Book Bits | 8.25.2012

The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims
By Tamar Frankel
Q&A with author, via The New York Times/DealBook blog
Maybe “Ponzi scheme” should have its own spot in the Dewey Decimal System. Along with biographies of the schemers, a growing stack of scholarly references, legal tomes and articles aims to collect knowledge about this age-old crime. But the latest entry in the category, “The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims” by Tamar Frankel, takes a different approach. While Professor Frankel is a legal scholar who has been on the faculty of the Boston University Law School since 1968, her book explores the psychology of the financial criminals and what makes them tick. She was inspired by a colleague who referred to them as “those mimics of trustworthiness: con artists.” She spent more than a decade researching the book, analyzing more than a hundred Ponzi schemes.

How to Make Money with Junk Bonds
By Robert Levine
Review via CFA Institute
Authored by an experienced professional (Robert Levine was founding president of Kidder, Peabody High Yield Asset Management and later ran Nomura Corporate Research and Asset Management for two decades), How to Make Money with Junk Bonds is a well-written, clear, and occasionally humorous tutorial on investing in speculative-grade corporate debt. All essential aspects of high-yield debt are covered. Credit analysis, the bread and butter of high-yield investing, is explained at a rudimentary level. Levine shows, inter alia, how to calculate interest coverage and financial leverage ratios, why EBITDA (earnings before interest, taxes, depreciation, and amortization) is an imperfect measure of cash flow, and why one would want to invest in high-yield bonds in the first place. As a basic introduction to the high-yield debt market in fewer than 200 pages, the book can’t be beat.
The Missing Risk Premium: Why Low Volatility Investing Works
By Eric Falkenstein
Blog post by author via Falkenblog
Schopenhauer said good new ideas are first ridiculed, then violently opposed, then accepted as obvious. While the idea that low volatility investing ‘works’ is becoming more common, the why remains rather unsettled. I am happy to have my argument neatly summarized in one terse book. Last Christmas it was about 20% larger, but I got it down to about 60k words or 160 pages with about 30 pages of references and endnotes. After years of being rejected by academics, and I guess in some sense this is an end run, as various journals have called my theory ‘obvious’ and ‘wrong’, or that it was ‘not of interest to the general reader of the the Journal of Finance’, or that I was arguing the Earth was flat and wasting their time.
Finance experts know one thing, that risk and return are positively linearly related via a covariance with something that conveniently hasn’t been identified. They are wrong.
Energy for Future Presidents: The Science Behind the Headlines
By Richard A. Muller
Summary via publisher, W.W. Norton
The author of Physics for Future Presidents returns to educate all of us on the most crucial conundrum facing the nation: energy. The near-meltdown of Fukushima, the upheavals in the Middle East, the BP oil rig explosion, and the looming reality of global warming have reminded the president and all U.S. citizens that nothing has more impact on our lives than the supply of and demand for energy. Its procurement dominates our economy and foreign policy more than any other factor. But the “energy question” is more confusing, contentious, and complicated than ever before. We need to know if nuclear power will ever really be safe. We need to know if solar and wind power will ever really be viable. And we desperately need to know if the natural gas deposits in Pennsylvania are a windfall of historic proportions or a false hope that will create more problems than solutions. Richard A. Muller provides all the answers in this must-read guide to our energy priorities now and in the coming years.
The Undercover Economist, Revised and Updated Edition: Exposing Why the Rich Are Rich, the Poor Are Poor – and Why You Can Never Buy a Decent Used Car!
By Tim Harford
Summary via publisher, Oxford University Press
With over one million copies sold, The Undercover Economist has been hailed worldwide as a fantastic guide to the fundamental principles of economics. An economist’s version of The Way Things Work, this engaging volume is part Economics 101 and part expose of the economic principles lurking behind daily events, explaining everything from traffic jams to high coffee prices. This revised edition, newly updated to consider the banking crisis and economic turbulence of the last four years, is essential for anyone who has wondered why the gap between rich and poor nations is so great, or why they can’t seem to find a decent second-hand car, or how to outwit Starbucks. Senior columnist for the Financial Times Tim Harford brings his experience and insight to bear as he ranges from Africa, Asia, Europe, and the United States to reveal how supermarkets, airlines, and coffee chains–to name just a few–are vacuuming money from our wallets.
Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World
By James Dale Davidson
Summary via publisher, Wiley
Davidson points out that with a population just two-thirds the size of that of the U.S., Brazil has created over 15 million jobs in the past eight years, while the U.S. lost jobs. Combining energy independence and vast natural resources, including 60 percent of the world’s unused arable land, and 25 percent of its fresh water, Brazil is the first tropical superpower, offering a whole new frontier for growth. Add in a young population, a relatively underleveraged consumer economy, and a per capita GDP that has more than doubled in the last decade, and you have a recipe for investment success.
Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t
By Steve Forbes and Elizabeth Ames
Video interview with Forbes via C-SPAN
Steve Forbes talked about his book, Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t, a follow-up to his book, How Capitalism Will Save Us. He was interviewed while attending FreedomFest, which was held July 11-14, 2012, in Bally’s Las Vegas Hotel and Casino.
Financial Statistics and Mathematical Finance: Methods, Models and Applications
By Ansgar Steland
Summary via publisher, Wiley
Mathematical finance has grown into a huge area of research which requires a lot of care and a large number of sophisticated mathematical tools. Mathematically rigorous and yet accessible to advanced level practitioners and mathematicians alike, it considers various aspects of the application of statistical methods in finance and illustrates some of the many ways that statistical tools are used in financial applications.