All the Devils Are Here: The Hidden History of the Financial Crisis

"Hell is empty, and all the devils are here."-- Shakespeare, The Tempest

As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street, or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators, or clueless home buyers?

According to Bethany McLean and Joe Nocera, two of America's most acclaimed business journalists, the real answer is all of the above-and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

All the Devils Are Here goes back several decades to weave the hidden history of the financial crisis in a way no previous book has done. It explores the motivations of everyone from famous CEOs, cabinet secretaries, and politicians to anonymous lenders, borrowers, analysts, and Wall Street traders. It delves into the powerful American mythology of homeownership. And it proves that the crisis ultimately wasn't about finance at all; it was about human nature.

Among the devils you'll meet in vivid detail:

• Angelo Mozilo, the CEO of Countrywide, who dreamed of spreading homeownership to the masses, only to succumb to the peer pressure-and the outsized profits-of the sleaziest subprime lending.
• Roland Arnall, a respected philanthropist and diplomat, who made his fortune building Ameriquest, a subprime lending empire that relied on blatantly deceptive lending practices.
• Hank Greenberg, who built AIG into a Rube Goldberg contraption with an undeserved triple-A rating, and who ran it so tightly that he was the only one who knew where all the bodies were buried.
• Stan O'Neal of Merrill Lynch, aloof and suspicious, who suffered from "Goldman envy" and drove a proud old firm into the ground by promoting cronies and pushing out his smartest lieutenants.
• Lloyd Blankfein, who helped turn Goldman Sachs from a culture that famously put clients first to one that made clients secondary to its own bottom line.
• Franklin Raines of Fannie Mae, who (like his predecessors) bullied regulators into submission and let his firm drift away from its original, noble mission.
• Brian Clarkson of Moody's, who aggressively pushed to increase his rating agency's market share and stock price, at the cost of its integrity.
• Alan Greenspan, the legendary maestro of the Federal Reserve, who ignored the evidence of a growing housing bubble and turned a blind eye to the lending practices that ultimately brought down Wall Street-and inflicted enormous pain on the country.

Just as McLean's The Smartest Guys in the Room was hailed as the best Enron book on a crowded shelf, so will All the Devils Are Here be remembered for finally making sense of the meltdown and its consequences.

Bethany McLean 2010 CSPAN YouTube video:

http://www.youtube.com/watch?v=3C8tC_0dsDI

Fraud -- What Fraud? Besides, There's Only $1.6 Billion Missing

There's seldom a criminal charge in sight for these runaway rogue traders, it seems.

I can feel a smirk spreading across my face.

By Jonathan Stempel

* Ex-MF Global CEO said had no motive to commit fraud

* US investigators also probe future brokerage's collapseNEW YORK, Oct 22 (Reuters) - Jon Corzine's lawyers say allegations that he fraudulently ran MF Global Holdings Ltd make "no sense" and that a lawsuit seeking to hold him and others responsible for the futures brokerage's bankruptcy must be thrown out.

Corzine, former colleagues and several banks, including JPMorgan Chase & Co and Goldman Sachs Group Inc, filed papers on Friday night to dismiss investor litigation over MF Global's collapse. The company's Oct. 31, 2011, bankruptcy was Wall Street's biggest meltdown since 2008.

Plaintiffs led by the Virginia Retirement System and the province of Alberta, Canada, have accused MF Global in the U.S. District Court in Manhattan of inflating its ability to manage risk, obscuring risks from a big bet on European sovereign debt and improperly accounting for deferred tax assets.But lawyers for Corzine, MF Global's former chairman and chief executive officer, said there was no securities fraud. They said the allegations merely suggested that Corzine mismanaged the company, was too optimistic, or failed to predict a liquidity squeeze prompted in part by credit rating downgrades.

Corzine's lawyers also said the former New Jersey governor's ownership of 441,960 MF Global shares, including some bought in August 2011 when the exposure to European sovereign debt had peaked, showed that he had no motive to commit securities fraud.

"Plaintiffs have not alleged any facts from which it could be inferred that Mr. Corzine knew prior to October 30, 2011 that MF Global would not be able to survive," Corzine's lawyers wrote. "Plaintiffs' theory that Mr. Corzine had fraudulent intent or participated in a fraud makes no sense."

The bank defendants, in a separate court filing, contended that MF Global's business strategy and risks were fully disclosed in public filings.

Salvatore Graziano and Jonathan Plasse, lawyers who represent the lead plaintiffs, did not immediately respond to requests for comment.

The Virginia Retirement System said it had managed about $53.1 billion of pension fund and other assets as of June 30. Alberta, through its Alberta Investment Management Corp unit, said it oversaw about C$70 billion (US$70.4 billion) of pension fund and government assets.

Their lawsuit, which seeks class-action status, covers investors in MF Global common stock, convertible bonds and senior notes between May 20, 2010, and Nov. 21, 2011.

Among the other defendants are former MF Global Chief Financial Officers J. Randy MacDonald and Henri Steenkamp, seven former independent directors, and units of Bank of America Corp , Citigroup Inc, Deutsche Bank AG and Royal Bank of Scotland Group Plc.

The U.S. Department of Justice and Commodity Futures Trading Commission are also investigating MF Global's collapse, which has left an estimated $1.6 billion of customer funds missing.
Criminal charges stemming from the collapse are unlikely, and civil cases are the more likely outcome, people familiar with the matter have said.

The case is DeAngelis et al v. Corzine et al, U.S. District Court, Southern District of New York, No. 11-07866.

Mark Cuban: What Business Is Wall Street In?

Wall Street doesn't know what business it is in. Regulators don't know what the business of Wall Street is. Investor/shareholders don't know what business Wall Street is in.

The only people who know what business Wall Street is in are the high frequency and automated traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It's a platform to be exploited by every technological and intellectual means possible.

The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, high frequency traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you.

A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade or the rebate they are getting from the exchange because they provide liquidity to the market.

I recognize that one is illegal, the other is not. That isn't the important issue.

The important issue is recognizing that Wall Street is no longer serving the purpose that it was designed to. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days?

I started actively trading stocks in 1992. I traded a lot. Over the years I've written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.

Over just the past five years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game that I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.

So back to the original question. What business is Wall Street in?

Its primary business is no longer creating capital for business. Creating capital for business has to be less than one percent of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn't shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which I think are always a mistake), than flows into companies in the form of equity.

My two cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it's through a use of taxes on trades (hit every trade on a stock held less than one hour with a 10 cent tax and all these problems go away), or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for one year or more, and no tax on dividends paid to shareholders who have held stock in the company for more than five years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won't come from traders trying to hack the financial system for a few pennies per trade.

And solutions won't come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.

Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks they make will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the U.S. and world economy nearly enough for the risk of collapse they introduce into the system.

Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The government needs to create simple and obvious incentives for this business and extract compensation from the traders/hackers for the systemic failure risk they introduce.

There will be another flash crash, and probably a crash far worse than the May 2010 flash crash simply because there are too many players looking for the trillion dollar score. They can't all win, yet how many do you think wouldn't risk everything, even what is not theirs, for that remote chance to score big? Put another way, there is zero moral hazard attached to any trade. So why wouldn't traders take the biggest risk possible?

There is value to trading automation. It is here to stay. There is absolutely NO VALUE to high frequency trading. None. We need to bring our markets back to their original goals of creating capital for business. It's impossible to guess how many small to medium size companies have been held back from growing and creating jobs and wealth because of lack of access to capital from the stock market. It's not impossible to know that our economy has suffered because Wall Street equity markets are no longer a source of equity for helping companies grow, it is not a platform for hackers and that needs to change. Quickly.

Order flow toxicity in the hours prior to the Flash Crash.

My Obsessive Reading

I have an "indexing gene." I love checklists and reference data. I used to catalogue the creative credits for my favorite comic books, in pencil, on 3" x 5" index cards, during the Anchorage Fur Rendezvous dogsled races televised in the mid-seventies. I thought it was fun. Like most collectors, I would also make ultra-detailed "want lists" of missing, desired issues, and reading lists of favorite authors.

For a time in the nineties, I joined legendary comic fan Jerry Bails' indexing apa (amateur press association), apa-i. I 've contributed to the online Grand Comic Book Database., Askart, and other databases -- the ultimate versions of my old catalog card system.

These days, when I finish a nonfiction book, I write down the title and author(s) in a notebook. Sometimes I forget, but usually I record the books soon after reading. In true OCD fashion, I have to actually finish a book in order to record it. Partially finished books don't count. Believe it or not, just seeing the title/author information again helps me recall much of what I've read.

I originally read popular science and math books for the nonfiction genre, but after the 2008 financial crisis meltdown, I realized I knew nothing of business, and went on a business, economics, and investing book jag. Then in 2010, I shifted gears again to the current trend of mainly psychology and neuroscience reads. The "Behavioral Economics" business books made a nice bridge to these psychology books. I think my "psychology phase" is winding down now. What's next? Probably learning theory.

For "extra credit," I have typed out my list of my obsessesive fact-based reading conquests. You might enjoy reading a few of them yourself, so I have roughly categorized them. Frankly, after typing out this list, I'm a bit blown away at how much material I've consumed so far, and this doesn't even count all the comics, art books, magazines, and crime novels. I'm sure I've also missed a few books that I forgot to record. Here's the list, alphabetized by author.

Biography/Memoir/Military/Pop Culture

The Wire: Truth Be Told - Rafael Alvarez and David Simon

Band of Brothers: E Company, 506th Regiment, 101st Airborne from Normandy to Hitler's Eagle's Nest - Stephen E. Ambrose

Citizen Soldiers: The U. S. Army from the Normandy Beaches to the Bulge to the Surrender of Germany - Stephen E. Ambrose 

D Day: June 6, 1944: The Climactic Battle of World War II - Stephen E. Ambrose

The Wild Blue: The Men and Boys Who Flew the B-24s Over Germany 1944-45 - Stephen E. Ambrose

Howard Hughes: His Life and Madness - Donald L. Barlett and James B. Steele

Under Cover: An Illustrated History of American Mass-Market Paperback - Thomas L. Bonn ; Foreword by John Tebbel

Possible Side Effects - Augusten Burroughs

Running with Scissors: A Memoir - Augusten Burroughs

The Path to Power (The Years of Lyndon Johnson, Volume 1) - Robert A. Caro

Means of Ascent (The Years of Lyndon Johnson) - Robert A. Caro

The Power Broker: Robert Moses and the Fall of New York - Robert A. Caro

From Birdland to Broadway: Scenes from a Jazz Life - Bill Crow

Marine! The Life of Chesty Puller - Burke Davis

Miles: The Autobiography - Miles Davis and Quincy Troupe

Django Reinhardt - Charles Delaunay

I Feel Bad About My Neck - Nora Ephron
Rod Serling: The Dreams and Nightmares of Life in the Twilight Zone/a Biography - Joel Engel

Grant Green: Rediscovering the Forgotten Genius of Jazz Guitar - Sharony Andrews Green  

Searching for Robert Johnson: The Life and Legend of the "King of the Delta Blues Singers" - Peter Guralnick

Summer of '49 - David Halberstam

The Fifties - David Halberstam  

Howard Hughes: The Secret Life - Charles Higham

The Know-It-All: One Man's Humble Quest to Become the Smartest Person in the World - A. J. Jacobs

Kind of Blue: The Making of the Miles Davis Masterpiece - Ashley Kahn

Too Marvelous for Words: The Life and Genius of Art Tatum - James Lester

Options: The Secret Life of Steve Jobs - A Parody by Fake Steve Jobs (Daniel Lyons)

The Terrible Hours: The Greatest Submarine Rescue in History - Peter Maas 

Underboss: Sammy the Bull Gravano's Story of Life in the Mafia - Peter Maas

Stan Getz: A Life in Jazz - Donald L. Maggin

Goodbye, Darkness: A Memoir of the Pacific War - William Manchester

Jim Thompson: Sleep with the Devil - Michael J. McCauley

Positively Fifth Street: Murderers, Cheetahs, and Binion's World Series of Poker - James McManus

Cornell Woolrich: First You Dream, Then You Die - Francis M. Nevins

Hardboiled America: Lurid Years of Paperbacks - Geoffrey O'Brien

Deep Blues: A Musical and Cultural History of the Mississippi Delta - Robert Palmer

Dance of the Infidels: A Portrait of Bud Powell - Francis Paudras 

Straight Life: The Story of Art Pepper - Art Pepper and Laurie Pepper

Bill Evans: How My Heart Sings - Peter Pettinger

Goodfellas - Nicholas Pileggi  

Savage Art: A Biography of Jim Thompson - Robert Polito

Fortunate Son: The Healing of a Vietnam Vet - Lewis B. Puller Jr.

Jelly's Blues: The Life, Music, and Redemption of Jelly Roll Morton - Howard Reich and William M. Gaines

The Making of the Atomic Bomb - Richard Rhodes 

A Bridge Too Far: The Classic History of the Greatest Battle of World War II - Cornelius Ryan 

The Longest Day: The Classic Epic of D-Day - Cornelius Ryan

Serling: The Rise and Twilight of Television's Last Angry Man - Gordon F. Sander

In God We Trust: All Others Pay Cash - Jean Shepherd

Wanda Hickey's Night of Golden Memories: And Other Disasters - Jean Shepherd    

Blind Man's Bluff: The Untold Story of American Submarine Espionage - Sherry Sontag and Christopher Drew

Between Covers: The Rise and Transformation of Book Publishing in America - John William Tebbel   

Off the Wall (David Berkowitz) - Charles Willeford

Something About a Soldier - Charles Willeford

Business/Economics/Finance/ Investment

The Long Tail: Why the Future of Business is Selling Less of More - Chris Anderson

Predictably Irrational: The Hidden Forces That Shape Our Decisions - Dan Ariely

The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home - Dan Ariely

Corporate Cults: The Insidious Lure of the All-Consuming Organization - Dave Arnott

Super Crunchers: Why Thinking-By-Numbers is the New Way To Be Smart - Ian Ayres

The Numerati - Stephen Baker

The Secret History of the South Sea Bubble: The World's First Great Financial Scandal - Malcolm Balen

The Cartoon Introduction to Economics: Volume One: Microeconomics - Yoram Bauman and Grady Klein 

Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics - Gary Belsky and Thomas Gilovich

Against the Gods: The Remarkable Story of Risk - Peter L. Bernstein

Capital Ideas: The Improbable Origins of Modern Wall Street - Peter L. Bernstein 

The Four Pillars of Investing: Lessons for Building a Winning Portfolio - William Bernstein

The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk - William J. Bernstein

The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between - William J. Bernstein

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation - Richard M. Bookstaber

The Poker Face of Wall Street - Aaron Brown

Frozen Desire: Meaning of Money - James Buchan

Mean Genes: From Sex to Money to Food Taming Our Primal Instincts - Terry Burnham and Jay Phelan

Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality - Terry Burnham

The Whiz Kids: The Founding Fathers of American Business and the Legacy They Left Us - John A. Byrne

How Markets Fail: The Logic of Economic Calamities - John Cassidy

25 Myths You've Got to Avoid If You Want to Manage Your Money Right: The New Rules for Financial Success - Jonathan Clements

You've Lost It, Now What? How to Beat the Bear Market and Still Retire on Time - Jonathan Clements

The Perfect Store: Inside eBay - Adam Cohen

Extreme Money: Masters of the Universe and the Cult of Risk - Satyajit Das

Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It - Nicholas Dunbar   

The Lazy Person's Guide to Investing: A Book for Procrastinators, the Financially Challenged, and Everyone Who Worries About Dealing with Their Money - Paul B. Farrell

The Ascent of Money: A Financial History of the World - Niall Ferguson

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street - Justin Fox

One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy - Thomas Frank

Money: Whence It Came, Where It Went - John Kenneth Galbraith

The Age of Uncertainty - John Kenneth Galbraith

The Great Mutual Fund Trap: An Investment Recovery Plan - Gregory Baer and Gary Gensler

The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream - Jacob S. Hacker

The Reckoning - David Halberstam  

Rivethead: Tales from the Assembly Line - Ben Hamper

The Undercover Economist - Tim Harford

The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers - Robert L. Heilbroner

The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency - Robert Kanigel

Code Name Ginger: The Story Behind Segway and Dean Kamen's Quest to Invent a New World - Steve Kemper

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything - Steven D. Levitt and Stephen J. Dubner

SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance - Steven D. Levitt and Stephen J. Dubner

Liar's Poker - Michael Lewis

Moneyball - Michael Lewis

The Big Short: Inside the Doomsday Machine - Michael Lewis

The Blind Side - Michael Lewis

Origins of the Crash: The Great Bubble and Its Undoing - Roger Lowenstein

When Genius Failed: The Rise and Fall of Long-Term Capital Management - Roger Lowenstein

Bull: A History of the Boom and Bust, 1982-2004 - Maggie Mahar

No One Would Listen: A True Financial Thriller - Harry Markopolos

More Than You Know: Finding Financial Wisdom in Unconventional Places - Michael J. Mauboussin 

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash - Charles R. Morris

Die Broke: A Radical Four-Part Financial Plan - Stephen Pollan and Mark Levine

The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It - Scott Patterson

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism - Kevin P. Phillips

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street - William Poundstone

Priceless: The Myth of Fair Value (and How to Take Advantage of It) - William Poundstone

Winning the Cash Flow War: Your Ultimate Survival Guide to Making Money and Keeping It - Fred Rewey

The Madoff Chronicles: Inside the Secret World of Bernie and Ruth - Brian Ross

Company Man: The Rise and Fall of Corporate Life - Anthony Sampson

The Mind of the Market - Michael Shermer

Irrational Exuberance - Robert J. Shiller

Crashproof Your Life : A Comprehensive, Three-Part Plan for Protecting Yourself from Financial Disasters - Thomas A. Schweich

Trading Up: Why Consumers Want New Luxury Goods -- and How Companies Create Them - Michael J. Silverstein, Neil Fiske and John Butman

The Smartest 401(k) Book You'll Ever Read: Maximize Your Retirement Savings...the Smart Way! - Daniel R. Solin

The Smartest 401(k) Book You'll Ever Read: Maximize Your Retirement Savings...the Smart Way! - Daniel R. Solin

The Smartest Retirement Book You'll Ever Read - Daniel R. Solin

The Wisdom of Crowds - James Surowiecki

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets - Nassim Nicholas Taleb

The Black Swan: The Impact of the Highly Improbable - Nassim Nicholas Taleb

Nudge: Improving Decisions About Health, Wealth, and Happiness - Richard H. Thaler and Cass R. Sunstein

The Winner's Curse: Paradoxes and Anomalies of Economic Life - Richard H. Thaler

The History of Money - Jack Weatherford

What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels Who Made It Happen - Eric J. Weiner

Wall Street Versus America: A Muckraking Look at the Thieves, Fakers, and Charlatans Who Are Ripping You Off - Gary Weiss

Naked Economics: Undressing the Dismal Science - Charles Wheelan and Burton G. Malkiel

The Judas Economy: The Triumph of Capital and the Betrayal of Work - William Wolman and Anne Colamosca

The Prize: The Epic Quest for Oil, Money and Power - Daniel Yergin  

Diet/Health/Medicine/Neuroscience /Psychology/Self-Help

Change Your Brain, Change Your Life: The Breakthrough Program for Conquering Anxiety, Depression, Obsessiveness, Anger, and Impulsiveness - Daniel G. Amen

Healing Anxiety and Depression - Daniel G. Amen and Lisa C. Routh

10 Simple Solutions to Panic: How to Overcome Panic Attacks, Calm Physical Symptoms, and Reclaim Your Life (The New Harbinger Ten Simple Solutions Series) - Martin M. Antony and Randi E. McCabe

Prozac and the New Antidepressants: What You Need Know About Prozac Zoloft Paxil Luvox Wellbutrin Effexor Serzone Vestra Celexa St. John's Wart and Others - William S. Appleton M. D.

Art and Visual Perception - Rudolf Arnheim

NeanderThin: Eat Like a Caveman to Achieve a Lean, Strong, Healthy Body - Ray Audette

The Imp of the Mind: Exploring the Silent Epidemic of Obsessive Bad Thoughts - Lee Baer  

Side Effects: A Prosecutor, a Whistleblower, and a Bestselling Antidepressant on Trial - Alison Bass

Train Your Mind, Change Your Brain: How a New Science Reveals Our Extraordinary Potential to Transform Ourselves - Sharon Begley

When in Doubt, Make Belief: An OCD-Inspired Approach to Living with Uncertainty - Jeff Bell

Happier: Learn the Secrets to Daily Joy and Lasting Fulfillment - Tal Ben-Shahar

Coping with Anxiety: 10 Simple Ways to Relieve Anxiety, Fear and Worry - Edmund J. Bourne and Lorna Garanao

The Anxiety and Phobia Workbook - Edmund J. Bourne

Sway: The Irresistible Pull of Irrational Behavior - Ori Brafman and Rom Brafman

Getting Past OK: The Self-Help Book for People Who Dont Need Help - Richard Brodie

Virus of the Mind: The New Science of the Meme - Richard Brodie

Feeling Good - The New Mood Therapy - David D. Burns

When Panic Attacks: The New, Drug-Free Anxiety Therapy That Can Change Your Life - David D. Burns

Syndrome X: The Complete Nutritional Program to Prevent and Reverse Insulin Resistance - Jack Challem, Burton Berkson and Melissa Diane Smith

On Being Certain: Believing You Are Right Even When You're Not - Robert Burton

Overcoming Obsessive Thoughts: How to Gain Control of Your OCD - David A. Clark and Christine Purdon  

Nerve: Poise Under Pressure, Serenity Under Stress, and the Brave New Science of Fear and Cool - Taylor Clark

The Paleo Diet: Lose Weight and Get Healthy by Eating the Foods You Were Designed to Eat - Loren Cordain

Flow: The Psychology of Optimal Experience - Mihaly Csikszentmihalyi

Descartes' Error: Emotion, Reason, and the Human Brain - Antonio R. Damasio

IBS For Dummies - Carolyn Dean and L. Christine Wheeler

The Brain That Changes Itself: Stories of Personal Triumph from the Frontiers of Brain Science - Norman Doidge

Coping with OCD: Practical Strategies for Living Well with Obsessive-Compulsive Disorder - Troy DuFrene and Bruce Hyman

Obsessive-Compulsive Disorder For Dummies - Charles H. Elliott Ph.D. and Laura L. Smith Ph.D.

Overcoming Anxiety For Dummies - Charles H. Elliott Ph.D. and Laura L. Smith Ph.D.

Emotions Revealed: Recognizing Faces and Feelings to Improve Communication and Emotional Life - Paul Ekman

Telling Lies: Clues to Deceit in the Marketplace, Politics, and Marriage - Paul Ekman

Thanks: How Practicing Gratitude Can Make You Happier - Robert Emmons

Another Day in the Frontal Lobe: A Brain Surgeon Exposes Life on the Inside - Katrina Firlik

Stop Obsessing!: How to Overcome Your Obsessions and Compulsions - Edna B. Foa and Reid Wilson 

The Mindfulness and Acceptance Workbook for Anxiety: A Guide to Breaking Free from Anxiety, Phobias, and Worry Using Acceptance and Commitment Therapy - John P. Forsyth and Georg H. Eifert

Positivity: Top-Notch Research Reveals the 3 to 1 Ratio That Will Change Your Life - Barbara Fredrickson

Stumbling on Happiness - Daniel Todd Gilbert

The Sense of Order: A Study in the Psychology of Decorative Art (The Wrightsman Lectures, V. 9) - E. H. Gombrich

Freedom from Obsessive Compulsive Disorder: A Personalized Recovery Program for Living with Uncertainty - Jonathan Grayson

Manufacturing Depression: The Secret History of a Modern Disease - Gary Greenberg

Insomniac – Gayle Greene

The Intelligent Eye - Richard L. Gregory

Mirrors in Mind - Richard L. Gregory

Odd Perceptions – Richard L. Gregory

Why We Make Mistakes: How We Look Without Seeing, Forget Things in Seconds, and Are All Pretty Sure We Are Way Above Average - Joseph T. Hallinan

Made to Stick: Why Some Ideas Survive and Others Die - Chip Heath and Dan Heath

On Second Thought: Outsmarting Your Mind's Hard-Wired Habits - Wray Herbert

Sleep Disorders For Dummies - Max Hirshkowitz, Patricia B. Smith and William C. Dement

Mind Wide Open: Your Brain and the Neuroscience of Everyday Life - Steven Johnson

Sleep Apnea - The Phantom of the Night: Overcome Sleep Apnea Syndrome and Snoring - T. Scott Johnson, William A. Broughton, Jerry Halberstadt and B. Gail Demko

Man and His Symbols - Carl Gustav Jung

Apprentice to Genius: The Making of a Scientific Dynasty (neuroscience and neuropharmacology)  - Robert Kanigel

Who Switched Off My Brain? Revised: Controlling Toxic Thoughts and Emotions - Caroline Leaf Ph.D.

The Emotional Brain: The Mysterious Underpinnings of Emotional Life - Joseph LeDoux

Synaptic Self: How Our Brains Become Who We Are - Joseph LeDoux

How We Decide - Jonah Lehrer 

Proust Was a Neuroscientist - Jonah Lehrer

The Accidental Mind: How Brain Evolution Has Given Us Love, Memory, Dreams, and God - David J. Linden

The Compass of Pleasure: How Our Brains Make Fatty Foods, Orgasm, Exercise, Marijuana, Generosity, Vodka, Learning, and Gambling Feel So Good - David J. Linden

Of Two Minds: The Growing Disorder in American Psychiatry - T. M. Luhrmann

The How of Happiness: A New Approach to Getting the Life You Want - Sonja Lyubomirsky

101 Theory Drive: A Neuroscientist's Quest for Memory (Gary Lynch) - Terry McDermott

Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School - John Medina

The Society of Mind - Marvin Minsky

Psychology Today: Taming Bipolar Disorder (Psychology Today Here to Help) - Lori Oliwenstein

The Cult of Personality Testing: How Personality Tests Are Leading Us to Miseducate Our Children, Mismanage Our Companies, and Misunderstand Ourselves - Annie Murphy Paul

Obsessive-Compulsive Disorders: A Complete Guide to Getting Well and Staying Well - Fred Penzel

Learned Helplessness: A Theory for the Age of Personal Control - Christopher Peterson, Steven F. Maier and Martin E. P. Seligman

The Boy Who Couldn't Stop Washing: The Experience and Treatment of Obsessive-Compulsive Disorder - Judith L. Rapoport

Shadow Syndromes: The Mild Forms of Major Mental Disorders That Sabotage Us - John J. Ratey M. D. and Catherine Johnson Ph.D.

Be Different: My Adventures with Asperger's and My Advice for Fellow Aspergians, Misfits, Families, and Teachers - John Elder Robison

Look Me in the Eye: My Life with Asperger's - John Elder Robison

Authentic Happiness: Using the New Positive Psychology to Realize Your Potential for Lasting Fulfillment - Martin E. P. Seligman

Flourish: A Visionary New Understanding of Happiness and Well-Being - Martin E. P. Seligman   

Learned Optimism: How to Change Your Mind and Your Life - Martin E. P. Seligman

What You Can Change and What You Can't: The Complete Guide to Successful Self-Improvement - Martin E. P. Seligman

Brain Lock: Free Yourself from Obsessive-Compulsive Behavior - Jeffrey M. Schwartz and Beverly Beyette

The Mind and the Brain: Neuroplasticity and the Power of Mental Force - Jeffrey M. Schwartz and Sharon Begley

Connectome: How the Brain's Wiring Makes Us Who We Are - Sebastian Seung

Wish I Could Be There: Notes from a Phobic Life - Allen Shawn 

The Other Side of Normal: How Biology Is Providing the Clues to Unlock the Secrets of Normal and Abnormal Behavior - Jordan W. Smoller

Stuff: Compulsive Hoarding and the Meaning of Things - Gail Steketee 

The Impulse Factor: An Innovative Approach to Better Decision Making - Nick Tasler

Overcoming Health Anxiety - David Veale

Anatomy of an Epidemic: Magic Bullets, Psychiatric Drugs, and the Astonishing Rise of Mental Illness in America - Robert Whitaker   

Cognitive Behavioural Therapy for Dummies - Rob Willson and Rhena Branch

Don't Panic: Taking Control of Anxiety Attacks - Reid Wilson

Math:

A Tour of the Calculus - David Berlinski

Newton's Gift: How Sir Isaac Newton Unlocked the System of the World - David Berlinski 

The Advent of the Algorithm: The Idea that Rules the World - David Berlinski

First You Build a Cloud: And Other Reflections on Physics as a Way of Life – K. C. Cole

Mind Over Matter: Conversations with the Cosmos – K. C. Cole

The Universe and the Tea Cup: The Mathematics of Truth and Beauty – K. C. Cole

Archimedes' Revenge: The Joys and Perils of Mathematics - Paul Hoffman

The Man Who Loved Only Numbers: The Story of Paul Erdos and the Search for Mathematical Truth - Paul Hoffman

The Man Who Knew Infinity: A Life of the Genius Ramanujan - Robert Kanigel

The Fractal Geometry of Nature - Benoit Mandelbrot

A Beautiful Mind (John Nash) - Sylvia Nasar

A Mathematician Reads the Newspaper - John Allen Paulos

Innumeracy: Mathematical Illiteracy and Its Consequences - John Allen Paulos

Fermat's Enigma: The Epic Quest to Solve the World's Greatest Mathematical Problem - Simon Singh and John Lynch

Science:

Bursts: The Hidden Patterns Behind Everything We Do, from Your E-mail to Bloody Crusades - Albert-Laszlo Barabasi

Linked: How Everything Is Connected to Everything Else and What It Means - Albert-László Barabási

Forward Through the Rearview Mirror: Reflections on and by Marshall McLuhan - Paul Benedetti and Nancy DeHart 

American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer - Kai Bird and Martin J. Sherwin 

Turbulent Mirror: An Illustrated Guide to Chaos Theory and the Science of Wholeness - John Briggs  

Ubiquity: Why Catastrophes Happen - Mark Buchanan

The Selfish Gene - Richard Dawkins

The Meaning of it All: Thoughts of a Citizen-Scientist - Richard P Feynman

What Do You Care What Other People Think?: Further Adventures of a Curious Character - Richard P. Feynman 

Blink: The Power of Thinking Without Thinking - Malcolm Gladwell

Outliers: The Story of Success - Malcolm Gladwell

The Tipping Point: How Little Things Can Make a Big Difference - Malcolm Gladwell

What the Dog Saw: And Other Adventures - Malcolm Gladwell

Chaos: Making a New Science - James Gleick

Faster: The Acceleration of Just About Everything - James Gleick

Genius: The Life and Science of Richard Feynman – James Gleick

The Information: A History, A Theory, A Flood - James Gleick

What Just Happened: A Chronicle from the Information Frontier - James Gleick

Alan Turing: The Enigma - Andrew Hodges and Douglas Hofstadter

Emergence: The Connected Lives of Ants, Brains, Cities, and Software - Steven Johnson

Chances Are . . .: Adventures in Probability - Michael Kaplan and Ellen Kaplan

Out of Control: The New Biology of Machines, Social Systems, and the Economic World - Kevin Kelly

Naked To The Bone: Medical Imaging In The Twentieth Century - Bettyann Kevles

John Von Neumann: The Scientific Genius Who Pioneered the Modern Computer, Game Theory, Nuclear Deterrence, and Much More - Norman Macrae

The Gutenberg Galaxy - Marshall McLuhan 

The Medium is the Massage - Marshall McLuhan, Quentin Fiore and Shepard Fairey

Feynman's Rainbow: A Search for Beauty in Physics and in Life - Leonard Mlodinow 

The Drunkard's Walk: How Randomness Rules Our Lives - Leonard Mlodinow 

What the Numbers Say: A Field Guide to Mastering Our Numerical World - Derrick Niederman and David Boyum

Universal Foam: Exploring the Science of Nature's Most Mysterious Substance - Sidney Perkowitz

Labyrinths of Reason: Paradox, Puzzles, and the Frailty of Knowledge - William Poundstone

The Prisoner's Dilemma - William Poundstone

The Lady Tasting Tea: How Statistics Revolutionized Science in the Twentieth Century - David Salsburg

Fringes of Reason (Whole Earth) - Ted Schultz

Why Things Bite Back: Technology and the Revenge of Unintended Consequences – Edward Tenner

Philosophy/ Sociology

Bait and Switch: The (Futile) Pursuit of the American Dream - Barbara Ehrenreich

Nickel and Dimed: On (Not) Getting By in America - Barbara Ehrenreich

The True Believer: Thoughts on the Nature of Mass Movements - Eric Hoffer

The Age of Alienation - Bernard Murchland

The Thorpophile:Making Millions the Easy Way

http://www.youtube.com/watch?v=lbjB2aO04lg

The Thorpophile: The Quants Book Review

Ed Thorp's Genius Detailed In Scott Patterson's 'The Quants'

 

Feb 05, 2010

The amazing career of Ed Thorp -- which has included creating a system to beat the house in blackjack, uncovering the Bernie Madoff scam 17 years before it was made public and racking up eye-popping returns at his hedge funds while avoiding the risk that killed others -- is detailed in a great new book by Wall Street Journal reporter Scott Patterson.

Thorp isn't the primary character in Patterson's bestselling "The Quants," but to this reader the now 77-year-old genius steals the show.

"The Quants" is about the new breed of young math geniuses who guided their hedge funds and investment-banking units to unfathomable returns last decade before crashing to earth in epic fashion. Patterson focuses his attention on four "quants" -- Ken Griffin, Cliff Asness, Peter Muller and Boaz Weinstein.

Each of the quants attended the country's best schools and stood out among their talented peers. Each gravitated to Wall Street, where they racked up impressive gains through their highly complex trading models and hedging strategies. The quants were so sure of their models, which were based on historical data and the belief that market prices were efficient, that they took on massive leverage to juice returns.

The problem with the models, however, was that they assumed investors were rational and that highly unusual market conditions -- the kind Nassim Nicholas Taleb calls "black swans" in his book of that name -- wouldn't persist for any extended time. Highly confident in their models, the quants went "all-in" in the parlance of poker, which many of them played with the same zeal as they brought to their investments.

When the U.S. subprime market cracked in 2007, panicked markets turned irrational. As everyone tried to unwind their trades at the same time to stay afloat, the models stopped working and the quants lost billions.

Meanwhile, coming out of retirement from his office in Newport Beach, Calif., Ed Thorp racked up 18 percent gains in the brutal 2008 market with a non-leveraged trading strategy he called "System X." That was nothing new for Thorp, who had consistently achieved double-digit returns since his days running the hedge fund Princeton/Newport Partners.

Thorp was one of the earliest quants. He developed an early mechanism to price warrants and used that advantage to rack up fantastic returns for his investors. His work inspired numerous quants and other investors, including bond king Bill Gross, whose Pimco office is just down the street from Thorp's.

Thorp avoided the ruin that met other quants by refusing to stick rigidly to models and by employing a system of risk management based on the Kelly criterion (William Poundstone also delves into this in the excellent book "Fortune's Formula").

The Kelly criterion helps gamblers, as well as investors, decide how much to bet on each hand. When the odds are good, you bet a higher percentage of your bankroll. But you don't bet 100 percent of your money unless you have a 100 percent chance of winning.

Thorp learned the Kelly criterion while studying ways to beat casino blackjack, which led to the ground-breaking 1962 book "Beat the Dealer" that inspired many quants. Warren Buffett, whom Thorp met with in 1968 to discuss Buffett's investment partnership structure, is said to use a form of the Kelly criterion in deciding how much money to put into various holdings.

After learning how to beat the casino in blackjack, Thorp delved into the markets. He started Princeton/Newport Partners in 1969 and ran it successfully for decades. In 1991 a company asked Thorp to review its investment portfolio. That's when he learned of Madoff's fund, which he quickly realized couldn't possibly be legitimate based on its reported trades.

In many ways Thorp seems to share commonalities with Buffett -- mathematical genius, constant thought into avoiding catastrophic risk, common sense, honesty, passion for the game and a decades-long track record of success through numerous market conditions. But he hasn't won the same fame that the Oracle of Omaha has.

Happily, "The Quants" shines a well-deserved light on Thorp.

Bill Freehling

The Market Is Dark

Scott Patterson

I enjoyed Scott Patterson's first book Quant. Now he has a new financial chiller.

The Market Is Dark

By Scott Patterson on June 26, 2012

One of the primary themes in my new book Dark Pools is embedded in the title–the market is dark. It’s dark to regular investors, to institutional traders, to fund managers, to exchange operators, and to regulators. There are many reasons for this, but primarily it is due to the massive number of orders flooding the system from high-frequency firms and the complexity of how those orders interact with other orders inside exchanges and dark pools. Essentially, the market has become too complex, and too fast, for the human mind to follow or even remotely understand.

That’s a problem–a big problem. Because retail investors are starting to realize that no one is watching. Even Mary Schapiro, chairman of the SEC, has told Congress that her agency doesn’t have the ability to track what’s going on in the stock market (and just forget options). So who can know? Who can reassure the investing public that the market, despite many signs to the contrary, really isn’t rigged?

No one can.

The SEC has proposed building a computer system to track the market, the consolidated audit trail, which I wrote about for The Wall Street Journal last September. But there’s been little word of progress on the so-called CAT. Until there is, investors are going to remain in the dark.

Dark Pools

Dark Pools

High-Speed Traders, A.I. Bandits and the Threat to the Global Financial System
by Scott Patterson

A news-breaking account of the global stock market’s subterranean battles, Dark Pools portrays the rise of the “bots”– artificially intelligent systems that execute trades in milliseconds and use the cover of darkness to out-maneuver the humans who’ve created them.

In the beginning was Josh Levine, an idealistic programming genius who dreamed of wresting control of the market from the big exchanges that, again and again, gave the giant institutions an advantage over the little guy.  Levine wondered, What if the little guy could see all trades in real time and, in the process, cut out the middlemen who picked his pocket with every trade?  But for that to happen, the market had to be plugged in.

And so Levine created a computerized trading hub named Island where small traders swapped stocks.  Soon after its launch, Island spawned a day-trading revolution that would reshape the market.  Eventually, Levine’s creation became the electronic version of the New York Stock Exchange, and in a few short years the world’s capital flowed through a vast jungle of fiber-optic cables.

By then, the market that Levine had sought to fix had turned upside down.  The giant institutions and the little guys had developed a shared interest, and they were both imperiled.

The solution: “dark pools” – secretive exchanges where the “whales,” big institutional investors that often traded the little guys’ money, could move through the turbulent electronic waters unmolested.  But soon the bots acquired night vision; they learned how to peer into the darkness. Growing savvier with each tick of the tape — always learning – they steadily fed on the whales, evolving into a new breed of high-speed middlemen.

Dark Pools is the fascinating story of how global markets have been hijacked by trading robots – many so self-directed that humans can’t predict what they’ll do next.  And it shows how the new players moving into artificial intelligence are on the verge of tipping the entire system toward a global meltdown that could happen in minutes – maybe even seconds.

Online Radio show: The Brian Lehrer Show
Trading Machines with Scott Patterson


http://www.wnyc.org/shows/bl/2012/jun/29/trading-machines/

They Earn Their Money the Old-Fashioned Way -- They Cheat. Dept.: Bernie Madoff

I mentioned earlier, that after the 2008 Financial Crisis, I devoted myself to reading business books in an attempt to wise up. I've since studied the efficient market hypothesis, passive indexing, portfolio allocation, 401 (k) plans, IRAs, value investing, arbitrage, diversification, collectibles, commodities, etc.

I opened a Roth IRA at Fidelity in 2011, and put in the max for the last two years, about $6K worth of cribbed savings. Last week I received via snail mail a jaw-dropping statement for my tax-free interest for the month of May, 2012. The grand total? One thin dime. Clearly, I haven't learned enough about sound investing strategies.

What I have learned along the way, is that the big boys often earn their fortunes "the old-fashioned way" -- they cheat. They steal, use inside information, and at the very least, "game the system."

There's scores of hindsight exposes about scandalous cheaters. From John Law's (1671-1729) Mississippi Bubble to Kenneth Lay's (1942-2006) Enron fiasco, it seems con men are jockeying to soak us gullible investors.

A recent eye-opener for me was Bernard Madoff (b. 1938). He was the dad-blamed former non-executive chairman of the NASDAQ stock market for chrissakes, and when finally exposed, the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history.

Madoff didn't mess with implementing any of those complex financial strategies I mentioned above. He didn't allocate, arbitrage, or diversify. No sir, he just cheated his clients out of their money. Savvy investment analysts like Harry Markopolis and Edward O. Thorp saw the end-result coming, but somehow the SEC didn't. Madoff's returns were just too good, month after month, to be possible. Those charged with recovering the missing money believe Madoff's investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. Below are two in-depth books on the scandal.

As for me, I might just stick with original comic book art for my fortune. Even I can make more than a dime a month with $6K.

The Madoff Chronicles: Inside the Secret World of Bernie and Ruth by Brian Ross

"After the news broke of Bernie Madoff's arrest on December 11, 2008, the facts were hard to grasp. Madoff claimed to have stolen fifty billion dollars; the sum seemed impossibly large. But of course it wasn't impossible. And that was only the beginning of the story.

As chief investigative correspondent for ABC News, Brian Ross has been on the front lines of the Madoff scandal since the beginning. Throughout the course of his investigation, he and his team have achieved unequaled access to the investigators working to unravel Madoff's fraud, and have succeeded in cultivating sources deep within the walls of Bernard L. Madoff Investment Securities that no other journalist has reached. Ross was even able to obtain a copy of the contents of Madoff's "little black book."

The result is an unparalleled, fly-on-the-wall view of a life of corrupted luxury and outrageous lies.
Ross chronicles the lavish lifestyle that Bernie and his high-school sweetheart, Ruth, enjoyed as the result of his ill-gotten gains and the bone-deep deceit that shocked the world with its sheer audacity. He details the layers of Madoff's scheme--from money men across the country who made millions convincing clients to entrust their wealth to Madoff, to the fabricated stock trades and false quarterly statements that fooled his victims, many of whom lost their savings, their homes, some of them even their lives, in the wake of Madoff's betrayal.

This is a true-crime drama of Shakespearean proportions, built upon the up-close investigative skills of one of our most respected journalists. The Madoff Chronicles is a vivid and chilling look behind the gilded doors of the greatest financial fraud in history."


No One Would Listen: A True Financial Thriller by Harry Markopolos

"Harry Markopolos and his team of financial sleuths discuss first-hand how they cracked the Madoff Ponzi scheme.
No One Would Listen is the exclusive story of the Harry Markopolos-lead investigation into Bernie Madoff and his $65 billion Ponzi scheme. While a lot has been written about Madoff's scam, few actually know how Markopolos and his team-affectionately called "The Fox Hounds" by Markopolos himself, uncovered what Madoff was doing years before this financial disaster reached its pinnacle. Unfortunately, no one listened, until the damage of the world's largest financial fraud ever was irreversible.

Since that time, Markopolos openly has testified and questioned the enforcement and fraud investigation capabilities of the Securities and Exchange Commission (SEC), shared a sliver of this page-turning story with 60 Minutes, and become perhaps the world's most visible and insightful whistleblower on fraud and conflicts of interest in financial markets.

Throughout the book, Markopolos and his Fox Hounds tell their first-hand story of investigating Madoff-with the help of bestselling author David Fisher. They explain how they discovered the fraud, and then how they provided credible and detailed evidence to major newspapers and the Securities and Exchange Commission (SEC) many times between 2000 and 2008, only to have his warnings ignored repeatedly by the SEC.

Provides a firsthand account of how Markopolos uncovered Madoff's scam years before it actually fell apart

Discusses how the SEC missed the red flags raised by Markopolos
Describes how Madoff was enabled by investors and fiduciaries alike
The only book to tell the story of Madoff's scam and the SEC's failings by those who saw both first hand

Despite repeated written and verbal warnings to the SEC by Harry Markopolos, Bernie Madoff was allowed to continue his operations.

No One Would Listen paints a vivid portrait of Markopolos and his determined team of financial sleuths, and what impact they will have on financial markets and financial regulation for decades to come."