The 86 Biggest Lies on Wall Street

by John R. Talbott and John Talbott

Book Overview

How strong was the American economy going into the present crisis? How strong will it be a year from now? How about five years from now? Investors and citizens around the world realize, as never before, that we were misled--lied to--about the stability of our financial system. But what now?

John R. Talbott's ingenious new book, The 86 Biggest Lies on Wall Street, exposes the lies and then exposes us to the truth of what it will take to rebuild...

• Format: Hardcover
• Language: English
• ISBN: 158322887X
• ISBN13: 9781583228876
• Release Date: April 2009
• Publisher: Seven Stories Press
• Length: 256 Pages
• Weight: 0.94 lbs.
• Dimensions: 0.9" x 5.8" x 8.3"

Customer Reviews

Brilliant prognosticator so far

Mr. Talbot was successful in predicting recent calamities. He is not against the market, only against a self-destructive lawless market in the manner that Adam Smith himself opposed lawlessness. The only little flaw is this: while he introduces some absolutely original notions about the limitations of diversification, he does not discuss the problem of diversification in one place so that you would know up to what point diversification is good, and when it is foolish.

Change to my 15-year old investment strategy

For the past 15 years, I have used asset allocation as my strategy with a quarter of my assets in each of four categories: S & P500 index, international stock fund, REIT fund and bond fund. The 50-year old asset allocation idea was that these four categories were mostly uncorrelated. But the recent crash has disproved that. A recent WSJ front page article confirmed that financial planners are going back to the drawing boards. But what to do going forward. This book points out that the USA's financial situation is now fundamentally flawed and the necessary corrective changes are unlikely to occur until near-bankruptcy as a nation. As a direct result of reading this book, I'm going to switch to these four categories: gold, TIPS, foreign currency and the S & P500 index. The justification for the latter is that most of the big companies that make up the S & P500 index have substantial sales overseas and the index is weighted by company size which makes an investment in the S & P500 index like owning international stocks.

Much more than a populist diatribe

The title of this book might imply that it's a populist diatribe, but the book is so much more than that. John Talbott manages to provide very clear, concise, and (most importantly) logical explanations for the roots of the current financial crisis, along with his strong opinions about how it might have been handled, and what's in store for the future. Along the way, he does manage to dispel a number of popular myths about this recession. Interestingly, the book is about as totally non-partisan as a book on the politics of economics could possibly be. He simultaneously lambastes the corporate world for it's greed, excesses, and short-sightedness, while at the same time strongly criticizing Obama's strategy for ending the economic malaise. He couches his explanations in terms other than liberal vs. conservative, or Republican vs. Democrat. For people who would like to understand the roots of our current situation, and listen to some practical suggestions and (sadly, rather dour) prognostications on the future, this book is an excellent investment.

Offers up the alternative view to "conventional wisdom"...

I love books that take conventional wisdom, the things "everyone knows to be true", and puts them under the microscope for renewed examination. John R. Talbott does this to Wall Street and investing in his book The 86 Biggest Lies on Wall Street. You may not agree with all of his conclusions, and a number of them might make you financially uncomfortable. But in any case, it's worth having your assumptions challenged to see if there might be a better path out there. Contents: Lies About What Caused This Mess; Lies About How to End the Crisis; Investment Strategy Lies; Stock Investing Lies; Bond Investing Lies; Lies About Other Investments; Lies in Economics; Lies in Finance; Lies About the Global Economy; Lies About Hedge Funds and the Derivatives Market; Lies About Government and Regulation; The Real Reform Needed on Wall Street; Index The format here is pretty simple. You have "Lie #nn: " followed by the statement that tends to be spouted as a truth that everyone accepts. And then Talbott proceeds to smash it based on his observations and experience from a lifetime of working in Wall Street. Given his track record in calling the mortgage crisis and banking crisis, he does bear some attention. For instance, he starts out with a heavy hitter, and that is that the American economy was the strongest and most resilient in the world heading into the current crisis. When he digs below the stats usually cited to "prove" this, you see why he disagrees. He sees GDP growing due to population growth, not due to a strengthening economy. There's also the matter of illegal aliens hiding the true growth of the population. Borrowing has driven the increased consumption, which means that in addition to "growth" you have debt. Total debt outstanding in the US has gone from $25 trillion to $60 trillion in the last 10 years, and he doesn't even bring in the unfunded liabilities of Social Security and Medicare. Family income has also increased due to spouses joining the workforce, as opposed to real income per individual worker increasing. When you add all this up along with other observations he has, you realize that this economy was far from healthy and robust. Talbott also has harsh words for the Troubled Asset Relief Program that Hank Paulson deemed critical to getting the markets unfrozen. In fact, lie #17 is "everything that Hank Paulson ever said about the Troubled Asset Relief Program". Can't get much more inclusive than that. He shows how the initial target of the plan was immediately dropped after the legislation was passed, and money was instead given to banks who were in good standing with Paulson. Talbott also shows how, if banks had really sold their bad properties to TARP, there would have been even worse financial ramifications, as it would then be possible to value the bad debt and banks would be forced to revalue their balance sheets (for the worst), leading to even more solvency issues due to being over-leveraged. I felt the

Nice.

Very well written book, concise and to the point. I've learned quite a lot from reading it. Some author's beliefs I can't agree with but overall the picture he depicts is unfortunately very true. My only criticism is author's premise that markets are efficient which leads him to conclude, for instance, that Harvard likely trades partially on inside info. While this certainly could be true, my research indicates that one can beat the market using short-term approach (granted it's not easy) and Harvard's trading team returns are certainly reasonable. In this day and age holding a belief that markets are efficient or they are a random walk is a clear bias people hold on to for psychological reasons since computer simulations can demonstrate that neither is true. One thing I would add to the gloom and doom picture is often neglected aspect of environment. On top of all other purely economics problems, we also face an unprecedented environmental threat which can't be considered as entirely unrelated problem. For instance, we could soon reach a point when not regulating companies is not an option due to environmental hazard they create, but imposing regulations on them would push these companies into bankruptcy. As for politics, I 100% agree that current model is unsustainable. In my view, it's ridiculous that we elect people based on how well they campaign. As a result, we have politicians making worst economic decisions possible.