Posts Tagged ‘hedge funds’

The Great Read-cession, Part X

We’re done with the book reviews, but John S isn’t done breaking down the books of the financial crisis. We still have a few things left to cover, most importantly….

The Whole Truth...

The Whole Truth…

Rankings!

Obviously I wasn’t going to read 16 books and NOT rank them.

It was a little hard to determine the criteria. Some of the books were well-written, but not especially good at delving into the causes; others were thorough but boring; some were great but a little off-topic. If someone asked me to recommend one of these books, I wouldn’t answer until I got more information about what exactly she was looking for. If, however, she were somehow unable to clarify, I would recommend them in this order:

16) A Colossal Failure of Common Sense

15) Reckless Endangerment

14) The Quants

13) The Greatest Trade Ever

12) Crash of the Titans

11) On the Brink

10) Bailout Nation

9) Financial Crisis Inquiry Report

8) Confidence Men           

7) House of Cards

6) Griftopia

5) More Money Than God

4) Too Big To Fail

3) The Big Short

2) Bailout

1) All the Devils Are Here

Some Questions, Answered

 So, um, whose fault was it? 

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The Great Read-cession, Part VII

The QuantsIt’s Part VII! (Remember, if you’re having trouble keeping up, check here for a complete list of all posts in the series.) Today John S looks at the magical world of hedge funds.

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

by Scott Patterson 2010

 

“Quant” is a word that pops up over and over again in descriptions of the financial crisis, but it never really gets defined. It tends to be used on Wall Street the way “sabermetrician” gets used in baseball or “Nate Silver” is used in politics: It just means someone who uses math in a slightly unconventional way while doing his job.

Nevertheless, these “quants” were blamed for much of the financial crisis, as those industry “experts” who concocted elaborate formulas showing that housing prices would never fall and homeowners would never default. I turned to Patterson’s book to find out who, exactly, these “quants” were and why their formulas—unlike Nate Silver’s and Billy Beane’s—went so awry.

Patterson’s title bills the book as a story of these “new… math whizzes,” and the cover even contains a quote from Warren Buffett: “Beware of geeks bearing formulas.”* Unfortunately, Patterson’s book focuses primarily on the world of quantitative hedge funds. In other words, instead of focusing on those within the banks themselves and how these whizzes were used to justify massive trading strategies, Patterson’s book is about some of the most successful outsiders. Continue reading