These books discuss major events in finance and financial markets from the past and present. They help readers understand how the current financial system developed and important lessons that can be learned from past crises and failures. Several books profiled analyze the 2008 financial crisis and housing bubble, including The Big Short about those who predicted the crisis and Flash Boys about high-frequency trading. Other books discuss the collapse of Enron, the failure of hedge fund Long-Term Capital Management, the rise of leveraged buyouts in the 1980s, and the classic Security Analysis on value investing.

1. 10 Best Books
Finance and Financial Markets

2. These books discuss most recent
events and recede back to episodes in
the past. They help us gain an
understanding of how we got to now,
what we have learned from past
debacles, and how history repeats
itself.

3. Wall Street

5. Flash Boys
• As was the case with mortgage-backed
securities and collateralized debt
obligations and credit default swaps, the
automated stock market is stunningly complex.
On its face, high-frequency trading seems like
it should be illegal. But no, the system is
merely riddled with perverse incentives. The
reality is that between investors and the
market sits a layer of middlemen who earn
fees, commissions, and rebates from order
flow and volume. This labyrinth adds little
actual value to the market or the larger
economy; middlemen profit from the
complexity they have nurtured and sustained
— and defend with every resource at their
disposal
– Brian Tanguay
• Dark Pools
• Kickbacks
• Front Running

6. The Big Short
• The Big Short: Inside
the Doomsday
Machine is a non-fiction
book by Michael
Lewis about the build-
up of the housing
and credit
bubble during the
2000s

7. The Big Short
• The Big Short describes several of the key players in the creation of
the credit default swap market that sought to bet against
the collateralized debt obligation (CDO) bubble and thus ended up
profiting from the financial crisis of 2007–2010.
• The book also highlights the eccentric nature of the type of person who
bets against the market or goes against the grain.
• The work follows people who believed the bubble was going to burst,
like
– Meredith Whitney, who predicted the demise of Citigroup and Bear
Stearns;
– Steve Eisman, an outspoken hedge fund manager;
– Eugene Xu, a quantitative analyst who created the first CDO market by
matching buyers and sellers;
– the founders of Cornwall Capital, who started a hedge fund in their garage
with $110,000 and built it into $120 million when the market crashed; and
– Dr. Michael Burry, an ex-neurologist who created Scion Capital despite
suffering from Asperger's syndrome

8. On the Brink
• The financial crisis from
the perspective of
Henry Paulson
– Treasury Secretary
– Goldman Sachs
• Timothy Geithner
– NY FED
• Ben Bernanke
– FED Chariman

9. Too Big To Fail
• Andrew Ross Sorkin
– NY Times
• Chronicling the events
of the 2008 financial
crisis and the collapse
of Lehman
Brothers from the point
of view of Wall Street
CEOs and US
government regulators

10. Conspiracy of Fools
• Kurt Eichenwald
• Enron
• CFO Andy Fastow
• CEO Jeff Skilling
• Chairman Ken Lay
• Arthur Andersen

11. Conspiracy of Fools
• Story of the 2001 collapse of Enron. Enron's Chief Financial Officer (CFO) Andrew
Fastow is depicted as voraciously greedy, using front corporations and partnerships,
paying himself "management" and "consultant" fees as if he were an outsider, all
while cooking Enron's books to show fictitious profits. I
• n the 1980s there were questionable activities at the company, but the bulk of the
events depicted in the book occur from 1997 onward and led to Enron's collapse.
• In addition to Fastow, there are stories of the complicity of Enron's auditors
(at Arthur Andersen), their lawyers (internal and external), the senior management
(Kenneth Lay and Jeffrey Skilling), Fastow's partner in many of his deals, Michael
Kopper, and Enron's board of directors.
• The picture that emerges of Enron is that of an out-of-control corporate culture that
ignored the basic principles of business, allowing it to be manipulated by greedy
incompetents for their own personal gain. The focus on reporting profits — rather
than actually making money — created a situation that both encouraged and
enabled a small group of insider criminals to "game the system". Enron's business
losses were masked by accounting tricks, while the insiders raked off huge "profits"
and bonuses for themselves.
• The game was eventually undone by huge losses, bad investments and the structure
of the outside partnerships themselves, the solvency of which depended on ever-
rising Enron stock prices. When Enron's stock began to fall, the financial structures
imploded, leaving Enron with billions of dollars in losses and few assets.

12. When Genius Failed
• By Roger Lowenstein
• About LTCM
• Myron Scholes
– Black Scholes option
pricing model
– Nobel Prize
• John Meriwether
• I banker
• Robert Merton
– Nobel laureate in
Economics

13. When Genius Failed: The Rise and Fall
of Long-Term Capital Management
• An account of the creation, early success, abrupt
collapse, and rushed bailout of Long-Term Capital
Management (LTCM).
• LTCM was a tightly-held American hedge fund founded
in 1993 which commanded more than $100 billion in
assets at its height, then collapsed abruptly in
August/September 1998. Prompted by deep concerns
about LTCM's thousands of derivative contracts, in
order to avoid a panic by banks and investors
worldwide, the Federal Reserve Bank of New
York stepped in to organize a bailout with the various
major banks at risk.

14. Wall Street in the 80s

15. Liar’s Poker
• a history of Salomon
Brothers and an overview
of Wall Street in general,
especially how the firm
single-handedly created a
market for mortgage
bonds that made the firm
wealthy, only to be
outdone by Michael
Milken and his junk
bonds.

16. Barbarians at the Gate
• RJR
• LBO
• KKR
• Junk Bond financing
• Leveraged Buy Outs

17. Barbarians at the Gate
• Self-made multi-millionaire F. Ross Johnson decides to take the tobacco and food
conglomerate RJR Nabisco private in 1988 after receiving advance news of the
likely market failure of the company's smokeless cigarette called Premier, the
development of which had been intended to finally boost the company's stock
price.
• The free-spending Johnson's bid for the company is opposed by two of the
pioneers of the leveraged buyout, Henry Kravis and his cousin. Kravis feels
betrayed when, after Johnson initially discusses doing the LBO with Kravis, he
takes the potentially enormous deal to another firm, the Shearson Lehman
Hutton division of American Express.
• Other bidders emerge, including Ted Forstmann and his company, Forstmann
Little, after Kravis and Johnson are unable to reconcile their differences. The
bidding goes to unprecedented heights, and when executive Charles Hugel
becomes aware of how much Johnson stands to profit in a transaction that will put
thousands of Nabisco employees out of work, he quips, "Now I know what the 'F'
in F. Ross Johnson stands for."
• The greed was so evident, Kravis's final bid is declared the winner, even though
Johnson's was higher.

18. Security Analysis
• Benjamin Graham
• The Bible
• Securities analysis
• Value Investing
– SEC formed
– 10Ks instituted
– Financial statement
analysis possible
• Warren Buffet
• Bill Ackman
– Big Think

19. Professor John Cousins
jjcousins@gmail.com
@jjcousins