scandal during which he was accused of creating $350 million in fake trading profits for his employer Kidder Peabody, and earning $8 million in bonuses for himself. This book is Jett’s story from his perspective. It may or may not convince you of his guilt, but it definitely provides a very interesting view of the markets as they can be seen from the inside of bond trading desks.

Sticking to the 1990s, the fourth of the primary books is When Genius Failed. In the latter part of the decade, a massive hedged fund known as Long-Term Capital Management was the biggest name in the markets. It had holdings reported to be $140 billion dollars, with massive positions in a wide array of markets. Those running the fund were among Wall Street’s best and brightest and they were producing amazing results – until it all fell apart incredibly fast. It was such a potentially devastating scenario for the whole financial system that the the Federal Reserve had to step in to avoid complete chaos.

These stories involve traders and firms with huge positions. That doesn’t seem like it would really mean much to the individual trader. The fact of the matter, though, is that they are still people. They make the same kind of mistakes that small traders make. Even putting that aside, the look in to the inner workings of the markets that these books provide are very worthwhile by themselves.