Book Bits For Friday: 4.15.2011

Boombustology: Spotting Financial Bubbles Before They Burst
By Vikram Mansharamani
Interview with author via The Leonard Lopate Show
Vikram Mansharamani, lecturer at Yale University and a global equity investor, explains how to identify unsustainable booms and forthcoming busts. Boombustology: Spotting Financial Bubbles Before They Burst gives an in-depth look at several major booms and busts and shows how to identify upcoming financial bubbles and the tell-tale signs of a forthcoming bust.

Money and Power: How Goldman Sachs Came to Rule the World
By William D. Cohan
Review via The Economist
Once upon a time, the evening before a long Memorial Day weekend, a senior partner of Goldman Sachs kept 40 new recruits waiting in a conference room for five hours, until 10pm, just to teach them the value of patience. The three who left early, overcome by the urge to begin their holidays, were sacked days later. Pointless cruelty? Or a simple way to communicate the corporate culture? The paradoxical message of William Cohan’s compelling history of the world’s most envied and—recently at least—most pilloried securities firm is that much of what Goldman does seems to warrant admiration and opprobrium in equal measure. There is no starker example than the role it played in the global credit crisis when it dodged the bullets that floored many rivals, but did so by cashing in on others’ misery and pushing the bounds of ethics.
Ben Graham Was a Quant: Raising the IQ of the Intelligent Investor
By Steven P. Greiner
Excerpt via publisher, Wiley
Why is alpha so earnestly sought after in modern quantitative investment management? Alpha is the legacy of focus by most analysts and portfolio managers as ordered by chief investment officers (CIOs) because of the history of the field of investment management. In the early days, analysts performed portfolio management, and management meant reading, digesting, and regurgitating balance-sheet information. Prior to 1929, the assets of a firm were the most important consideration, and stock selection was predominately based on how good the book value was. Later, after the 1929 crash, earnings becamemore important, and Graham, in an article in Forbes, said value has come to be exclusively associated with earnings power, and the investor no longer was paying attention to a company’s assets, even its money in the bank. In addition, these early analysts believed (some still do today) that they were ascertaining, by their fundamental analysis, a company’s alpha simultaneously with its risk, and to a certain extent that was true. However, those early analysts never ascertained the co-varying risk this way, only the company-specific risk. This is because the typical fundamental analyst thought of individual companies as independent entities. There was a natural tendency to view investments in isolation, and not to think of the portfolio as a whole or of risks due to co-ownership of several correlated stocks.
Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
By Nicholas Shaxson
Interview with author via Democracy Now!
As millions of Americans prepare to file their income taxes ahead of Monday’s deadline, we look at how corporations and the wealthy use offshore banks and tax havens to avoid paying taxes and other governmental regulations. “Tax havens have grown so fast in the era of globalization, since the 1970s, that they are now right at the heart of the global economy and are absolutely huge,” says our guest, British journalist Nicholas Shaxson. “There are anywhere between $10 and $20 trillion sitting offshore at the moment. Half of world trade is processed in one way or another through tax havens.” Shaxson is the author of the new book, Treasure Islands
Oil’s Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy
By Dan Dicker
Interview with author via CNNMoney
At this time last year, the nationwide average price for a gallon of unleaded was $2.83. That means that gas prices have gone up 87 cents, or 30%, over the last 12 months. “It’s pretty bad and it’s likely to get worse,” said Dan Dicker, an oil trader for 25 years and author of “Oil’s Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy.” Dicker said the nationwide average price for gas could hit $4 again “if we get the regular kind of demand that we get during the summer driving season.”