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The Asylum: The Renegades Who Hijacked the World's Oil Market
The Asylum is a stunning exposé by a seasoned Wall Street journalist that once and for all reveals the truth behind America’s oil addiction in all its unscripted and dysfunctional glory. In the tradition of Too Big to Fail and Liar’s Poker , author Leah McGrath Goodman tells the amazing-but-true story of a band of struggling, hardscrabble traders who, after enduring decades of scorn from New York’s stuffy financial establishment, overcame more than a century of failure, infighting, and brinksmanship to build the world’s reigning oil empire—entirely by accident.
416 pages, Hardcover
First published February 15, 2011
19 people are currently reading
180 people want to read
About the author
Leah Mcgrath Goodman
3 books9 followersAn award-winning freelance journalist, Leah McGrath Goodman spent a decade in New York and London as an editor, senior writer and special correspondent for Dow Jones & Co., breaking hundreds of stories on the oil market and the New York Mercantile Exchange for the Wall Street Journal and Barron's. She has written for Forbes, Condé Nast Portfolio, the New York Times, the Financial Times and The Guardian, and has appeared on CNBC, MSNBC, and Fox News. Residing in Boulder, CO, she is a Ted Scripps environmental journalism fellow at the University of Colorado.
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Displaying 1 - 20 of 20 reviews
April 26, 2011
It is rare I give a negative review for a book, but feel compelled to do so in this case. If you are buying this book to get a better understanding of how NYMEX affects current oil prices then stare clear as it fails in every way to offer an explanation. Instead this book is like a series of magazine articles on the various characters who made up the NYMEX during its glory years. Notice i write "magazine article"? Thats because even these profiles lack real depth normally found in a book and instead are incredibly repetitive and bland. There is not a single character in this book who you really feel you have gotten to know even slightly below the surface. So the book fails as both an expose on the oil markets and even as an interesting profile on the traders made up the NYMEX. Other than insiders who may get a chuckle recalling some old friends or foes, I can't think of many people who will not find this book at least 100 pages too long and still very much lacking in depth.
January 9, 2016
This is arguably close to my favorite book I've read this year. It blends a muckracking researching prospective with direct quotes. The book is probably 50% quotes from the actual Nymex traders which makes it much more interesting. The book highlights the development of the oil market as the rough traders of the Nymex pried the power of pricing oil from OPEC and delivered it to the select few traders in Nymex. By pricing oil on the exchange, suddenly people purchasing gas didn't have to do so straight from the middle east or opec, they could buy it when it was sold on the exchange for a completely different price, often a more realistic price (at first). Throughout the book it is clear that each trader is self-concerned even when the entire stability of oil price is placed in their hands. Each trader is portrayed as an awful human being by themselves as they describe the inability to work at in the pits without drinking, doing drugs, and hiring massive amounts of prostitutes on business trips. The cut throat nature of the business is fascinating and the degree to which the traders disregarded every professional standard is amazing, whether they hire people straight off the streets, make bets with the loser dressing like a girl, or putting interns under immense pressure to see which ones are cut out for the job. Much of this book is like a recollection of all the gossip and cutthroating going on The best part about this book is how the author spends each chapter following one specific member of the exchange that was crucial in chronological order and turns it practically into a biography. She does a great job at tracking each character and really helps give the reader an idea of what it was like during that time with much help from personal accounts. All of the guys are extremely witty and make me laugh multiple times a chapter. AS an example, when the Nymex was upgrading they installed fancy, "phallic shaped soap dispensers" and at the end of a board meeting one member said "yeah, i just wanted to let everyone know I finally managed to remove all you guys' teeth marks for the soap dispensers.' The room just exploded. We were pounding on the tables. We were laughing so hard we were crying." Even thought the joke isn't hilarious, their reaction and the retelling is hilarious. Most of the funny parts of this book is just the amazing things that happened to them, for them almost crashing in a plane to waking a guy up on a phone conference by telling the hotel he was at that he was having a heart attack.By the end of the book or each chapter you really feel like you care for each of these awful people just because they are witty and hard working. On a different note, i learned a lot about trading oil. In 2008, oil is traded 4-5 times by speculators before the physical oil is purchased. Today, market prices are actually pushing gas prices higher than they should be. Even if OPEC increases production, Milton Friedman's theory that too much money chasing too few goods creates price rises really comes to life here. the price can be artificially increased by making huge orders for oil contracts. Today on the online exchange banks can and do do this pretty often with OPEC admitting that it has very little power over the price of oil. Just by selling/buying tons of contracts near close can assure a price swing.
I don't care what anyone says about it. I was there and i have been there from the beginning.. and since the oil market's gone to the screen, we've seen prices go up sometimes 5 to $10 a barrel a day. Even on the really crazy days in the past, you dirndl see daily price moves of more than a couple dollars usually, I want to know, what is happening out there that is warranting a price change of that magnitude? Did an oil field blow up? Is there a new world war being fought somewhere?... The market's no longer reflecting supply and demand. It used to be fundamentally driven. Theres no new war, no big supply disruption, and suddenly oil is going through the roof?.. Just guys trading around the world in giant rooms they're calling arcade."
At this point, oil inventories will hold their inventory until gas is high enough where they can make their profit, thus holding the us consumer hostage.
the other part of the book was basically showing how corrupt and awful government agencies regulating markets are. The government barely regulated dual trading, which is when a person will trade their own futures just before they trade their customers' so they can get a bigger profit on insider information. The CFTC sucked the entire history of its existence with awful courts that are biased against big time traders with an appeal process that runs through its own department. The CFTC also never regulated anything because of a lack of power and the revolving door. As a reference to the book My Face is Black is True, the CFTC is as corrupt as the postal service back in the day. A good quote about the inaction of the department: "...the CFTC's probe into the NY silver market also mysteriously ground to a halt. In a lengthy letter, the agency reported finding no evidence of any market manipulation, despite handwritten complaints from more than 500 SILVER INVESTORS BEGGING IT TO LOOK INTO what they believed to be deeply suspicious activity." The trades themselves are asking for some investigations and the department ignores it. Unreal, so many times this organization drops the ball in this book. Whats amazing is that the Head of the CFTC eventually becomes CEO of Nymex and realizes he should have been regulating much harder, and the new head of the CFTC has to knowledge of the industry and chooses not to regulate it. It just makes you wonder if the revolving door actually helps with creating competent government officials.
Another interesting thing is that back in the 90s i believe the traders went to a military base for military exercises and had a simulation which they beat the military guys at, yet they were much more ruthless and showed less regard for their own teammate's safety and more for achieving the goal. then, years later when they have full control over the market, the gov still lets them by giving them self regulation even though they have seen that the traders only care about the money and power.
The section about 9/11 was fascinating. Obviously the terrorists were bent on destroying the corrupt financial sector of America, yet almost all of the traders survived. the group that did get killed was actually setting up a meeting to ban dual-trading, yet since the terrorists killed them the ban never happened. Thats some pure irony. To make all of the traders more confusing, though they don't care that they destroy the oil market and the american economy, they put ridiculous amounts of money into charities for post 9/11. Perhaps the most heroic part of the book is when the chairman Viola actually hires private ferries, police officers, air conditioning units, firemen, and others to get the exchange running only a few days later.
It was interesting reading about Enron after watching the documentary countless times. Enron actually partially created the collapse of 08 because the Enron loophole they pushed in Congress actually increases the lack of regulation in the over-the-market derivatives and other complex financial tools market which is what caused the collapse, specifically the deregulation of the credit-default-swap market.
"A healthy market had to be carefully balanced between the speculators, who were essentially gambling on prices, and the commercial hedgers, like oil companies and refineries, which were in the market to specifically protect themselves from price pops and drops." If the volatile-living speculators outnumbered the stability-loving hedgers then the prices would be controlled by something other than supply and demand. In fact, supply and demand makes little sense in this market comparatively. At times, Big Oil/traders makes price changes that don't make sense. "When Florida has a freeze and the price of orange juice goes up, you don't hear everyone blaming Big Citrus."
Another fav part is a cameo by Chavez in 2004 when US gas prices were crazy high where it says he began a charity drive to five away "hundreds of millions of dollars' worth of fuel to thousands of American poor who could no longer afford to pay full price for heating oil. Overnight, in the ghettoes of cities across 23 states, he became an unlikely folk hero." What a hero, even if his motivation was the undermine the us gov
There were also some supporting evidence for the target revenue model.
"Although the cartel had lost its grip on the oil market... it found it could always raise [raise the price]...'OPEC...could raise oil to $200 a barrel tomorrow if they really wanted to.. but they don't do it. Why? Because they are RATIONAL...Their objective is to charge as much as the market will possibly bear [without restricting us form affording oil]. Basically, they set prices to keep us hooked, make as much money as possible without running out of supply.
Maybe the funniest part is when Greenpeace protestors barged into the trading pit and released helium balloons with airhorns tied to them. The traders beat the hell out of the protestors. "We thought we were going to die", one protestor said gasping over the phone.
A very telling part of the book was when she focuses on the gas stations. Gas stations really just set the price they can to make even a few pennies on each gallon of gas. When people hate on the gas stations its really unwaranted because they don't have a choice but sell at high prices.
Relating back to Mill, the fact that these exchanges are self regulated and each person has its self interest, this sector has the right to be regulated by the government heavily, for with competing interests the exchanges have the potential and often do hurt other people through their laissez faire policies.You have to wonder why the government is letting conflicting interested people make such big ramification decisions for the market.
Another insightful thing is why physical oil is more important to hedge than for speculators:
"I think its all right for traders who need to hedge their price risks on the physical energy assets to get an exemption (to trader more gas futures contracts)... it is purely speculative traders who are only in the market to place bets that i have a problem with." It makes sense to could buy more if you owned physical oil, then you could hedge against it since your business completely relies on that oil, like refineries. On the other side, if the price did fall and you didn't trade escheat oil your company wouldn't go under without hedging. At this point, heading is so prevalent that people are hedging against the dollar.
Back in the day before screens, the traders knew every trade going on in the world because it was coming through them, so if Goldman was making a huge sale to swing the price of gas, they could counteract it. today, no one is on top of it which makes it so dangerous. Can the gov really regulate that?
I don't care what anyone says about it. I was there and i have been there from the beginning.. and since the oil market's gone to the screen, we've seen prices go up sometimes 5 to $10 a barrel a day. Even on the really crazy days in the past, you dirndl see daily price moves of more than a couple dollars usually, I want to know, what is happening out there that is warranting a price change of that magnitude? Did an oil field blow up? Is there a new world war being fought somewhere?... The market's no longer reflecting supply and demand. It used to be fundamentally driven. Theres no new war, no big supply disruption, and suddenly oil is going through the roof?.. Just guys trading around the world in giant rooms they're calling arcade."
At this point, oil inventories will hold their inventory until gas is high enough where they can make their profit, thus holding the us consumer hostage.
the other part of the book was basically showing how corrupt and awful government agencies regulating markets are. The government barely regulated dual trading, which is when a person will trade their own futures just before they trade their customers' so they can get a bigger profit on insider information. The CFTC sucked the entire history of its existence with awful courts that are biased against big time traders with an appeal process that runs through its own department. The CFTC also never regulated anything because of a lack of power and the revolving door. As a reference to the book My Face is Black is True, the CFTC is as corrupt as the postal service back in the day. A good quote about the inaction of the department: "...the CFTC's probe into the NY silver market also mysteriously ground to a halt. In a lengthy letter, the agency reported finding no evidence of any market manipulation, despite handwritten complaints from more than 500 SILVER INVESTORS BEGGING IT TO LOOK INTO what they believed to be deeply suspicious activity." The trades themselves are asking for some investigations and the department ignores it. Unreal, so many times this organization drops the ball in this book. Whats amazing is that the Head of the CFTC eventually becomes CEO of Nymex and realizes he should have been regulating much harder, and the new head of the CFTC has to knowledge of the industry and chooses not to regulate it. It just makes you wonder if the revolving door actually helps with creating competent government officials.
Another interesting thing is that back in the 90s i believe the traders went to a military base for military exercises and had a simulation which they beat the military guys at, yet they were much more ruthless and showed less regard for their own teammate's safety and more for achieving the goal. then, years later when they have full control over the market, the gov still lets them by giving them self regulation even though they have seen that the traders only care about the money and power.
The section about 9/11 was fascinating. Obviously the terrorists were bent on destroying the corrupt financial sector of America, yet almost all of the traders survived. the group that did get killed was actually setting up a meeting to ban dual-trading, yet since the terrorists killed them the ban never happened. Thats some pure irony. To make all of the traders more confusing, though they don't care that they destroy the oil market and the american economy, they put ridiculous amounts of money into charities for post 9/11. Perhaps the most heroic part of the book is when the chairman Viola actually hires private ferries, police officers, air conditioning units, firemen, and others to get the exchange running only a few days later.
It was interesting reading about Enron after watching the documentary countless times. Enron actually partially created the collapse of 08 because the Enron loophole they pushed in Congress actually increases the lack of regulation in the over-the-market derivatives and other complex financial tools market which is what caused the collapse, specifically the deregulation of the credit-default-swap market.
"A healthy market had to be carefully balanced between the speculators, who were essentially gambling on prices, and the commercial hedgers, like oil companies and refineries, which were in the market to specifically protect themselves from price pops and drops." If the volatile-living speculators outnumbered the stability-loving hedgers then the prices would be controlled by something other than supply and demand. In fact, supply and demand makes little sense in this market comparatively. At times, Big Oil/traders makes price changes that don't make sense. "When Florida has a freeze and the price of orange juice goes up, you don't hear everyone blaming Big Citrus."
Another fav part is a cameo by Chavez in 2004 when US gas prices were crazy high where it says he began a charity drive to five away "hundreds of millions of dollars' worth of fuel to thousands of American poor who could no longer afford to pay full price for heating oil. Overnight, in the ghettoes of cities across 23 states, he became an unlikely folk hero." What a hero, even if his motivation was the undermine the us gov
There were also some supporting evidence for the target revenue model.
"Although the cartel had lost its grip on the oil market... it found it could always raise [raise the price]...'OPEC...could raise oil to $200 a barrel tomorrow if they really wanted to.. but they don't do it. Why? Because they are RATIONAL...Their objective is to charge as much as the market will possibly bear [without restricting us form affording oil]. Basically, they set prices to keep us hooked, make as much money as possible without running out of supply.
Maybe the funniest part is when Greenpeace protestors barged into the trading pit and released helium balloons with airhorns tied to them. The traders beat the hell out of the protestors. "We thought we were going to die", one protestor said gasping over the phone.
A very telling part of the book was when she focuses on the gas stations. Gas stations really just set the price they can to make even a few pennies on each gallon of gas. When people hate on the gas stations its really unwaranted because they don't have a choice but sell at high prices.
Relating back to Mill, the fact that these exchanges are self regulated and each person has its self interest, this sector has the right to be regulated by the government heavily, for with competing interests the exchanges have the potential and often do hurt other people through their laissez faire policies.You have to wonder why the government is letting conflicting interested people make such big ramification decisions for the market.
Another insightful thing is why physical oil is more important to hedge than for speculators:
"I think its all right for traders who need to hedge their price risks on the physical energy assets to get an exemption (to trader more gas futures contracts)... it is purely speculative traders who are only in the market to place bets that i have a problem with." It makes sense to could buy more if you owned physical oil, then you could hedge against it since your business completely relies on that oil, like refineries. On the other side, if the price did fall and you didn't trade escheat oil your company wouldn't go under without hedging. At this point, heading is so prevalent that people are hedging against the dollar.
Back in the day before screens, the traders knew every trade going on in the world because it was coming through them, so if Goldman was making a huge sale to swing the price of gas, they could counteract it. today, no one is on top of it which makes it so dangerous. Can the gov really regulate that?
August 29, 2018
John read this book and wrote this review: For a non-fiction book this read like a fiction thriller. The character (real people) actually seemed like characters out of a novel. Excellent! If I was a rogue I would have been an oil trader. Find two copies of this fantastic book at the Dover Free Library. This author was the featured speaker this summer at the Library's Annual Dessert Social Fundraiser. The video can be seen on our Facebook or BCTV.org
May 27, 2017
So much fun it could have got another star... but this isn't a 5-star book. Read it, enjoy it, and then go looking for serious writing.
I also thought it was good as an introduction to some of the practicalities of exchange markets.
I also thought it was good as an introduction to some of the practicalities of exchange markets.
February 7, 2012
Interesting read. Lots of silly trivia that attempts to make NyMex look like a bunch of cowboys, but the 3rd party review of a complex political/economic organization from many different perspectives is very interest. There are some valuable lessons: always tread carefully, always watch your back. You can see that nothing that transpires was remotely "fair", but by being in the right place at the right time, you definitely have a big head start in terms of taking care of yourself.
The moral of the story was basically that in spite of it's corruption and in-efficiency, having actual traders on the floor that could see each other face to face, that new all of the players --- it wasn't a perfect solution, but it would regulate prices. If somebody wanted to drive up prices with a big buy, or down with a big sell --- the traders new who was doing it and could call their bluff. Nobody would try anything too ridiculous, because you would get caught.
Now days, manipulating the market is easier for those with big piles of assets. It's bigger, so you need more money to make the manipulation happen - but since all the traders are just looking at numbers, there's no accountability, and no way to call someone's bluff.
Most importantly, this is the story of how Lou Guttman, Hungarian emigre, was able to transform the exchange from dealing on Potato contracts to Heating Oil contracts, and eventually to set global energy prices. It's a story in line with McDonalds in terms of entrepreneurial success - but with one problem. Guttman was an employee of NyMex, not the owner. He didn't play the politics well. In spite of being the man who made NyMex what it became, he was pushed out.
Corporate America 101.
The moral of the story was basically that in spite of it's corruption and in-efficiency, having actual traders on the floor that could see each other face to face, that new all of the players --- it wasn't a perfect solution, but it would regulate prices. If somebody wanted to drive up prices with a big buy, or down with a big sell --- the traders new who was doing it and could call their bluff. Nobody would try anything too ridiculous, because you would get caught.
Now days, manipulating the market is easier for those with big piles of assets. It's bigger, so you need more money to make the manipulation happen - but since all the traders are just looking at numbers, there's no accountability, and no way to call someone's bluff.
Most importantly, this is the story of how Lou Guttman, Hungarian emigre, was able to transform the exchange from dealing on Potato contracts to Heating Oil contracts, and eventually to set global energy prices. It's a story in line with McDonalds in terms of entrepreneurial success - but with one problem. Guttman was an employee of NyMex, not the owner. He didn't play the politics well. In spite of being the man who made NyMex what it became, he was pushed out.
Corporate America 101.
June 3, 2011
I went into The Asyulum with high hopes. Finally a book that exposed the oil futures industry for what it was: a reckless and greedy bunch of traders who systematically gamed the system for profit. Goodman's book provides some of that, but stops far short of what could have been one of the most damning exposes of a dangerous financial system in years. The book is thin on the economics behind the system, which involves traders rapidly buying and selling oil they do not physically posses, and instead fills the pages with the seedy and sordid tales of executives who used enough cocain to put Tony Montana to shame and bought enough "hoes" and hookers to make the oil futures market the setting for the next Lil' Wayne song.
That's not to say the book was a complete failure. Goodman does paint an interestning picture of the men (and occasional woman) who make up the shady and ellusive business of oil futures. Sadly though, it is less of a searing indictment of a whole system that something shocking made for E! Television or for Piers Morgan would gush about for an hour on CNN.
That's not to say the book was a complete failure. Goodman does paint an interestning picture of the men (and occasional woman) who make up the shady and ellusive business of oil futures. Sadly though, it is less of a searing indictment of a whole system that something shocking made for E! Television or for Piers Morgan would gush about for an hour on CNN.
May 11, 2011
I am surprised I gave this book a 4-star rating due to my frustration and anger with the people and stories of "Corporate America/Wall Street" in this book. It is a stranger than life book that could be made into a movie, which would need an R rating. The greed, idiocy, hubris, and love of power that was characteristic of the majority of the people in this book was beyond frustrating at times. But, it certainly opened my eyes, which is a good thing. A definition of asylum is "an institution offering shelter and support to the mentally ill". Wall Street, Corporate America, call it what you want certainly appeared to be the institution offering shelter and support to people who may not have been mentally ill, but were certainly morally ill.
February 9, 2017
A crude yet funny book covering the history of NYMEX. Despicted all the ugliness of the NYMEX traders yet also concludes why it's better to have them than the faceless electronic trading we have now. Good job putting finance in layman's terms for the average reader.
September 4, 2011
An interesting account of the rigged oil market. How our elected representatives are complicit in fostering a rigged oil market that is costing the consumers billions, and making a few individuals and financal institutions billions of dollars. A must read for those who are fed up with our elected representaives working for the special interests groups to the detriment thier constituants.
August 3, 2015
This book tries hard to be Wolf of Wall Street meets Michael Lewis character based story telling and fails at both. Sensationalist, and lacking any central thread or charater that is worth caring about this book only got read to fill the gaps between choosing other titles.
That said, the sensational stories were entertaining enough in short bursts not to make me hate it.
That said, the sensational stories were entertaining enough in short bursts not to make me hate it.
March 17, 2016
Never gonna look at prices at the pumps the same way again. Goodman lives in Brattleboro, Vt., where I work. She appeared on the radio station just before I did one day. That's how I heard of this book.
The way she made complicated things understandable was inspiring. Enjoyed every minute of this book. Recommend it!
The way she made complicated things understandable was inspiring. Enjoyed every minute of this book. Recommend it!
August 23, 2011
A must-read for anyone either in or on the sidelines of the energy industry. If there was any last remnants of belief that fundamentals rule the energy markets, this portrait of the NYMEX pits and how screen trading as completely overcome the industry, will bury that belief firmly six feet under.
July 30, 2011
Commento per gli italiani: un attesissimo libro negli Stati Uniti, una interessante storia da leggere, per chi ama leggere in inglese
April 20, 2012
Outstanding analysis on the background and evolution of the Oil futures market. This should required reading for everyone interested in the cause and effect regarding oil prices and the world market
May 13, 2012
This was recommended to me as a sort of companion book to the Enron story "The Smartest Guys in the Room" but it wasn't as well-written and I gave up.
November 26, 2012
Good book thus far. But needed to downsize. Left it with Bastian.
November 22, 2012
Fuck NYMEX, fuck futures trading. The first 1/4 of this book explains in detail just what is wrong with the oil market and tells you who to blame for gas prices.
July 25, 2014
Interesting if you are into market structure, but a little hard to follow at points
December 4, 2013
One of the best non-fiction books I have read in quite awhile.
May 3, 2017
An excellently written history of how the world's oil market was turned into a casino by a bunch of drug-addicted, mostly high school drop-outs, and a must-read for those who foolishly believe markets are efficient and best left unregulated!
Displaying 1 - 20 of 20 reviews