The Finance Professionals' Post

Book Review: The Hedge Fund Mirage

If you want the truth about hedge funds and how to invest in them, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True is a must read. An especially important picture of a major part of financial services, this book provides insight into a field of which little information is publicly available.

Despite the increased fortune hedge funds produce, their investors barely profit. As the book reads, “investors would have made more putting their money into treasury bills instead.” Currently risks and returns favor the hedge fund managers. Of course, this was not always the case. During the 1990s, there were fewer hedge fund investors, which, to some degree, allowed for greater profitability. Owing to this shocking truth, author and hedge fund expert Simon Lack provides an in-depth inside look into the world of hedge funds in an effort to help put the investors back on top.

Book Review: The Growth Map

Ten years ago Jim O'Neill, chairman of Goldman Sachs Asset Management, changed the field of global investing by coining the now iconic phrase, “BRIC”—abbreviated for the four countries that he and his team predicted as the main emerging economies. Brazil, Russia, India, and China—countries that he said would eventually surpass the six largest Western economies, and changed the scope of emerging markets. In his new book, The Growth Map: Economic Opportunity in the BRICs and Beyond, O’Neill provides a firsthand account of the evolution of “BRIC,” and where these countries currently stand. He also introduces a new prediction: the "Next Eleven" countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam. These countries, according to O’Neill’s prediction, will offer great opportunities for investors over the next decade, similar to the BRICs.

Book Review: Grow Globally

An increasingly common company announcement is plans to expand in another part of the world. There are a variety of reasons given, including diversification and the seeking of additional resources. The most common, though, are lower costs and faster growth markets. Major companies like General Electric and Coca Cola are prime examples of successful globalization endeavors.

Book Review: A Contest for Supremacy

The announcement that the United States will base 2,500 troops in Australia is a public recognition of the contest between China and the US for power in the Pacific, where the US has long been dominant. For China, the troop deployment increases fears of encirclement. For the US, it reflects fears of being pushed out or neutralized in this key geography. For an in-depth analysis of what will be an increasing contest, Aaron L. Friedberg's new book is a superb resource. Friedberg, a former fellow at the Smithsonian Institution’s Woodrow Wilson International Center for Scholars, the Norwegian Nobel Institute, and Harvard University’s Center for International, took part in a “review of China's economic performance, political stability, strategic intensions, and military power" during the Clinton administration. This review was the start of the research that produced A Contest for Supremacy: China, America, and the Struggle for Mastery in Asia.

Book Review: Exorbitant Privilege

The phrase "exorbitant privilege" was created in the 1960s by French Prime Minister Valéry Giscard d'Estaing to express his annoyance at what the U.S. dollar’s strength and role allowed the U.S. to do, owing to its then role as the dominator of international currency. As described by author, Barry Eichengreen, exorbitant privilege gave America "the ability to purchase foreign goods and companies using resources conjured out of air." The dollar’s status allowed the U.S. to "import goods and services amounting to $1 trillion in excess of what we export." As this pattern developed, periodic fears that the dollar would end its role as the international reserve currency emerged. To address this fear, Barry Eichengreen presents Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, a timely book on monetary economics and currencies that is clear and easy to read, with elements of drama and excitement.

Book Review: Anglo Republic

Anglo Republic is the story of the remarkable rise and fall of the Anglo Irish Bank—once one of the fastest growing financial institutions worldwide, an in-depth review of how, "a small Dublin bank became too big to fail and too rotten to save—and how it dragged an entire country to the brink of bankruptcy." Anglo Irish had a spectacular rise on the Irish property boom, and an equally dramatic fall into eventual oblivion in 2008. Along the way, the Irish government and bank regulators, management, and board appear to have been largely oblivious to the bubble they were riding, and its end result. While the cast of characters may be unfamiliar to American readers, the book is a graphic chronological record of a bank failure, authored by journalist Simon Carswell, Finance Correspondent of the Irish Times. Carswell covered the Anglo Irish story throughout its peril.

Book Review: Great by Choice

Jim Collins is considered one of the very top management experts, and has written several books that have gained a wide audience. His new book Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All follows in this path. It is carefully researched, clearly presented, and studies a timely topic—why some companies are able to move ahead in times of turmoil and trouble, while others fail to do so.

The Inner Voice of Trading

Trading has become one of the core activities in modern capital markets, and a potentially very rewarding career path. This is evident in the size and growth of hedge funds and proprietary trading. Despite this, there is a scarcity of books on how to become a successful trader. Thus, Michael Martin's new book is especially welcome.

Book Review: The Wizard of Lies

The Wizard of Lies is hard to put down. It reads like a novel. Diana B. Henriques of The New York Times was the go-to reporter for the Bernie Madoff scandal since its beginning in 2008. The first reporter to be granted on-record interviews with Madoff post-arrest, the a recent Times review boasts Henriques “…probably knows more than anyone outside the F.B.I. and Securities and Exchange Commission about the mechanics of the fraud.” She uses that knowledge and resource here to offer an in-depth look into the man behind the $65-billion-dollar Ponzi scheme that rocked the nation.

Book Review: Reckless Endangerment

Is the love of money in fact the root of all evil? Perhaps. It was overwhelming greed and overreaching ambition that led to one of the greatest economic downturns of our time, the 2008 Recession, also dubbed the "Great Recession". 

This recent financial crisis resulted in a mass demand for literature which details the facts surrounding the financial meltdown. Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led To Economic Armageddon  is the best book on the roles of major mortgage companies, Fannie Mae and Freddie Mac, who intensified the housing boom through the pursuit of loans and agressive lobbying.

Book Review: The Global Economic System

The financial crisis that began in 2008 continues to produce aftershocks, and the way in which the current troubles will be resolved remains unclear. The impact of liquidity shock in today’s Great Recession, as well as in the Great Depression and Japan’s Lost Decade, is the subject of a new book by George Chacko, Carolyn L. Evans, Hans Gunawan, and Anders Sjöman. In The Global Economic System: How Liquidity Shocks Affect Financial Institutions and Lead to Economic Crises , these authors present their analyses and conclusions in a systematic, easily understood fashion, illustrating their points with well-chosen and instructive charts.

Book Review: The Most Important Thing

Howard Marks is chairman and co-founder of Oaktree Capital Management, which has over $80 billion in assets under management. His book The Most Important Thing: Uncommon Sense for the Thoughtful Investor is based on periodic memos sent to customers and serves as a clear presentation of his investment philosophy. Risk—“the most interesting, challenging and essential aspect of investing”—is at the core of his approach. A few years ago, his thinking would have seemed old fashioned; the recent financial crisis has made it relevant again. Marks’ decades of experience lend his book extra credibility.

Book Review: What Would Ben Graham Do Now?

In his new book, What Would Ben Graham Do Now?: A New Value Investing Playbook for a Global Age, Jeffrey Towson offers a unique glimpse into global investing at the very top levels of sophistication. Towson was head of direct investments for the Middle East, North Africa, and Asia Pacific for Prince Waleed, one of the most successful global investors. Towson adapts Benjamin Graham’s value concept to a world that is vastly different from the one Graham knew.

Pulp Finance

The tumultuous life of Wall Street has always fascinated American novelists, often (though not always) emerging from their pens in the form of potboilers, or pulp fiction—thrillers, murder mysteries, or hardboiled noir. And despite the fact that this literary subgenre has been alive and well for more than a century, the depiction of the hero (or antihero) has changed little in that time. In the popular imagination, the analyst or investment banker is rarely harried or cowed, drab or meek. Whether the protagonists of these novels are idealistic crusaders for free markets and fair play, or the scheming, sneering villains of insider deals and underhanded intrigue, they almost always embody American finance as a figure of daring—glamorous, breakneck, and dangerous!

Understanding China’s Economic Indicators

China moves the markets. The world’s second largest economy, biggest source of growth, and most important consumer of commodities is an increasing focus of attention for investors.

But answering even simple questions about the size and growth of the Chinese economy is not straightforward. The official data is haunted by controversy, with widespread doubts about its accuracy.

Writing Covered Calls

These days, it is hard to find investments with the potential to generate attractive returns without taking on too much risk. At the conservative end of the spectrum, bond yields are well below historical norms. The average bond now yields just 2.5%/year, below the typical rate of inflation. If interest rates should recover to more normal levels, today’s bond investors would have locked in at paltry yields and may also suffer big losses in the value of their investments (particularly if they have invested in bond mutual funds as opposed to individual bonds). But, on the other hand, the stock market appears very risky after losing more than 50% from the top in 2007 to the bottom in March 2009 and after falling 16% from April-July in 2010 in response to the European debtcrisis.

What Would Ben Graham Do Now?

THE STRUGGLE TO GO GLOBAL

Going global as an investor is conspicuously problematic—particularly for the value crowd. When we dig into the public markets in places like China and India, we find that corporate behavior is far different from what we have learned to expect in the United States and Europe. The companies just don’t appear to be very stable, making calculations of a useful intrinsic value difficult. In fact, the economies themselves appear to be changing rapidly (that is, developing). Additionally, information, even in published financial reports, appears questionable. Unless you’re investing short-term, it’s a struggle to invest in changing companies in changing environments with limited and/or incorrect information.

Iron Condor Spread Strategies: Timing, Structuring, and Managing Profitable Options Trades

The purpose of this essay is to improve your ability to trade iron condor option spreads. Iron condors have become a very popular spread type among active options traders, but there is little detailed or quantitative information available about the best way to employ these spreads. As participants in the crash of 2008 and the intense bull market of 2010 can attest, the static “set-it-and-forget-it” method with which some novice traders approach iron condors does not produce ideal results. In the following, I will consider the circumstances in which it is appropriate to enter a condor spread, key techniques and considerations when structuring spreads, and will present some backtested historical returns for a few strategy variations.

Book Review: Managing the China Challenge

Managing the China Challenge: How to Achieve Corporate Success in the People's Republic is an authoritative guide to China’s intricate political and business structure. Author Kenneth G. Lieberthal is the director of the John L. Thornton China Center at the Brookings Institution and was senior director for Asia on the National Security Council from 1998 to 2000. His new book is essential reading for anyone investing or doing business in China, where “the state is always your partner.”

Book Review: The Forbes CFA Institute Investment Course

The Forbes/CFA Institute Investment Course: Timeless Principles for Building Wealth is a great introduction for the beginner investor as well as a great refresher for seasoned investors and finance practitioners. It explores a myriad of important topics, such as how stocks have historically outperformed cash and fixed-income investments, the various investment asset classes, asset allocation, the pros and cons of active versus passive investing, and how to determine your unique risk profile and investment horizon and how to use both to help define your investment goals. Additionally, the reading provides a strong appreciation for risk management as a counterbalance to the return-seeking attitude that many investors exhibit, as well as an effective comparison and contrast between fundamental and technical analysis.

Microsoft Excel for Stock and Options Traders: Build Your Own Analytical Tools for Higher Returns

In August 2010, Cisco stock (ticker: CSCO) hovered just a few cents below $25. Several analysts identified the stock as a strong buy. They pointed to the rising demand for network infrastructure that, among other things, was being driven by explosive growth in online video gaming and Internet television. Cisco, they believed, would continue to dominate the consumer market while benefiting from a weak dollar and low manufacturing costs. They must have been wrong because the stock fell 15% when earnings were released on August 11. The price continued to decline until August 31, when it bottomed out at $19—24% below its previous high. About the time that everyone had given up and turned bearish, the stock began to rally. On November 10 the price was, once again, back up to $24.50. Then came another earnings report and another sharp decline. The price immediately fell 16% and continued plunging until, on December 3, it once again bottomed out at $19. These bizarre dynamics played out a third time, with the stock rallying steadily to $22 on February 9, 2011, before falling back to $18.92 the very next day after earnings were released—another 14% decline. Figure P.1 displays Cisco closing prices from June 1, 2010, to February 11, 2011.

Book Review: When China Rules the World

The rise of China and the potential economic and political decline of the United States is a concern for many Americans. In When China Rules the World: The End of the Western World and the Birth of a New Global Order, Martin Jacques depicts a world in which Chinese influence is paramount. He challenges the assumption that China will adopt Western values. Chinese modernity, he argues, would be very different from Western modernity, and China would transform the world far more fundamentally than any other global power has done in the last two centuries.

Book Review: The Big Secret for the Small Investor

Joel Greenblatt is a master of succinct and humorous writing about investment. He is also the founder and portfolio manager of hedge fund firm Gotham Capital and an adjunct professor at Columbia University’s Graduate School of Business, where he teaches courses in value investing. His latest work, the smart and simple The Big Secret for the Small Investor: A New Route to Long-Term Investment Success, would have saved me several years of research on the art of investing, had it been part of the CFA curriculum in the 1990s.

Book Review: The Origin of Financial Crises

In The Origin of Financial Crises: Central Banks, Credit Bubbles, and the Efficient Market Fallacy, Dr. George Cooper, a former head of fixed income at JPMorgan Chase and currently a principal at Alignment Investors, argues that credit excesses are the wellspring of financial crises. Cooper’s book is a vigorous indictment of the EMH (efficient market hypothesis), in which laissez-faire economic theories are applied to financial markets. He skillfully dismantles the prevailing theoretical paradigm, which has failed to predict or explain the recent carnage in financial markets, and suggests an alternative based on economist Hyman Minsky’s financial instability hypothesis, which Cooper contends better fits recent market facts. Applying Minsky’s theory, Cooper proposes modifications of the mandates of central banks and suggests prescriptions for the current economic malaise. The book is a deftly reasoned contribution to the torrent of criticism surrounding orthodox financial market theories.

Profiting from ETF Rotation Strategies in Turbulent Markets

In today’s volatile financial markets, many investors are having a hard time deciding whether or not to be invested in equities and/or bonds. After the stock market turbulence and two severe bear markets of the past decade, as well as the uncertainty about the future, you are probably more cautious than ever about your investments. You might have moved to bonds, relied on mutual funds, followed the broker-friendly “buy and hold” strategy, or deposited your funds in a money market fund (“cash”). You might have made your decisions based on emotion, rather than discipline and fact. You are not happy with the results. So, how can you do better?

Book Review: Money and Power

In his New York Times bestsellers The Last Tycoons and House of Cards, William D. Cohan showed how the history and culture of Lazard Frères and Bear Stearns, respectively, led to the firms’ ultimate fates. He applies the same historical approach in his new book Money and Power: How Goldman Sachs Came to Rule the World.

Goldman Sachs is known for its strong corporate culture. Corporate cultures were typical of outstanding companies in the past and are seen in newer companies like Google, but are not very common in the contemporary financial industry. In contrast, culture continues to be at the heart of Goldman’s business. Cohan takes up a key issue that has been raised by the media and federal investigations—namely, whether the firm’s mission statement and guiding principles were eroded or ignored in the push for big, fast profits.

Book Review: The Snowball: Warren Buffett and the Business of Life

There’ s no shortage of Buffett books out there. For insight into his strategy, McGraw–Hill’ s 2008 edition of Benjamin Graham’ s classic Security Analysis, which features an introduction by Buffett, is the way to go. For behind-the-curtain revelations about Berkshire Hathaway’ s annual meetings, nothing beats Jeff Matthews’ s Pilgrimage to Warren Buffett’ s Omaha. But Alice Schroeder’ s The Snowball: Warren Buffett and the Business of Life gives the fullest, most nuanced picture of both the personal and professional man.

Book Review: The Intelligent Entrepreneur

You don’t have to be a Harvard graduate to glean wisdom from The Intelligent Entrepreneur: How Three Harvard Business School Graduates Learned the 10 Rules of Successful Entrepreneurship. Author Bill Murphy Jr. relates his 10 rules—including “find a problem, then solve it”; “think big, think new, think again”; and “persist, persevere, prevail” —to the stories of three HBS alumni who launched successful start-ups within 10 years of their graduation in 1998. However, anyone wishing to start a business can, and should, put these rules into practice.

Mental Aspects of Day Trading

Throughout my years in the futures industry, I have come to a conclusion in regards to the difference between winning and losing as a trader. In my opinion, the primary characteristic of successful traders is the ability to stay calm through thick and thin. This means avoiding the panic feeling that overcomes logic when trades are going against the speculation, and resisting the over-confidence that can come with a few winning endeavors. Each of these symptoms can have a severely negative impact on future trading decisions and profitability.

Book Review: Panic: The Story of Modern Financial Insanity

Michael Lewis’s anthology Panic: The Story of Modern Financial Insanity examines four events, linked but distinct, that span a period of just over twenty years: the 1987 crash, the Asian crisis, the dot-com bubble, and the subprime crisis. Lewis has collected book, newspaper, and magazine articles written before, during, and shortly after each crisis; the contemporaneity of the analyses with the events precludes any hindsight or backward thinking. Instead, Panic is comprised of unfiltered accounts, admissions of bewilderment, clumsy stabs at solutions, and some examples of far-sighted predictions.

Book Review: King of Capital

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone, by David Carey and John E. Morris, recounts the history of one of the financial industry’s most successful firms and one of the current generation’s top financiers. It also offers an education in the world of deals, and in coping with management challenges.

Crapshoot Investing

Picking out a single stock for one’s portfolio had become a mug’s game, the equivalent of buying a lottery ticket. So, too, had long-term investing. Investors who had lost their shirts in 2007 and 2008 now held onto their investments for shorter periods. They had been badly scalded by following the conventional wisdom about stocks being the superior investment over the long term. Like sage cats, they’d never again jump on that stove top. The game now was to make 15% to 20% in a few weeks like the big boys at the hedge funds.

Book Review: Digging for Disclosure

Fraud is an occupational hazard for even the most scrupulous financial professionals and their firms. Cases of fraud typically come to light during a financial collapse. The Madoff scandal is the most infamous case of financial fraud in our time, but it is just one case. If history is any guide, more schemes will be perpetrated, and exposed, in the years ahead.

In addition to the monetary cost, fraud takes a huge huge toll on the reputations of companies and their employees. The innocent as well as the guilty can get swept up in the intense media coverage, government investigation, and litigation that ensue from a scandal. Kenneth S. Springer and Joelle Scott’s new book, Digging for Disclosure: Tactics for Protecting Your Firm's Assets from Swindlers, Scammers, and Imposters , teaches you how to spot fraud in advance and avoid becoming another victim.

The Keynesian Endpoint

After Lehman fell, the scope of the financial crisis became so great that the fiscal and monetary authorities throughout the world possessed the only balance sheets large enough to resolve the crisis. In essence, the ills of the private sector were set to shift to the public sector. The sense at the time was that it would work; after all, the borrowing ability of the United States and the rest of the developed world were proven, and the ability of central banks to print money was and remains indisputable. Nevertheless, there was a sense of discomfort in the supposed solution.

Book Review: Hedge Fund Alpha

Generating and understanding performance are two distinct processes that often require different skill sets and are typically performed by different arms within a hedge fund organization. The former falls under the realm of the portfolio manager; the latter is often provided by the CFO, COO, or investor-relations functions at the hedge fund. Editor John Longo skillfully combines explanations of both processes in the Hedge Fund Alpha: A Framework for Generating and Understanding Investment Performance.  The essays in this book elucidate what the alpha-generation process is, as well as how the outcome of that process is assessed, evaluated, and monitored. While these are separate questions, there is a feedback mechanism between the two, which reinforces the importance of understanding both topics.

Three Paths to a Prosperous Future

The first decade of the twenty-first century has not been kind to investors. On average, stocks lost about 1% per year over the ten-year period or more than 10% for the entire decade. During the decade we saw the collapse of three bubbles: the dot-com boom came to an end in 2000, the meteoric rise in housing prices in the middle years of the decade reversed sharply in 2007, and then in 2008 the massive over-leveraging of the banking system came home to roost, very nearly destroying the economy.

How Do You Know the Volatility Risk Premium Exists?

Any option contract can be replicated with cash and a series of trades in the underlying asset. Given a perfectly priced option, a trader who buys the option and transacts the offsetting trades in the underlying will have no gain or loss at expiration (before transaction costs).

Book Review: The Age of Deleveraging

As the US recovers from its longest and deepest recession since World War II, financial practitioners and economists have varying opinions on the future of the global and American economies. In  The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation, A. Gary Shilling argues that the global economy is experiencing a prolonged period of deleveraging and muted growth that will make deflation a likelier and greater threat to investors than inflation. Shilling is president of A. Gary Shilling & Co., an economic consulting firm and a registered investment advisor, and a former economist at Merrill Lynch.

Book Review: Bust—Greece, the Euro, and the Sovereign Debt Crisis

In his new book, Bust: Greece, the Euro, and the Sovereign Debt Crisis, Matthew Lynn provides a thorough and fast-paced account of Greece’s role in the decline of the euro and the impact felt by the rest of Europe. Lynn, a financial commentator and writer for Bloomberg Television, Bloomberg News, MoneyWeek, and Spectator, is well equipped for the task.

The reader will find it astonishing that Greece was ever admitted into the euro and lent money. Rife with economic dysfunction, governmental incompetence, and corruption, Greece has been “stuck in the past, and largely unable to compete in the modern world.” The annual household budget for bribes to get anything done is estimated at 1,500 euro. Lenders were well aware of Greece’s situation.

Michael Covel on Trend Following

Accepting the inevitability of change is the first step to understanding trend following philosophy. One trend follower described it:

“But what won’t change? Change. When a period of difficult performance continues, however, most investors’ natural conclusion is that something must be done to fix the problem. Having been through these draw downs before, we know that they are unpleasant, but they do not signal that something is necessarily wrong with the future. During these periods, almost everyone asks the same question in these exact words: ‘Have the markets changed?’ I always tell them the truth: ‘Yes.’ Not only have they changed, but they will continue to change as they have throughout history and certainly throughout our 19 years. Trend following presupposes change. It is based on change.”

Markets go up, down, and sideways. They trend. They flow. They surprise. No one can forecast a trend’s beginning or end until it becomes a matter of record, just like the weather. However, if your trading strategy is designed to adapt to change, you can take advantage of the changes to make money.

Four Investing Fundamentals Everyone Needs

The majority of investors—even those who swear they follow fundamental indicators—tend to act on and react to the market chaos seen in the daily action of the DJIA and stock prices. The short-term price movement in the market is always chaotic and, as confusing as this is, it can become your greatest advantage.

If you pick stocks based on the identification of four key fundamental indicators, you narrow down your list to the best companies. If you then time your entry on the price dips in the market, you can buy those companies at bargain prices. Two key rules should always be kept in mind. First, pick companies and stocks based on sound fundamental analysis. Second, time your purchase based on value and avoid relying on passing fads.

Book Review: Fallen Giant

Though the title would suggest that Fallen Giant dissects the collapse of AIG, nearly two-thirds of this book is given over to a chronological analysis of how AIG became an insurance powerhouse.

Author Ron Shelp, who worked for AIG and served on a number of the company’s boards, does a great job of delving into individual personalities and their motivations, leaving the reader with a front row seat to AIG’s genesis, growth, and fall from grace.

Iron Condor Options: Placing a Trade

Indexes are probably the best instruments to trade condors, and the SPX, RUT, and NDX are the best of this group. The two main reasons are liquidity and their use of European-style options. The greater the liquidity, the easier it is to execute the trade, and European-style options increase your safety by eliminating the risk of early exercise.

The buying and selling of contracts takes place through an auction process. The bid represents what the buyer wants to pay, and the ask is the price the seller is seeking. There is no right way or wrong way to approach the bid-ask spread, but how you negotiate the price will result in different outcomes in your trading.

Commodity Market Fundamentals

All markets are valued by a simple function between supply and demand; or at least that is how it seems throughout the typical economics 101 course. However, in reality, the components of supply and demand are highly complex and, some will argue, might be too overwhelming to effectively use as a speculative tool. Nonetheless, even those looking to trade commodities via technical analysis should have an overall idea of what might be impacting the data displayed on a price chart. It would be impossible to delve into market fundamentals in great depth within the scope of this writing, but I hope that you gain an understanding of price determinants and the ability to prioritize available information.

Book Review: Best Practices for Equity Research Analysts

“This book wasn’t written simply to help analysts improve, but also to give them the competitive advantage to move to the top 10 percent of their peers,” writes James J. Valentine, CFA, in the preface to Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts. Ranked by Institutional Investor as one of the top three analysts in his sector for 10 consecutive years, Valentine served as Morgan Stanley’s associate director of North American research and director of global training and development. He brings his 16 years of experience to bear on problems faced by today’s analysts and offers real-world solutions that either he or the professionals interviewed in the book have implemented.

Book Review: Brazil on the Rise

Brazil is a country that has become an industrial and agricultural superpower in the world market. However, it is a country still not well known to many and “hardly on the radar screen" to most Americans. Larry Rohter’s new book, Brazil on the Rise: The Story of a Country Transformed, is an excellent introduction to Brazil. He was in Rio de Janeiro for 14 years as a correspondent for Newsweek and the New York Times.

Book Review: The Facebook Effect

In The Facebook Effect: The Inside Story of the Company That Is Connecting the World, David Kirkpatrick offers a detailed account of the birth and growth of one of the most important companies of our time. A former senior editor for Internet and technology at Fortune, Kirkpatrick makes use of liberal access to founder Mark Zuckerberg and other Facebook executives to explore the company’s history, future, and global impact.

Like the founders of Google, Zuckerberg is the product of an elite education and early involvement with the Internet. Kirkpatrick portrays him as a dramatic visionary and gifted creator. Despite the college dorm culture in which he lived, Zuckerberg made connections with several influential CEOs and Internet venture capitalists. His key contributions to the growth of the social media tool were the news feed, applications translation tools, and ability to handle photos. Like many Internet pioneers, he focused on growth, market dominance and social impact; he had little interest in generating revenue and relied on external financing.

Why Are Systems Necessary?

No stock market goes up forever. Indeed, most world stock markets have declined to zero at one time or another. The buy-and-hold strategy so popular in the U.S. today is based on a statistical anomaly. It is a strategy based on a survival bias in the U.S. and the U.K. markets, the only countries in history, so far, whose markets have not completely disappeared at some time (Burnham, 2005). This has caused a misleading assumption that U.S. stocks and stocks in general will necessarily continue to rise. “It would be naïve to expect the future of U.S. stocks to be as bright as the past” (Burnham, 2005, p 175).

Preferred Stock Versus Common Stock: Relatively Safe and High Yielding Versus Potential Growth in Income and Share Value

There are basically two categories of dividend paying stocks: preferred shares, all of which pay dividends, and dividend paying common shares.

PREFERRED SHARES

Preferred shares are a sort of cross between shares of common stock and regular corporate bonds—generally providing higher income than either, but with certain disadvantages compared to both.

Book Review: Fool's Gold

When Fool's Gold opens in 1994, a group of young, bright JPMorgan bankers from the swaps department meet in Boca Raton, Florida, for an alcohol-fueled weekend of frat-house pranks and intense financial discussions. At these meetings they generated an idea that would change modern finance: how to use derivatives to manage credit risk attached to the loan book of banks.

Tracing the history of the derivatives team from the Boca Raton meeting to the beginning of 2009, Gillian Tett describes the genesis and fall from grace of the booming credit derivatives market, and how the use and abuse of once-obscure products such as CDSs (credit default swaps) and CDOs (collateralized debt obligations) brought the world to the edge of a depression.