Books in the Queue
By Barry Ritholtz - April 17th, 2010, 5:15PM
Not too long ago, I finished Justin Fox’s Myth of the Rational Market. I’m about halfway through Scott Patterson’s The Quants.
I have the following lined up in my queue:
• Roger Lowenstein’s The End of Wall Street
• Steven D. Levitt and Stephen J. Dubner’s Super Freakonomics
• Michael Lewis’ The Big Short
• Yve Smith’s Econned
• Liaquat Ahamed’s Lords of Finance
I am interested on any feedback you might have regarding any or all of these . . .
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April 17th, 2010 at 5:39 pm
The Big Short was fun, you’ll enjoy it.
April 17th, 2010 at 5:55 pm
I found Econned very informative. Good on the historical origins; good on derivatives; knows the players; has a chapter titled Looting which is on target; and her heart is in the book. I read it a second time to take it all in.
April 17th, 2010 at 6:19 pm
I’m almost finished with The Quants and I think it’s great. It should be required reading for anyone who really wants to know what a rigged game the markets had become and probably still are. I know some people found it a little sensationalistic but I think it works considering some of the dry subject matter.
After reading this book and in light of the GS news… I don’t see how GS or any of the big banks have a leg to stand on. They ALL knew what a potential disaster was on the horizon but kept cranking out that toxic shit anyway. Sadly it’s also a reminder that virtually none of the trades I see scroll down my screen everyday are being initiated by humans.
April 17th, 2010 at 6:21 pm
I am not that far into Lords of Finance but it is very interesting. It seems that with the history he discusses about posturing in Europe (financially and politically) prior to WWI that it is not a far stretch to predict another war in Europe within 20 years.
April 17th, 2010 at 6:21 pm
I didn’t like SuperFreakonomics too much, which was surprising because I loved Freakonomics.
April 17th, 2010 at 6:30 pm
Lords of Finance was good, although YMMV. I like history books that talk about the characters in detail, since I think that the characters have a big effect on history, although not always in the way they intended. It also makes for a better read. Thought Once in Golconda was good in that way.
April 17th, 2010 at 6:43 pm
Mike in Nola:
I agree re: Lords of Finance. You never hear about any of the old central bankers and how they might, or might not, stack up to their predecessors.
April 17th, 2010 at 7:54 pm
just finished The Big Short..agreed its easy reading and fun. I read Yves issues with the book and agree on the ‘who the heck is taking this other side of the trade’ thing as Lewis didnt get into Magnetar’s role + that Lewis claims nobody really understood what was happening. But have to disagree on her take that the shorts are to blame for taking the problems to a level that should not have happened. It wasnt the shorts fault! The shorts simply took advantage of market inefficiencies at the time and took a side of a trade that many flat out disagreed with OR thought would not see Armageddon for a looooong time! There are two sides to every trade, and the shorts had to buy the CDS and shorts the CDOs any way they can…the long side thought it was business as usual and if these guys didnt short them, someone else would have.
But to hear Yves tell her side, “He failed to clue in his readers that the actions of his chosen heroes drove the demand for the worst sort of mortgages and turned what would otherwise have been a “contained” problem into a systemic crisis. ”
I didnt expect that from her. That is the regulators fault and the systems fault both in incentive structure for traders and how the ratings systems worked to sell these trash assets to institutional clients. Those are structural issues that allowed the so called “Molotov cocktails” that Yves discusses to be thrown in the first place; and of course, the markets found the holes and exploited them against a system that worked for a decade
April 17th, 2010 at 8:01 pm
The Big Short was like reading the SEC suit before the SEC actually sued.
April 17th, 2010 at 8:13 pm
big short was a “can’t put it down” piece. read it in the gym, in bed, etc. the paulson book was somewhat interesting, but lewis does a terrific job of exploring the cdo/cds stuff from the “little guy” perspective. lot’s of detail also. i’ve been a markit.com follower for a few years and it was telling the story long before the bank/broker nitwits tuned in.
April 17th, 2010 at 8:46 pm
I would agree re: Big Short and Zuckerman’s book (presumably clipb’s reference to the “paulson book”?)… they cover a lot of the same territory, I liked both, but I think Lewis is better. I’d read Lewis then Lowenstein, in that order, because of both chronology of actual events and Lewis is easier to get through. I
What I really liked about The Big Short was that Lewis told the story through the eyes of some pretty interesting people (Eisman, Burry, etc.), which adds a human element to an otherwise dry topic. The End of Wall Street was really well written, researched, and structured, but definitely dry relative to The Big Short (I’d have enjoyed it a bit more if he used Robert L. Rodriguez of FPA a bit more as a device).
April 17th, 2010 at 8:46 pm
I’m half way through Lowenstein’s book, which seems to repeat a lot of what I already know, having read TBTF, Bailout Nation, and The Big Short. I loved The Big Short. I feel like I know enough about this subject already, especially since I read you. In fact the most amusing thing I read today was Dylan Ratigan’s letter to the Goldman PR guy.
All the Wall Street stuff makes me vomit, but since money controls everything and every Congressperson is bought, I doubt we will get meaningful reform. Instead, we will get something arcane and complex that everyone can work around to do business as usual.
April 17th, 2010 at 8:48 pm
Oh, I forgot that I just read 13 Bankers, too. It was okay, but again, these are all repetitive.
April 17th, 2010 at 9:50 pm
Smith is almost as good as Ritholtz. Lords of Finance is as well crafted as anything in the stack. Suspect you can skip Lewis as an entertaining lightweight. Superfreakonomics you probably don’t need except for cocktail party chatter. 13 Bankers is good for the “banana republic” angle, though duplicates earlier books. For a different spin, do Gary Gorton, Slapped by the Invisible Hand, silly title, serious book. Do not confuse with MP3 song file of the same name. And if you haven’t read it before, Alyssa Katz, Our Lot, on the housing market and how it all began.
April 17th, 2010 at 11:58 pm
Have read both Econned and Lords of Finance (also Myth of Rational Market which should be required reading in biz school). The Smith is incredibly informative, albeit one wishes she was either a more cogent writer, or had a more forceful editor.
The Ahamed is the best modern history I have read in several years and hands down one of the best histories I have ever read. Perhaps of the stature of Paul Kennedy’s Rise and Fall of the Great Powers, which sits at the top of my list. One note: Ahamed clearly has a Keynesian-bent. I am not enough of a scholar to know whether this disposition materially distorted his narrative nor have I read any criticisms on this point.
April 18th, 2010 at 12:08 am
All of those are fine books. At this point, the book of the year looks to be S. Drobny’s latest – The Invisible Hands: Hedge Funds Off the Record …
The Invisible Hands: Hedge Funds Off the Record – Rethinking Real Money
~ Steven Drobny
April 18th, 2010 at 12:11 am
I agree with a few posters above, The Big Short is like a John Grisham book- any easy read, but its primarily entertainment. The Lords of Finance was great; the world would be better off if fewer people spent time tweaking analogs and instead read history like this…
a little off the subject, but I was wondering if Barry, or anyone else here has read Hayek’s ” The Counter-Revolution of Science“; i’m not too much of an Austrian- leaning guy really- but I think the book is brilliant so far (about halfway through) It’s not about Austrian economics per se, but rather about the bastardization of economics by logical positivists like the Chicago School, Greenspan, etc. who share many of Hayek’s views, but they differ on methodology.
Modern economics is basically synonymous with data-worship–a measured guy like Ritholtz is even a data-worshiper now- this means all these econ policy makers are basically viewing the world through a rear-view mirror- constantly. Greenspan didn’t see the credit bubble coming because in 2004 it wasn’t yet reflected in the data; in April 2010 people are pointing to improving economic data being a harbinger of the end ofthe recession- There is no context or reasoning attached, everything is about data-points; disgusting. History will have its way with neoclassical economics in time, like it does all failed ideologies…the only question is how much damage will be done to our society and markets in the process.
April 18th, 2010 at 12:14 am
I think Lowenstein is one of the best financial writers of our day; I’ve read 4 of his books and The End of Wall Street is excellent. Yves Smith is wicked smart and Econned is also excellent. Michael Lewis’ book is very entertaining and, at times, illuminating. I still highly recommend Joe Stiglitz’ Freefall, but perhaps you’ve already read this.
April 18th, 2010 at 12:59 am
I haven’t read it, but Joe Romm over at ClimateProgress rips the book and the authors up-side the wall:
http://climateprogress.org/2009/11/16/superfreakonomics-review-prostitutes-drunk-walking/
http://climateprogress.org/2009/11/05/superfreaknomics-errors-levitt/
You might want to take a pass on this one.
April 18th, 2010 at 1:34 am
terryh-you can’t be serious in thinking that is an honest rebuke of sfonomics. incentives don’t play a role in people’s actions? really.
April 18th, 2010 at 2:10 am
I’m 2/3 of the way through Paulson’s “On The Brink“. It’s definately revealing but not in the way the former Mr. Secretary thinks. It’s quite the howler.
Yves Smith’s book is up next.
April 18th, 2010 at 3:44 am
Lords of finance was excellent. Not merely for the personalities but also a good economic history. Together with wages of destruction By Adam tooze these books give a good narrative of the issues of credit growth, fixed exchange rates and foreign currency debt.
April 18th, 2010 at 3:52 am
“Lords of Finance” is an absolute must read. The detail based on the contemporaneous writings of the four central bankers (and others) is extraordinary. One area where that kind of detail is sadly lacking (not Ahamet’s fault but due to a thin historical record) is the motivations of Havenstein, president of the Reichsbank during the Weimar hyperinflation. Very deserving of the Pulitzer.
Thanks to martin66 for the recommendation for “Rise and Fall”. Another book you might like is David Hackett Fischer’s “The Great Wave” which was undeservedly ignored (not due to a lack of scholarship however as he won a Pulitzer for his next book on Washington’s Crossing).
April 18th, 2010 at 6:24 am
OT, Phil about flimsiness of rally, BR is mentioned in article too!
http://www.philstockworld.com/2010/04/16/high-frequency-friday-the-wsj-finally-catches-on/
April 18th, 2010 at 6:46 am
Barry, you need a life at weekends. Get out to the beach and read:
P.J.O’Rourke: “Driving like crazy” (Thirty years of vehicular Hell-bending celebrating America the way it’s supposed to be – with an oil well in every backyard, a Cadillac Espcalade in every carport, and the Chairman of the Federal Reserve mowing our lawn”
April 18th, 2010 at 9:58 am
“Freakonomics” was a fun read, and informative to boot.
“Super Freakonomics” is a typical sequel … long on promise, short on anything else.
Don’t waste your time.
April 18th, 2010 at 10:36 am
SuperFreak’s Climate Chapter looks like a Blatant SELL to the Oil Industry.
Bringing into question All the other chapters.
Whenever you find Murdoch somewhere in the info stream, you can start doubting the veracity of the information.
April 18th, 2010 at 2:08 pm
Lords of Finance was a lovely post-grad seminar into the disastrous decisions of the post-World War I era: the reparations and the reestablishment of the gold standard. With it, I would read John Cassidy’s How Markets Fail (paying close attention to his discussion of Minsky) and re-read Galbraith’s The Great Crash. I have only one regret with Niall Ferguson’s The Ascent of Money. It was published too soon, and so was the paperback version.
April 18th, 2010 at 4:02 pm
In Econned, Smith did a superb job critiquing Economics and the failure of the profession at large to seek truth and chose to recycle irrelevant models ad nauseam. Her assessment of the causes of the financial crisis are detailed and extensive. I agree that it could have been better edited but it is thorough, complete and well thought out. And if that isn’t enough, the title is fabulous.
April 18th, 2010 at 10:21 pm
agreed – Super Freak is a dud sequel
April 18th, 2010 at 11:24 pm
I love the hour long interview Bill Moyer just did with the authors of “13 Bankers”. It should be repeating on PBS stations for the next few days, very informative! Even after reading much of Barry’s stuff, this interview was still riveting. A large part of the interview was about how big banking money is influencing and trying to stop the current financial reform legislation, and how the financial system really should be reformed.
I also like the book review Joseph Stiglitz’s did on Robert Skidelsky’s, “Keynes: The Return of the Master” in the London Review of Books. http://www.lrb.co.uk/v32/n08/joseph-stiglitz/the-non-existent-hand
Don’t know about the book though. I gotta pick up a copy of Stiglitz’s, “Freefall: Free Markets and the Sinking of the Global Economy.”
April 19th, 2010 at 4:57 am
A Different Book:
“Outsourcing America, published by the American Management Association. The authors, two brothers, Ron and Anil Hira, are experts on the subject. One is a professor at the Rochester Institute of Technology, and the other is professor at Simon Fraser University.”
….
“…The loss of these jobs “is fool’s gold for companies.” Corporate America’s short-term mentality, stemming from bonuses tied to quarterly results, is causing US companies to lose not only their best employees-their human capital-but also the consumers who buy their products. Employees displaced by foreigners and left unemployed or in lower paid work have a reduced presence in the consumer market. They provide fewer retirement savings for new investment.
Nothink economists assume that new, better jobs are on the way for displaced Americans, but no economists can identify these jobs. The authors point out that “the track record for the re-employment of displaced US workers is abysmal: “The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts. Many former manufacturing workers who were displaced a decade ago because of manufacturing that went offshore took training courses and found jobs in the information technology sector. They are now facing the unenviable situation of having their second career disappear overseas.”
American economists are so inattentive to outsourcing’s perils that they fail to realize that the same incentive that leads to the outsourcing of one tradable good or service holds for all tradable goods and services. In the 21st century the US economy has only been able to create jobs in nontradable domestic services-the hallmark of a third world labor force.
Prior to the advent of offshore outsourcing, US employees were shielded against low wage foreign labor. Americans worked with more capital and better technology, and their higher productivity protected their higher wages.
Outsourcing forces Americans to “compete head-to-head with foreign workers” by “undermining US workers’ primary competitive advantage over foreign workers: their physical presence in the US” and “by providing those overseas workers with the same technologies.”…”
http://www.informationclearinghouse.info/article25250.htm
April 19th, 2010 at 1:09 pm
The Big Short is entertaining but lacks any analytical rigor and has limited if any explanatory power concerning the factors that led to the financial crisis. Yves Smith’s Econned is a near tour de force, however, in explaining how a world intellectually hijacked by an ideological belief in “free markets” and the benefits of a perfectly competitive economy, something which has never existed and actually can’t exist, leads inexorably to what you, Barry, have termed regulatory malfeasance. What is really extraordinary about the book is how well she describes to relative lay persons such thing as an Arrow-Debreu economy, why that matters and why it leads economists down a path of favoring mathematical tractability over realistic models of economic and financial market behavior.
For example she does a better job of explaining to a lay person what the assumption set is that is required for an Arrow-Debreu economy and how that is the only time a mathematical proof has been provided that perfectly competitive markets can in fact lead to optimal social welfare. She also explains why that assumption set cannot hold in the real world and leaps immediately into the Theorem of the Second Best which shows why trying to get as “close as possible” to the competitive ideal is almost certainly sub-optimal. In this regard she does a better job that Stiglitz does in Freefall, which is interesting because Stiglitz basically won his Nobel Prize for explaining how informational asymmetries blows up an Arrow-Debreu construct. My only comment is that as good as she is, she occasionally has a few oxen a long the way that she needs to gore that may not provide the only sensible solutions to the problems she outlines. And finally, while I think she wrote a fairly accessible book, I am pretty well trained in mathematical economics and so I may not be the best judge of how easy it is for a lay person to penetrate her arguments. But my take is that it was a great undertaking and on balance it should be sufficiently accessible to make one realize how vacuous it is when people like say, Larry Kudlow, only grade public policy proposals on whether or not they are “free market” oriented. Highly recommended. Read Econned first.
April 19th, 2010 at 3:33 pm
@ Mark E HofferM said
“US workers’ primary competitive advantage over foreign workers: their physical presence in the US”
Now sit down Mark, are you ready for this one?
“RALEIGH, N.C. – Furniture companies are raising prices despite fears that higher costs could kill off a rebound just as recession-shocked shoppers appear willing to spend.
Furniture makers are blaming higher labor and material costs for producing in Asia as well as trans-Pacific shipping fees. Industry insiders expect more news of price hikes after buyers and producers gather in High Point for the world’s biggest furniture trade fair that began Saturday.”
(http://www.msnbc.msn.com/id/36601907/ns/business-retail/)
I read an article that said if China lets the Yuan go up that will not necessarily be good for US manufacturers. A furniture maker in China who makes “too much” will see his job go to Thailand not
California.
April 19th, 2010 at 5:08 pm
Big Short – Good storytelling, good chapters on Eisman and the California garage team, otherwise a re-hash of Greatest Trade Ever
Quants – Still leaves you wondering – who was the overleveraged firm that tipped the markets into chaos?
Lowenstein – Haven’t read this yet but next on my list; because of “when genius failed” i have high expectations for him to deliver a lot of thoughtful insights