House of Cards - William D. Cohan

Wall Street has long been a source of fascination for me and many people. It's kind of frightening to think that the money you earn and spend, the money you invest in pensions and savings, and the debts you incur are all influenced by the actions of a relatively small group of (mainly) men located in financial centres like Wall Street.

House of Cards tells the story of Bear Stearns, a global investment bank, which was the first major casualty of the recent crisis in the financial markets. Bear Stearns was a pioneer in the area of securitisation and asset-backed securities which initially resulted in bumper figures at the bank, but ultimately led to its downfall in 2008. This resulted in the bank being sold in a firesale to JP Morgan Chase.

The story starts in 2008 and recounts the mounting pressure on the bank's executives as they faced an unparalleled liquidity crisis in the overnight lending market, resulting in the sale of the proud and historic bank, all in the space of just 10 days. Having established the present, Cohan then starts to take us through the history and key personalities of Bear Stearns.

What emerges is a portrait of how powerful and dominant personalities came to be in charge of billions of dollars. One of the main figures in the rise, and ultimate downfall, of Bear Stearns is long-serving CEO Jimmy Cayne. Named as one of the worst American CEOs of all time, Cayne is endemic of both the brilliance and faults that lay at the heart of the bank. A championship bridge player, he was playing in a tournament when B.S. hedge funds experienced difficulty, and it was clear to see that he did not comprehend the financial instruments upon which the success of Bear Stearns had been built.

Cohan paints a picture of character over integrity, forcefulness and personality over knowledge and regulation. It is a scary world, full of folly. Many people are confused about recent events, but House of Cards is a wonderful place to start to learn. It is well researched, detailed and well-written. Cohan does not eulogise, but simply presents the personalities and facts. There is no need for embellishment - the outcomes of recent years speak for themselves.

SuperCycles - Arun Motianey

Arun Motianey is an ex-Citigroup senior employee with a wealth of economic experience. With the current worldwide turmoil, he has chosen a highly appropriate time to advance his theory of the SuperCycle.

The SuperCyle is a long, continuous wave of up and down that stretch throughout the global markets. Motianey attributes the existence of the SuperCycle to the misguided, but well-meant actions of policymakers and leaders. The author takes us through the entire story of a SuperCycle, from beginning, middle to end, using the classic example of the Great Depression to highlight his theory. This naturally leads to an exploration of the current crisis. Motianey's argument against lending on asset value, rather than on income streams rings eerily true following the recent falls in property prices.

Be warned, this is not a light read and definitely not for the faint of heart, or those unlearned in matters economic. I frequently found myself researching topics on the internet in order to supplement my basic economic knowledge. But the author makes interesting reading and his contrary viewpoint is definitely welcome in a time when no one seems to have the answer.

SuperFreakonomics - Stephen D. Levitt & Stephen K. Dubner

Superfreakonomics is the inevitable follow-up to the best-selling book on microeconomics Freakonomics which took a light look at the decisions and motivations of the individual and presented it in an easy to read format. It was a novel approach at the time and bought microeconomics to the attention of the general public.

Well, why change a winning formula? Superfreakonomics continues much in the same vein and it will undoubtedly be bought by the buckload. Be prepared to see the intellectual poseurs reading this book on the morning and evening commute.

The authors do make some interesting and controversial arguments at times, especially with regard to climate change and children's carseats. I must admit that I did find their arguments quite controversial, given the general public concensus on these topics. But that's no bad thing. It would be a dull world indeed if we all agreed.

Overall though, I found no sense of cohesion in the book and I found that it reinforced my view of economists as people groping around in the dark for a lightswitch. Despite ending with a very humourous description of an experiment where Cappuchin monkeys were taught the value of money, there was no wrap-up or final conclusion to the book. I literally turned the page expecting more and was greeting by the bibliography.

Right now, we are in an era of massive change, i.e. on a macroeconomic scale, and I found the minutiae of microeconomics tedious, unoriginal and non-contemporary.

Ireland's Economic Woes Exaggerated, Believes Canadian Research Team

BCA Research, a Canadian-based investment research company who provide advice to international investors on investing in Europe, believe that coverage of Ireland's economic bother has been overly-pessimistic and that the economy may begin to rebound in 2011.

Good news eh? We have been digging ourselves into a bit of a bottomless trough. However, this piece of news does come with caveats attached. They comment that "policymakers must rein in government spending and get the banking system working again". Furthermore, while they welcome the creation of a "bad bank", they believe that the current crisis in the Irish banking system is much worse than the oft-compared early 1990s crisis in Sweden.

They warn the government not to rely on revenue but instead that "The biggest gains would be made by further cutting public-sector pay and employment."

This is not the first time that international agencies have stated the obvious about what is needed in Ireland. The McCarthy report also stated this. The whole public (bar the public sector trade unions) know that cuts in public sector pay and employment, along with social welfare cuts, are what is sorely needed.

But did our glorious leaders ever listen to common sense?

At Last! Some Sense

I've been reading Volume 1 of the Bord Snip Nua report, chaired by UCD economist, Dr. Colm McCarthy, and it makes for some of the most sensible reading I've ever encountered.

Rationalisation of the crazy number of agencies and semi-state bodies, cuts in social welfare and elimination of duplicate payments, reduction in public sector staffing... In fact, estimates of over 17,000 job cuts in the public sector have been bandied about.

The annoying aspect of the report is that all this is common knowledge, and that it represents fat that we should have trimmed during the good years. Unfortunately, we all know that things are left ignored and buried while the going is good. Now, we have to face the pain.

As a private sector employee, who has taken a pay cut in addition to the government levies, I am glad to see a bright light being clearly shone on the elephant in the room - namely staffing and pay in the public sector. It is an area that is long overdue and I firmly believe that if the Government fails to tackle this issue, it could well mean their downfall. Private employees have had just about enough job losses and pay cuts and want to see some equality across the entire workforce.

The report is honest and considered. The question remains if the Government will implement it in an honest and considered fashion.

The Black Swan - Nassim Nicholas Taleb

The Black Swan: The Impact of the Highly Improbable has been a recent bestseller recently. Given the current economic turmoil, the lessons that Taleb imparts in this book are even more relevant. However, much of what is interesting and relevant is undermined by the author's attitude and dare I say, arrogance.

Let's start with the definition of a black swan. It is a rare (or outlying) event, which has a maximum impact and that with hindsight could have been predictable. What Taleb reiterates throughout the book is that we should not confine ourselves to the realm of the usual and predictable. Fair enough.

Taleb then goes on to disparage Gaussian statistics and the reliance that is placed on such statistics, particularly in financial or economic matters. Given that Taleb is an ex-trader himself, I found it highly interesting that he doesn't detail any of the modelling methods that he employed. He refers to himself as a skeptical empirist, someone who is not easily convinced.

However, as a physicist (though not working as such anymore) I found his bashing of the bell-curve to be tedious. Most good scientists are well familiar with the limitations of such statistics and do not place any real credence in them. However, judging from the author, you would gain the impression that all of the world is founded upon these methods, and it's just waiting to come crashing down.

In short, I did enjoy his concept. Black swan events should happen and we should not ignore them when they do. Life is a blend of random and predictable and to ignore the former in favour of the latter is hardly a clever thing to do.

I did not enjoy the book because of the Taleb's attitude. His sense of superiority is astounding, especially when you consider that he rails so often against the arrogance of those who think they know it all.