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Book report: Lowenstein's "Origins of the Crash"
Old 03-05-2006, 10:07 PM   #1
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Book report: Lowenstein's "Origins of the Crash"

Lowenstein is one of my favorite financial authors-- you may remember his Buffett biography and his analysis of the LTCM failure.

This time he's writing about a subject that's been covered in excruciating detail by a few other books: Frank Partnoy's "F.I.A.S.C.O." & "Infectious Greed", Kurt Eichenwald's "Conspiracy of Fools", "Serpent on the Rock", & "Smartest Guys in the Room", James Stewart's "Disney War", Andy Kessler's "Wall Street Meat" & "Running Money"... you get the idea.

Lowenstein's advantage is that he manages to summarize 25 years in about 250 pages instead of the thousands covered by the other books. If you've read a couple books in the previous paragraphs then you don't need to read this one. However, if you haven't read any of them, then "Origins" is a Cliff Notes summary that'll help you decide if you want to dig deeper.

He starts in the '80s with the spread of junk bonds & derivatives. As the bull market gets going he focuses on the SEC's inability to keep up with changes in technology, CEO pay, options, auditing, financing, and legislation. He points out that Levitt's attempt to shut off the auditing/consulting conflicts in the mid-90s almost caused Congress to cut the SEC's funding... pretty ironic when you consider how much money was lost over the next decade. He spends a chapter on Enron as a metaphor of the entire bull market and the dot-com craze, and he runs through all the major personalities during the rest of the era.

Of course the book's advantage is also its flaw-- he can't go into enough gory detail. He also had too much to cover, so he missed some issues that have been corrected by subsequent research. (Enron did freeze their employee 401(k) plan for a custodian change, but the freeze was announced weeks in advance and the stock price, although down in the single digits by this time, actually rose during the freeze.) Finally, he published in 2004 so he wasn't able to put a coda on the good stuff like the Martha Stewart & Waksal trials, the Rigas' implosion, or the Lay/Skilling trial.

So maybe he'll put out a 2007 edition...


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Re: Book report: Lowenstein's "Origins of the Crash"
Old 03-06-2006, 01:12 AM   #2
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Re: Book report: Lowenstein's "Origins of the Crash"

Haven't read this one (although I loved Lowenstein's other two books Nords mentioned), but Maggie Mahar's "Bull!" is a great read about the late 90's bubble and a good look at longer ("secular") bull and bear cycles. Much about the "promoters" (such as Henry Blodgett, who announced Amazon--whose link I put below--was going to the moon) and those who warned that the "irrational exuberance" was just that.

Well worth it, I think. I have the hardback, but I saw in a bookstore that the trade paper version has an afterward with an update.

Another book worth reading for a history of secular cycles in John Mauldin's "Bull's Eye Investing" (since he works for a company that sells hedge funds, I don't take his advice as seriousl in terms of investing solutions). But the numbers and info on secular cycles are very interesting and worthwhile.

I'll check at the library for Lowenstein's book soon!

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