Hedge hunters

It took me several weeks finishing reading “Hedge hunters” by Katherine Burton (Bloomberg). The book was written in 2007 and updated in 2009 after the crisis. It’s a hedge fund version of the “market wizard” series. I bought the book primarily because Andrew Lo recommended it on the cover page. Some well known managers, such as Robertson of the Tiger fund, are covered in the book. It should be an easy read, but somehow I found it very painful to read. The book is organized by manager with each manager being covered in a chapter. Within each chapter, the story was not organized by time. As a result, somehow it feels not smooth. The lessons given by the hedge fund managers interviewed by the author are mostly generic and of hindsight nature. For instance, following a bad investment, the manager would typically conclude that he should have entered the position a little longer etc. This is especially obvious after the crisis. Overall, the book is not informative.

“No one would listen”

I read “No one would listen” by Harry Markopolos over the Memorial day weekend. Markopolos is a Greek name and the author was the whistleblower for the Madoff scandal. Several thoughts on the book. First, it’s unnecessarily long. It could be explained in 20 pages, but the author drags on and on and finally it’s a 300-page book. The basic story is very simple and there is lots of repetition throughout the book (even some exact sentences show up several times). Second, the author keeps calling himself “quants” while in fact, he’s not really a quant. The option product he designed for his employer is just laughable. Third, he’s way too negative on the SEC, who has to deal with lots of tips and should rightfully be worried about false positives. But he definitely deserved lots of credit in this case and I learned something reading the book.

“The Accidental Investment Banker”

Another interesting read on the investment banking industry. The author (Jonathan Knee) was a MD in the media group of MS. Before that he worked for GS. The book is somewhat harder to read than many other books because of its writing style and its content. The author shows and explains a shift from the traditional relationship banking (represented by Sidney Weinberg of GS) to today’s transaction-based banking. Also over time the IBD is becoming marginalized in large investment banking houses, as principal business began to dominate the agency business in terms of profitability. There are also some anecdotes such as how Paulson, together with Thornton and Thain, got rid of Corzine and then Thornton and Thain themselves. The author was a math undergrad  major with a JD from Yale and an MBA from Stanford, which might explain the writing style and his thoughts on the industry.

Reading

Just finished “Too Big To Fail”. This is a very good book that covers an amazingly amount of details  of the events around the 2008 financial crisis. It covers Bear (briefly), Lehman, MS, and AIG with painstaking details. It’s actually very easy to get lost in the book simply because they are too many characters and their relationships with each other are like a spiderweb. Imagine a banker who was advising Wachovia in a deal but became interested in the deal itself or was forced by the government to consider the deal itself. Hence the switch in role from an adviser to a bidder in a couple of hours.  Much of the focus is of course on Lehman and its CEO Fuld. New facts to me include the stories about MS. In particular, the CEO of CIC, Gao Xiqing, flew to MS headquarter and offered a ridiculous price for a large amount of MS equity. Also funny is that the guy has severe back pain and had to lie down in a conference room to talk with MS people. Excellent book.

新书

Just finished reading “The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It” by Scott Patterson, a WSJ reporter. The book is a fun read and it provides many interesting stories about many quant celebrities, including Thorp, Simons and Asness. It covered nicely the argument made by Mandelbort in the 1960s and covered the basic convertible arb and statistical arb. So overall it’s a nice and quick read. Here are some less positive comments. The author apparently has relatively little training in financial theories or quant trading. For e.g., the value and momentum strategies used by AQR are discussed as if they were some fancy and mysterious strategy. As a result, anything that involves earnings or returns is counted as “quant”. In addition, the book uses many colorful words, which reduce its credibility.

新书

看完了“Street fighter: The last 72 hours of Bear Stearns, the toughest firm on Wall Street”.

The book is a quick read. There is not much new information given that I’ve read so many books on the financial crisis now. It’s written by Kate Kelly, a journalist. It really goes beyond the 72 hours before the firm got purchased by JPM (how could you fill a 200-page book based on 72 hours of events?) Some interesting anecdote: The father of Andrew Metrick (who is at Yale now) is a senior executive at Bears; Hank Paulson is a Christian Scientist and environmentalist; Jamie Dimon knows a lot about the technical details of accounting.

Chicago school of Economics

New Yorker blogger John Cassidy interviewed eight Chicago economists and talked about the efficient market hypothesis and the rational expectation models in light of the financial crisis. Very fun reads.

http://www.newyorker.com/online/blogs/johncassidy/2010/01/interview-with-richard-thaler.html#entry-more

In particular, the following conversations are very interesting:

Cassidy: I spoke to Cochrane. He said the problem with behavioral economics is it is too flexible—you can use it to explain anything. He also pointed out that Robert Shiller has been calling for economics to incorporate psychological insights for thirty years, but little progress has been made.

[In answering this question, Thaler brought up the Internet stock bubble, during which shares in Palm, the handheld computing companies, were worth more than the entire market capitalization of Palm’s parent company, 3Com.]

Thaler: [Cochrane] has a model explaining why, during the Internet bubble, the prices of Palm and 3Com were rational. Rational models are one hundred per cent flexible. If you allow time-varying discount rates, there is no discipline whatsoever. If you look at what happened to tech stocks and then to real estate, and you say maybe there wasn’t a bubble—where is the discipline in that?

I think it’s fair to say that behavioral economics hasn’t solved everything. That is true. But to say Shiller and I have been doing it for thirty years—there was just me and him. Now we have some young recruits. We are not outmanned a thousand to one. But there is work to do.

新书

看完了Henry Kaufman写的”The road to financial reformation: warnings, consequences, reforms”

新书

读完了Gasparino写的”The sellout: how three decades of Wall Street greed and government mismanagement destroyed the global financial system.”

This is one of the better books that I’ve read so far on the financial crisis. Compared with the other two books on Bear Sterns and Lehman Brothers, this book covers a much broader range of firms, starting with Salomon Brothers in the 80s and digging into firms such as Merrill, Citi, JPM, Morgan Stanley, and GS with more depth. Much of the book is based on anecdotes or conversations with the executives of these firms. It does feel quite repetitive from time to time when reading the book. The main thesis is that the excess leverage taken by the Wall Street firms  leads to their eventual collapse. Inevitably, a book such as this tends to be oversimplified in the process of searching for the truth for a phenomenon as complicated as a financial bubble and crisis. Overall, an interesting read; even though it does not necessarily give the readers more insights into the financial crisis, it provides many fun stories about the firms in the last 30 years.

新书

看完了Alan Murray写的”Revolt in the Boardroom.”

新书

看完了巴菲特的半官方传记”雪球“。

正在看Michael Lewis写（编辑）的“Panic: the story of modern financial insanity”.

新书

看完了Larry McDonald写的“A colossal failure of common sense”， 讲述莱曼兄弟公司倒壁前的故事。

新看完的书

Steve Levitt的Superfreaknomics 和 Charles Ellis的“The Partnership: the making of Goldman Sachs”.

新书

新买了两本书：“A colossal failure of common sense: The insider story of the collapse of Lehman Brothers” 和 “Catching the wolf of the Wall Street （by Jordan Belfort)”. 两本书的风格相差很远。Belfort的风格跟Michael Lewis有点相似，但是更加夸张地幽默。

“成吉思汗和现代世界的形成”

很容易忘记现在蜗居在内蒙和外蒙地区的蒙古人曾经如此具有统治力。看“成吉思汗和现代社会的形成”让自己重温那段时光的故事。这本书当然只是给我等业余人士饭后读的。几个小事实:

1.蒙古人第一次西进到德国，发现西欧与中东和亚洲相比太穷，没有掠夺价值，于是往东撤回。几十年后，蒙古人再往西进，抵达大马士革就停止了。

2.巴格达被蒙古人攻下并遭血洗。这个城市再下一次被非穆斯林占领是2003年美国入侵时。

3.欧洲人一度认为蒙古人是犹太人变来的，为以后欧洲排犹埋下种子。

4.十字军东征并没有攻克阿拉伯地区，在蒙古人入侵阿拉伯地区时，跟着蒙古军队趁火打劫。

5.蒙古帝国在宗教上异常开明，曾经让穆斯林，基督徒，和佛教徒公开辩论各自教义的合理性。

6.蒙古人以肉食为主。当他们南下入侵金朝控制的华北地区时，惊讶地发现当地百姓以植食（小麦）为主，于是在心里上就把这些人当作牛羊对待。

7.忽必烈军事才能平平，但是是一个非常出色的政治家。攻下南宋，更多的是依靠“政策”。事实上，普通汉人对蒙古人比对南宋政府更有认同感。

8.忽必烈定都大都（今北京），修建城中皇城，就是今天的紫禁城。但是在皇城里，蒙古人依然睡在蒙古包里。

“当我谈论跑步时我都谈论什么”

看完了村上春树的“当我谈论跑步时我都谈论什么”。对这本书的感觉随着时间的变化是一条U型曲线。刚拿到书的时候，觉得眼前一亮，与以前看的关于跑步的书感觉很不一样。慢慢看下去，逐渐觉得文笔拖沓，无病呻吟。但是最后的几章，又变得有意思起来。跑完Crim之后，我对书中描写的跑马拉松和三项全能比赛的感觉变得更有共鸣。看完这本书坚定了我2年内参加三项全能比赛的决心。当然，首先要解决游泳这一关。

正在看的书

目前正在看的书有三本。

Jack Weatherford (Author)

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第一本是 Jack Weatherford的“Genghis Khan and the Making of the Modern World” （成吉思汗和现代世界的形成）。Weatherford是一位人类社会学家，写过不少很畅销书。这本书一反以前关于成吉思汗的书主要强调蒙古人在战场上的创新和力量，同样强调了蒙古人，尤其是成吉思汗, 对社会和经济型态的影响。看来，”只识弯弓射大雕“远远不能总结成吉思汗的一生。有意思的是，这本书居然是纽约时报的最畅销书之一。

第二本是Peter Robinson的“Snapshots from Hell”。作者说这本书的灵感来源于另一经典“One L”。

第三本是最近收到的一个礼物。很有意思的一本书：Haruki Murakami （春上村树）的“What I Talk About When I Talk About Running” （当我谈论跑步时我都谈论什么）。书的标题很特别，我看了两遍才看懂, 跟另一本书的标题如出一辙(“What We Talk About When We Talk About Love”)。本书几乎可以看作是作者的一本自传。春上村树是个长跑狂热分子。每年一次马拉松，并参加过十二小时一百公里的超级马拉松。刚刚翻了两页，发现英文译本非常令人爽心悦目，翻译得很到位。书的前言有一句令人印象深刻，深有哲理的话：Pain is inevitable. Suffering is optional.

最近看的书

最近终于看了一遍Liar’s Poker这本经典。Lewis非常幽默，书中人物形象很鲜明，作者对一些金融概念的解释也比较到位。

上星期去纽约出差，在机场买了一本“House of Cards“。这本书详细地描写了Bear Stearns的历史和最后被JPM收购的过程。Cohan的风格和Lewis差别很大。书中大段的人物原话。这一方面是因为Cohan并没有在BS工作过。另一方面因为Cohan非常喜欢翔实的采访资料。