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Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue Kindle Edition
Could 2008's credit crisis have been minimized or even avoided? In 2002, David Einhorn-one of the country's top investors-was asked at a charity investment conference to share his best investment advice. Short sell Allied Capital. At the time, Allied was a leader in the private financing industry. Einhorn claimed Allied was using questionable accounting practices to prop itself up. Sound familiar? At the time of the original version of Fooling Some of the People All of the Time: A Long Short Story the outcome of his advice was unknown. Now, the story is complete and we know Einhorn was right. In 2008, Einhorn advised the same conference to short sell Lehman Brothers. And had the market been more open to his warnings, yes, the market meltdown might have been avoided, or at least minimized.
- Details the gripping battle between Allied Capital and Einhorn's Greenlight Capital
- Illuminates how questionable company practices are maintained and, at times, even protected by Wall Street
- Describes the failings of investment banks, analysts, journalists, and government regulators
- Describes how many parts of the Allied Capital story were replayed in the debate over Lehman Brothers
Fooling Some of the People All of the Time is an important call for effective government regulation, free speech, and fair play.
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From the Publisher
- ASIN : B004D4YO6A
- Publisher : Wiley; 1st edition (7 December 2010)
- Language : English
- File size : 2106 KB
- Text-to-Speech : Enabled
- Screen Reader : Supported
- Enhanced typesetting : Enabled
- X-Ray : Not Enabled
- Word Wise : Enabled
- Print length : 450 pages
- Page numbers source ISBN : 0470481544
- Best Sellers Rank: 348,011 in Kindle Store (See Top 100 in Kindle Store)
- Customer Reviews:
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This book, his first, chronicles his 5 year battle against Allied Capital, a significant business development corporation that invests in small, mostly private businesses. In 2002 as part of normal research into potential investment opportunities, Einhorn uncovered serious flaws in Allied's accounting proceedures. He came across many examples of the valuation of certain assets held by Allied, in the accounts of the company at substantially above the quoted market prices and write-downs were only recorded when it determined that money would be permanently lost thus presenting a deliberately erroneous (some might allege fraudulent) picture to shareholders and potential investors. Guessing that when the truth was out, Allied would record losses resulting in a possible big fall in its share price, Greenlight Capital went short on Allied's stock.
When Einhorn first asked Allied to explain the incorrect overstated treatment of assets in its balance sheet, it immediately went on the offensive and Einhorn was personally vilified by senior Allied executives spearheaded by the CEO and COO. These personal attacks intensified over a number of years and included (and later admitted by Allied) an attempt to steal his phone records as well as alleged external pressure which resulted in his wife losing her job at Barrons.
These unwarranted attacks only seemed to make Einhorn even more determined to pursue his quest and with other'whistleblowers' that came forward with further disturbing information of malpractices, presented his irrefutable findings to the Small Business Agency and the Securities Exchange Commission, the two regulatory authorities responsible to the public for the proper running of Allied. To say their response was enthusiastic, diligent or grateful was a monster over-statement and was very reminiscent of the limp-wristed, 'cold-shoulder' reaction that Harry Markopolos (No One Would Listen) got when he blew the whistle on Madoff's Ponzi Scheme - several years before Madoff walked into a police station and voluntarily confessed. The sluggish activity in listening to Markopolo's well evidenced submissions resulted in Investors losing a further estimated $40 billion.
This book is a tribute to the single-minded determination of the 'small man' against the Goliathesque federal regulatory authorities - not that David Einhorn is lacking in stature, he and those that worked with him are excellent examples of true grit and determination. Before reading this book I was very doubtful of the ethics of short selling, but now I am much less so, which is indeed a compliment to David Einhorn's candour and fairness.
A unique book and I look forward to his next book.
Nonetheless, this is a worthwhile read, and it is rather troubling to think about how many of these "rogue" companies are getting off scott-free for each one that is finally caught out.
the book itslef centres on david einhorn - who at the value investors congress (back at the beginning of the naughties) was asked to give a speech and give the audience some advice on investing. at the event he told the audience to short a company called allied capital (a company that acts as a lending arm to small businesses) - the reason was they weren't using standard gaap accounting principals (so their books were incredibly difficult to decipher) they were making bad loans to companies, and they were hiding the losses in their books where very few could question their decisions. the book tells the 5 year plus battle which took place.
first of all they tried to damage his name; stating that he was only a short trader who was trying to earn a few bucks on their share price fluctuations, they then got his wife fired from her job, they also stole his phone records. in this time the borad of directors did everything they could publically to try and hide their losses (through enron type "raptor" companies - smaller companies created to hide the losses of the bigger company.) this is only half the story...
what's more worrying is how the american government (who ultimately insured the losses allied capital were making - which was passed to the average american tax payer...) did everything they could to hide the losses as well, they also refused to listen to einhorn when he complained through the sec channels - but they also allowed them to carry on instead of intervene! why did the government turn a blind eye? the reason was that allied capital's board of directors consistently made contributions to congress - tuly frightening that a company can create billion dollar losses and get away with it because of a few cents to would be presidents...
the ending of the book is well known; allied capital went under but what is also interesting was theat einhorn told the value investing congress a few years later to short lehman brothers before the sub prime mortgage fiasco. so the reader gets 2 tales for the price of one, learns how einhorn makes his investments (not just his shorts), the investment mistakes he makes as well and gives a worrying insight to a badly run american economy. a really good book...
Straight off the bat it becomes clear that Einhorn is intelligent and talented at his job. Despite being written by a hedge fund manager, 'Fooling Some...' reads well and the story unfolds at a pace neither too fast causing a sense of overwhelm, nor too slowly leading you to wonder when the hell it gets started.
It could easily pass as a fiction as the events come across as so outlandish, yet Einhorn leads you through the proceedings in a friendly and matter-of-fact way. Some passages come across as dispassionate or 'cold' and, personally, this adds to the narrative because it's how I imagine Einhorn to be if you sat down and he told you the story in person. He wouldn't be animated or outraged at management's actions, he'd just tell you what he did, Allied's reactions and then proceed to justify why he went short. This built the excitement.
The 'finance' is only 1/2 the story here, so this can be enjoyed by a die-hard finance nerd interested in forensic accounting, through to the casual stock market enthusiast who likes to watch a bit of Bloomberg every now and then. After I finished, my grandfather (in his 80s) borrowed it and raced through.
Einhorn is a perfect guide through a scandalous story; by the end of the book you'll be rooting for his corner and you'll be only too tempted to re-read it.
Strongly recommended to anyone, not just those with a vested interest in finance.