Wednesday, December 21, 2005

Financial thrillers are the best way to begin your career in finance

The first time I heard about the name of this book I thought it was some Sydney Sheldon thriller but, "Barbarians at the Gate" was a complete non-fiction thriller. The book takes one back to the early eighties when leveraged buyouts (LBOs) were in rage. Junk bonds found themselves at the centre of financial market. The story is about the hostile takeover by private equity investor - Kohlberg Kravis Roberts (then and still headed by Henry Kravis). The company that was taken over was RJR Nabisco (owner of the famous Oreo cookies, Camel cigarettes, etc.) And the amount involved, hold your breath, USD 23.5 billion. This was a huge amount for the eighties and was by far the largest then.
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The takeover was full of thrill and action, something that may put most of the Jeffrey Archer and Syndey Sheldon's books to shame. The book takes you on a mindblowing trip through the jungles of investment banking. A must read for any finance student.
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There are two other books of the same period - Den of Thieves and Predator's Ball. While the former gives an account of how Michael Milken (the junk bond machine) and Ivan Boesky (rocking trader) manipulated (or rather used privy information) to their own benefits. These gentlemen led to what we today know as the "Chinese Wall". The first half of the book gives you an account of the misdealings of these two gentlemen whereas the second half is about the "Law of the Land" taking its course and grounding the two. Another amazing trip down the high finance lane. Predator's Ball, by the way, was the name of the annual meetings that Michael Milken used to have with his clients. The clientele included some of the biggest takeover kings (Posner, Kravis, Pickens, etc.) and hundreds of 'wannabe' takeover kings.
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What Michael Milken provided was a ready market which would not ask for your rating before loaning you. This ofcourse led to many small - to - medium companies gunning for loans - for takeovers (of the size atleast 5-10 times their own size), buyouts, expansions and a whole lot more.
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While I absolutely loved reading these books, there a host of others which I recommend every fresher in a finance class must read. Here is the complete list -
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1. Barabarians at the Gate
2. Den of Thieves
3. Predators Ball
4. Scam by Sucheta Dalal (Indian securities scam)
5. Rogue Trader (Nick Leeson story)
6. Crash of 1979 (Paul Erdman - Fiction)
7. Panic of 1989 (Paul Erdman - Fiction)
8. Zero Coupon Bond (Paul Erdman - Fiction)
9. Silver Bears (Paul Erdman - Fiction)
10.The Set-Up (Paul Erdman - Fiction)
11. The Billion Dollar Killing (Paul Erdman - Fiction)
12. FIASCO
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Financial thrillers are a wonderful way of learning of a lot of basic finance. For example, my understanding about the bond markets developed after I read "The Zero Coupon Bond" by Paul Erdman. The advantage these books carry is simple - they are meant to be communicated to people from all areas of life - finance/non-finance. More for non-finance starters like me. So If you are finding it difficult to understand why bond prices go up when interest rates fall or how do commodity futures work, or how does sharp rise in crude oil prices affect prices of precious metals or a host of such questions just grab a Paul Erdman book.
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Anything and virtually all of investment banking (M\&A's, LBOs, Hostile Takeovers, Junk bonds, Poison Pill) is present in the first three books. The last one FIASCO will end up teaching you most of the derivative instruments (from options to swaps, from forwards to futures).
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Some truly remarkably enjoyable reads.

2 comments:

RiskBuster said...

some more:
1. when genius failed
2. the story fo risk

while you are at it, try to watch the movie 'barbarians at the gate' too.

srahul said...

hey, i guess you could even add up Paul Eradman's latest find---- Tug Of War ----- to the list. If you go finish this book please let me now the thrill experienced by you.