I remember that day in October 1987 when the stock market crashed. Since I was not in the market at the time, I stood outside the event, watching, won...moreI remember that day in October 1987 when the stock market crashed. Since I was not in the market at the time, I stood outside the event, watching, wondering if this would lead to another depression as it had almost 60 years before. I was young with a wife and child, financially unprepared, and completely at the mercy of what was to come.
I got lucky: Neither depression nor recession were in the cards, but the crash did lead to clumsy attempts by the Securities and Exchange Commission to shelter small time investors from the effects of such events. Those attempts in turn led to a federally mandated computerized trading system that foreshadowed the Rise of the Programmers.
I have been a computer programmer for 45 years as well as stock market investor, off and on, since 1981. For the last two years, while posting buy orders for stock, I have often watched the price of the stock tease upward – like a shop owner who jacks up prices when he sees how much a shopper wants his goods. Similarly, my attempts at sales would result in the stock teasing downward. In each case I learned that if I took the bait, it promptly popped back to the original price I had tried to target. I imagined writing a program that intervened in the middleware and played with bids and offers in order to make money. Dang, can’t a daydreamer like me imagine something happening just once without it actually coming true?
As we learn in Michael Lewis’ latest expose of the dark inner workings of the financial world, Flash Boys, this is Wall Street at work, not my imagination. If you hear a TV pundit or reporter speak of this book, as I have this week, as an expose of high frequency trading (HFT), that is proof they have not read it or they have not understood it. HFT is merely the context. Lewis reveals that new stock exchanges are springing up right and left around Wall Street, run by computer programmers who deal in micro seconds (millionths of a second) not just so they can trade faster, but so they can use their extra speed to spy on the opposition and do end runs so they can buy and sell the stock out from under the order makers.
The shocking news of the story is this: for investment bankers like Goldman Sachs or Morgan Stanley, the opposition is their clients. Banks and investment houses that handle trading for their clients now run the trades through “dark pools” that strip the metadata from the proposed trade, run out and steal the trade, then re-sell at higher prices, at a profit, to their own clients. Some of them make a billion dollars a year and more doing this, so you know it is a serious business.
Lewis’ story goes into more depth than the point I’ve just made. As usual he does a masterful job, taking projects like mundane utility digs and making them endlessly fascinating. He also has an interesting sociogeopolitical story of Russian nerds overcoming adversity from their homeland. While making themselves rich, they accomplished something never approached by their Communist forebears: sabotaging, through technical innovation, the stable capitalist foundation on which Wall Street has been based for more than two hundred years.
If you trade or invest in the stock market, or trust someone to do it on your behalf, these revelations are far more disturbing than the knowledge that Wall Street is a big casino. We’ve known that for generations. Now we know that Wall Street is a rigged casino. Insider trading is a joke compared to this travesty. Martha Stewart should demand a retrial! Imagine the Mafia completely controlling modern-day Las Vegas without state gaming regulation, and multiply that by 1,000: that gives you a modest notion of the seriousness of the problem that Lewis presents to us.
Should you stay out of the market altogether? Truth is, modern America provides limited choices for parking our investment and retirement funds. Keep your 401K or IRA in the market, but otherwise the smartest thing you can diversify your funds. Buy real estate, buy businesses, buy CDs, buy gold, and keep cash in CDs. Five years ago I bagged a long-term CD at five percent. The yield is not massive but it beats anything available today, and it is rock solid; CDs never lose money. And when you do have to invest, leave the trading to experienced professional money managers with strong institutional resources to weather the coming computer-generated crash.
As for Lewis’ latest book, it is a quick and easy read – if you are a computer programmer. Time and time again the book demonstrates the difficulty of explaining the situation to bankers with no programming background. My hunch is that you can understand a lot of the book fine without it, and if you invest in the stock market, you can’t afford to ignore it. Michael Lewis hits another home run with Flash Boys.
A great deal of my early political interest as a teenager was stimulated by Theodore White’s Making of the President series of books, for the election...more A great deal of my early political interest as a teenager was stimulated by Theodore White’s Making of the President series of books, for the elections of 1960 through 1976. I still have my original copy of the 1972 edition, and recently re-read the premier book covering John Kennedy’s razor-thin victory over Richard Nixon.
The two Game Change books are nothing like the Making of the President books. Both are good in their own ways. White’s series focused more on how the campaigns were shaped by the state of the nation and its people. He does not not have the deep inside information that the Game Change authors have, though he has some. The White approach is journalistic; the Halperin/Heilemann approach is for political junkies and would-be insiders. As a guy who studied journalism as an undergraduate and public affairs as a graduate student, both approaches work for me.
Double Down has a lot of inside goodies that would make any political junkie salivate - such as early evidence that New Jersey Governor Chris Christie's background is littered with pot holes overflowing with broken glass and rusty nails. He will never be president. More about that in a minute.
Most striking about this book is how its depiction of the Republican primaries differs from my memory of it. When we are in the middle of an event, time moves differently than when we are outside it. At the same time, I think the authors missed the essence of the Republican problem in this book. The authors are clearly, though not flagrantly, in favor of Obama over the Republicans, who they think are either lunatics or just not ready for prime time. They do a reasonable but not great job of holding their bias in check. That's a lot of generalities to toss out, so let me get specific.
The campaigns for the Republican nomination took place in the fall of 2011 as well as during the 2012 spring primary season, with almost two dozen debates going into the primary season, with Most of the candidates were dead in the water before the first caucus, Iowa, or the first primary, New Hampshire, although several held on. Why is this significant?
National Republican leadership recently set new rules for their 2016 primaries. The purpose of the rules is to cut the primary season short, to make sure that the nominated candidate is chosen early and not picked apart by minor or losing candidates who don't mind sticking around to humiliate themselves, like Ron Paul, Rick Santorum, and Newt Gingrich. In the process they have caused a major rift with conservatives and libertarians who understand that the real goal is for establishment Republican to cut everyone else out.
If the Republican leadership had read Double Down closely, they would understand that the problem was not the primary season, because most candidates were effectively knocked out by the debates, partially or completely, before the primaries began. As a result almost all were gone before Super Tuesday, which from now one we will have to call Super-Duper Tuesday, because effectively it will be a national primary day.
Their plans to compress the primaries are for naught because the problem in 2012 was not the process - it was the candidates. In most dysfunctional organizations, the problem is almost always people, not process. If any troublemakers of the ilk of 2012 come along in 2016, the new rules changes will make no difference.
Back to the book. The list of inside goodies is endless. Spoiler alert! I'm going to list some of my favorites. If they sound interesting, just read the book. If you were alive and conscious in 2012, it will be a familiar and easy read. Chris Christie seriously considered running, not because he wanted to, but because the public and private pressure to run was intense. He did not thinkg he was ready, but realized that he was facing a once-in-a-lifetime opportunity. Unlike Obama, faced with a similar choice in 2008, he held back.
* Obama's campaign did indeed examine the possibility of replacing Joe Biden with Hillary Clinton as vice president. Obama was not involved, and Biden was not told of his near miss (though he suspected): all the polling showed that Hillary would not help the re-election chances, which no one took for granted until October, so Joe was left alone.
* Biden's and Obama's decisions to do a flip-flop in favor of gay marriage was an event coordinated carefully over several months. Even so, Biden jumped the gun because he was not kept in the loop by staff, so it did not go as planned.
* Early on, the Bush family tried to recruit a number of senators and governors, folks like Ohio senator Rob Portman and Indiana governor Mitch Daniels. Daniels and his wife were lobbied hard; Laura Bush even called to reassure his wife that raising kids in the White House wasn't so bad., but to no avail. Daniels let his daughters veto it.
* Michelle Bachman thought Sarah Palin was prettier than her, but resented intellectual comparisons between the her, a tax lawyer, and "the moose hunter".
* Jon Huntsman floundered partly because his campaign was based on the premise that family money would kick in. Jon Huntsman Senior, was the founder and and is the chairman of Huntsman Chemical - among other things, he got rich designing and making the boxes for Big Macs. He was believed to be worth more than Romney, but as it turned out, neither Junior nor Senior had the cash flow to fund the campaign, and it died for lack of oxygen. When questioned, Huntsman refused to call himself a conservative, which made him the kind of guy the Bushes had their eye on. In 2016, with Jeb Bush and Chris Christie out of the running, Huntsman may well be the most viable Republican moderate in the campaign - if he runs and if he can get better traction in the primaries.
* Mitt Romney vetted, or tried to vet, five men as candidates for vice president - Chris Christie, Paul Ryan, Tim Pawlenty, Rob Portman, and Marco Rubio. He wanted Christie so badly that in his second pass through the collected information, he tried to ignore the fact that Christie had supplied almost none of the information requested, and refused to supply more. Missing were key financial documents, legal disclosures, government documents, and medical records. Romney tried hard to ignore these problems, but his chief Christie vetter, Mark Nielsen compiled a list of ten major questions unanswered by Christie. Keep in mind that this was before Christie's re-election last year: Nielsen concluded that if Christie had run for president, he would have been so damaged by the disclosures against him that he could not have stood for re-election as governor.
* Obama won. He was not confident of victory until after the last debate. From the beginning he was worried about that his campaign would be overwhelmed by money from Republican Super PACs. Later during the fall campaign, Obama and Romney struggled with their debate preparations, though in different ways. Double Down describes their travails in considerable detail, almost none of which became public during the campaign. The preparations, and the candidates' handling of them, tell us more about both men than any other study. Read the book if only for this study, but you will be amazed at the other things you learn along the way.
If you care about the presidency and its elections, read this book. 4.5 stars. (less)
Not what I was looking for ... just a discussion of some of his favorite problems and issues in math/logic. That may be perfect for some readers, but...moreNot what I was looking for ... just a discussion of some of his favorite problems and issues in math/logic. That may be perfect for some readers, but I was hoping he would go beyond problem-solving to discuss the larger issues, such as those Bertrand Russell confronted when he eventually rejected logic as a practice because "all logic is tautology". (less)
Ike’s Bluff is an informative read that is easy to get through, but if you are insistent on reading for what Ike's Big Bluff was, you may be disappoin...moreIke’s Bluff is an informative read that is easy to get through, but if you are insistent on reading for what Ike's Big Bluff was, you may be disappointed: this reviewer would guess that the title was an afterthought by a publisher looking for a good marketing hook. The truth is, Ike did not really bluff in foreign policy, at least not as depicted in this book. No, he kept his nuclear cards right there on the table for anyone to see. Nuclear war was a constant threat throughout his administration, largely because he was willing to make the threat, at least implicitly, every time he butted heads with Stalin, Mao, or Khruschev.
Ike's Bluff, then, is a book about Ike's foreign policy as President, and as such, name or no name, it is a Good Read. Evan Thomas portrays Ike as a vigorous, aggressive, egocentric president who was actively engaged on all fronts of his foreign policy - and when he was not active, those were the times when things were most likely to go wrong. He was subtle and nuanced, more experienced and knowledgeable than any of his appointees, and by duping the public with his genial golfing grandfather act, proved himself a far better actor than Ronald Reagan.
Students of the time period, 1953-1961, will be interested in quite a few of the specifics, such as the details of Ike's opposition to the Korean “police action” and his subsequent opposition to bailing out the French in Indochina (Vietnam) in 1954; his handling of Sen. Joe McCarthy; his handling of LBJ and the U.S. Senate; the nuclear saber rattling over the Quemoy-Matsu fiasco; and his concern that the "military-industrial complex", and the Cold War, would turn America into a garrison state. Eisenhower never supported American military action in Vietnam.
The subtext of the entire book is the threat of nuclear war with the Soviet Union. Ike's experts estimated in 1953 that a nuclear exchange would result in about 9 million Americans dead, a "small" enough number that American planners did not reject it out of hand; but by 1956 that number had risen to 27 million dead, as the Soviets got serious about its building of ICBMs. No one in Ike's administration seriously considered it as a policy option after that.
Prominent in that subtext is Ike's handling of the U-2 incident involving pilot Francis Gary Powers. For two years Eisenhower had guardedly sent U-2 flights over Russia to follow the Soviet progress in building atomic missile sites and in housing bombers that could make the flight to America. As a result he knew that in the midst of the multiple near-nuclear crises, both Stalin and Khruschev were terrified of a nuclear war with the U.S.: They had only a handful of bombers and missiles to strike with. But Ike worried that a U-2 flight over Russia was technically an act of war, so he was never willing to admit to their existence, and hence the intelligence derived from them. It was safe as long as the U-2 could fly higher than Soviet anti-aircraft weapons could reach, but eventually that reach was high enough to bag a U-2, as Ike knew they would. The much-discussed missile gap in the 1960 election was largely a result of the fact that neither Eisenhower nor Nixon dared reveal the national secret of the U-2 and its intelligence capabilities.
I am a big American history buff, but I was never terribly interested in the Cold War period. Evan Thomas managed to sucker me in painlessly, and I’m glad he pulled it off. Good job! Good read! If this subject interests you, Ike’s Bluff will be a welcome addition to your library. (less)
I think the very idea of a book dedicated to the joys of acting without thinking ... was clearly not thought through. Apparently the author was attrac...moreI think the very idea of a book dedicated to the joys of acting without thinking ... was clearly not thought through. Apparently the author was attracted by the idea of writing a book about giving the worst advice in the world ... and he gave it all the thought required to blink one's eyes.(less)