Book Bits | 1.5.13

The Physics of Wall Street: A Brief History of Predicting the Unpredictable
By James Owen Weatherall
Review via Kirkus Reviews
A young physicist and contributor to Slate and Scientific American, Weatherall (Logic and Philosophy of Science/Univ. of California, Irvine) was puzzled when experts began blaming the 2008 economic collapse on physicists who created complex financial instruments for Wall Street. He wondered: What do physicists have to do with the economy? The author explains how physicists have been predicting the unpredictable on Wall Street for 30 years, accounting for such hedge-fund successes as Jim Simons’ Renaissance Technologies, whose staff, loaded with physics and math doctorates, produced a remarkable 2,478.6 percent return in the decade from 1988 to 1998.

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry
By Helaine Olen
Review via The New York Times
It’s rare to come across a realistic and readable book about personal finance. Most are laden with rosy promises, followed by acronyms and turgid advice. Helaine Olen, a freelance journalist, offers an exception with “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry” (Portfolio, $27.95). It’s a take-no-prisoners examination of the ways she says we have been scared, misled or bamboozled by those purporting to help us achieve financial security.
The Land of Too Much: American Abundance and the Paradox of Poverty
By Monica Prasad
Summary via publisher, Harvard University Press
The Land of Too Much presents a simple but powerful hypothesis that addresses three questions: Why does the United States have more poverty than any other developed country? Why did it experience an attack on state intervention starting in the 1980s, known today as the neoliberal revolution? And why did it recently suffer the greatest economic meltdown in seventy-five years? Although the United States is often considered a liberal, laissez-faire state, Monica Prasad marshals convincing evidence to the contrary. Indeed, she argues that a strong tradition of government intervention undermined the development of a European-style welfare state. The demand-side theory of comparative political economy she develops here explains how and why this happened.
The Unloved Dollar Standard: From Bretton Woods to the Rise of China
By Ron McKinnon
Summary via publisher, Oxford University Press
The world dollar standard is an accident of history that greatly facilitates international trade and exchange-even trade not directly involving the United States. Since 1945, the dollar has been the key currency for clearing international payments among banks including interventions by governments to set exchange rates, the dominant currency for invoicing trade in primary commodities, and the principal currency in official exchange reserves…. This book presents a perspective on the role of the dollar exchange rate in undergirding multilateral trade on a global basis, both as a facilitator and as an anchor. Instability in the dollar standard is linked to commodity price bubbles, particularly spikes in the world price of oil in the 1970s and since 2007.
The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk
By Andrew Abraham
Summary via publisher, Wiley
Profiting from long-term trends is the most common path to success for traders. The challenge is recognizing the emergence of a trend and determining where to enter and exit the market. The Trend Following Bible shows individual traders and investors how to profit from this approach by trading like today’s top commodity trading advisors. In this book, author Andrew Abraham stresses the importance of a disciplined, consistent methodology, with stringent risk controls, that allows you to catch big trends, while limiting losses on unprofitable trades. By trading in this manner, he shows you how to successfully achieve market-beating returns over the long term and multiple your trading capital along the way.
Wall Street Values: Business Ethics and the Global Financial Crisis
By Michael Santoro and Ronald Strauss
Summary via publisher, Cambridge University Press
Wall Street Values chronicles the transformation of Wall Street’s business model from serving clients to proprietary trading and explains how this shift undermined the ethical foundations of the modern financial industry. Michael A. Santoro and Ronald J. Strauss argue that postmillennial Wall Street is not only “too big to fail” but also a threat to the economy even when it succeeds. They describe how, more than a year before the government acknowledged the financial crisis, Wall Street icon Goldman Sachs saved itself by misleading its clients and impeding the information flow needed for the efficient functioning of free markets, thereby prolonging the mortgage bubble and adding to the financial and human cost of the crisis.
The Efficient Market Hypothesists: Bachelier, Samuelson, Fama, Ross, Tobin and Shiller
By Colin Read
Summary via publisher, Palgrave Macmillan,
The Efficient Market Hypothesists is the fourth book in a series of discussions about the ‘great minds’ in the history and theory of finance. While the first three volumes in the series examined the Life Cyclists, the Portfolio Theorists and the rise of the quants, respectively, in this fourth book, Colin Read investigates the concept of an efficient market, describing the evolution of thought since the turn of the twentieth century through to the present day and modern financial theory.