Conglomerate Blog: Business, Law, Economics & Society

So, for our spring reading pleasure, two books springing out of the stock market happenings of the past two years have just hit the stores.

First, No One Would Listen: A True Financial Thriller, by Harry Markopolos. You remember Harry Markopolos as the man who tried to warn the SEC numerous times that Bernard Madoff's empire had no clothes. Madoff told clients that their consistent returns were the result of a split-strike conversion strategy in which he bought stocks on the S&P index, then bought "put" options for the same stocks at a lower price and sold "call" options for the same stocks at a higher price. Markopolos, who was a derivatives rocket scientist and a competitor of Madoff, tried to duplicate his strategy and could not get consistent returns, leading him to believe that Madoff was a fraud. Repeatedly, he sent documents and called meetings with SEC officials, who seemed to humor him more than believe him. Partly because the people he spoke to didn't understand the finance behind what he was saying, partly because he seemed to want financial remuneration, and partly because he seemed to be waging a jealous campaign against Madoff, Markopolos' warnings were ignored. Was Markopolos a Solieri or a Herbie Stempel? Of course, history has proved Markopolos correct -- Madoff was a fraud, in exactly the way that Markopolos suspected.

That being said, I'm not sure how much I'm looking forward to the book. In interviews, Markopolos still has a big chip on his shoulder and no hint of graciousness, even now when he can afford it. In reality, the best thing that every happened to him was Bernie Madoff -- he's not like victims who have lost money, he's made money! Last week, a WSJ article posed the question of whether Markopolos should be chairman of the SEC, and law professor John (Jack) Coffee answered "He is what the commission needs only if the commission needs an emotionally unstable idiot savant. You cannot be serious. He was right but that does not mean he will be right again." ( I just saw Gordon's post on Markopolos' take on SEC attorneys, below -- I guess he is having his day on the Glom!)

The second book that is ripped out of the financial pages is The Big Short: Inside the Doomsday Machine by Michael Lewis. According to reviews, the book also focuses on contrarians who didn't believe the hype -- this time about the stock market and the real estate market. Betting on their instincts, these folks sold short and made millions and millions. (If only Madoff had been publicly-traded; Markopolos could own his own island by now!) I am looking forward to this book (why is it not available on the Kindle?) because I enjoy Lewis' writing style.

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So, for our spring reading pleasure, two books springing out of the stock market happenings of the past two years have just hit the stores.

First, No One Would Listen: A True Financial Thriller, by Harry Markopolos. You remember Harry Markopolos as the man who tried to warn the SEC numerous times that Bernard Madoff's empire had no clothes. Madoff told clients that their consistent returns were the result of a split-strike conversion strategy in which he bought stocks on the S&P index, then bought "put" options for the same stocks at a lower price and sold "call" options for the same stocks at a higher price. Markopolos, who was a derivatives rocket scientist and a competitor of Madoff, tried to duplicate his strategy and could not get consistent returns, leading him to believe that Madoff was a fraud. Repeatedly, he sent documents and called meetings with SEC officials, who seemed to humor him more than believe him. Partly because the people he spoke to didn't understand the finance behind what he was saying, partly because he seemed to want financial remuneration, and partly because he seemed to be waging a jealous campaign against Madoff, Markopolos' warnings were ignored. Was Markopolos a Solieri or a Herbie Stempel? Of course, history has proved Markopolos correct -- Madoff was a fraud, in exactly the way that Markopolos suspected.

That being said, I'm not sure how much I'm looking forward to the book. In interviews, Markopolos still has a big chip on his shoulder and no hint of graciousness, even now when he can afford it. In reality, the best thing that every happened to him was Bernie Madoff -- he's not like victims who have lost money, he's made money! Last week, a WSJ article posed the question of whether Markopolos should be chairman of the SEC, and law professor John (Jack) Coffee answered "He is what the commission needs only if the commission needs an emotionally unstable idiot savant. You cannot be serious. He was right but that does not mean he will be right again." ( I just saw Gordon's post on Markopolos' take on SEC attorneys, below -- I guess he is having his day on the Glom!)

The second book that is ripped out of the financial pages is The Big Short: Inside the Doomsday Machine by Michael Lewis. According to reviews, the book also focuses on contrarians who didn't believe the hype -- this time about the stock market and the real estate market. Betting on their instincts, these folks sold short and made millions and millions. (If only Madoff had been publicly-traded; Markopolos could own his own island by now!) I am looking forward to this book (why is it not available on the Kindle?) because I enjoy Lewis' writing style.

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