|
|
|
|
|
|
|
|
|
|
|
|
|
|
my rating |
|
|
|
|
|
|
|
|
|
|
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| B09QT3Y69V
| 4.05
| 2,268
| Jun 16, 2022
| Jun 16, 2022
|
really liked it
|
What was Wirecard? Was it a payments facilitator like paypal? Was it a savy mergers and acquisitions player? Was it a showcase for German business acu
What was Wirecard? Was it a payments facilitator like paypal? Was it a savy mergers and acquisitions player? Was it a showcase for German business acumen? Or was it a palace of jello, susceptible to meltdown under the hot lights of intense scrutiny? Dan McCrum, a journalist with the Financial Times, unspools a lurid tale of accounting fraud, corruption, money laundering, market manipulation, wire-tapping, and intimidation spread across two decades. It all began in 2001 when a failed payments processor called Wirecard was swallowed by Electronic Billing Systems. The newly incarnated Wirecard exploited a dodgy niche servicing online gamblers and pornographic websites. It created Click2Pay, an e-wallet that shielded the nature and identity of online payments, securing them from scrutiny by credit card companies and banks. Absorption of InfoGenie, a publicly traded company bestowed that same status on Wirecard without the bothersome details of due diligence in 2004. Two years later Wirecard acquired its own bank by purchasing XCOM, allowing it to issue its own credit cards. In 2007 Wirecard acquired G2Pay, a processor for Absolute Poker, Full Tilt, and Poker Stars. G2Pay kept these customers alive in a world where the U.S. Unlawful Internet Gambling Enforcement Act had been passed toward the end of 2006. However, the writing was on the wall, and Wirecard needed a way to make G2Pay look like a profit machine. The mechanisms of fraud which McCrum details were difficult for me to follow due to their complexity. The simplest examples were miscoded transactions that made illegal transactions appear legal. Chargebacks or disputed transaction stats were closely monitored and shuffled to keep the company from raising red flags about its real customer base. McCrum's suspicions were aroused when he finds so-called licensing fees paid by a partner company in Bahrain fail to show up in Wirecard's books. He flies to Bahrain to query the payer only to embark on a serpentine journey finally leading to a construction site where the company's lawyer refers him to a local actress who then refers him to her “business partner,” Christopher Bauer. McCrum surmises that no money changed hands. The deception was to increase profits on Wirecard's books, thus increasing shareholder confidence and pumping up the share price. Leo Perry of Ennismore Fund Management tells McCrum: “'Faking profits, you end up with a problem of fake cash. At the end of the year the auditor will expect to see a healthy bank balance, it's the first thing they check. So what you have to do is spend that fake cash on fake assets.'” (p.72) Those fake asset purchases proliferated faster than rabbits, but to uncover the fraud meant knocking on doors in places like India, Singapore, and the Philippines – places with obscure address systems and people suspicious of foreigners looking under rocks. Another ploy, although merely a stopgap, was to create fake invoices – money owed to Wirecard for licensing fees and consulting which would show up on the balance sheet as receivables, an asset. McCrum uncovered another way to commit fraud called “Round-tripping.” The idea ws to move actual cash across a series of fake subsidiaries and then back to the originator, Wirecard's bank. The movement would give the illusion of robust financial health for each of these entities which the cash passed through. By 2019 McCrum had an epiphany. He learns that the FTC has reached a settlement with a company called Allied Wallet. The name rings a bell. It was listed as a Wirecard customer on a spreadsheet he has. However, when he questions Allied Wallet the company denies any connection to Wirecard or to its Middle East partner Al Alam Solutions. Scrutiny of other customers on the spreadsheet reveals them to be mirages as well. McCrum exclaims: “'None of it's real. The customers are fake. There's nothing there.'” (p.211) Of course none of this would be interesting if billions of euros were not at stake. In 2006 Wirecard had a market capitalization of €300 million. By 2014 it had risen to €4.2 billion. The company was not about to let some nosy journalist wreck their money-making machine. By 2015 Wirecard was on the offensive. It's lawyers threatened to sue the Financial Times and McCrum. Private security operatives were hacking cell phones and computers. The bank accounts and trades of suspected “enemies” were being monitored for evidence of bribery or market manipulation. The website of Zatarra Research, an anonymous group which had released a report connecting multiple dots of accounting fraud, was hacked. Fake emails were circulated and rumors of a possible merger which if true would have boosted Wirecard's sagging share price were being whispered. Finally, Wirecard would accuse McCrum of conspiring with short-sellers to topple the company's share price. It was shocking how BaFin, the German equivalent of the SEC, Wirecard's auditor Ernst & Young, and the investment community as a whole remained complacent as the evidence kept piling up. Detailing the enabling role of Deutsche Bank and SoftBank, McCrum exclaims in frustration: “How many times does a company need to be accused of fraud for those overseeing it to start playing detective?” (p.287) Equally interesting was McCrum's depiction of the heady and tight-knit world of the billionaire ecosystem. We cling to the myth of the bold technology visionary reaping rewards for game-changing innovations. The reality is quite sobering. It is a world of private clubs and exclusive vacation properties where gossip is the coin of the realm. The excesses of luxury made the Roys of “Succession” seem paltry by comparison. Information exchange and peddling were the bread-and-butter of this world. This book is at times difficult to follow. McCrum's chronology tracks the revelations he learns about Wirecard. However, he is then forced to backtrack to fill the history of each of those events. There are scores of people to keep track of and a rudimentary knowledge of stocks and bonds is required. However, the effort is well worth the time. ...more |
Notes are private!
|
1
|
not set
|
Jul 09, 2023
|
Aug 13, 2022
|
Kindle Edition
| ||||||||||||||||
| B01HM24IRY
| 4.07
| 5,902
| Mar 21, 2017
| Mar 21, 2017
|
really liked it
|
Demands for accountability became particularly loud after the 2008 financial meltdown. In particular the cries were directed at Attorney General Eric
Demands for accountability became particularly loud after the 2008 financial meltdown. In particular the cries were directed at Attorney General Eric Holder, after his “too big to fail” pronouncement. Surely someone should have gone to jail for causing such a debacle. Author David Enrich touches on that subject of accountability from a very different vantage point. He intertwines the rise of investment banking superstar Tom Hayes with competitive economic strategies crafted in London and Washington decades earlier. Prospective readers might be dismayed by the long cast of characters in the opening pages of the book. However, there are only a few key points to remember. Banks employ traders, or “market makers.” Each trader has an area of expertise – a specific currency, a country, or type of security. They rely on middlemen employed by brokerages to find a trading partner. These brokers make it their business to develop strong personal relationships with traders from all the big investment banks, in order to pitch the deal. For their matchmaking efforts they earn a commission. The more trades they broker, the more commissions they earn. The big players here will be Royal Bank of Scotland, Royal Bank of Canada, UBS, Citigroup and Deutsche Bank on the investment side and ICAP, R.P. Martin, and Tullett Prebon on the brokerage side. The inanimate entities in this drama, interest based derivatives and Libor, are even more important cast members. Enrich provides a lucid and succinct explanation of derivatives. “They were instruments whose values derived from something else. What you were buying or selling was not the thing itself (widgets, bushels, gold bars) but something related to that thing, maybe its future value, or how it compared to something totally different. If you wanted to buy ten gold bars, that was straightforward; if you wanted to place a bet that nine months from now the price difference between ten gold bars and fifty bushels of wheat would be twice the difference between five bushels of wheat and sixteen widgets, then you were playing with derivatives.” (p.31) Libor (London Interbank Offered Rate) was officially launched in 1986. Banks submitted an estimate of what interest rate each of them expected to pay for securing a short-term loan from another bank. The estimates were averaged by Thomson Reuters and reported daily. Those numbers determined either in whole or in part the interest rates of bonds, adjustable rate mortgages, and dozens of other financial products. One/one-hundredth of a percent change in Libor would move the value of a derivative valued at one million dollars up or down by $10,000. A hedge fund trader might make thousands of daily transactions resulting in gains and losses in the millions. Two events set the stage for this drama. First, the 1986 “Big Bang” – Margaret Thatcher's launch of British banking deregulation. Second, the passage in 1999 of the Gramm-Leach-Bliley Act in the U.S. Both events removed restrictions separating investment banks from commercial banks. Raw profit for the bank replaced customer service. In 2001 Thomas Hayes began his banking career at the Royal Bank of Scotland. He had an uncanny facility with numbers and a unique skill for designing predictive algorithms. By this time, Libor had spawned multiple variants: Tibor (the Tokyo interbank offered rate); the Euribor (the Euro version); Hibor (the Hong Kong version) and so on. Each iteration netted the British Banking Association a licensing fee, so the Association encouraged this proliferation. “Hayes organized his bets around derivatives that would deliver profits if, at a specific date, the difference between two interest rates – say, those in the United States and those in Japan – narrowed or widened by very precise margins. Hayes might wager the U.S. dollar Libor might fall relative to yen Libor.” (p.91) It soon occurred to him that since each bank's submission to Thomson Reuters was an estimate, that estimate could be tweaked up or down. All he needed were the right personal connections. An avuncular broker like Darrell Read at ICAP or Terry Farr at R.P. Martin would have just those sorts of connections and would be eager to do him “a favor” by talking to some of their banking contacts. Libor swings favored the holdings of reporting banks; and ultimately a collection of colluding traders. A deregulated banking environment, huge global transactions instantaneously effected, a key index based on subjective and undocumented “guesses,” a caste of superstar traders rewarded by the amount of money their trades generated, exchanges of kickbacks between brokers and traders for favors, and what Enrich repeatedly refers to as a “frat house culture” .... the fixes became more frequent and blatant. A little over half the book is devoted to Tom Hayes’ rise in spite of an abrasive personality oblivious of social niceties (there was a general consensus he displayed Asperger’s Syndrome characteristics). This was the most interesting part of the book. The second half chronicles a slow but inevitable downfall and surprising denials of his “friends,” colleagues, and supervisors. Enrich converts what could have been a dry financial narrative into a mind-blowing story of hubris and reckless greed. He even garners a bit of sympathy for the unrepentant Hayes. The story poses a dilemma: who exactly was culpable? Not even the foot-dragging compliance investigators can be said to be blameless. ...more |
Notes are private!
|
2
|
not set
not set
|
Sep 08, 2021
Sep 08, 2021
|
Jul 18, 2021
|
Kindle Edition
| ||||||||||||||||
| B003K16PAA
| 3.76
| 1,786
| Jun 04, 2009
| Apr 12, 2010
|
really liked it
|
England's money was vanishing! To be specific, legal silver coinage was being taken out of circulation, melted down, and was being sold abroad at a ha
England's money was vanishing! To be specific, legal silver coinage was being taken out of circulation, melted down, and was being sold abroad at a handsome profit throughout the last half of the 17th century. Stop gap loans including 1.2 million pounds from the newly created Bank of England could not staunch the bleeding. In the middle of a war with France, the country was on the brink of bankruptcy. The solution? Let's get the smartest guy in England and put him in charge of England's money. Well, it didn't actually play out in exactly that way. Sir Isaac Newton had already established his reputation. However, he was restless in his role as Lucasian Professor of Mathematics at Trinity College in Cambridge. Cambridge was a mere intellectual backwater. London was the place to be for intellectual stimulation, influence, recognition and prestige. As early as 1690 he was asking friends like John Locke to explore opportunities for a position in London. Six years later, he got his wish. Charles Montague, Chancellor of the Exchequer, a Trinity College alumnus, and friend of John Locke offered Newton the job of Warden of the Mint. This book is not just the dual biography of a scientist and a counterfeiter. It is a fascinating view of London in the late 17th century where a commercial revolution was underway. As with all revolutions there were winners and losers. The losers were very poorly off indeed. They included unskilled and semi-skilled laborers excluded from the craft guilds and forced to accept low-paying piece-work wages while being squeezed by the threat of advancing mechanization. Even a prisoner needed money to stay alive, money to buy food or to forestall brutal treatment. A series of catastrophes swept the country: the Great Plague in 1665, the Great Fire in 1666, and periodic outbreaks of smallpox, tuberculosis, influenza, malaria and dysentery. Typhus was so prevalent in the prisons that it was known as jail fever. Petty corruption thrived in these conditions. William Chaloner found modest success as purveyor of quack remedies. However, he was always convinced he was destined for greater things. Chaloner advanced to crude counterfeiting (a widespread practice known as clipping which entailed shaving off bits of silver coinage and melting down the metal to create new coins). As a criminal he demonstrated remarkable enterprise. In 1662 England had begun the lugubrious process of striking new coins to replace the debased currency. To discourage counterfeiting, the new coins had etched rims. Chaloner befriended a goldsmith who showed him the techniques for working with molten metal and partnered with a master engraver named Thomas Taylor. Chaloner's ingenuity did not stop there. In 1694 the Bank of England began issuing promissory notes to wealthy bank customers. The cash was then loaned to the government. The success of this transaction rested on the bank's assumption that only a fraction of the notes would be returned for redemption. The outstanding notes would circulate just like money. The denominations of these notes were large in order to limit them to large financiers. Nevertheless, Chaloner found the craftsmen to create high quality forgeries, and the means to circulate them. Author Thomas Levenson delves the human dimensions of Sir Isaac Newton's personality. Newton was not merely brilliant. He was methodical, obsessive and patient. He brought these habits to his work as Warden of the Mint, but added one other skill: interrogation of the most relentless and detailed sort. Counterfeiting was a capital crime. Newton quickly discerned that lower rung criminals – the distributors – could easily be persuaded to inform on their higher-ups. In addition, he cultivated his own jailhouse snitch. Given the confines and monotony of prison even the most cautious prisoner was likely to confide in someone. Newton slowly worked his way up to the top of the counterfeiting ring. Author Thomas Levenson reveals other aspects of Newton's personality. Despite the popular suspicion that alchemists were charlatans, Newton, like Robert Boyle, was a devoted practitioner. This was not merely the curious whim of a polymath. It was an obsession that absorbed his energy over large parts of a four year period. Levenson links this obsession with Newton's realization that the physical laws he was uncovering appeared to diminish the role of God: “In a world composed entirely of matter in motion, the traditional role of God had to shrink. The author of a mechanical universe could put events in train, but after that primary impulse, the cosmos could wend its way forward through time on its own.” (p.79) In other words, merely assigning God the role of the first cause was emotionally unsatisfying. “Alchemy seemed to offer a way for him to rescue God from the threat of irrelevance – salvation through the ancient alchemical idea of a vital agent or spirit.” (p.82) That living spirit animated matter; it was capable of destroying and regenerating. Newton experimented, measured, annotated and interpreted, often in florid mystical language, in pursuit of this evidence of divine activity. Levenson assesses the suppression of this aspect of Newton's career in colorful terms: “The distinction was simple: the real Newton, the official Newton, compounded antimony and mercury in precise proportions and carefully wrote down the results. The other Newton was an embarrassing uncle to be kept in the attic lest he walk unsteadily down Trumpington Street, uttering just a little too loudly about wingless dragons and infernal fire.” (p.87) But the real Newton was all of these parts: the reclusive scientist, the brilliant mathematician, the visionary natural philosopher, the prickly egoist, the spiritual investigator, and finally, the relentless grand inquisitor determined to bring monetary miscreants to justice. ...more |
Notes are private!
|
1
|
Nov 09, 2020
|
Nov 16, 2020
|
Nov 09, 2020
|
Kindle Edition
| ||||||||||||||||
| 1741767938
| B005ZLZJ46
| 3.55
| 867
| Jan 2011
| 2011
|
liked it
|
DOUBLE ENTRY is a brief history of double-entry bookkeeping from the principles systematized by Luca Pacioli in his Particularis de Computis et Script
DOUBLE ENTRY is a brief history of double-entry bookkeeping from the principles systematized by Luca Pacioli in his Particularis de Computis et Scripturis (Particulars of Reckonings and Writings) published in 1494 to today's arbiter of national economic progress (the GDP). The revolution that double-entry bookkeeping represented was the reorganization of discrete sequential transactions (the buying and selling of goods) into an abstraction (the same activities organized as capital assets, expenses, and income represented as exchanges). Second, the method, not unlike the scientific method that also grew out of the Renaissance, allowed, through its system of dual entries and balancing, a means of detecting errors. Ideally, a set of accounts should be identical, regardless of who had done the actual clerical work involved. Double entry bookkeeping has evolved very far from these humble origins. In 1772 Josiah Wedgwood applied the method and discovered many of the problems that plague modern businesses including erratic pricing, poor cash flow, and an undisciplined financial basis for expansion. A major revelation was his perception of fixed vs. variable costs. A second major transformation arose in the 19th century when the system expanded to reflect the mechanism of capital investments. Gleeson-White uses the building of the railroads which solved the problem of raising capital by selling shares of stock, to demonstrate this adjustment. As a corollary, asset valuation, depreciation, and recognition of arbitrary time cycles needed to be addressed. (In 15th century Venice, the time cycle was governed by the twice a year shipments of goods). By 1900 the generation of annual financial statements became a prime goal of accounting. If you haven't fallen asleep yet, let me assure you that the final section of Gleeson-White's book is of broader interest. We seem to be unable to make a new conceptual leap comparable to that of the merchants of Venice. By viewing all enterprise and even national economies through the oversimplified lens of accounting, we ignore the costs and depletions outside of the system: Pollution, deforestation, and social well-being. She bolsters her arguments with opinions offered by economists ranging from Schumpeter to Raj Patel. She recounts an interesting anecdote from Patel. A group of filmmakers did a psychological profile of corporations, treating them as if they were people. Diagnosis: Psychopaths! Rationalizations that sanction law-breaking, sacrificing long-term benefit for short-term gratification, litigiousness, and blindness to ethical boundaries were some of the conclusions they cited using the DSM-IV (Diagnostic and Statistical Manual of Mental Disorders). At another point she relates the chilling “cost-benefit” analysis conducted by the marketers of the Ford Pinto. Gleeson-White's most effective critique is of the GDP as sole measure of economic well-being. It's basis is a mystery to most of us, and therefore, it's implications as well are overlooked. “A tree in a forest is not counted as a national asset. But when that tree is cut down and sold as timber it is measured in GDP—and only then does it contribute to economic growth as officially measured.” DOUBLE ENTRY is a valiant attempt to delineate the historical evolution of a world view that treats all human endeavor as part of a giant income statement. However, the road to that destination is long. In spite of detailed explanations, only a student of accounting will comprehend the mechanics of double-entry bookkeeping. (My experience is that you only learn mathematics by actually working through the problems). Historians will find the dense recitative of Italian tracts on mathematics of interest. Incredibly, in the 15th century, calculations were still written with Roman numerals and computations done by abacus. The contributions of India and the Muslim world are often either overlooked or dismissed. Yet, all of this foundation is necessary to the author's eloquent critique of the way we currently view the economy. “In an era of international capital, when our wealth is more than ever tied up in its fortunes, and at a time when corporations, governments and financial institutions are demonstrating their fallibility on a global scale, it is essential that we are aware of the somewhat arbitrary laws of account that govern them—especially because it is in the labyrinthine workings of our accounting systems that value itself is assigned....In one way or another, this century will be the one in which we learn to account for our planet. Because unless we start accounting for our transactions with the earth, we will bankrupt it for all future human habitation.” NOTE: "Green is Good; The Nature Conservancy wants to persuade big business to save the environment," by D.T. Max in THE NEW YORKER, May 12, 2014, p.54-63 is an interesting article that applies the idea of valuing resources." The idea is both interesting and controversial. (note added June 2, 2014). ...more |
Notes are private!
|
1
|
not set
|
Nov 19, 2012
|
Nov 19, 2012
|
Kindle Edition
| |||||||||||||||
| 1466326840
| 9781466326842
| 1466326840
| 4.00
| 12
| Dec 22, 2011
| Apr 24, 2012
|
liked it
|
The appeal of this unusual melodrama is its dodgy accounting backdrop. The main character, Sara Banski, fresh out of college, is recruited by a boutiq
The appeal of this unusual melodrama is its dodgy accounting backdrop. The main character, Sara Banski, fresh out of college, is recruited by a boutique investment bank. Sara is all too eager to embrace the “real world.” Of course, the reader is a bit more skeptical, and even Sara has to question her good fortune. Why, despite her inexperience, is she given a lead role in an important and potentially lucrative IPO as her first assignment? Her task is to lead the “due diligence” phase, and the intriguing elements begin to unfold. We hear about rebates being booked as “soft sales,” shell companies in the Cayman Islands, “smurfing,” Dutch auctions, “Chinese Walls,” and the architecture of insider trading conspiracies (it's far more subtle than whispering: “Blue horseshoe likes....” Needless to say, I come from an accounting background and savored the authentic feel of these elements woven into the plot and setting this book apart from the typical potboiler. Unfortunately, the weakness of this book lies with the characters. The narrative is in third person. Hicks relies on description rather than dialogue through the opening chapters and it feels forced and deliberate, like a film overly reliant on voice-over narrative for its exposition. It takes a while for him to ease comfortably into his story. The characters, Sara, and her college friends, lack dimension. It is only during the action-filled denouement that these problems begin to recede into the background. At that point, a “don't get mad, get even,” mentality ignites the plot with a kind of cinematic momentum. I'm not sure how this got on my reading list, but it was an interesting adventure, and a pleasant jaunt into escapism. NOTE: I read this on the Kindle, and they really did the author a disservice. The numbered chapters are not indexed, so that it is impossible to navigate using the chapter control. (I tend to jump around a lot when reading because I take notes; readers who simply read and bookmark, especially with the newer generation of devices, should have no problem). ...more |
Notes are private!
|
1
|
not set
|
Dec 04, 2012
|
Sep 20, 2012
|
Paperback
| ||||||||||||||
| 1429985291
| 9781429985291
| 1429985291
| 3.80
| 87
| Aug 04, 2009
| Apr 27, 2010
|
it was amazing
|
The casual horseracing observer knows about the triple crown, and might even be familiar with some of the horses listed in the record books. The recor
The casual horseracing observer knows about the triple crown, and might even be familiar with some of the horses listed in the record books. The record books, however are only the tip of the iceberg. Great horses also lose – by a nostril, by a whisker – at the wire. They get bumped at the gate, boxed in at the stretch, and forced wide at the turn. Steroids can make a winner. The breeding shed can be a second proving ground. Horse-racing is a complicated business, so take another look at the record book. The jockey, trainer, and owner are listed. The missing piece of the cycle is what transpired before and after: Three Chimneys Farm and Claiborne are not famous because they owned or trained winning horses. They are famous because they are stallion farms, and that's where the story begins and ends. Jim Squires is the owner of the modest breeding farm, Twin Bucks. His most famous connection is as the breeder of Monarchos, winner of the 2001 Kentucky Derby in a time bettered only by the great Secretariat. Squires is also former editor of the Chicago Tribune, and used to speaking his mind. What he offers here is a series of overlapping stories set mainly between 1980 and 2008 (the year of Eight Belles' tragic accident), told with insider knowledge and the kind of candor one might find among friends in a bar room. For that candor and uniquely personal viewpoint, he can be forgiven the frequent diversions, and occasionally over-worked hyperbole. This is a refreshingly irreverent look at the aristocrats of horseracing and at a business which should have seen the writing on the wall when Calumet Farms filed for bankruptcy in 1991. One of the threads he traces is “The Rise of the Sale Horse.” The Yearling Sales have gradually moved to the role of prelude to the Second-Year sales. Some of his stories revolve around the dizzying heights top horses have fetched at the yearling auctions, fueled by the rivalry between the Irish Coolmore group, and the ruler of Dubai, and the primacy (a dubious indicator he later explains) of pedigree. Other stories trace the bargain hunting at the yearling sales in the hope of marketing a “home-run” at the 2-year old auctions. Each sale is fraught with scheming – behind the scenes deals to bid up the price of the horse, and secret whisper campaigns to lower the price a horse might fetch. Of the sanctioned secret ownership deals, Squires observes wryly: “Oh, okay, and maybe identifying the owner might violate the privacy of the horse or shame him among his friends.” It's a telling remark in that so often the welfare of the horse actually places last. Veterinarians are frequently engaged for their knowledge of steroid enhancement that falls just short of illegal (the rules vary from state to state, and detection procedures are determined by each individual lab). We are left to conclude that Rick Dutrow's troubles stem not from his unethical reliance on medicating his horses but his inability to keep his mouth shut. However, winning races is only a small part of the incentive for steroid use. A bigger factor is bulking up the appearance and speed of the horse prematurely in order to attract the highest prices at the 2-year old and any subsequent sales. Squires' stories range far, and there are no heroes or even main characters. We meet John Gaines and Gary Biszantz, reform-minded owners, and Robert Courtney Sr., lauded for his ethics and courageous independence when he retired. Why was the compliment so enormous, Squires asks. Because “As a group, we are as herdbound as our animals and not nearly as honest,” he is told. We witness Unbridled's Song's 10-second furlong (due to the “rotary gallop”) which has nothing to do with stamina or development that will unfold in a three-year old colt, and the many successful progeny of such sires as Storm Cat and A.P. Indy. This is a book for those interested in more than a superficial knowledge of horseracing. The gap between ethics and legality is disturbing. Drawing a parallel between the latest housing bubble and the economic woes of the horseracing industry, Squires states: “Like uniform drug rules, any restructuring of the sport's business model will have to come from a federal government mandate connected to the interstate gaming laws.” To those whose motto is greed, he warns: “My old business, newspapers, believed it was all about the money, too, and now it is too late for them.” In another time, many people might cringe; today we have learned once again where the mantra, Greed is Good, will ultimately lead. By the end of his story, we have a renewed respect for Larry Jones, trainer of the ill-fated Eight Belles, and for Squires himself, who is unafraid to speak of his attachment to his horses and of the ills that the powers that be continue to turn a blind eye at. ...more |
Notes are private!
|
1
|
not set
|
Jul 28, 2012
|
Apr 28, 2012
|
Kindle Edition
| ||||||||||||||
| B003LSTK8G
| 4.30
| 162,653
| Mar 15, 2010
| May 12, 2010
|
it was amazing
|
Michael Lewis turns the 2008 financial meltdown into a compelling narrative about two very smart, very abrasive skeptics who realized the juggernaut W
Michael Lewis turns the 2008 financial meltdown into a compelling narrative about two very smart, very abrasive skeptics who realized the juggernaut Wall Street had created was doomed to self-destruct, and worked out how to cash in big — the big short. Steve Eisman began his career as a corporate lawyer. Eisman was an outspoken curmudgeon. Stupidity bored him. Tact was not one of his gifts. When others spoke it looked like he was sampling rather than listening. It's difficult to imagine how he managed to sit through corporate meetings or deal with clients. At 31 he switched careers and became an equity analyst at Oppenheimer. In December 1991 he wet his feet in the murky waters of the subprime lending world. In September 1997 he issued a prescient and bluntly worded report on publicly traded subprime lenders. The verdict — Sell. By 2002 publicly traded subprime lenders were gone. That opened the door to Act II, Household Finance Corporation's reincarnation as an aggressive home equity lender. The company enticed borrowers with fraudulent low interest rates based on voodoo math. When the company was brought to court it received a fine. Nobody went to jail. HSBC, a British congomerate, acquired HFC in 2002. The only losers were the hapless borrowers. Eisman with his black and white mindset was outraged, and the experience would fuel his subsequent zeal. Eisman was determined to make his analytic gifts pay off. By 2004 he had started his own hedge fund, FrontPoint Partners. He knew he could profit from the debacle unfolding in slow-motion before his eyes. The key was timing. The second protagonist in Lewis' story was an obsessive financial blogger completing his medical internship. His name was Dr. Michael Burry, and he was attracting a lot of attention from savvy, heavy-hitting investors. He, too, realized he needed a career change. In 2000 he founded a hedge fund called Scion Capital. Like Eisman, he discerned the inherent flaw in the logic of the subprime mortgage bond market. Like Eisman, Burry was looking for a way to capitalize on that insight. Lewis follows these two men from 2000 to 2007 along with the rapidly mutating bond market. The narrative reads like a detective novel uncovering a trail of clues. The technique adds a measure of suspense to a story whose ending is already well known. The first clue was the rise of the originate-and-sell business model. Fees and commissions, not the mortgage bond itself, was the profit generator. Lenders needed increased volume not loan quality to feed profits. The same was true for the investment banks buying these bonds and collecting their own commissions. Default risk was the buyer's problem. Sy Jacobs, an analyst who trained at Salomon Brothers, summed up: “Any business where you can sell a product and make money without having to worry how the product performs is going to attract sleazy people.” In that sense, what followed was inevitable. Originators waived documentation, lured borrowers with artifically low teaser rates which would not reset for 2 years, and finally, no money down loans to feed the profit machine. The adjustment, of course, would occur 2 years into the loan when the floating and substantially higher market rate would kick in. Borrowers would be forced to either sell or refinance, an easy decision as long as real estate prices continued to escalate steeply. Who would buy such risky loans? The loans were bundled into huge pools where the risk could be disguised. As a further refinement, the pools were subdivided so that levels designated to absorb the earliest defaults were assigned higher rates of return to compensate for the increased risk. The underlying pitch, however, was: What were the odds that all (or a significant percent) of the borrowers in a given level would default? In the beginning Eisman and Burry were the only ones who reasoned the answer had to be 100%. Other clues emerged. By 2005 75% of subprime loans were made at adjustable teaser rates rather than fixed rates. Housing prices were rising precipitously. However, if that rise merely slowed, a cascade of defaults would be triggered. The median house price to income ratio had risen from the traditional 3:1 to 4:1, but in some markets, such as Los Angeles, the ratio had climbed to an unbelievable 10:1. Eisman and Burry detected yet another clue when they examined the methodology applied by ratings agencies such as Moody's and Standard and Poor. Their examiners looked at the characteristics of an entire pool, not the characteristics of the individual underlying bonds. One metric was the FICO score or credit rating of borrowers. The average FICO for a pool was used for the rating formula. Packagers quickly created pools with a wide range of scores; the result looked exactly like a package whose scores clustered closely around the mean. Moreover, all FICO's were not equal. A Mexican migrant worker who spoke no English and who had no assets but had never borrowed could have the same high FICO as an affluent borrower with plenty of assets and disposable income. In his inimitable way, Lewis summarizes: “The Mexican harvested strawberries; Wall Street harvested his FICO score.” After learning all of this, Eisman and Burry realized that a triple A rated slice of the pool was no less risky that the worst slice of the worst pool. Act III of this drama introduced Greg Lippman, a bond salesman employed by Deutsche Bank. People described Lippman as over-the-top: Loud, self-aggrandizing, self-confident, brash. Such chutzpah... and such a long long list of contacts. Lippman was the mobilizer, the catalyst. The insurance giant AIG had figured out a way to enter the lucrative mortgage market, now morphed into the synthetic subprime mortgage bond-backed collateralized debt obligation. Too much of a mouthful? How about the CDO. Certain the bond pools were safe, AIG began to sell bond insurance, a conventional instrument for hedging. The insurance was not called insurance but rather a credit default swap. Lippman also began to look into the bond market and discovered the flaw. To him, the swaps were a bonanza. It was the vehicle he and his customers needed to short the bond market and he began talking to anyone who would listen. Anyone within AIG who suspected the ugly reality was quickly silenced by AIG Financial Products division head Joe Cassano. By the time AIG woke up it was like closing the barn door after the cattle have escaped. Lewis deftly reduces what are ultimately complex legal contracts and accounting strategies into terms understandable to the ordinary person. He strips away the ambiguities of Wall Street “market speak.” A collateralized debt obligation was actually the smoke and mirrors backed subprime bond. The bonds weren't even classed as mortgage bonds but as “asset-backed securities” like car loans, student loans and credit card debt. Mobile homes were termed “manufactured housing,” certainly a more stable sounding proposition for the unwary investor. Defaults were referred to as “involuntary payments.” The bottom or riskiest tranche wasn't called the basement; it was a mezzanine tranche. With this lexicon it is no wonder that bond buyers were befuddled and Wall Street started to believe its own lies. Lewis never underplays the role of luck or the degree of risk in his account. Eisman and Burry did the meticulous grueling analysis that led to the right answers, but the market does not always reward those who are right. They were placing their bets in 2005 but the collapse did not begin until 2007. In the interim they were obligated to pay out huge sums in premiums and collateral. Their backers became alarmed at the short-term negative returns. Paradoxically, bond prices kept rising even as the bad news started to surface. The bond prices did not begin to fall uninterrupted until June 2007. By 2008 those on the short end of the bet had yet one more worry. The entire financial system could collapse and their creditors could declare bankruptcy. If that happened theirs would be a pyrrhic victory. Those looking for a precise chronology of events or a nuanced quantitative narrative should look elsewhere. This is a riveting story about institutional greed and driven by colorful characters who say and do shocking things. The amounts of money involved are not millions but billions. Lewis draws from emails, letters, interviews and conversations and provides a context filled with striking metaphors and surprising drama. NOTE: The film based on Lewis' book is scheduled for release on December 23, 2015 ...more |
Notes are private!
|
2
|
not set
not set
|
Oct 05, 2015
not set
|
Oct 11, 2011
|
Kindle Edition
| ||||||||||||||||
| 1591843634
| 9781591843634
| 1591843634
| 4.04
| 7,462
| Nov 16, 2010
| Nov 16, 2010
|
really liked it
|
The companies involved in the financial crisis: Countrywide, AIG, Merrill Lynch, Ameriquest, Lehman Brothers, and Bear Stearns, didn't simply sprout h
The companies involved in the financial crisis: Countrywide, AIG, Merrill Lynch, Ameriquest, Lehman Brothers, and Bear Stearns, didn't simply sprout horns and tails one night The elements personified in the title are instead a list of financial tools, events, and attitudes that didn't just coalesce but rather evolved in almost predictable though unintended ways. Their growth was part of a monstrous symbiosis. Readers with a non-finance background should not be dismayed by the parade of ever more complex financial tools described in this book: Tranches, derivatives, collateralized debt obligations (CDO's), CDO's squared, credit enhancements, and credit default swaps. McLean and Nocera direct their explanations at the general reader. However, as with any accounting technique, one can really only begin to understand these instruments within the context of specific numbers and scenarios. The broader picture they paint is of techniques to manage risk. Risk management such as practiced by the “quants” at J.P. Morgan evolves into risk dilution (tranching, and hedging), which leads all too easily to merely the appearance of risk reduction (the role of the ratings agencies, passing risk on to 3rd parties as if it were a hot potato, and ultimately, the inability to even identify where the risk lay in the layers of repackaged shadow securities). It's interesting to learn that when Merrill Lynch was in crisis, several of its board members began requesting tutorials on CDO's. So again, don't be intimidated by the financing terms! The first half of the book deals with these elements in the context of the Savings and Loan crisis, rising interest rates, changing banking legislation, an ideology of non-regulation, and a political agenda of increasing the numbers for home ownership. It is startling to learn that the authors chart the seeds of the crisis 30 years back in time. History, not specific villains, is the focus here. Most fascinating, perhaps, is the interplay between Wall Street and the political clout of Fannie Mae. This segment even peaks with a punchline; we learn what a "fannie pack" is. The second part of the book follows specific “characters”: AIG, Countrywide, Ameriquest and Merrill Lynch. It is striking that the guiding human emotion in these stories was not greed but envy. Companies and leaders feared that their competitors might pull away from the pack, and that fear motivated the drive toward expansion and risk. Despite the fact that the focus is not on blame, it is clear that McLean and Nocera are ardent skeptics of the self-regulation credo the financial community has so long espoused. Greenspan and like-minded economists at the Federal level failed in their duty to protect the public, even when regulators and consumer advocates at the state and local level were pointing to problems. None of these people have yet shown any public remorse for the mistakes that were made. (Somehow, an admission of "Oops" doesn't seem to suffice). The assessment of Goldman Sachs is more problematic. The authors emphacize that Goldman Sachs was despised, not so much for its lack of ethics, as for its success in execution of its game-plan. This book serves as an introduction to a much closer scrutiny of the investment industry. ALL THE DEVILS ARE HERE is the first book I have read on the financial crisis. It won't be the last. It is definitely well-written and cohesive, and will encourage readers to delve further. ...more |
Notes are private!
|
1
|
not set
|
Sep 09, 2011
|
Sep 10, 2011
|
Hardcover
|
Loading...
8 of 8 loaded
