A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber Summary and Reviews
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Book Reviews of A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
Book Review: Fine -- but how do you simply impose simpler finacial systems
Summary: 4 Stars
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.
Book Review: Excellent
Summary: 5 Stars
The style the author employs of mixing history with academic theories makes for an enjoyable read and unique perspective. This book does well in explaining the many complex relationships between securities in a way that makes them seem intuitive. While the early chapters are a great history lesson for anyone who dares venture into the high stakes world of derivatives, the later chapters offer a deeper intellectual dissertation on theories in pure mathematics, physics and other disciplines that offer unique perspectives when applied to the functions of markets and the interrelations between asset classes. I highly recommend this book to anyone who wishes to gain a deeper understanding of the processes that lay underneath the hood of modern market dynamics.Book Review: A scattered story-telling
Summary: 1 Stars
I will not recommend this book because the content is not rich. The author based mnay of his comments not on data but on anecdotal evidence. Besides, the story seems to be everywhere. In the beginning, he talks about Wall Street, then physics, etc. Confusion is the word I give to this book. Book Review: Only a Matter of Time
Summary: 4 Stars
The premise of this book is definitely interesting: the financial products introduced into the market in the past few decades have become too complicated for our own good. But the book seemed more of a history lesson in finance in the past twenty years than a warning that we are setting up our own economic demise. Yet, it's a worthwhile history lesson, especially upon the tail of what we have seen the subprime and collapsing MBS market do to the markets. The book highlights the ups and downs of the financial markets since the 1987 crash, as told by one who witnessed it all occur firsthand. Bookstaber assumes that the reader has a certain level of understanding of finance and complex financial products and provides excellent examples of how increased regulation and safety procedures actually led to more problems and human error once the emergency that was sought to be prevented by the safety measures occurred. The bottom line: we are not better off if we can squeeze every last dollar out of some financial product. The markets and financial engineers should focus on what they know works, is understandable and simple. Otherwise, a crash bigger than one we have ever experienced before is bound to happen.Book Review: Excellent book
Summary: 5 Stars
This book was a fascinating read. I am a financial professional, which added to my understanding of the concepts, but this book is extremely well written and I think even a layman can appreciate it. If you are interested at all in the grave mistakes that the "smartest" investors continually make, from hedge fund managers to the major banks,to market bubbles, this is worth your time. It also explains the recent "sub-prime mortage" market, and what contributed to all the losses the banks have had to write off. (Written prior the actual bubble bursting).
At times it gets a little technical, but in all it is very readable, and one of the best books I have read in a while.