Inside markets, innovation, and risk

Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street–from Morgan Stanley to Salomon and Citigroup–and a member of some of the world’s largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of man’s attempt to manage market risk and what it has wrought. In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds.

Customer Rating:
Summary: A good read in these troubled times we are at
Comment: I read this book back in December 07, the perfect timing for it would have been now, however.
A very simple conclusion from this book is that despite all the good intentions that the current bailout (TARP) might have, what we are doing is creating a new demon that will provoke a new crisis, with a different twist, anytime in the future.
Crisis are inevitable and we cannot go against financial innovations (like in the last 10 years with derivatives, CDS, MBOs, CDOs, etc.)
A better synchronicity among financial institutions and one regulatory agency (not several agencies that do not communicate between themselves as they should) could be a solution.

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Customer Rating:
Summary: Want to understand the current financial crisis?
Comment: Bookstaber has written a cogent, understandable and witty guide to the structural and human underpinnings of the current financial crisis. While this book requires thoughtful reading, it does not assume that the reader is technically savvy about markets or the plethora of financial instruments that have come to have such a dramatic impact on U.S. and world economies. I unhesitatingly recommend this book to anyone wishing a deeper understanding of the problems that can and have been created by financial markets and instruments.

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Customer Rating:
Summary: Thought-provoking reflection on Wall Street risk today
Comment: This book is part memoir, part reflection on risk, part tell-all, part recapitulation of recent financial crises and part polemic. If you fret that all these parts might blur author Richard Bookstaber's objectives and message, you are right, but, if you have the patience, keep reading. Enjoy the somewhat diffuse anecdotes and observations in the first few chapters until you reach the author's straightforward presentation of his case that the U.S. financial system is at risk from complexity and tight coupling. The book would have benefited from a slightly fresher take on the financial crises of the last three decades. However, given the author's years as a risk manager on Wall Street (Morgan Stanley, Salomon Brothers, Citigroup) and as a hedge fund expert (Moore Capital, Ziff Brothers, FrontPoint), his personal experience during fiscal crises and his close view of dramatic turns in the market, getAbstract finds that his diagnosis of systemic problems conveys several important stories and that his analysis deserves your attention.

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Customer Rating:
Summary: GLB
Comment: I have had great difficulty reading this book firstly as I am not a quant nerd. Secondly, the author deems fit to draw comparisons with hedge funds and a host of unrelated topics eg. Chernobyl, Two Mile Island and the military and the Post Office (for heaven's sake)! The less said about the ill fated shuttles the better!! Third, the book is poorly written and/or badly edited as there are many duplications throughout the text an example of which is LTCM which crops up in every other chapter. Nevertheless, I also read the authors' presentation to the oversight committee of Congress where he did a complete about turn and in complete contrast to this book stated that better regulation was the way forward!
Confused? You better believe it!!

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Customer Rating:
Summary: Great Book
Comment: Loving this book. It really brings clarity to all the events that surround financial crises. Got the book on time and in perfect condition.

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