Saturday, November 08, 2008

Weekend Book Rec

In the headlines today Regulators Shut Banks In Texas, California it was announced that Lewis Ranieri's Franklin Bank was seized by the FDIC. No residential mortgage problems for them, however. They got tripped up by lending to homebuilders and developers. It's the same mistake as far as I am concerned. Two years ago his bank was trading at $20 per share. Friday it closed, perhaps for the last time, at 26 cents per share.

Raineri invented mortgage-back securities back in the 1980s at Solomon Brothers. The story is colorfully told in Liar's Poker - a book I highly recommend - not just for those interested in trading - but for everyone. Learn about Wall Street yourself and you won't have to accept the propagandized crap written and spoken by everyone else.

This book is a must read for aspiring investors/trader/financiers. It'd be at the top of my list with Market Wizards, Den of Thieves, Reminiscences of a Stock Operator, and The House of Morgan. Put another way, if I ever opened a trading firm, these books would be *immediate* and *required* reading for all FNGs. Wall Street ain't that complicated; it hasn't changed much over time; and you can learn all about it by proxy.

I am sure your library has Liar's Poker. Preview it here on Google Book Search.

Yes, that is the same Michael Lewis who wrote MoneyBall. See my prior post - Empiricism - The Only Science.

1 comment:

Anonymous said...

Oh man! This book. No only is it a classic, check out page 80 or so (I can check this later as I have a copy at home and work). On that page, either "goodfriend" or Ranieri (sp?) talk how AWFUL these CDO's are but yet went on to sell a ton of them. The problem, they say in the book (and as I recollect) was the pre-payment option. They felt it was an awful investment as the borrower could 'pay back' the loan at any given time for par and they'd lose all the interest they were 'counting' on. Funny. How prescient was that book?! Reminds me a lot of my WFC call - muhahaha.