Books 01 (May 08 - Oct 08)

Re: Books

Postby millionairemind » Sat Oct 18, 2008 7:36 pm

Read the book by Soros - The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.

It is a short book of around 180pages. Gives me the feeling that it is trying to pick up where The Alchemy of Finance left off.

I tend to follow and agree with Soros' arguments on reflexivity of the markets and how the markets actually influences the real economy and the real economy provides another negative feedback loop to the market which causes a massive downward spiral.

The same also goes for the reversed +ve feedback loop.

Soros have been proven over and over again (just like WB) that markets do not tend towards equilibrium and they tend to be self-destructive if there is no state intervention. All the crap about EMT and random walk can be thrown out the window :lol:

Here is a good read on Reflexivity if you are interested.

http://www.geocities.com/ecocorner/intelarea/gs1.html

Soros was betting on India and China in January and I think he was also hurt by the selldown. He wrongly predicted that China was in the early part of the bubble.

Of course being a speculator, you can be sure that he definitely has cut out and moved on. The book was published in March and since then, market has take a frightening turn for the worse. :?

All in all, a good read. I also recommend The Alchemy of Finance.

Currently reading The Age of Turbulence by Greenspan and Come into My Trading Room by Alex Elder.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Books

Postby la papillion » Mon Oct 20, 2008 10:30 am

Yo mm,

Alchemy is a good read? I tried a few chapters quite long ago but gave up and chose another book instead. If you think it's good, i'll pick it up again in my book list :)
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Re: Books

Postby winston » Mon Oct 20, 2008 10:34 am

la papillion wrote:Alchemy is a good read? I tried a few chapters quite long ago but gave up and chose another book instead.


Same here. I gave up on it. Very dry. My simple mind cannot fathom his deep thoughts.
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Re: Books

Postby la papillion » Mon Oct 20, 2008 10:37 am

Hee hee, w, great minds dry alike :P
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Re: Books

Postby millionairemind » Mon Oct 20, 2008 10:52 am

la papillion wrote:Yo mm,

Alchemy is a good read? I tried a few chapters quite long ago but gave up and chose another book instead. If you think it's good, i'll pick it up again in my book list :)


Yo La pap,

Alchemy is a pretty good read. The condensed version is in the new book where Soros expounded and expanded on it on a summarized version.

I must say it took me twice to have the patience and courage to finish the Alchemy book. It is very dry and reads almost like a phD dissertation.

Cheers,
mm
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Re: Books

Postby kennynah » Mon Oct 20, 2008 10:52 am

the only alchemy book i read, was my secondary school chemistry text book :lol: my small brain limits my reading to mostly the stories of 5 seahs.....and comics now.... hahaha...
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Re: Books

Postby LenaHuat » Mon Oct 20, 2008 12:18 pm

I've only been away from the forum for a few days but am pretty overwhelmed by the quality and number of posts in this forum. Can't digest so many posts. Good job done.
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Re: Books

Postby la papillion » Mon Oct 20, 2008 1:14 pm

Origins of the Crash

I've finished the very readable book by Roger Lowenstein, titled "Origins of the Crash". There are many books that talked about crashes, but this book focuses more on the dot.com bubble, collapse of Enron, accounting scandal at Andersen and the telecommunications bubble, with the author linking the excesses of past markets to the downfall of future bubble.

Image

There are a few key take aways that I got from this book. Bubbles are caused by a series of factors:


1. Lack of corporate governance.

There are stories of dot.com companies where the CEO and chairman of the board of directors are the same person. Boards full of the CEO's 'independent' friends, some of whom are blatantly related in familial ties, some are the CEO's lawyers, accountants and so on. Audit committee do a perfunctory job of looking through results, and had absolute trust in the CEO.

Special purpose vehicles (SPV) are set up to transfer assets to these, so as to lighten the balance sheet to make it more attractive, less debt-ridden and thus able to borrow more.


2. Massive conflicts of interest

CEO is paid to direct the company. Board of directors are supposed to monitor the performance of the CEO. Audit committee in the board are supposed to monitor the results of the company, while external accounting firms are supposed to make sure the results released satisfied accounting standards.

All these broke down in the dot.com era when the CEO is the chairman of the board of directors. Audit committee and the renumeration committee are but cronies of the CEO, who are not only not independent but also had a massive stake in the company and/or subsidiaries. Some of them sitting in the board are also directors in the subsidiaries owned by the company. Accounting firms also act as consultants for the firm besides their accounting jobs, with some even switching over to become the CFO of the firm they used to work for.


3. Greed and emphasis on share price

Not only of the CEO with their massive pay scale and millions of options given to them, lifetime pensions and usage of company jet, serviced apartment, car with chauffeur etc, but investors are also at fault. Investors are so sure of being able to buy high and sell higher that all aspects of the business are thrown out. Only prices matter, even if the companies do not have earnings. In fact, earnings and fixed assets are seen as negative aspects anchoring the price because without them, the hopes and promises of the company becomes intangible - a value hanging in the air - and all who buy into it can hang onto their false hopes long enough to sell it to the next smitten investor.

(There's a very good side story of Jack Welch - famed CEO of GE, who got many perks after his retirement from GE. His lifetime perks included the use of a $15 million Manhattan apartment with complimentary wine, food, laundry services, newspapers and toiletries. He also have access to a corporate jet, floor level tickets to New York Knicks, courtside seats at the U.S Open, a box at Metropolitan Opera, a car and a driver. This is besides a $350,000 monthly pension, and a combined past earnings of more than $400 million while working at GE.)

Only when the share prices start to fall that the investors' dream become their nightmare.


4. Nobody guarding the guards

Gatekeepers are supposed to keep the gates, but who makes sure that the gatekeepers do their job? Apparently none.

Auditing firms became conflicted after the removal of rules that prevented them from doing underwriting business with their audit clients. Analysts in investment banks hyped companies that their firms did business with even if they felt that those companies did not deserve such praise. Directors turned a blind eye to many things management was doing. The government, with many ties to big business, failed in its regulatory role because times were good. There are also many stories of the whole lineup of politicians in the US being involved in the whole debacle.

Even the SEC chief was a lawyer who once fought against excessive clamping down on accountants.

Are we seeing more crashes in the future? I'll bet we will. But did you notice that many of the things that happened is happening now again? As the saying goes, there is no new thing in the market, history repeats itself again - in different forms.

(This site is a very good review of the book: http://www.eraider.com/images/articles/BookReview4.pdf)
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Re: Books

Postby millionairemind » Fri Oct 24, 2008 9:32 pm

Just finished reading The Age of Turbulence by Alan Greenspan. Here is a book review in the NYT.

http://www.nytimes.com/2007/09/18/books ... hardt.html

The book is about 500pages. It is a decent read when you have the time. I learn more about what the FED looks at and his views on BRIC, the world economy, US financial markets and the US presidents.

Coming soon after reading Soros book, you can see the difference of their approach to markets. Soros believes that market tend to self-destruct without supervision and chided Greenspan in his book for being a market fundamentalist.

As we can see, Greenspan was dead wrong and Soros was correct.

An enjoyable book if you have the time.

Waiting to start on the new book by Tom Friedman - Hot, Flat and Crowded ;)
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Books

Postby la papillion » Fri Oct 24, 2008 11:06 pm

mm, reading reminiscences of stock operator. Really good read, a page turner for me :) thks for ur intro!
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