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Whistle Stopper - A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
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List Price: $27.95
Our Price: $12.99
Your Save: $ 14.96 ( 54% )
Availability: Usually ships in 24 hours
Manufacturer: Wiley
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Average Customer Rating:  
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Binding: Hardcover
Dewey Decimal Number: 332.64524
EAN: 9780471227274
ISBN: 0471227277
Label: Wiley
Manufacturer: Wiley
Number Of Items: 1
Number Of Pages: 288
Publication Date: 2007-04-06
Publisher: Wiley
Studio: Wiley
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Spotlight customer reviews:
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Customer Rating:
Summary: Prescient in Description but Unimaginative in Prevention
Comment: At the time this book was published, the Wall Street Journal noted that things had changed since the time of the "problems" Bookstaber wrote about and that they were extremely unlikely to occur again. Rick Bookstaber has proved to be remarkably prescient. "A Demon of Our Own Design" provides the best perspective to date (06/08) on the credit crisis. The book's gossipy style doesn't detract from it. What does is Bookstabler's lack of imagination in prescribing the cure of blocking innovation. Yet, here too, he may be prescient as the regulators seem to be moving very much in that direction. Much better on this point is Steinherr's "Derivatives: The Wild Beast of Finance". In the end, though, one need look no further than simple hubris (as to which see Lowenstien's "When Genius Failed", the story of Long-Term Capital Management), and no regulatory structure can prevent hubris --- at least none that we'd want to live under.
Customer Rating:
Summary: Most cogent explanation for today's financial crises
Comment: This is one of the few books that explains the reasons for much of today's financial crises (as it relates to the banks, anyways), in a way that transcends sanctimony and overgeneralizations. Bookstaber has seen how the incentives to take risks permeate in an organization, and why that's generally acceptable. He is one of the few that highlights the importance of the tight interconnectedness of financial counterparties that spreads financial infection.
Customer Rating:
Summary: An excellent Book
Comment: This is an excellent book for understanding the nature of and pitfalls in financial innovation. It is the first coherent account of I have read of the nature, the purpose, and the inherent risks of hedge funds. Anyone risking their money in financial markets should read it.
Customer Rating:
Summary: Good read? Yes. Practical? No
Comment: This book will be a great read if you want to know someone's way into the Wall Street's biggest companies and his experiences working in those companies, but you will not find anywhere in the book practical recommendations on how to manage risk of a fund. The author says that he was behind the October 1987 crash, because it's him who started the program trading at Morgan Stanley and then other firms started doing the same thing. By accumulating the hedge from the short side in S&P 500 futures they caused a crash. It sounds to me like Dr. Richard Bookstaber is proud that he was the one who was somehow connected to the crash of 1987. The most interesting part of the book was about Bookstaber's career at Salomon Brothers. The chapters about Salomon's arbitrage team in Japan are exciting. Rob Stavis and Andy Fisher brought a lot of dough to the firm and then left it. The money making technique is explained in the book as well, but then again, how did they manage the risk when they got into troubles? The trade of 1993 by Larry Hilibrand at Salomon is an amazing example of the real TRADER, someone who doesn't fear the risk and in the end takes it all. The position was in a loss of 300 millions dollars and ended up with a nice 1 billion $ profit for the company. But again, no strict money management rules were mentioned here. It was the board of directors of Salomon that let Hilibrand stick to the position and even increase it, why Dr. Bookstaber, the company's risk manager, didn't manage the situation remains unclear to me. The chapters of Complexity, Tight Coupling, and Normal Accidents contain too much explanation of the workings of a nuclear plant. Why a trader needs to know that? Why couldn't you simply bring examples instead of going into details like: " The operators resorted to what is termed high pressure injection to force cool water into the core. This raised issues of its own, as the sudden injection of cold water into the superheated core could crack the structure." (Page 150). Why do you think it's important for a reader to know the details of a nuclear plant structure and its functionality? The most boring part would be "Liquidity in Three Easy Lessons". Here you'd read something like:" The implications of primogeniture were most evident in the social organization of the countryside" (Page 216). Why should someone who is reading a book on risk management and trading read about countryside of medieval England? Eventually Bookstaber - Langsam paper "On The Optimality of Coarse Behavior Rules" was interesting and you could learn some surviving principles from this chapter. In the end of the book the author talks about reducing the complexity of the financial instrument and minimizing leverage as a way to prevent the crashes and make the markets robust. I doubt that reducing the leverage will help the markets become more robust, reduced complexity could do that. Is it a good read? Yes. Is it a practical book? No.
Customer Rating:
Summary: Fine -- but how do you simply impose simpler finacial systems
Comment: The main point of this book is that as long as we have growing complexity in financial markets we are always going to have "accidents". Complex new rules and laws are not the answer, because "... trying to regulate a market entangled in complexity can lead to unintended consequences new safeguards add more complexity." On the final page Mr. Bookstaber recommends a solution to this problem: "... simpler financial instruments and less leverage will create a market that is more robust and survivable." And the book ends there. The author does not go on to discuss the inevitable problems implementation of his idea would encounter. How do you enforce the use of simpler financial instrument in a free market? Would not laws and rules written to require the use of simpler financial instruments and on the other hand forbid the use of those that are "too complex" become too complex themselves? Look at the results of our efforts to simplify our tax code. The question of how do we actually create the desirable coarse response mechanism of the cockroach in society of non-cockroaches is not addressed.
But the author deserves four stars for great job of describing the problem.
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Editorial Reviews:
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Inside markets, innovation, and risk Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street–from Morgan Stanley to Salomon and Citigroup–and a member of some of the world’s largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of man’s attempt to manage market risk and what it has wrought. In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds.
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