June 04, 2009

The road well travelled

Here are two interesting books that one should read .... Once in Golconda by John Brooks and The great Crash of 1929 by John Kenneth Galbraith. Both these books are Wileys Classic. There are a few more books worth reading but it is extremely difficult to get these books. In India, barring the easy book of Common stocks and Uncommon Profits, not many books are easily available. I had to borrow these books who could buy it only outside India.

Coming to the two books. Both these books are set stage in the great depression era. Reading these books back to back makes a lot of sense as they fill vital gaps that is present between the two books. Further, read "The Partnership" discussing the Goldman Sachs era in this period.

The interesting part of these two books is that they give a historian...s perspective rather than an analyst/economist perspective. It is advantageous reading it this way as the bias of the author, whatever it may be, is lost and readers get pretty much what happened as it unfolds in time.

"Once in Golconda" spans the period before and after the crisis while "The great crash of 1929" is fairly elaborate till the start of depression. Both these books discusses in detail of the speculative bubble created by excessive leverage available to investors and the failure to understand that stock market at best can only allocate capital and not support an economy. Further, the insider trading, creating pools to move stock prices and the creation of leveraged investment trusts that is similar to mutual funds today is something that is described well.

Once in Golconda discusses the stock market (not economic impact) of the crisis. The endless period of denial by all investors, the subsequent gloom and the final acceptance. The part played by the various banks during the crisis. The two big characters of Albert Wiggin, Chase National Bank and Charles E Mitchell of National City Bank and their contribution towards the crash.

Post the crash, the book moves towards the central character played by Richard Whitney, the head of the exchange, his personal life and his imbalance with professional life and the subsequent "Satyam" like saga. The role played by the regulators/politicians/president has been well documented. The book loses out in the end as it focuses largely on Richard Whitney and less on the exchange. It is entirely silent on what was happening to the economy.

The great crash of 1929 discusses the period just before the crisis and discusses the aftermath in a very brief manner. You like this book as it traces the movement of the index and the mania associated to it. The confidence that investors/ would be investors/ company management / policy makers/ bankers show is an eye opener. It attempts to reduce a few myths associated with the level of participation by Americans, the aftermath suicide rates and the simple stuffs of investing. However, one is trully stunned by the level of participation by banks. I use the word stunned is probably because one always assume bankers to be a pessimitic sort of people who can only look at the negative side as they are the one lending the money. However, the level of participation of banks in lending money to investors to speculate and their peddling of securities through their subsidiaries (leading to Glass Steagall Act- seperation of investment banking and lending activities) makes the book an interesting read. Considering the amount of tight leash the regulator has in India, one has to be trully appreciative of their efforts.

You will definitely like both these books as they are easy to read, and what more exciting. As the famous saying goes..."Those who don...t learn from the mistakes of the past are destined to repeat them". I got the "The smartest Guys in the room" finally from the same person who recommended it and have just started. It surely does not look like a fast read seeing the font size. Lets hope it is as good as the readers recommend it to be.

1 comment:

Shreyan M L said...

What does Mr MB do when he is forced to leave office as early as 6 in the evening ???

Ans: Read a book & post a review. like this one :D