Index
NUMBERS
13 Bankers, 294
60 Minutes, 343
401(k) plans, 48
1720 Bubble Act, 53
A
AAA tranches, 203
Abacus transactions, 197-199, 339
Abbey, Edward, 362
ABN-Amro, 197
ABS CP (asset-backed securities commercial paper), 190
ABS PAYG CDS (asset-backed securities pay-as-you-go credit default swaps), 196
Absolute Strategy Research, 357
ABX.HE (asset-backed securities home equity), 196
Abyssinian Baptist Church, 164
ACA Capital, 197
accounting
ark-to-market, 56
errors, 285
mark-to-market (MtM), 286-288
standards, 289
value, 286-287
accreting interest rate swaps, 160
accumulator contracts, 219
Ackoff, Russell, 309
General Electric (GE), 61
Adelphia, 154
adjustable rate bonds, 213
adjustable rate mortgages (ARMs), 148, 182-184
adjusted model prices, 289
Aeneid, 338
affinity fraud, 313
Affluent Society, The, 43
affluenza, 46
Africa, 22
Against The Gods: The Remarkable History of Risk, 129
Age of Turbulence, The, 302
Agnelli, Giovanni, 222
Airline Partners Australia (APA), 156
airlines, leveraged buyouts (LBO), 156-157
Albanese, Tom, 59
Alcan, 59
Alcar, 124
alchemy, 131-132
algorithmic trading, 242
Alice in Wonderland, 31
Allco Equity Partners, 156
Allco Finance Group, 156
Allen, Paul, 179
Allied Signal, 60
alpha (outperformance), 241
Alt A (Alternative A) mortgages, 182
alternatives
assets, 154
investments, 252
paper money, 35
Altman, Edward, 143
amakudari (descent from heaven), 316
Amaranth, 227
hedge funds, 250-252
Amazon.com, 97
America. See also United States
China’s relationship with, 87
dollars, 22
American Express, 71
American Finance Association, 127
American Nairn Linoleum Company, 133
American Psycho, 313
American Rust, 141
Ameriquest, 195
Amherst, 196
amortization, 182
Amphlett, Christina, 218
Andersson, Roy, 50
Angelides, Phil, 291
Angstrom, Harry “Rabbit”, 27, 46, 363
annihilation, 38
annuity income, 70
anti-debt, 93
AOL (America Online), 58
apical ballooning syndrome, 177
Applegarth, Adam, 200
AQR Capital Management, 126, 255
Arnason, Ragnar, 277
Arnold, John, 319
Arrow, Kenneth, 128
Artus, Patrick, 303
Ascent of Money, The, 157
Asian crisis, 280
Asquith, Paul, 144
assay marks, 25
asset-backed securities (ABSs), 169
assets
hiding, 288
lite strategies, 55
loans, 70
rise of prices, 296
supply of, 267
asymmetric information, 119
Atlantic Monthly, 95
attachment theories, 316
aussies (Australian dollars), 21
austerity, 357
Austrian School, 103
Austro-Hungarian Empire, 103
automated credit scores, 181
automobile industry bailouts, 344
Autovolanter, 322
avoidance of taxes, 48-49
Aztec cultures, invention of money, 24
B
BAA (British Airport Authority), 161
Babson, Robert, 347
Bacevich, Andrew, 43
backfill bias, 243
Bagehot, Walter, 63, 67, 201, 278
bailouts, 344
AIG, 234. See also AIG
Greece, 355
Baker, Martin, 239
Bakkavo, 275
balance sheets, parking assets, 288
balloon payment mortgages, 182
Balls, Ed, 82
Baltic Dry Index, 344
Baltimore, Maryland, 333
Banco Santander, 79
bancor, 30
Bank of America, 191
merger with Merrill Lynch, 339
Bank of America (BA), 291
Bank of China, 333
Bank of England, 25, 50, 81, 195, 240, 272, 299, 342
analysis of financial networks, 272
Bank of International Settlement (BIS), 74-75, 268
Bank of Manhattan Trust, 79
Bank, The, 308
bankers
earnings, 323-324
extravagances of, 322-323
Bankers Trust (BT), 141
Bankhead, Tallulah, 247
Enron, 49
banks, 32-33
bad loans (2008), 343-344
capital injections into, 348-350
CitiGroup, 75-77
credit cards, 71-72
culture of, 311-312
exotic products, 73-74
investment, 57
jobs, 307-308
leveraged buyouts (LBOs), 147-148
loans, 70-71
networks, 270
regulations, 65-67
risks, 67-70
shadow banking system, 192
Banks, Tyra, 322
banksters, 294
Banksy, 365
Barbarians at the Gate: The Fall of RJR Nabisco, 135
Barclaycard, 71
Barclays Global Investors (BGI), 123
Barings, 227
BARRA, 123
Barrack, Tom, 327
Barron’s financial paper, 34
Barron, Clarence, 34
bartering, 23
Bartiromo, Maria, 93
Basel 2, 200
Basel III, 353
Basel, Switzerland, 74
basis risk, 213
Bass, Robert M., 137
Bateman, Patrick, 313
Baum, L. Frank, 26
Beach Boys, The, 157
Bean, Charles, 50
Bear Stearns, 162, 191, 204, 249, 316, 318, 326, 338
Asset Management, 191
Beasley, Jane, 62
Beat the Market, 121
Beatrice, 141
Beckham, David, 339
Beerbohm, Max, 253
beggar-thy-neighbor policies, 349
behavioral economists, 125-126
bell-shaped normal distribution curves, 117
Beller, Ron, 321
benchmarking exercises, 315
benefits, employee, 47
Benna, Ted, 48
Berdymukhamedov, Gurbanguly, 299
Bergdorf Goodman, 330
Bergerac, Michel, 147
Berkshares program, 36
Berkshire Hathaway, 261, 322. See also Warren Buffet
Berle, Adolf, 54
Berlin Wall, fall of, 101, 295
Bernanke, Ben, 170, 182, 203, 303, 338, 366
debt, 267
Great Moderation, 277
on 60 Minutes, 343
September, 2008, 342
Bernstein, Peter, 26, 129, 208
Besley, Tim, 278
Best, George, 88
beta (market returns), 241
Beveridge Report, 47
Beveridge, Sir William, 47
Beyond Belief, 338
Bhagavad Gita, 339
Bhide, Amar, 312
BHP Billiton, 59
bias, 243
Bieber, Matthew, 198
Bierce, Ambrose, 326
Big Short, The, 198
Biggs, Barton, 99
Bild, 358
Billboard Top 100 Chart, 124
Billings, Josh, 233
billionaire drivel, 327
bills of exchange, 32
bimetallism, 26
bio-fuels, 334
Black Wednesday, 240
black-box trading, 242
Black-Scholes models, 120-122, 277
Black-Scholes-Merton (BSM) option, 121
Blackrock, 170
Blackstone Group, The, 154, 318
Blair, Tony, 81
Blinder, Alan, 129
Blomkvist, Mikhael, 360
Bloomberg TV, 92
Bloomberg, Michael, 164
Bloomsbury group, 29
Blue Force, 264
Blumberg, Alex, 185
Boao Forum, 324
boards of directors, knowledge of business operations, 292-293
BOAT (Best of All Time), 228
Bogle, Jack, 123
Boiler Room, 185
Bonanza, 31
Bond, James, 26
Bonderman, David, 154, 164, 318
bonds, 169
adjustable rate, 213
failure of securitization, 204-205
high opportunity, 143
insurance, 176
Milken’s mobsters, 146-147
municipal, 211-214
PAC (planned amortization class), 178
securitization, 173
TAC (target amortization class), 178
TOBs (tender option bonds), 222
VADM (very accurately defined maturity), 178
Bonfire of the Vanities, 239
bonuses, 317-318
books, financial, 96-98
boom and bust cycles, 305
Booth School of Business, 116
Borges, Jorge Luis, 210
Born, Brooksley, 300
borrowing levels, increase in, 265, 267-268
Boston Post, 34
Bottomley, Horatio, 89
Bourdieu, Pierre, 308
Bouton, Daniel, 227
Bowers, David, 357
Bowie Bonds, 168
Bowsher, Charles, 272
Boy, John, 330
BP (British Petroleum), Gulf of Mexico oil spill, 361
Braddock, Ben, 308
Brandenburg Gate, Ronald Reagan’s speech at, 101
Brazilian reals, 21
Bretton Woods, 29-30
BRIC (Brazil, Russia, India, and China), 90
Bridgewater, 327
Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America, 186
British Aluminum (BA), 57
British pound sterling, 22
Brodsky, Joseph, 44
brokers
money, 22
mortgages, 186
Brown, Ian Harold, 35
Bryan, William Jennings, 26, 324
bubbles, 277-278
end of, 329
price, 299
Buckely, Christopher, 98
budget deficits, 1970s, 104
Buffett, Warren, 154, 202, 276, 325-326
bonuses, 319
compensation, 316
end of bubble, 329
Financial Times, 206
Gen Re Securities, 231
GE stock, 344
hedge funds, 261
ownership percentage of Moody’s, 283
purchase of, 322
bugs, gold, 28
Bulletin of Atomic Scientists, 34
bullion, gold. See gold
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), 259
Bundy, McGeorge, 117
Bunning, Jim, 342
Bureau 39, 24
Burnett, Erin, 93
Burrough, Bryan, 324
Burry, Mike, 256
Bush, George H. W., 65
2001 tax cuts, 298
business schools, 308-313
bonuses, 317-318
compensation, 313-320
BusinessWeek, 170
buy and flick, 139
Byrd, Richard Evelyn, 256
Byrne, David, 46
Byrne, Rhonda, 45
C
Caesar, 295
calculators, 122
call options, 209
Volkswagen (VW), 257
Calomiris, Charles, 273
Canadian dollars, 21
Canary Wharf, 79
Cantor, Eddie, 338
capital
definition of, 280
flows, 205
gains, 160
injections into banks, 348-350
introductions, 247
leveraged, 244
Modigliani-Miller propositions, 119
structure arbitrage, 242
velocity of, 69
capital asset pricing model (CAPM), 117
capitalism, 102
Capitalism: A Love Story, 165
Capitalism: The Unknown Ideal, 297
CAPM (capital asset pricing model), 173
Capra, Frank, 65
carceral continuum, 312
careers
certifications, 309-310
finance, 308-313
bonuses, 317-318
compensation, 313-320
Carlyle Group, The, 154, 163, 318
Carlyle, Thomas, 102
Carnegie Mellon University, 119
Carr, Fred, 145
Carroll, Lewis, 31
CARS (certificate for automobile receivables), 173
Caruso-Cabrera, Michelle, 95
Case, Steve, 58
cash flow, 138
forecasting, 160
General Electric (GE), 61
cash for clunkers, 348
Cassano, Joseph, 232
Cat’s Cradle, 339
catastrophe risk, 232
Catillo, Bernal Díaz del, 131
Cavendish Laboratory (Cambridge, England), 101
Cayman Islands, 220
Cayne, James, 318
CBOs (collateralized bond obligations), 173
CDOs (collateralized debt obligations), 173, 176
defaults of, 284
celebrity central bankers, age of, 297-300
celebrity financiers, 324-326
Celtic tiger, 83. See also Ireland
Centaurus Energy, 319
Center for Research in Security Prices (CRSP), 131
Centlivre, Susannah, 75
central banks, 309
age of celebrity central bankers, 297-300
dissenters, 300-302
regulations, 279-281
risk transfers, 281-282
Central Intelligence Agency (CIA), 310
CEOs (chief executive officers)
earnings, 323-324
knowledge of business operations, 292-293
Cerberus, 162
certifications, finance, 309-310
CFA (certified financial analyst), 309
Chains or Chain Link, 269
chains, mortgage, 183
Chancellor, Edward, 161
Chanos, Jim, 161
chaos theory, 274
Chase Manhattan Bank, 79
Chassagne-Montrachet, 304
Cheney, Dick, 265
Chesterton, G.K., 226
Chettle, Geoff, 228
Chicago, 104-105
Chicago Board of Option Exchange (CBOE), 122
Chicago Interpretation, the, 104, 130
Chicxulub crater, 339
Chiemgauer, 35
China, 82
Chinese Communist Party, 350
Chinese paper, 144
Chinese renminbi, 21
Chinese walls, 66
debt, purchase of American dollars, 87
as a financial center, 84-85
global credit process, 88
growth of, 86
relationship with America, 87
slowdown in economic activity, 350-351
China Aviation Oil (Singapore) Corporation, 56
Chinalco, 59
chits, 22
A Chorus Line, 164
Christianity, 65
Christie’s, 323
Chrysler, 162
Building, 79
purchase by Fiat, 344
circulation of money, 32
Citibank, 71
Citicorp Venture Capital, 154
Citicorp, merger of with Travelers, 75
Cities Services, 137
CitiGroup, 41, 75-77, 165, 290, 315
Center, 79
Todd Thompson, 93
City, the (London), 79
CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa), 91
civilization, 38
Clarke, David, 159
Clarkson, Brian, 284
clickety-clicks, 39. See also housewife traders
clientele, hedge funds, 247-250
Clinton, Bill, 170
CLOs (collateralized loan obligations), 173
Clough, Arthur Hugh, 326
CMOs (collateralized mortgage obligation), 170
Cohen, Steve, 244, 253, 311, 322-324
bartering during, 24
Coldplay, 157
Collapse of Complex Societies, The, 349
collapse
of gold standard, 30-31
of Orange County, 283
of subprime mortgage market, 304, 329
collateral, debt as, 188
collateralization, 247
Colonialism, 84
Columbia University, 363
commercial banks, separation from investment banks, 66
commercial real estate vacancy rates, 349
Commissioners of Trade (England), 53
Committee on Agriculture, Nutrition and Forestry, 352
Kazakhstan, 72
Commodity Futures Trading Commission (CFTC), 300
communism, 30
Communist Party (China), 85, 350
Compagnie d’Occident (the Mississippi Company), 28
compensation
bonuses, 317-318
finance jobs, 313-320
Jack Welch, 62
concentrations, risk, 273
Condé Nast Portfolio, 329
condo flippers, 181
conduits, 190
conflicts of interest, 66
Confucius, 131
conglomerates, 60
Congoleum, 133-134
Connally, John, 87
connections, 270
Conrad, Joseph, 337
conspicuous consumption, 41
conspicuous leisure, 41
consulting fees, 316
consumerism, 43-44
consumption, 20
Contact, 348
continuous and instantaneous rebalancing, 121
continuous time mathematics, 121
Controladora Commercial Mexicana SAB, 218
controls, foreign exchange, 22
conventional wisdom, 301
convertible bond arbitrage, 242
converting
Indian rupees, 22
risk, 270
Coolidge, Calvin, 52
Cootner, Paul, 121
Copenhagen Interpretation, the, 101
copper, 56-58
core portfolios, 241
core-satellite approach, 124
Cornell Business School, 179
Corporate Bond Quality and Investor Experience, 143
corporations
debt, 173
limited liability, 53
practice, 124-125
raiders, 146
restructuring, 57
default, 177
swaps, 255
Correy, Stan, 285
Corrigan, Gerald, 234
costs, 245. See also fees
cutting, 60
leveraged buyouts (LBO), 148-149
loans, 188
Cotton Candy, 268
Cotton, Charles Caleb, 282
Council of Economic, 129
Council on Foreign Relations, 347
counterfeit money, 28. See also money
Countrywide Financial, 183-184, 195, 328
cov-lite (covenant light) loans, 155
Coxey march of unemployed men (1894), 26
CQF (certificate in quantitative finance), 309
Cramer, Jim, 92, 96, 338, 340, 343
creative destruction, 103
credit. See also debt
global credit process, 88
market-based, 269
ratings, 282
standby lines of, 281
supply of, 273
credit cards, 71-72
credit default swaps (CDSs), 173, 232, 237
credit money, 25. See also money
Credit Opportunities fund, 256
Credit Opportunities II fund, 256
Credit Suisse, 134
Credit Suisse First Boston, 79
CreditSights, 283
Crimson Tide, 312
crises, financial
preparation for, 264-278
Crisis of Global Capitalism, The, 327
crowded trades, 250
Cruise, Tom, 153
Cullen, Michael, 208
cultures
banks, 311-312
money, 20
Cummings, Elijah, 245
currencies, 124
currency
accumulators, 217
gold, 26. See also gold
types of, 21-23
world reserve, 30
Czech Republic, 24
D
D’Aniello, Daniel, 318
D.E. Shaw & Co., 315
da Silva, Luiz Inácio, 346
Daily Mirror, 295
Dali, Salvador, 321
Dalio, Ray, 327
Dallas, 147
Darling, Alastair, 81
Darst, Douglas, 35
Darst, Seymour, 34
Dartmouth College, 44
Darwinian schemes, 34
Das Kapital, 33
data mining, 127
Davenant, William, 353
Davidson, Adam, 185
Davies, Glynn, 24
Davos World Economic Forum, 163, 324
day trader phenomenon, 92
De Grauwe, Paul, 126
de Jong, Han, 298
de Montaigne, Michel, 305
De viribus quantitates, 286
de Vito, Danny, 21
De-Laurey, Joyti, 321
death bonds. See life insurance
Debreu, Gerard, 128
CDOs (collateralized debt obligations), 173, 176
as collateral, 188
corporate, 173
credit cards, 71-72
European debt crisis, 357-359
General Electric (GE), 61
gold, 26. See also gold
increase in borrowing levels, 265-268
Japan, 357
leveraged buyouts (LBO), 135-136
Congoleum, 133-134
cost of debt, 148-149
Drexel Harriman Ripley, 144
Drexel system, 151-152
high opportunity bonds, 143
hostile bids, 149-150
investment banks, 147-148
junk bonds, 145-146
KKR (Kohlberg, Kravis, and Roberts), 135-137
Milken’s mobsters, 146-147
percentage of GDP, 45
privatization to payoff government, 158
securitization of, 188-192
and speculation, 274-275
sovereign, 236-238
Suze Orman, 93
debt-fueled consumption, 295
debt-to-income limits, 181
decolonization after the Second World War, 84
deconstruction, derivatives, 235-236
decoupling hypothesis, 350
defaults
CDOs, 285
first-to-default (FtD) swap, 220-221
risk, 74
defense of record, Alan Greenspan, 303-304
defined benefit (DB) schemes, 47
defined contribution (DC) schemes, 47
DeLong, Brad, 279
demand, shadow banking system, 192
Deming, Edward, 139
Democratic Convention (1896), 26
Democratic Republic of Congo, 26
Demon of Chance, 118
Deng, Wendy, 323
deposits, 70. See also banks
financial markets, 279
of the financial system, 66
derivatives, 55, 169, 208-209. See also exotic products
AIG, 230-234
arbitrage, 242
central banks, 281-282
deconstruction, 235-236
first-to-default (FtD) swaps, 220-221
Harvard case studies, 214-215
hedging, 216-217
Italy, 215-216
Jerome Kerviel, 226-230
managing risk, 124
municipal bonds, 211-214
price movements, 210-211
risk, 218-219
design of, 225
Fiat, 222-223
sale of to ordinary investors, 332-333
sovereign debt, 236-238
TARDIS trades, 217-218
TOBs (tender option bonds), 222
Derman, Emanuel, 309
Derrida, Jacques, 236
Descartes, René, 228
Detroit, 42
Deutsche Bank, 79, 195, 272, 312
Devaney, John, 255
di Lampedusa, Giuseppe, 353
digitals, 211
Dillion Read, 201
dinars, 21
Diners Club, 71
Dirac, Paul, 104
dirty bombs, 26
disaster capitalism, 342
discrete time intervals, 121
dismal science, 102-104
dispersion swaps, 255
distressed debt trading, 242
distributions, normal, 126
diversification, 122-124
dividends, 119
Dixon, Geoff, 156
documentation requirements, 181
DOG (debt overburdened group), 161
dollars
aussies, 21
kiwis, 21
Zimbabwe, 23
domain knowledge, 64
domestic corporate profits, United States, 276
Dominion Bond Rating Service, 283
doomsday clock, 34
Dorgan, Bryan, 67
Dow 36,000, 99
Dow 40,000: Strategies for Profiting from the Greatest Bull Market in History, 97
Dow 100,000, 97
Dow Jones Industrial Average (DJIA), 89, 97, 126
Dr. Doom, 95
Dr. Strangelove or How I Learned to Stop Worrying and Love the Bomb, 35
Drexel Burnham Lambert, 140, 230
Drexel Harriman Ripley, 144
Drexel system, 151-152
Druckenmiller, Stanley, 261
Drucker, Peter, 63
drunk trading, 40
Dubai International Financial Centre (DIFC), 82-83
Dublin as a financial center, 83
Duncan, Richard, 235
Dunninger, Karl, 355
Duquesne Capital Management, 261
DVT (deep vein thrombosis), 166
Dynamite Prize in Economics, 304
E
early return of capital, 156
earnings
General Electric (GE), 61
loans, 70
Eastern Europe, reintegration of after fall of Berlin Wall, 295
Eaton Leonard LBOs, 150
eBay, 345
Ebbers, Bernie, 54
economic growth, risk, 295-296
economic rents, 276-277
economics, definition of, 102
Economics of Happiness, The, 364
Edens, Wesley R., 239
education, finance careers, 308-313
bonuses, 317-318
compensation, 313-320
efficient market hypothesis (EMH), 118, 303
Ehrenreich, Barbara, 186
Einarsson, Sigurdur, 275
Einstein, Albert, 90, 126, 128
Eisenhower, Dwight D., 294
El-Dorado economics, 84-85
Electric & Musical Industries, 157
Elias, David, 97
Elie Wiesel Foundation for Humanity, 313
Eliot, T.S., 321
Ellis, Bret Easton, 313
embedded loss leverage, 193
EMEA Trading in Local Currency, 318
emerging markets, 124
emotional market hypothesis, 303
Emperor Franz Joseph I, 163
employee benefits, 47
energy, 251
engineering, financial, 55-57
engineers, financial, 308
Engle, Louis, 131
Enron, 49, 55-56, 154, 283, 307, 313
Enterprise Fund, 145
equilibrium, markets, 327
equities, 55
equity, 119
long-short funds, 240-242
failures, 162-163
infrastructure, 158
public sector services, 161
Equity Office Properties, 155
Ernst & Young, 244
EU (European Union), stabilization funds, 354
Eurex, 227
European debt crisis, 357-359
euros, 21
event-driven funds, 242
Ewing, J.R., 147
ex ante (expected risk), 246
ex post (based on actual risk), 246
excess spreads, 169
exchanges, money, 23-24
Exor, 222
exotic products, 73-74
expensive capital, reduction of, 75
expiry, 120
exploding ARMs, 183
exploitation, 38
exports from China, 85
exposure to catastrophic weather events, 251
F
Fair Isaacs Corporation, 181
fallen angels, 144
falsifying financial statements, 289-291
Fan, Henry, 218
Fannie Mae, 339
fascism, 29
fat tails, 126
fata morgana, 130-131
Faust, 36
FCIC testimony, Alan Greenspan, 304-305
Fear of Flying, 73
fear of loss of status, 43
FEB Trucking, 150
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), 180
Federal Housing Administration (FHA), 179
Federal National Mortgage Association (FNMA or Fannie Mae), 179
Federated Department Stores, 150
fees
consulting, 316
derivatives, 215
hedge funds, 245
leveraged buyouts (LBOs), 141-143
Feldstein, Martin, 316
Ferguson, Charles, 316
Ferguson, Nicholas, 163
Ferris Bueller’s Day Off, 65
Fiat S.P.A. (Fabbrica Italiana Automobili Torino or Italian Automobile Factory of Turin), 222-223
purchase of, 344
fiat money, 27-28. See also money
FIBS (France, Italy, Britain, and the States), 354
FiDi (Financial District), 80
Fiennes, Ralph, 153
finance careers, 307-313
bonuses, 317-318
compensation, 313-320
finance certifications, 309-310
Financial Accounting Standard Board (FASB), 286
financial alchemy, 131-132
financial centers, 82-88
financial crises, preparation for, 264-278
Financial Crisis Inquiry Commission (FCIC), 291, 302, 325
financial districts, London, 53
financial engineering, 55-57
financial engineers, 308
financial frontiers, 52
financial gravity, 347
financial groupthink, 296-297
financial institutions, networks, 270
financial markets, deregulation of, 279
financial news, 89
newspapers, 89-91
video, 91-99
financial pornography, 92
Financial Products (FP), 230
Financial Services Authority (FSA), 81, 236
financial sponsors, 154
financial statements
bad loans (2008), 343-344
falsifying, 289-291
financial supermarkets, 67, 75
financial system, deregulation of, 66
Financial Times (FT), 38, 89, 206, 280, 298, 310, 329-330, 351
Joel Stern, 124
ShokcGen, 226
financialization, 20, 38, 41, 54-57
General Electric (GE), 59-62
Japan, 38-39
management, 63
financiers
celebrity, 324-326
end of bubble, 332
Fink, Lawrence, 170
firewalls, 66
First Executive Insurance, 145
First Investors Fund for Income, 145
first-to-default (FtD) swaps, 220-221
Fitzgerald, F. Scott, 41, 257, 343, 366
Fix, Saul, 141
fixed income arbitrage, 242
fixed rate mortgages, 170. See also mortgages
Fleming, Ian, 26
flip clauses, 221
flow monsters, 74
Flynt, Larry, 344
FoFs (fund-of-funds), 245
FOG (full of gearing), 161
FOMC (the Federal Open Market Committee), 341
food, rising prices, 334
Fooled by Randomness, 126
For the Love of God, 338
Ford Foundation, 117
Ford, Gerald, 292
foreclosure mills, 272
foreign exchanges
bonds, 55
controls, 22
foreign treasure, 86
forms of money, 25
Forster, E.M., 98
Fort Knox, 25-26
forwards, 208
Foucault, Michel, 312
Fountainhead, The, 294
Fox Network, 149
fractional banking, 32
Francis, Joe, 344
Francis, Mike, 185
Franco-Prussian War, 227
Francon, Dominique, 294
Frank, Robert, 41
Frank, Thomas, 129
Frankfurt as a financial center, 78
Fraser, Steve, 80
fraud, 280
affinity, 313
Freddie Mac, 339
Frederick the Great, 233
free cash flow, 138
free floats, 258
free markets, deregulation and, 301
French Revolution (1789), 365
Freud, David, 291
Friedland, Dion, 242
Friedman, Milton, 100, 104, 303-304
fund managers, 73
fund-of-funds, 240
fundamentalism, 100-109, 111-115
Future of Capitalism, The, 364
futures, 208
FX Beauties Club, 40
G
Gaffney, David, 67
Gaige Kaifang (reforms and openness), 85
Galbraith, John Kenneth, 27, 32, 43, 77, 157, 161, 262, 301-307, 315, 328, 354
Galileo, 129
Gallatin, Albert, 33
Galleon hedge fund, 244
gamma swaps, 255
Garner, Mike, 185
Gates, Bill, 326
gating, 255
GDP (gross domestic product), percentage of debt, 45
GE (General Electric), 344
GE Credit, 59
Gedanken, 296
Geest, 275
Geisst, Charles, 199
Gelman, Andrew, 363
General Electric. See GE
Building, 79
John Raskob, 97
General Motors Acceptance Corporation (GMAC), 56
General Reinsurance, 325
General Theory of Employment, Interest and Money, 29, 103. See also John Maynard Keynes
genocide, 38
Gere, Richard, 326
Germany, 312
gold, 359
inflation in, 22
get-rich investment and trading-secrets books, 98
Gherkin, 79
Gibson Greetings, 135
Gipp, George, 97
Girl with the Dragon Tattoo, The, 360
Girls Gone Wild, 344
Gladwell, Malcolm, 329
Glass, Carter, 66
Glass-Steagall Act of 1933, 66, 201
Gleacher, Eric, 148
Glengarry Glen Ross, 185
global credit process, 88
Global Crossing, 154
global financial crisis, 310, 346-347
aftermath, 361-366
European debt crisis, 357-359
Greece, 354-356
solutions, 352-354
global saving glut thesis, 303
GNH (gross national happiness), 364
Go-Between, The, 185
Godfather, The, 147
China’s investment in, 87
circulation of, 32
effect of speculators on price, 28
Germany, 359
reserves, 30
Sons of Gwalia (SoG), 216
standard, 29-31
golden ring, 314
golden years, 46. See also retirement
Goldfinger, 26
Goldman Sachs, 76, 81, 122, 191, 195, 289
David Viniar, 126
indictment of, 325
Jim O’Neill, 90
Milken’s mobsters, 146
Ron Beller, 321
SEC suit against, 196
Goldman, David, 287
Goldsmith, Sir James, 137
Goodspeed, Bennett W., 96
Gorbachev, Mikhail, 101
Gorton, Gary, 232
governance, 290
Government Accountability Office (GAO), 353
government-sponsored entities (GSEs), 180
Göttingen (Germany), 101
Graduate Business School (GBS), 116
Grais, David, 284
Gramm, Phil, 67
Grand Central Station (New York), 80
Grant’s Interest Rate Observer, 71
Grant, Duncan, 25
Grant, Emily, 71
Grantham, Jeremy, 265
Grapes of Wrath, The, 360, 365
Gravity; Our Enemy Number One, 347
gravity, financial, 347
Great Crash (1929), 332
Great Crash, The, 157
Great Depression, 29, 42, 102-103, 307
mortgage defaults, 179
great expectation machine, 54
Great Gatsby, The, 343
Great Moderation, 296
Great Moderation, 267, 277, 348
Great Slump of 1930, The, 306
Great Society, 30
Great Wave of Kanagawa, The, 324
global financial crisis, 354-356
Greenberg, Hank, 170
Greenberg, Maurice R., 230
Greenberger, Michael, 300
Greenburg, Ace, 326
greenmail, 137
Greenspan put, 280
Greenspan, Alan, 32, 44, 57, 129, 180, 215, 296
2002 interest rate cut, 154
adjusted rate mortgages (ARMs), 183
advocacy of derivatives, 213
Asian crisis, 280
as a celebrity central banker, 297
defense of record, 303-304
dissenters, 300-302
FCIC testimony, 304-305
Great Moderation, 277
regulation, 279
U.S. House Oversight Committee, 302-303
Griffith, Bill, 95
Grímsson, Ólafur Ragnar, 275
gross domestic product (GDP)
debt as a percentage of, 265
Greece, 354
Ireland, 344
United States, 357
Groucho and Me, 97
groupthink, 296-297
growth
of China, 86-87
debt-fueled consumption as driver of, 295
economic, 295-296
Grubman, Jack, 76
guaranteed investment contracts (GICs), 145
Guare, John, 269
Guernsey, 165
Guevara, Che, 229
Guilliani, Rudy, 150
Gulf and Western Industries, 60
Gulf of Mexico, BP disaster, 361
Gulf Oil, 137
Gulliver’s Travels, 130
GUT (grand unifying theory), 122
Gutfreund, John, 290
H
habitus, 308
Haghani, Victor, 248
Hagman, Larry, 147
haircuts, 247
Hambros Bank, 67
Hamlet, 265
handheld calculators, 122
Harding, David, 256
Hare, David, 278, 290, 314, 332
Harkey, Sue Anne, 365
Hart, Robert, 85
Hartley, L.P., 185
Harvard Business Review, 120
Harvard Business Schools, 140, 305
Harvard case studies, 214-215
Harvard Graduate School of Business, 144
Harwood, Richard, 89
Has Financial Development Made the World Riskier?, 301
Hasset, Kevin, 97
Havel, Václav, 359
Hawkin, Greg, 248
Hawking, Stephen, 126
Hayek, Frederick, 103
HE (home equity), 181
Heathrow Airport, 161
Hederman, Abbot Mark Patrick, 361
Hedge Fund Alley, 239
Alfred Winslow Jones, 240
Centaurus Energy, 319
compensation, 314
fees, 245
formula for, 239
Fortress, 318
George Soros, 240
Hyman Minsky, 260-262
leverage, 254
markets, 241
Porsche, 257-260
Sharpe ratios, 246-247
strategies, 241-243
structure of CDOs, 195
Hedgestock, 261-262
hedge funds, 252
hedging, 235
aspect of Black-Scholes model, 122
derivatives, 216-217
Heisenberg, Werner, 101
Heller, Walter, 129
Hellman, Lillian, 350
HELOC (home equity line of credit), 181
Hennessy, Peter, 278
Heritage Foundation, 350
Herodotus, 74
Hertz, 155
Hewlett-Packard (HP), 122
Heyman, William, 270
Hickman, W. Braddock, 143
Hidden Persuaders, The, 43
Higgins, Jay, 146
High Grade Structured Credit Fund, 204
High Grade Structured Credit Strategies Enhanced Leverage Fund, 191
High Grade Structured Credit Strategies Fund, 191
high opportunity bonds, leveraged buyouts (LBOs), 143
High Street, 80. See also New York
High Yield Bond Conference (Drexel), 146
high-risk mortgages, 196. See also mortgages
Hilibrand, Lawrence, 248
Hilton Hotels, 162
Ho, Karen, 313
Hockne, David, 75
Hoffman, Dustin, 308
Holidays in Hell, 293
home equity, 45
credit cards, 72
Honda, 56
Hong Kong
and Shanghai Bank, 202
hospitals, 158
hostile bids, leveraged buyouts (LBOs), 149-150
hostile takeovers, 57
Rio Tinto, 59
hot hedge funds, 245
Hotel New Hampshire, The, 29
Household Finance, 202
housewife traders, 40-42
housing market, 179-182
adjusted rate mortgages (ARMs), 183-184
prices, 337-338
Houston Natural Gas, 55
Howard, Alan, 261
Huc-Morel, Nicolas, 229
Hughes, Robert, 324
Hume, David, 126
Hundi, 22
Hurricane Katrina, 251
Hussein, Saddam, 282
hustle as strategy, 312
Hustler, 344
hybrid capital, 280
hyperinflation, 22
I
I Like Stocks, 40
i-banks, 76. See also investment banks
Iania, Leonardo, 126
IBM, 244
collapse of banking system, 275
stock market, 84
Ideal Husband, The, 53
IFIL Investments, 222
Ikebe, Yukiko, 40
illiquid markets, 287
imports from China, 85
income, annuities, 70
increase in borrowing levels, 265-268
independent contracting, 181
indexed gold put options (IGPOs), 216
India, 22
gold in, 27
rupees, 21-22
individual retirement accounts (IRAs), 48
industrialization, 38
after fall of the Berlin Wall, 101
effect on conglomerates, 60
hyperinflation, 22
in Zimbabwe, 22
information
asymmetries in securitization, 271
determining from noise, 125-127
transparency, 283
infrastructure, 124
innovation, 77
innovative debt structures. See debt
insolvency, 280
Institute of Theoretical Physics (Copenhagen, Denmark), 101
insurance
bonds, 176
life, securitization of, 178
prices, 209. See also options
profits, 121
risk, 124
intellectual property rights, securitization of, 168
interest rates
cutting of, 340-341
lowering of, 348
International Accounting Standards Board, 289
International Grain Council, 334
International Institute of Finance (IIF), 289
International Monetary Fund (IMF), 96
international reply coupons (IRCs), 33
Internet
bubble (1990s), 54
stocks, 58
InterNorth, 55
interviews on financial TV shows, 94
invention of money, 24-25
leveraged buyouts (LBOs), 147-148
percentage of jobs in, 313
separation from commercial banks, 66
investments
alternative, 252
exotic products, 73-74
hedge funds
Amaranth, 250-252
clientele, 247-250
fees, 245
Hedgestock, 252
markets, 241
returns, 243-244
Sharpe ratios, 246-247
strategies, 241-243
incentives, 348
IO (interest only) bonds, 178
Irish Times, The, 356
Iron Chef, The, 168
Irving, John, 29
Ising model, 204
It’s A Wonderful Life, 65, 180
Italy, derivatives, 215-216
ITT Corporation, 60
J
Jackson, Marjorie, 156
Jackson, Michael, 21
Jackson, Tony, 363
James, Oliver, 274
Japan
debt, 357
financialization, 38-39
housewife traders, 40-41
lost decades, 357
retirement, 49-50
six sigma, 60
Jefferson County, Alabama, 211-214
Jefferson, Thomas, 91
Jenkins, Simon, 302
Jiabao, Wen, 86-87
Jian, Ma, 295
Jintao, Hu, 363
jobbers, 53
jobs
certifications, 309-310
finance, 307-308
Jobs, Steve, 164
John F. Kennedy Profiles in Courage Award, 301
Johnson, Samuel, 352
Joint Economic Committee, 203
Jonas, Adam, 259
Jones, Alfred Winslow, 240
Jones, Norah, 157
Jones, Paul Tudor, 256
Jong, Erica, 73
Jorgenson, Andrew, 64
Joseph, Fred, 146
JP Morgan, 191, 272, 280, 283, 337, 360
jumbo loans, 182
Jünger, Ernst, 233
junk bonds, 143
leveraged buyouts (LBOs), 145-146
JWM Partners LLC, 257
K
Kadlec, Charles W., 97
Kahn, Herman, 35
Kahneman, Daniel, 126
Kaltwasser, Pablo Rovira, 126
Kapur, Ajay, 41
Karinthy, Frigyes, 269
Kasouf, Sheen, 121
Katainen, Jyrki, 356
Kaufman, Henry, 292
Kazakhstan, 72
keiretsu, 139
Kell, Kevin, 99
Keller, Marianne, 64
Kelly, Don, 141
Kennedy, Robert, 359
Kerkorian, Kirk, 137
Kerviel, Jerome, 226-230
Kessler, Andy, 316
ketchup economics, 116
Keynes, John Maynard, 25-29, 33, 77, 100, 303, 347, 362-364
China’s use of philosophy, 87
diversification, 123
Great Depression, 103
risk, 127
uncertainty, 366
warnings about speculation, 88
Kim, Dow, 315
Kimberly-Clark, 92
kimono traders, 40
King Kullen, 208
KISS, 327
kiwis (New Zealand dollars), 21
KKR (Kohlberg, Kravis, and Roberts), 135, 137
Klein, Naomi, 342
Klempere, Otto, 157
Kluge, John, 149
Knebworth House, 262
Knight, Frank, 128
Kogan, Valery, purchases of, 322
Koppel, Ted, 90
Kotov, Alexander, 252
Kravis, Henry, 162
Krawcheck, Salli, 316
kronas (Iceland), 275
Krug Grande Cuvée champagne, 304
Kübler-Ross, Elizabeth, 329
Kubrick, Stanley, 35
Kuhn, Thomas, 273
Kuwati dinars, 21
Kwak, James, 294
kwatcha, 21
Kynikos Associates, 161
L
L’engrenage, Mémoires d’un trader, 229
La Défense, 227
LA Galaxy, 339
LaBelle, Patti, 164
Ladies’ Home Journal, 97
Lamont, Thomas, 337
Last Chronicle of Barset, 173
Laurence J. Peter, 144
Law of Attraction, 186
Law, John, 28
laws, Sarbane-Oxley (SOX), 81
Lay, Kenneth, 55
Leach, Jim, 67
leadership styles, Jack Welch, 62-63
Lee, Thomas H., 156
Leeson, Nick, 227
Legal Tender Act of 1862, 28
Legg Mason Value Trust Fund, 245
Lehman Brothers, 154, 162, 292, 312, 316
bankruptcy of, 221, 329, 333, 339
bonuses, 319
contracts, 270
Milken’s mobsters, 146
Lehman Risk Committee, 292
lending practices, 70. See also loans
Letterman, David, 286
capital, 244
finance groups, 154
hedge funds, 254
loans, 154
leveraged buyouts (LBOs), 133-136
of airlines, 156-157
Congoleum, 133-134
cost of debt, 148-149
Drexel Harriman Ripley, 144
Drexel system, 151-152
fees, 141-143
high opportunity bonds, 143
hostile bids, 149-150
investment banks, 147-148
junk bonds, 145-146
KKR (Kohlberg, Kravis, and Roberts), 135-137
Michael Jensen, 138-141
Milken’s mobsters, 146-147
recovery of, 153-154
Levin, Gerald, 58
Levine, Dennis, 150
Levitt, Arthur, 300
Levy, Paul, 118
Lewes pound, 36
Lewis, Michael, 80, 198, 211, 290, 308
Li, David Xiang Lin, 177
life insurance, securitization of, 178
life spans, Japan, 49
Light, Jay, 305
limited liability, 53
Limits to Power, The, 43
Lincoln, Blanche, 352
Ling-Temco-Vought (LTV), 60
linoleum, 133
Lintner, John, 117
Lipper Analytical Services, 144
Liquidated, 313
liquidity, 281
evaporation of, 338
factory, 269
put mechanisms, 205
risks, 74
Little, Arthur D., 121
Litton Industries, 60
Lo, Andrew, 254
loan-to-value (LVR) ratios, 181
loans
banks, 70-71
costs of, 188
credit cards, 71-72
increase in borrowing levels, 265-268
leveraged, 154
repackaging of, 271-272
virtual, 195-196
Logic of Collective Action, The, 294
London
as a financial center, 78-82
financial district of, 53
London Abbey Road recording studios, 157
London Business School, 156
London Financial Guide, 89
London Inter-bank Offered Rate (LIBOR), 213
London School of Economics, 278
London Stock Exchange, 200
Long Johns, the, 91
long short equity, 254
Long Term Capital Management (LTCM), 122, 204, 244, 248-252
Loomis, Carol, 240
loonies, 21
Lorca, Federico García, 84
Lord Poole of Lazards, 70
Lorie, James, 123
loser effect, 126
Lottery of Babylon, The, 210
Louis Vuitton, 350
low productivity, 334
Lower Saxony, 258
Lucas, Robert, 347
Lucky Chance Oil Company, 54
M
Mack, John, 202
Mackay, Charles, 88
MacNamara, Robert, 274
Macquarie model, 158-161
Macquarie, Lachlan, 159
macro funds, 242
macroeconomics, definition of, 102. See also John Maynard Keynes
Mad Money, 96. See also Jim Cramer
madness of crowds, 296
Madoff fund, 292
Madrid, 79
magazines, 90. See also financial news
Magnetar, 195
Magnum Funds, 242
Maheras, Thomas, 304
Malay Archipelago, 23
Malaysia, 328
Malkiel, Burton, 123
Mamet, David, 185
management
earnings, 323-324
fees, 245
financialization, 63
Jack Welch leadership style, 62-63
knowledge of business operations, 292-293
techniques, 318
Maounis, Nick, 251
Marakon Consulting, 124
Mark (Germany), 22
mark-to-make-believe or mark-to-myself, 286
mark-to-market (MtM) accounting, 56, 231, 286-288
losses, 203
mark-to-myself, 231
market-based credit, 269
markets
adjusted rate mortgages (ARMs), 183-184
chain reaction in securitization, 202-204
color (commentary), 311
corporate control, 120
deregulation, 279
equilibrium, 327
hedge funds, 241
housing, 179-182
instability of, 337-338
leadership, 60
neutral arbitrage, 242
panic, 340-341
regulation, 300. See also regulation
Marketwatch, 338
Markopolos, Harry, 292
Markowitz, Harry, 116-117
Marshall, Alfred, 78
Marx, Karl, 33
Master’s Voice record label, 157
MasterCard, 71-72
Masters of the Universe, 257, 262, 308, 332-333, 343, 366
Masters, Michael, 334
Mauboussin, Michael, 246
Mauger, Charlie, 202
Maxim, 162
Maximum City, 44
MBSs (mortgage backed securities), 173
arbitrage, 242
McCaw Cellular, 146
McClure’s Magazine, 52
McCulley, Paul, 269
McDade, Herbert, 288
McDaniel, Raymond, 284
McGraw, Terry, III, 284
MCI, 146
McKinley, William, 26
McLuhan, Marshall, 72, 89, 366
McNamara, Frank, 71
mean-variance approach, 117
Meaning of Life, The, 180
Means, Gardiner, 54
Meckling, William H., 120
Media, financial news, 89-99
Mehta, Suketa, 44
Melamed, Leo, 125
Mephistopheles, 36
CitiGroup, 75
General Electric (GE), 61
Meriwether, John, 248-249
Merkel, Angela, 325
Merlin Entertainments, 163
Merrill Lynch, 66, 76, 148, 178, 191, 280, 315, 330
bonuses, 319
Center for Research in Security Prices (CRSP), 131
merger with BoA, 339
MERS (Mortgage Electronic Registration System), 271
Merton, Robert K., 121, 130, 248
Metallgesellschaft, 56
Metro-Goldwyn-Mayer, 155
Metromedia, 149
Metromedia Broadcasting Corporation, 149
Metropolitan Club, 304
Meyer, Phillipe, 141
mezzanine
“mezz” debt, 154
notes, 170-171
Mickey Mouse, 324
microeconomics, definition of, 102
middle class for blue-collar workers, 42
Middle East, 264
petro-dollars, 82
Mikado, The, 128
Milgram, Stanley, 335
military industrial complex, 294
Milken, Michael, 141, 144-150, 152, 168, 244
1987 equity crash, 153
Milken’s mobsters, 146-147
purchases of, 322
Millennium Challenge, 264-265
Miller, Daniel, 130
Mills, Susan, 299
Milton, John, 359
Minibonds, 220
Minogue, Kylie, 157
Minsky machines, 261. See also hedge funds
Minsky moments, 261
Minsky, Hyman, 260-262
minutes to midnight, 34
Mirrored Room, The, 36, 64, 238
Mishkin, Frederic, 316
MIST (Mexico, Indonesia, South Korea and Turkey), 91
Mitchell, Andrea, 299
mobile phone airtime credits, 24
Mobile, Alabama, 55
models
risk, 246
securitization, 177
Modern Corporation and Private Property, The, 54
modern portfolio theory (Markowitz), 117
Modigliani, Franco, 119
Modigliani-Miller propositions, 119-120
Mohamme, Mahathir, 328
Molden, Mike, 184
momentum, 242
monetization, 38
money
circulation of, 32
cultures, 20
exchanges, 23-24
gold. See gold
invention of, 24-25
paper, 27-28
transfer systems, 22
transformations of, 35-36
types of, 21-23
waster of, 41
Money and Trade Considered with a Proposal for Supplying the Nation with Money, 28
Money Honey, 92. See also Maria Bartiromo
monolines, 176
Montag, Tom, 198
Moody’s Investor Services, 141, 282
Warren Buffett’s defense of, 325
Moore Capital, 250
Moore, Michael, 165
Moore, Nicholas, 159
moral hazards, 319
Morgan Stanley, 76, 99, 148, 185
Morgan, J.P., 324
Morning Joe, 93
mortality, Japan, 49
mortgages, 179-182
adjusted rate mortgages (ARMs), 183-184
brokers, 186
decline of housing prices, 337-338
repackaging of, 271-272
scrutiny of ratings agencies, 283
subprime, 70
Mossin, Jab, 117
Motherwell, Robert, 200
Motorola, 60
Movement of the Machines, 275
MSNBC, 93
multistrategy, 243
Mumbai Stock Exchange, 91
Münchau, Wolfgang, 351
Mundell, Robert, 170
municipal bonds, 211-214
TOBs (tender option bonds), 222
Murakami, Takashi, 324
Murder on the Orient Express, 302
Murdoch, Rupert, 149, 164, 322
Museum of Modern Art, 324
mutually assured destruction (MAD), 38
My Broker: A Monk Tycoon Reveals the 7 Laws of Spiritual Growth, 98
N
Nader, Ralph, 326
Narvik, Norway, 221
National Australia Bank (NAB), 228
National City Bank, 342
national debt clock, 34
National Economic Council, 215
National Health Service, 47
National Homeownership Strategy, 181
National Public Radio (NPR), 185
natural gas, 251
negative amortization, 182
Nemesis, 366
nest eggs, 27
net risk, 240
networks, 270
vulnerability of, 272-273
Neues Deutschland, 260
Neutron Jack. See Jack Welch
Never Never, 67
new austerity, 357
New Century Financial, 195, 202
New Scientist, 363
New York
as a financial center, 78-79
FiDi (Financial District), 80
New York Stock Exchange (NYSE), 80
Ayn Rand, 297
Michael Milken, 152
newspapers, 89-91
Nicholson, Eddy, 134
Nietszche, Frederich, 300
NINJA borrowers, 70
Nintendo DS, 40
NIVA (no income verified assets) loans, 182
Nixon, Richard M., 31, 104, 342
Nobel prize in Economics, 104
Black and Scholes, 122
nolo contendere (no contest), 150
normal distributions, 126
Norris, Stephen, 154
North Korea, 24
Norway, 221
Noyer, Christian, 228
nuclear war, 34
nuclear winter, 339
O
O’Neal, Stan, 178, 201, 291, 315, 319, 330
O’Neill, Eugene, 46
O’Neill, Jim, 90
O’Rourke, P.J., 293
Obama, Barack, 215, 325, 342, 358, 362
objective truths, 130
objects d’art, 176
Och, Daniel, 318
Och-Ziff Capital Management, 318
off-market interest, 224
oil, 57
banks, 57
petro-dollars, 82
Old Lane Partners, 319
Olso, Mancur, 294
Once in a Lifetime, 46
One Market, One God, 129
one-touch, 211
Onex Group, 156
opacity, 61
Oppenheimer, Robert, 339
Orange County, collapse of, 283
Organisation, The, 296
originate and hide, 270
originate-to-distribute models, 68
Orman, Suze, 92-93
Orwell, George, 365
Orzag, Peter, 358
Osgood, Charles, 353
Other People’s Money, 21, 40, 64
over-collateralization, 169
overcapitalization, 54
oversight, 290
Oversight Panel Report, 340
Oxley, Michael G., 154
P
PAC (planned amortization class) bonds, 178
Pacioli, Luca, 285
Packard, Vance, 43
Paille, Antoine, 228
Paine, Thomas, 36
PaineWebber, 201
Pakistan, 22
Palin, Sarah, 95
panic, markets, 340-341
paper losses, 203
paper money, 27-28. See also money
parallel tranching, 178
parasitism, 33
Parisian Parliament, 275
parking assets, 288
part-time employment, 181
Partnoy, Frank, 206
Patient Zero, 354
patterns in data, 128
Patterson, David, 357
Paul the Octopus, 243
Paulson & Co, 256
Paulson, Henry (“Hank”), 170, 198, 314, 338, 341
purchases of, 322
Paulson, John, 256-257, 304, 329
pay options, 182
pay-in-kind (PIK) notes, 148
PAYG (pay-as-you-go) systems, 47
PCF (primary credit facility), 340
PDCF (primary dealer credit facility), 340
Peck, Gregory, 64
Peleton Partners, 204
pension plans, 50
General Electric (GE), 61
percentage returns, 243. See also returns
perfect default correlation, 220
performance fees, 245
Permira, 154
Perry, Fred, 81
personal finance writers, 90
Peter Principle, The, 144
petro-dollars, 82
phase transition, 204
philanthropy of the financial elite, 326
Phillips, William, 351
physical frontiers, 52
Physical Impossibility of Death in the Mind of Someone Living, The, 131, 253, 323-324, 338
Picasso, Pablo, 221
pick a payment, 182
pick’n pay, 182
Pickens, T. Boone, 137, 146, 149
Piëch, Ferdinand, 257
Piga, Gustavo, 224
piggyback loans, 182
PIGS (Portugal, Ireland, Greece, and Spain), 354
PIK (pay in kind) debt, 154
Pimco (Pacific Investment Management Company), 96, 285
Pingyao as a financial center, 84
Pink Floyd, 157
Pirate Capital, 254
Pires, Tome, 82
pitch books, 310
PIYC (pay if you can), 155
Pizarro, Hernán Cortés de Monroy, 131
planned obsolescence, 43
Playboy magazine, 94
plutonomy, 41-42
PO (principal only) bonds, 178
Policymakers, preparation for financial crises, 264-278
Polonius, 265
Ponzi schemes, 34
Ponzi, Charles, 33
Poor Richard’s Almanac, 93
Porter, Cole, 41
Porter, Michael, 120
Portfolio Management Workshop, 21
Portfolio Selection, 117
portfolios
risk-free, 121
ports, 158
Posner, Richard, 291
Posner, Victor, 137
postal reply coupons, 33
pounds, 21
devaluation of, 240
sterling, 22
Power Lunch, 95
Power of Yes, The, 278, 290-291, 298, 332
POWS (physicists on Wall Street), 211
precomputer analysis, 143
Predator’s Ball, 147
premiums, 120
preparation for financial crises, 264-278
prepayment tranching, 178
Presley, Elvis, 298
price bubbles, 299
Price Is Right, The, 119
prices
insurance, 209. See also options
movements, 210-211
stocks, 117-118
strike, 120
prime brokerage units, 73
prime mortgages, 181. See also mortgages
Prince, Chuck, 201, 315, 319, 329
princes of industry, 54
Principal Finance Group, 154
prisons, 158
private banks, 73
failures, 162-163
infrastructure, 158
public sector services, 161
returns, 162
Private Equity Council, 167
Private Equity Growth Capital Council, 167
private equity managers, compensation, 314
privatization
of government-owned banks, 66
to pay off government debt, 158
Proctor & Gamble, 56
Product Disclosure Statements, 219
productivity
General Electric (GE), 60
improvements in the 1960s, 47
miracle of 1996, 41
Profit from Property, 96
General Electric (GE), 61
insurance, 121
property rights, protection of, 41
prosperity
in Ireland, 83
trading, 352
protection
of property rights, 41
Protégé Partners, 261
Proust, Marcel, 335
Prudential Insurance Company, 134
Ptolemaic systems, 129
Ptolemy, 129
public private partnerships (PPP), 158
public sector services, 161
Publishers Weekly, 97
Pudd’nhead Wilson, 123. See also Mark Twain
purchases by bankers, 322-323
Pynchon, Thomas, 352
pyramid schemes, 34
Q
Qing dynasty, 84
Qishan, Wang, 346
QSPEs (qualified special purpose entities), 288
quantification of risk, 130
quantitative
easing, 340
equity market neutral, 254
funds, 242
Quantos, 211
Quantum Fund, 240
quantum theory, 126
quasi-currency, 24. See also currency
Quayle, Dan, 95
Queen, 157
Queen Elizabeth, 278
R
Rabbit Is Rich, 363
Racketeer Influenced and Corrupt Organizations (RICO) Act, 150
Radaker, Byron, 134
rainbows, 211
Raines, Sylvain, 309
Rains, Claude, 77
Rajaratnam, Raj, 244
Ramones, The, 79
RAND Corporation, 35
random walks, 118
rands, 21
Range Rover, 346
Ranieri, Lewis, 170
Rapid American, 143
Rappaport, Alfred, 124
Raskob, John, 97
Ratergate (2008), 285
ratings
agencies, 141
bonds, 282-285
CDOs, 285
credit, 282
Rational Man, 119
Rattner, Steven, 274
Raynes, Sylvain R., 196
re-re-securitizations, 191
re-securitizations, 191
Reagan, Ronald, 65-66, 97, 101, 298, 364
real estate, 179-182
adjusted rate mortgages (ARMs), 183-184
reals, 21
recessions, 350
recovery, 359-360
rates, 171
recruitment of finance candidates, 310
recycling in Japan, 39
Red Force, 264
Redline, 186
reflexivity, 327
Regnault, Jules, 118
regulations, 81
banks, 65-67
Basel 1, 74
Basel 2, 200
central banks, 279-281
self-regulating markets, 102
synthetic securitization, 176
regulators
preparation for financial crises, 264-278
understanding of securitization, 282
regulatory arbitrage, 75
Reid, Harry, 299
relative value funds arb (arbitrage) market inefficiencies, 242
religious prohibitions on usuries, 32
remote risk of loss, 220
renminbi, 21
rentiers, 33
repackaging corporate debt, 173
repos (repurchase agreements), 288
reserves
banking, 32
gold, 30
resources, financial news, 89-99
restructures, corporations, 57
Japan, 49-50
pension plans, 50
self-funded savings, 180
returns
benchmarking, 123
on capital, 57
hedge funds, 243-244
private equity, 162
Revco drug stores, 150
Reykjavík, Iceland, 275
as a financial center, 84
Reynolds, Glenn, 283
Reynolds/Tube, 58
Rhodesia. See Zimbabwe
Richard, Cliff, 157
Richistan, 41
Rio Tinto, 58
Rise and Decline of Nation, The, 294
Rishengchang as a financial center, 84
risk, 35
Bank of International Settlement (BIS), 74-75
banks, 67-70
basis, 213
capital asset pricing model (CAPM), 117
catastrophe, 232
central banks, 281-282, 300-302
concentrations, 273
converting, 270
AIG, 230-234
design of, 225
Fiat, 222-223
first-to-default (FtD) swaps, 220-221
Harvard case studies, 214-215
hedging, 216-217
Italy, 215-216
LTOBs (tender option bonds), 222
municipal bonds, 211-214
price movements, 210-211
sovereign debt, 236-238
TARDIS trades, 217-218
economic growth, 295-296
exotic products, 73-74
financial groupthink, 296-297
hedge funds, 246
of individual securities and portfolios, 117
insurance, 124
reduction, 122-124
risk-free portfolios, 121
securitization, 170-172
taming, 120-122
tranches, 175
unification of, 130
riyals, 21
RJR Nabisco, 139, 149-150, 155
Ro, Arundhati, 365
Road to Serfdom, The, 103
roads, 158
Roark, Howard, 294
Robbins, Larry, 259
Robeldo, Alfredo, 215
Roberston, Julian, 243
Roberts, George, 157
robo signing, 272
Rochefoucauld, François Duc de La, 349
Rockefeller, John D., 338
Rockne, Knute, 97
rogue traders, 227
Rohatyn, Felix, 148
Rolling Stone magazine, 364
Rolling Stones, the, 164
Rolls Royce jet engines, 24
Rome, 295
Roosevelt, Franklin Delano, 279, 290, 365
Ropes & Gray, 244
Roseman, Joel, 255
Rosenbaum, Alisa. See Ayn Rand
Rosenberg, David, 357
Rosenfield, Eric, 248
ROT (ruse on toll roads), 161
Roubini, Nouriel, 95
roubles, 21
Rowling, J.K., 328
Royal Commission, 299
Röpke, Wilhelm, 295
RTN (road to nowhere), 161
Rubenstein, David, 154, 163, 318
Rubin, Howard, 178
Rubin, Robert, 129, 200, 205, 215, 292, 300, 315
Rubinstein, David, 164
rupees, 21-22
Russell, Frank, 123
Russian roubles, 21
S
Sadek, David, 186
Sagan, Carl, 348
salaries, 323-324
Salomon Brothers, 80, 122, 170, 248, 292, 325
bonuses, 319
Michael Lewis, 308
municipal bonds, 211
Salomon North, 248
Saltarelli, Gerald, 140
Salter, Malcolm, 140
Sants, Hector, 302
Sarbanes, Paul, 154
Sarbanes–Oxley Act (2002), 81, 154
Sarkozy, Nicolas, 346, 355, 364
Saudi riyals, 21
Savage, Tom, 232
Saville Row, 44
saving and loans associations (S&Ls), 145
scalability, 254
scales, ratings, 143
scams, 23
Schacter, Barry, 125
Schadenfreude, 343
Schäuble, Wolfgang, 353
Schiffrin, Anya, 312
Schjedahl, Peter, 131
Schneider, Ralph, 71
Scholes, Myron, 248
schools, 158
Schroder Ventures, 154
Schularick, Moritz, 87
Schultz, George, 342
Schumpeter, Joseph, 103
Schwarzman, Stephen, 154, 164, 318
Schwed, Jr., Fred, 243
Science Museum (London), 351
Scion Funds, 256
Scissors, Derek, 350
Seabright, Paul, 35
Seagram, 79
Secret of FX, The, 40
Secret, The, 45
Secrets of Wealth, 96
Securities, exotic products, 73-74
Securities and Exchange Commission (SEC), 131
Securities Exchange Company, 34
Securities Industry and Financial Markets Association (Sifma), 213
securitization, 68, 169, 188, 207
adjusted rate mortgages (ARMs), 183-184
bonds, 173
central banks, 281-282
chain reaction in markets, 202-204
of debt, 188-192
failure of bonds, 204-205
housing market, 179-182
information asymmetries in, 271
of intellectual property rights, 168
of life insurance policies, 178
models, 177
rating agencies, 282
regulators understanding of, 282
security, trading, 66
self-employment, 181
self-regulating markets, 102
selling, 311
senior debt, 148
senior management, knowledge of business operations, 292-293
senior tranches, 171
Sentamu, John, 346
seppuku, ritualized suicide, 200
September 11, 2001, 44
September, 2008 market crash, 341-343
sequential tranching, 178
Serin, Casey, 187
setsuyaku no tatsujin (master penny-pincher), 39
sewer bonds, 214. See also municipal bonds
shadow banking system, 192, 195
Shakes, Ronnie, 43
Shang Kong, 82
Sharpe ratios, hedge funds, 246-247
Sharpe, William, 117
Shearson Lehman Hutton, 149
shell games, 293
shift of assets, 288
Shin, Hyun Song, 273
Shiva, 339
ShockGen, 229
shopping after September 11, 2001, 44
A Short History of Financial Euphoria, 77
Short, Martin, 164
shorting of credit risk, 176
Sigur Ros, 345
silver, 58
Silver State Mortgage, 185
Simmon, Gene, 327
Simon, David, 333
Simon, William, 135
Sinatra, Frank, 157
Sinclair, Upton, 305
Singapore as a financial center, 78, 82
Singer & Friedlander, 275, 288
single premium deferred annuity (SPDA), 145
SIVA (stated income verified assets) loans, 182
SIVs (structured investment vehicles), 190
Six Degrees of Separation, 269
six sigma, 60
Skeel, David, 206
Skilling, Jeffrey, 55-56, 288, 307, 313, 328
Skinner, B.F., 274
Skull and Bones, 148
Sloan School of Management at MIT, 96
slowness movements, 364
Slutsky, Eugene, 128
small-firm effect, 126
Smith, Adam, 23, 102, 129, 252, 320, 361
paper money, 27
Snail House, 351
snuff movies, 335
Social Insurance and Allied Services, 47
social security, 48
Société Générale (SG or Soc-Gen), 29, 226-228, 349
solid forms of money, 25
Solomon, David, 145
solutions, global financial crisis, 352-354
Sons of Gwalia (SoG), 216
Soros, George, 240, 242, 302, 326-327, 341
Sosin, Howard, 230
Sotheby’s, 323
South African rands, 21
South Sea Company, 53
Southern District of New York, 150
sovereign debt, 236-238
Soviet Union, 30
special economic zones (SEZ), 85
special purpose entity rules (SPE), 57
Spectator ab Extra, 326
speculation, 311
bubble economies, 54
debt and, 274-275
economy, 52
speculators, 88
Spencer, Herbert, 281
spontaneous symmetry breaking, 204
spreads, 169
Square Mile, the (London), 79
Squawk Box, 94
stabilization
funds, 354
of global trade, 349
Stadler, Robert, 302
stagflation, 138
stagnation, 357
Stamford, Connecticut, 80
Standard & Poor’s (S&P), 141, 282
Standard Oil of Ohio (Sohio), 57
standards
accounting, 289
gold, 29-31. See also gold
standby lines of credit, 281
Stanziale, Bruno, 251
State Reserve Bureau (China), 56
state securities, 128
State Street Global Markets, 91
statements, financial
bad loans (2008), 343-344
falsifying, 289-291
statistical quantum field theory, 204
status, 43
Status Seekers, The, 43
Steagall, Henry B., 66
Steil, Benn, 347
Stein, Ben, 65
Steinbeck, John, 360
Steinberg, Saul, 137
Steinhardt, Michael, purchases of, 322
Stern Stewart & Co, 124
Stern, Joel, 124
Stevenson, Adlai, 354
Stewart, Potter, 352
Stewart, Rod, 164
Stillman, James, 342
Stillman, W.J., 95
stock market crashes
1987, 39
September, 2008, 341-343
Stockholm syndrome, 284
stocks
Internet, 58
prices, 117-118
valuations, 58
strategies, hedge funds, 241-243
Strauss-Kahn, Dominique, 303
Street Signs, 93
Street Sweetie, 92. See also Erin Burnett
stress cardiomyopathy, 177
strip mining, 156
bids, 192
credit, 188
finance, 188
style drift, 242
subjective truths, 130
subordinated (“sub” or “junior”) debt, 148
subordination levels, 172
subprime mortgages, 70. See also mortgages
shorting (2005/2006), 256
Suma Oriental, 82
Sumitomo, 227
Summers, Lawrence, 116, 129, 214, 300, 304, 315
Sunday Times, 364
super jumbo loans, 182
Super Return annual industry conference, 162
super senior tranches, 175
supply of assets, 267
survivorship bias, 243
suspension of deep-water drilling, 362
Suze Orman Show, The, 93
Suze Orman’s Financial Freedom, 93
swaps
correlation, 255
credit default swaps (CDS), 232, 237
dispersion, 255
Fiat, 222-223
first-to-default (FtD), 220-221
gamma, 255
total return swap (TRS), 209
Swensen, David, 124
Swift, Jonathon, 130
Sydney Airport, 159
synchronous lateral excitation, 273
synthetic securitization, 173, 176
systematic risk, 118
T
TAC (target amortization class) bonds, 178
TAF (term auction facility), 340
tail risk, 246
Tainter, Joseph, 349
takeovers (risk arb), 242
Taleb, Nicholas Nassim, 126, 246
Talking Heads, The, 46
taming risk, 120-122
Tang dynasty, 351
tansu savings, 39
Tao Jones Averages, The, 96
TARDIS (Time And Relative Dimension(s) In Space) trades, 217-218
target redemption forwards, 217
Tavakoli, Janet, 177
taxes
avoidance, 48-49
cuts, 348
Dubai International Financial Centre (DIFC), 82-83
favorable regimes, 41
leveraged buyouts (LBOs), 138
VAT (value added tax), 262
tchotchkes, 162
Teenage Cancer Trust, 262
Teledyn, 60
television, financial news, 91-99
Templars, 32
temporary suspension of deep-water drilling, 362
Terra Firma Capital Partners, 154, 157, 162, 165
terrorism, 44
Texas Instruments (TI), 122
Texas International, 146
Texas Pacific Group, 154
Textron, 60
Thaler, Richard, 126
Thatcher, Margaret, 66, 81, 158
the Government National Mortgage Association (GNMA or Ginnie Mae), 179
theoretical profits, 231
theories, bubbles, 277-278
Theory of the Leisure Class, The, 41
This American Life, 185
Thompson, Todd, 93
Thoreau, Henry David, 359
Thornton, John, 76
Thorp, Edward, 121
thought leaders, 90
thundering herd, the, 66
TICKETs (tradable interest bearing convertible to equity trust securities), 160
Tierney, John, 98
Tiger Fund, 243
Time Warner, 58
Tobias, Seth, 322
TOBs (tender option bonds), 222
toggle loans, 154
toilets, Japanese, 38
Tokyo as a financial center, 78
tools, six sigma, 60
Torii, Mayumi, 43
Toscanini, Arturo, 157
total return swap (TRS), 209
Tourre, Fabrice, 199
toxic currency structures, 218-219
toxic waste, 172
Toynbee, Arnold, 354
Toys R Us, 155
TPG, 156
trading, 23-24
alleys, 92
banks, 73
proprietary, 352
securities, 66
stabilization of global trade, 349
traditional banking models, 68
tranches, 169
AAA, 203
equity, 192
innovation of, 178
super senior, 175
synthetic CDOs, 174
transfers
risk, central banks, 281-282
systems, money, 22
Transformers, 278
Travelers, merger of with Citicorp, 75
Treynor, Jack, 117
trickle-down economics, 42-43
Triffin dilemma, 31
Triffin, Robert, 31
Trollope, Anthony, 173
Troubled Asset Relief Program (TARP), 340
troy ounce bars, 25. See also gold
TSLP (term securities lending facility), 340
tunnels, 158
turn-of-the-year effect, 126
Turner Broadcasting, 146
Turner, Lord Adair, 236, 280, 298
Tversky, Amos, 125-126
Twain, Mark, 123
Tweedie, David, 289
Twilight, 327
Tyco, 154
types of money, 21-23
U
U.S. Bankruptcy Court, 319
U.S. Civil War, 28
U.S. Commodity Futures Trading Commission, 215
U.S. Community Reinvestment Act (CRA), 181
U.S. Corporate and Auditing Accountability and Responsibility Act (2002), 154
U.S. Employee Retirement Income Security Act (1974), 123
U.S. Financial Reform Act, 353
U.S. House Oversight Committee, Alan Greenspan, 302-303
U.S. Internal Revenue Service, 140
U.S. Office of Management and Budget, 358
U.S. Securities and Exchange Commission (SEC), 196
U.S. Treasury bonds, 87
UBS, 201
UK Financial Services Act (2001), 279
UK House of Commons, 288
ultra prosperity, 99
uncertainty, 366
unintended consequences, 130
United Airlines (UAL), 166
United States
debt levels as a percentage of GDP, 265
domestic corporate profits, 276
universal banks, 75
University of California at Berkeley, 42
University of Chicago, 34, 101, 104
collaboration between Black and Scholes, 121
University of Surrey, 363
Unocal, 137
Urbanek, Zdener, 91
urbanization, 38
Urdu, 22
ushinawareta junen (the lost decade), 39
usuries, 32
V
vacancy rates, commercial real estate, 349
VADM (very accurately defined maturity) bonds, 178
value
accounting, 286-287
of commodities, 24
of modern money, 35
stocks, 58
value at risk (VAR) models, 125
Van der Starr, Cornelius, 230
Van Riper, Paul, 264
Vanguard Group, 123
Vanity Fair, 324
vapidity of life, 328
VAT (value added tax), 262
Veblen, Thorstein, 41, 52, 245
Veil, Jean, 229
velocity of capital, 69
Velvet Revolution (1989), 359
vertical segmentation, 170. See also tranches
Vertin, James, 123
Viagra, 326
video, financial news, 91-99
Vienna landmark, 163
Virgil, 338
virtual loans, 195-196
volatility, 254
hedge funds, 246
LCTM, 250
of currencies, 125
Volcker rule, 353
Volcker, Paul, 78, 145, 352, 359
Volvo AB, 343
von Bismarck. Eduard Leopold, 47
von Clemm, Michael, 79
von Goethe, Johann Wolfgang, 36
von Rothschild, Karl Mayer, 343
Vonnegut, Kurt, 339
voodoo
economics, 65
vulnerability of networks, 272-273
vulture funds, 242
W
Wada, Yuki, 39
Wade, Robert, 280
Wade, Virginia, 81
Wakabayashi, Fumie, 42
Wal-Mart, 323
Wall Street, 150, 167, 319, 323
Wall Street Journal, The, 89, 120, 122, 177, 274, 330
Joel Stern, 124
Susan Faludi, 149
Joel Stern, 124
Wallace, A.R., 23
Walter Industries, 150
Walters, Barbara, 299
war, 38
war games, 264-278
Wära, 35
Ward, Anthony, 334
Washington Mutual, failure of, 339
Waste Makers, The, 43
waste of money, 41
watered stock, 54
Waterford Wedgwood, 345
Watermark Place, 349
watermarks, 245
Waxma, Henry, 302
Way to Wealth, The, 93
wealth
concentration of, 41
management businesses, 73
Wealth of Nations, The, 102
Weber, Max, 31
Weimar Republic (Germany), 22
Weinberger, David, 128
Welch, Jack, 59-60, 344. See also General Electric (GE)
leadership style of, 62-63
Straight from the Gut, 62
Marakon Consulting, 124
Wen Jiabao put, 351
West Virginia, 54
Wharton Business School, 143, 309
Where Are The Customer’s Yachts?, 243
whistleblowers, 292
White Zombie, 65
White, Harry Dexter, 29
Why the Bust is Really a Boom, 96
Why the Real Estate Boom Will Not Bust?, 96
Whyte, William, 296
Wiedeking, Wendelin, 257
Wilde, Oscar, 53
Williams, Robbie, 157
Williams, Robin, 164
Williams, Rowan, 346
Williams, Tennessee, 339
Wilson, Harold, 40
WIN (whatever is necessary), 342
winner’s curse, 241
Wire, The, 333
Wired, 99
WIT (whatever it takes), 342
Wizard of Oz, 26
Wolf, Eric, 144
Wolf, Martin, 280
Woodstock Experience, 255
Woolf, Virginia, 179
World Economic Forum (2011), 312
worst-case daily change, 247
worst-off, 211
Wriston, Walter, 89
Wurstelprater, 163
X–Y–Z
Xiaochua, Zhou, 363
Xiaoping, Deng, 85
Yale, 232
Yale Endowment, 124
Yasgu, Max, 252
Yellen, Janet, 298
yen carry trade, 40
You the Living, 50
YSP (yield spread premium), 184
Zabel, William, 62
zaibatsu, 139
Zambian kwatcha, 21
Zelie, Mademoiselle, 23
zero interest rate policies (ZIRP), 348
Zertifikate, 332
Ziegler, Jean, 334
Zimbabwe, 22
Zimbabwe dollar, 22
Zuccaro, Robert, 98