Unemployment in America is off the charts, thousands of families are struggling to pay the bills and even feed their kids……..and the stock market is up over 30% since late March. Does something strike you as wrong with that picture?
You’d be forgiven for thinking that either we’re on the brink of complete financial collapse, or that the markets are insane and incomprehensible. Or both.
But we’ve got your back – we’ve trawled through the best financial journalism of the past three decades to bring you a selection of books that will give you a better understanding of the insanity of markets….and the equally insane personalities behind some of the biggest financial disasters of recent years.
Spoiler alert: there’s no happy endings here.
Liar’s Poker: Rising Through the Wreckage on Wall Street
by Michael Lewis
Liar’s Poker was Lewis’s first book; a tell-all book of the industry he had immersed himself in (and excelled at) in the 1980s when he became a bond trader in his early twenties straight out of university. Documenting the training and mentorship he received from more senior colleagues at Salomon Brothers (now a part of Citibank), the author reveals the already well-established tricks of the business that enabled a know-nothing Geek to rise to Big Swinging Dick (yes, seriously; those were the terms actually thrown around on the trading floor, apart from when the traders were actually throwing landline telephones at each other’s heads in frustration at failed deals). Off-loading dodgy bonds by the bucketload, and earning millions in the process (while the sucker buyers stood to potentially lose all their investment, and in some cases their livelihoods), was everyday life for Lewis and his former colleagues.
It’s thirty years now since Liar’s Poker was originally published, but the work has lost none of its potency, or relevance, as the insanity of Wall Street and its cyclical crashes continue to make headlines, most recently in the 2008 financial crisis……
The Big Short: Inside the Doomsday Machine
by Michael Lewis
Don’t worry, not ALL of our recommendations are going to be by Michael Lewis. Although it does demonstrate the extent to which he has come to dominate book-form financial journalism. The Big Short, subsequently made into a movie starring Steve Carrell, Brad Pitt, and Christian Bale amongst others, was a return to familiar territory for Lewis. Reprising his role as Wall Street’s excoriator-in-chief, Lewis takes apart the madness within the derivatives sector that created a ticking time-bomb, with some of America’s most vulnerable families feeling the full force of the financial collapse that ensued when the damn thing inevitably blew up in the traders’ own faces in 2008. The greed, arrogance, and stunning callousness of the traders convinced of their own superiority over non-finance industry mortals makes for enraging content. Lewis’s prose, by this point honed through years of producing best-selling industry critiques, is a pleasure to read and his ability to break down the components, and consequences, of complex financial instruments enables non-specialists to hitch a ride on the crazy train.
OK, OK…….there are some great books by writers other than Michael Lewis……let’s check them out
Too Big to Fail
by Andrew Ross Sorkin
Sorkin, a respected financial columnist at The New York Times, was in the perfect place to document not just the financial mechanics, and the larger-than-life Wall Street personalities, at the heart of the financial implosion in 2008, but also the key political players in Washington who came together to fashion the largest bailout in history (at the time). In doing so, they laid the foundations of a new financial reality which persists, for better or worse, to this day. Sorkin’s eye for detail, coupled with a breezy journalistic style incorporating intimate, telling anecdotes of key moments in the thought processes of the financial titans at the heart of the story, makes for compelling reading. Clocking in at over 600 pages, the book is a door-stopper, but one which will keep you captivated from the first page to the last. After reading Too Big To Fail, you’ll have a comprehensive perspective on the financial and political dynamics at the heart of the battle to save the world economy in 2008.
Of course, that’s not to say that all this hadn’t happened before…..
The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
by Bethany McLean, Peter Elkind
Enron’s fall in December 2001 serves as a case study of corporate hubris. McLean’s article for Fortune magazine (behind a paywall), written on a tip-off from short-seller billionaire Jim Chanos, in October 2001 was a catalyst for closer scrutiny of the corporation’s dodgy accounting practices. In this book, she and Elkind pursue the story further, creating a dazzling account of a megacorporation’s business dealings gone horribly wrong, and the often criminal actions of senior executives to cover up its mismanagement. Whereas Michael Lewis’s books portray a financial industry culture of poisonous machismo, The Smartest Guys lays bare an organization of almost sociopathic intent. Given the overlapping nature of Enron Corp.’s various business entities, the timescale of events spanning a period of over 15 years, and the deliberate effort at every step to conceal the company’s business dealings, it’s a wonder that the authors are able to put together such a lucid account of the entire fiasco. Interviews with key players throughout the entire process, as well as layman’s terms explanation of bewildering corporate set-ups and accounting practices keep the narrative flowing throughout.
Coming a full 7 years before the financial crisis of 2008, it’s a wonder that the Enron scandal didn’t make people, both inside and outside the financial world, much more wary of believing companies’ balance sheets, or prepare for worse to come…..
by Gillian Tett
JP Morgan, under Jamie Dillon’s leadership, came out of the 2008 financial crisis relatively unscathed (it’s worth emphasising…….relatively). Tett, a Financial Times journalist (now chief of the Editorial Board) whose early warnings about the impending disaster enraged industry insiders, has written a detailed account of not only how Dillon’s team at JPM created the foundations of the financial collapse in the mid-90s, with their initial development of credit derivatives, but also how the same executives were able to avoid the worst effects of the financial crisis when it hit by refusing to engage in the riskier trades of their colleagues at other financial institutions. The author’s direct access to Dillon and his tightly-knit team of senior managers at the company provides a gripping account of one group of Wall Street titans who foresaw the dangers ahead, and took action to save their own skin. In doing so, and contrasting this with the unrestrained greed and heedless arrogance of Wall Street as a whole during the sub-prime mortgage boom, Tett delivers a unique post-mortem of the financial crisis which still has relevance to today’s unreformed markets.
It’s almost as though the guys at the top have nothing to fear…..
Den of Thieves
by James B. Stewart
Originally published in 1992, Stewart’s work details the dogged investigation of a group of Wall Street high-flyers by a team of low-paid lawyers and dedicated detectives. Stewart’s meticulous reporting utilizes secret grand jury transcripts, trading records and interviews with key players to reveal the shocking extent of criminality committed by four men once considered by Wall Street to be an elite within the elite. A Pulitzer Prize winner, the author was among the first journalists in the 1980s to question the trading practices of major players in some of Wall Street’s largest and most successful firms. Den of Thieves remains today a timeless account of the excesses inspired by the financial industry’s legitimization of the worst human instincts in the relentless hunt for profit.
I guess if you’ve got the money, you can get away with anything (financially-speaking)….
Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World
by Tom Wright, Bradley Hope
1MDB. The scandal that brought down former Malaysian PM Najib Razak, and made an international fugitive of Malaysian-Chinese playboy Jho Low. Million Dollar Whale documents the global financial scam perpetrated by Low for the better part of a decade in the wake of the 2008 financial crisis. By siphoning money from a billion-dollar fund right under the noses of Wall Street’s supposedly sharpest traders and deal-makers, most notably Goldman Sachs, not to mention the international watchdogs whose job it is to detect and prevent this very behavior, Low used his ill-gotten millions to finance election campaigns, invest in multi-million dollar mansions, and even provide funding for the Leonardo DiCaprio-headlining Wolf of Wall Street, a film that dramatizes the insanity and brazen excesses of the financial industry itself (seriously, we’re not making this up). Low is now, somewhat inevitably, a fugitive from the US Department of Justice.
Wright and Hope, both award-winning journalists at the Wall Street Journal, tell the story with panache and an eye for revealing details. As the sheer madness of what occurred flows off of page after page, you might be forgiven for thinking you’ve stumbled into some alternate reality where absolutely nothing is what it seems.
Or just fallen into a hell of unrestrained capitalism’s own making……..
All the Devils Are Here: The Hidden History of the Financial Crisis
by Bethany McLean, Joe Nocera
McLean, whose previous articles and book-length journalism on Enron made her an internationally acclaimed Wall Street journalist, returns with her colleague Joe Nocera to provide one of the most detailed deep-dives on the origins, decades in the making, of the 2008 financial crisis. By profiling a dozen or more of the “devils” whose collective and individual incompetence, dereliction of fiduciary duties, and all-encompassing selfishness drove several of their own companies, and nearly the entire financial system, to collapse. All the Devils are Here is a work of ambitious scope, after all, even seasoned financial industry veterans were left scratching their heads trying to make sense of the disaster that unfolded in 2008-09. McLean and Nocera take the reader through the maddening, and purposely opaque, spider-web complexity of the derivative products whose implosion almost brought about a financial apocalypse. It’s a testament to their journalistic experience and clarity of their prose that the reader doesn’t feel overwhelmed by the forest of acronyms (MBS, CDOs, VaR etc.) and comes out with a broad understanding both of the disaster in macro-view, as well as the individual madmen and their personal flaws that exacerbated the rot from within.
So there you have it, our 8 best books for understanding the madness of the stock market. Do you think we missed a classic? Let us know in the comments below.
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