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Origins of the Crash: The Great Bubble and Its Undoing Paperback – December 28, 2004

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Editorial Reviews

Review

"The perfect epitaph to an era of monumental avarice and folly on Wall Street. This is financial history at its best." —Ron Chernow

"A crucial account of an era of excess and folly...riveting...will only seem fresher with time." —BusinessWeek

From Publishers Weekly

Well-known financial journalist Lowenstein (Buffett; When Genius Failed) sets out to explain the stock market crash of 2000 and the ensuing corporate scandals. The ingredients are familiar: executive overcompensation and stock options, irrationally exuberant shareholders, friendly auditors, short-term focus by financial professionals and overemphasis on shareholder value. The author puts his unique stamp on these factors by juxtaposing them so brilliantly that the 20-year history that inflated the bubble seems not just understandable, but inevitable. The story is traced from the doldrums of the 1970s through the raiders and junk bonds of the 1980s to the financial brave new world of the 1990s. In self-conscious parallel to John Kenneth Galbraith's The Great Crash, Lowenstein explains that it is the boom that needs to be explained; the crash is simply the natural consequence. Lowenstein's low-key ease with the most complex financial reporting makes this book both accurate and easy to read, just as his earlier Buffett revealed a fascinating character where other writers saw only dullness, and his Where Genius Failed was a very comprehensible account of the 1998 Long-Term Capital Management blowup.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to the Library Binding edition.
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Product Details

  • Paperback: 272 pages
  • Publisher: Penguin Books (December 28, 2004)
  • Language: English
  • ISBN-10: 0143034677
  • ISBN-13: 978-0143034674
  • Product Dimensions: 5.4 x 0.6 x 8 inches
  • Shipping Weight: 8 ounces (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (47 customer reviews)
  • Amazon Best Sellers Rank: #1,064,352 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Donald Mitchell HALL OF FAME on February 19, 2004
Format: Hardcover
Roger Lowenstein is one of the best financial reporters around, and he has done a fine job of taking the public information about stock market influences since the 1970s and connecting them to the 2000-2002 stock market crash in the United States.
I know of no book that touches on so many subjects including:
-Retirement money moving into mutual funds
-LBOs creating pressure on CEOs to get their stock prices up
-Leveraging of public companies to improve stock price
-The rise of free market economics as a policy influence
-401(k) plans creating a chase for fast results
-CEO stock options rising through the roof
-Michael Jensen and Joel Stern providing arguments in favor of excessive payments to executives
-Rise of the CFO as a "profit engineer" to produce most of company earnings results
-Lack of e.p.s. hit for stock options
-CEO pay skyrockets in the absence of performance due to lax consultants and boards
-New stock options being granted after stocks drop
-Cozy boards that inappropriately keep CEOs in place
-Managed earnings (especially by GE and Coca-Cola)
-Reduced disclosure
-Special Purpose Vehicles (to keep losses and debt hidden from investors)
-Security analysts having conflicts of interest
-SEC didn't do enough
-Accounting firms have conflicts of interest
-Derivatives are too unregulated
-Too much money to Venture Capital funds
-IPO boom
-Pro forma earnings
-Overinvestment in telecommunications
-Unrealistic expectations for the Internet and Internet companies
-Fraud by Enron, WorldCom and others.
Mr.
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Format: Hardcover
First off, disclosure: Penguin sent me a copy of this book to read & review for free based on an earlier review I wrote of one of Roger Lowenstein's books on this site. So I have a theoretical conflict of interest, though I am doing my best not to allow it to affect - positively or negatively - my view of this book.
That being said it is a somewhat ironic marketing tactic for Penguin to use n this particular case (but one which I heartily encourage, by the way) since Lowenstein's main theme is the mischief arising from conflicts of interest suffered by research analysts when covering the stocks of companies to whom their firms are pitching for investment banking business.
Be that as it may, I've disclosed it now, so you're warned.
Origins of the Crash covers much the same ground as Frank Partnoy's Infectious Greed and John Cassidy's Dot Con. As usual, Partnoy can't resist hopping on his moral high-horse, or mentioning 10+ year old derivatives scandals that have nothing to do at all with the recent market turmoil; Cassidy is more measured but restricts himself very much to the Dot Com phenomenon, adding an interesting history of the internet and computers in finance.
Lowenstein manages deals with the spinning, laddering and corporate governance scandals of the early part of this decade, but as many of the reviewers here have noted, doesn't really add much that you wouldn't know had you been reading the papers for the last few years.
Also, as he was with his book on LTCM, he is good at wisdom after the fact and retains a weakness for the cute aphorism, though he is more circumspect with it here and doesn't allow the neat turn of phrase to undermine his argument in quite the same way.
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By A Customer on January 26, 2004
Format: Hardcover
I agree with much of what has been said in the other reviews; particularly, that most of what is said here as already been said by others, often more lucidly and without the vitriol. I much preferred reading the Times' coverage. The book also seemed pretty quickly put together; there were a couple of obvious factual errors, and other sections looked like they were thrown in at the last minute. The overall impression that I received was of a book desperately done on a deadline, which affected both the tone (righteous) and substantive content (often derivative) of the text. I would have much preferred the book had Lowenstein taken the time to do this book right, with a fresh approach and a least a little new insight.
I know that Lowenstein has many loyal readers who would happily declare "brilliant" anything he writes. I like his stuff too, usually. But this book is just not up to standards. I know he could do better if he tried, but he just didn't do so here. And that's the harsh but accurate truth about this book.
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Format: Hardcover
In Origins of the Crash, Roger Lowenstein has written a fascinating account of the late 90's stock market bubble and subsequent collapse. The overriding theme of the book is that the culture of "shareholder value" was twisted from creating true long-term value into an obsession with the daily ups and downs of the companies' stock prices. It's an interesting way to view things and should prove thought provoking to many. Lowenstein makes a compelling case that the scandals of the past several years are not the work of just a few bad actors, but rather were symptomatic of widespread failures throughout all levels of business, government and the public. The cast of villains is extensive including the now common ones like Ken Lay (along with Skilling and Fastow), Jack Grubman, Bernie Ebbers (and Scott Sullivan) and Henry Blodget, but also includes the complicity of weak boards (and overall lax corporate governance), conflicted accountants and lawyers and an investing public (both individual and professional) that was too busy making money to worry about any of it.
I am not sure how much new reporting there is in this book... much of it is pulling together various stories that have been widely reported on. But it is put together artfully into a compelling narrative. It was fascinating to watch Michael Jensen, who was one of the earliest advocates of the use of stock options, eventually turn on his own creation. The section on Enron, while obviously not as extensive as some of the works devoted to the subject, is one of the best condensed accounts I have seen.
I do have a few quibbles with the book though. First, it winds up being something of a polemic. Reading Mr.
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