The Art of Contrarian Trading: How to Profit from Crowd Behavior in the Financial Markets (Wiley Trading) Review

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(More customer reviews)The author puts tremendous weight on using popular media headlines to gauge whether a bullish or bearish crowd has emerged and/or predominates. However, this no long works. The author himself states that determining whether the sentiment is bullish or bearish through the media has not worked after the tech bubble burst in 2001. Perhaps this is due to the incredible speed and fickle nature of print media, CNBC talking heads, and bloggers in the modern era. It's no longer slow, old-fashioned print media.
If you follow his method, you have a choice of (1) not being fully invested at the bottom of the bear market and missing an upswing (his conservative contrarian method) or (2) jumping in during sizeable pullbacks with the risk of trying to catch a falling knife and getting burned (his aggressive contrarian method). HOWEVER, the author also says that the worst mistake of the contrary investor is not being fully invested when there is a bull market, especially in the earliest stages (as the bear market turns very unexpectedly and abruptly skyrockets). This is a contradiction in philosophies. Also he even states that the "aggressive contrarian" got wiped out by this method during the Great Recession of 2008.
Overall, the author suggests some bizarre combination of momentum trading, using old fashioned market technicals, keeping your pulse on the media, and then breaking the rules you set up because they don't really work anymore.

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A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers Review

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(More customer reviews)Two kinds of people are likely to be attracted to this book: the common man in the street who wants to know how a company like Lehman blew up so spectacularly and the financial markets insider who wants to know the inside scoop.
If you are the former, this book is likely to please. It has all the elements of a pot boiler - the breathless accounts of secret meetings, mutiny in the boardroom and the heroic efforts of a few key guys trying valiantly to save the sinking ship. It has the relentless enemy and the arch villain. The only thing missing is the scantily clad woman draped over the hero's arm.
The other side of the barbell is the financial services insider who knows all the acronyms inside and out - CDO, CLO, RMBS, CMBS, SIV who is nevertheless looking for a straight account of what went wrong - like the classic 'smartest guys in the room' on the Enron disaster.
If you are on that side of the barbell, steer clear of this book. It offers no insight into anything, except perhaps the massive ego of a low level trader. By all accounts, Larry McDonald should never have been allowed to place the kind of bets he claims to have made. He was obviously a junior trader on a bond desk that used shareholder money to short everything in sight taking massive short CDS positions on all sorts of names, good and bad. The irony seems entirely lost to him, but his desk was part of the CDS problem - buying protection with no underlying holdings.
Like any gambler, he worships the analyst (Jane Castle) who gave him the hot tip - (Buy Delta, young man!) but is too dumb to acknowledge that Delta could easily have woundup another Eastern, or more to the point, another TWA. The 'hostile' bid from US Airways that made his profit, nearly killed US Airways... but I digress.
Larry does let his political persuasions come through. Clinton is an arch villain for letting Roberta Achtenberg loose on banks 'forcing' them to lend to the huddled masses. 'Easy mortgages were the invention of Bill Clinton's Democrats' he proclaims. Never mind that the CRA ran for over 12 years with nary a problem until the boneheads on Wall Street decided to get in on the action by securitizing it.
Perhaps the most telling passage comes in the tail end of the book and summarizes it quite well:
"All my life, I've been a laissez-faire Ronald Reagan / Margaret Thatcher capitalist, swearing by the market, taking the risks and the devil take the hindmost. But this one time, I was looking for a Givernment rescue and I wasn't going to get it"
This one time. When my stock value is at stake, the principles I held all my life just vaporized. Hank Paulson should have cared more about my stock options in Lehman. That son-of-a-bitch was making an example out of Lehman with *MY* money.
This book is a lousy excuse for a tell-all or even a straight accounting of the events leading up to Lehman;s demise. 'When Genius Failed' this ain't.

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