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Christmas tips for finance bookworms Back  
Can’t quite stop thinking about work over Christmas? For those of you who may feel lonely away from the world of finance, Alan Soughley and Fiona Reddan present a brief overview to some of the best financial books – both classic and new – that will keep you busy over the Christmas holidays.
BBBBBBarbarians at the Gate, Bryan Burrough and John Helyar, Arrow, 1990
Barbarians at the Gate has become a classic account of greed run wild for business and non-business readers alike. As a cautionary tale of just how dirty corporate executives will play when the stakes are high enough, it has had few equals – at least until the collapse of the financial house of cards caused by the Enron debacle. It describes, in fascinating and minute detail, the story of the largest corporate take-over in American history. With a stake of $25 billion, the bitter boardroom fight for control of RJR Nabisco during October and November 1988 has become an enduring symbol of the greed and power-mongering of the eighties. Burrough’s and Helyar’s account of the intrigue, brinkmanship and sheer aggression of the takeover battle has long been regarded as the template for how to write a business book – piercingly informative, exciting and possessed of a logical progression water tight enough to satisfy the most demanding of readers. The authors are clearly fascinated with the personalities of the players in the deal and with the trappings of corporate wealth and from boardroom to, quite literally, bedroom, readers are treated to a gripping narrative of deals, publicity flaks, strategy meetings and society dinners, in what is not just a detailed look at how financial operations at the highest levels are conducted, but also a richly textured social history of wealth at the twilight of the Reagan era.

Hedge Funds – The Courtesans of Capitalism, Peter Temple, John Wiley & Sons, 1998
Temple’s comparison of hedge funds and the courtesans of old is less of a fanciful analogy than one would initially believe. Like the high class prostitutes that courtesans essentially were, the hedge fund is the preserve of the wealthy - secretive, seductive, exciting, and, perhaps most dangerously, often outside the scope of the law.

This is an an account of hedge funds, their pull on global financial markets and how they effect us all without our knowledge. It describes how, despite the intentions of their originator, Alfred Winslow Jones, they have often contributed to market volatility, broken currencies, bankrupted economies and threatened to destabilise the financial system. George Soros’ puncturing of the British pound in the early 1990s is just one example of the devastating effect of these vehicles. Jones’ idea was to generate profits while attempting to eliminate market risk, and thereby shift the onus of the fund away from the notoriously precarious art of predicting the direction of the overall stock market. To do so, he picked both undervalued stocks, which he would buy, and overvalued stocks, which he would sell short. His idea was spectacularly successful; over the first five years of his fund’s life, it outperformed its nearest rival by 44 per cent and over 10 years this outperformance jumped to 87 per cent. However, in a era that demands the stakes be constantly upped, hedge fund managers have moved light years away from Jones’ modest and common sense approach to finance and the benefits of such vehicles are increasingly hard to measure, unless, as Temple pointedly remarks, you are a hedge fund manager. This insightful book offers that rarest of critiques – historically aware, technically proficient, yet socially and morally concerned with its subject.

He describes how hedge funds can be utilised to great benefit for all involved, yet does not shy away from questioning the culture of fund managers that has led to spectacular failures such as Nick Leeson’s single handed destruction of Barings, while also raising the moral issue of retail banks’ involvement in hedge funds and the lack of enforceable regulation of the industry.

Liar’s Poker, Michael Lewis, Hodder and Stoughton, 1989
A real life ‘Bonfire of the Vanities’, whose author Tom Wolfe called it the ‘funniest book about Wall Street I have ever read’, Liar’s Poker has become one of the most famous financial books ever written, and a must-read for anyone interested in the real-life workings of trading desks.

The book traces author Michael Lewis’ journey from art history student at Princeton University, to lowly geek with Salomon Brothers in New York and London, to his eventual triumph at the bank as a ‘Big Swinging Dick,’ during the heady mid-1980s, when the bank was one of the world’s most powerful and profitable merchant banks. Encountering many memorable characters along the way including the ‘Human Piranha’, Lewis gives an insiders’ view on the workings of investment banks at the time. One of his colleagues at the time was Lewis Ranieri, who famously coined the term ‘securitisation’, and was involved in the creation of the US mortgage-backed bond industry. A true storyteller, Lewis makes the world of bond traders, and their outrageous behaviour, accessible for all, including those who would have no prior knowledge of financial markets. Essential.

When Genius Failed: The Rise and Fall of Long Term Capital Management, Roger Lowenstein, Fourth Estate, 2002
‘How One Small Bank Created a Trillion-Dollar Hole When Genius Failed’ is the extraordinary final installment in a financial saga that began with the gambling on the futures markets in the 1980s. It is the conclusion of the poker players so memorably depicted in Liar’s Poker and, fictionally, in Bonfire of the Vanities. By 1994 John Meriweather, the pivotal figure on the trading floor at Salomon Brothers during the 1980s when the firm had made $500 million annual profits in arbitrage alone, was out of work. To fill his time, he created a financial institution as much a product of the era of the 1990s as the futures floors had been in the 1980s: a hedge fund, named Long-Term Capital Management. Meriweather took to LTCM the brightest of his disciples from Salomon and added Nobel prize-winning economics from Harvard. The team believed that it could outsmart the markets in a strategy of hedge betting, leveraged to levels previously unseen. Even a small percentage profit could be turned into a huge financial gain if the stake placed was big enough. So LTCM bet big, very big. Hedge funds are the equivalent of private clubs on Pall Mall or exclusive Oxbridge colleges: you have to be invited to join. LTCM’s partners quickly included every bank on Wall Street and many of Europe’s premier banks as well. They built up a fund of $100 billion. Which meant that they could really put some money down.
And they made spectacular profits for a while. Until the pressure to keep achieving led to increasingly risky speculations and less protected gambles. When the markets in Brazil, Indonesia and Russia all crashed within months of each other it was as if a wrecking ball had ploughed through LTCM. But because they had continued to leverage their investments at very high multiples the effect was shared throughout the world’s banks. When LTCM went down it threatened to open up a trillion-dollar black hole, a financial abyss that could have busted a continent and an entire banking system. In a classic tale of greed, ambition, pride and overbearing confidence in their ability to beat the market, Meriweather’s poker players play out their last hand.

‘Infectious Greed – How Deceit and Risk Corrupted the Financial Markets’, Frank Partnoy, Profile Books, 2004.
From the author of F.I.A.S.C.O. Blood in the Water on Wall Street comes another rip-roaring tale of life in the financial markets. Focusing on the deception and manipulation that led to the collapse of major corporations such as Enron, Global Crossing and Worldcom, Partnoy details how the financial system came unstuck.

Beginning in the mid-1980s with the introduction of the first proto-derivatives, and going through such high-profile disasters as Barings Bank and Long-Term Capital Management, Partnoy documents how each new level of financial risk and complexity both obscured and aggravated the sickness of the company in question. Drawing on his experience as a securities attorney, financial analyst and law professor, Partnoy describes how major corporations imploded, prey to a greed-driven culture and dubious or illegal corporate finance and accounting.

‘Paul Volcker – The Making of a Financial Legend, Joseph B. Treaster, John Wiley & Sons, 2004
Paul Volcker may not be a name that immediately springs to mind when compiling a list of financial heroes, but in this insightful chronicle by New York Times reporter Joseph B. Treaster, the former head of the US Federal Reserve is credited with no less a feat than almost single handedly saving the biggest economy in the world in the early 1980s when an inflationary cycle threatened to cripple future its prosperity. Volcker served as chairman of the Federal Reserve through the Carter and Reagan administrations and was viewed by financial markets as the second most powerful person in America; later he became a university professor and investment banker.

Treaster charts Volker’s life from his brilliant university career at Princeton and Harvard through his early days as a young Treasury Department official during the Nixon years and his leading role as Treasury Department undersecretary in ending the Bretton Woods system, to his appointment as president of the New York Federal Reserve Bank and subsequent tenure as chairman of the Federal Reserve via anecdote and sharp pinpointing of the economic issues facing Volker at each turn.

Subjects such as Volker, who has spent his working life in what surely must be one of the least glamorous roles of public service, rarely lend themselves to in-depth psychological analysis yet, to his credit, Treaster’s discussion of Volker’s personal life is still adequate, offering sufficient anecdotal insight into the development of a highly meticulous and logical personality, imbued with a natural gravitas due to his great height of six foot seven inches, to convince readers that they are dealing with a man, and not merely the embodiment of economic theory. This is significant because when it came to public perception, Volker was enormously unpopular due to his now legendary policy of hiking rates to cut money supply, a strategy which caused enormous pain for ordinary workers struggling to hold down jobs and pay mortgages. While this hardship caused Volker personal anguish, he insisted it was the only medicine capable of curing the malaise of inflation he saw as the single greatest threat to the American economy. And, of course, the issues facing Volker have not disappeared today. While inflation may have been tamed, that other bete noir of the central banker – the budget deficit – is still threatening to derail the US economy – George Bush take note!

Although a hero to the world of finance, it is only recently that Volker, through roles as diverse as negotiating the settlement between Swiss banks and victims of the Holocaust, and as honest broker at the the Enron debacle, has been seen by the public as the man of integrity and ability that he clearly is.

‘Ryanair, How a Small Irish Airline Conquered Europe’, Siobhan Creaton, Aurum Press, 2004
The rise and rise of Irish budget airline Ryanair from basket case to the largest and arguably the most successful carrier in Europe at present has been a source of wonder for many observers, a cause for concern for others, but for most consumers, a reason to cheer as low cost air travel has become a reality across the Continent. Irish Times journalist Siobhan Creaton’s chronicle of the Ryanair success story and the driving personality of its controversial chief executive Michael O’Leary offers a fascinating insight into just how Tony Ryan’s money pit was transformed into a treasure chest.

One of the most striking aspects of the story, as told by Creaton, is the sheer simplicity of O’Leary’s strategy – cut costs wherever possible without regard for who is offended, be they passengers or staff, and thereby create a culture where a cent is only spent if it can be proved to O’Leary’s satisfaction that there is no alternative. Sure, Ryanair’s basic business model, as inspired by the legendary Texas based Southwest budget carrier, is solid – fly to out of the way airports so desperate for the business that they will cut charges to a minimum, then sell off seats that would otherwise be empty at knockdown prices to build capacity – but it is the micro management of the cost base that really keeps Ryanair’s bottom line in top shape, not to mention the very selective application of bargain prices. But this book is far more than a mere assessment of a business plan come good, it also offers a revealing insight into the disturbing transformation of what started out as a public service ethos to a ruthless drive for success. Readers will be amused, if somewhat surprised to be informed that in its initial mission statement, Ryanair stressed the importance of treating passengers with courtesy and respect – hardly an attitude one associates with O’Leary’s view of the airline as the equivalent of a flying bus service, where service is so often an absent luxury. The transformation of O’Leary from shy suit-wearing bean counter to flamboyant smart casual buccaneer is also of interest, with his description of himself long before his recent wedding as ‘miserably single’ also amusing – although readers will be excused if sympathy isn’t forthcoming. The obvious weakness of Creaton’s book is the lack of direct access to O’Leary himself – hardly surprising considering his unapologetic abhorrence of journalists. Still, she vaults this hurdle via competent use of closely placed sources and recourse to interviews he has given over the past years.

‘The Naked Truth – A Working Woman’s Manifesto on Business and What Really Matters’, Margaret Heffernan, John Wiley & Sons, 2004
In this sometimes enlightening, sometimes disappointing treatise on the role of women in today’s business world, Margaret Heffernan (not the Dunnes Stores executive) fuses her own experience as former CEO of five different businesses with that of hundreds of women to identify the biggest challenges that women face today – and the best solutions. From VPs of Fortune 100 companies to entrepreneurs to women just starting their careers, she elucidates the different working environment women face and how they can overcome the challenges faced to develop worthwhile careers.

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