I have yet another shameful confession to make.
I am fascinated by stock market scandals and calamities. Do not get me wrong – I do feel bad for the people who suffer losses due to these events. Sadly it is usually the employees and small investors that suffer most, but as the scandals are unfolding it can be hard to look away.
What I find very interesting is that some companies pulled off these great shams in full sight of the analysts, investors and regulators. When the postmortem is performed it becomes painfully obvious that the signs and clues were there all along, but for whatever reason they were missed.
Just this week, a new calamity started to unfold. An organization calling themselves The Trinity Research Group Released a 121-page report alleging that Chinese Company 21Vianet Group described as “the largest carrier-neutral Internet data center services provider in China” is a Ponzi scheme (their words not mine). The report can be found at the Trinity Research Group (site not reachable when checked September 2015 – Sorry!) website if you are interested in perusing it yourself and it is amusing. The company denies the report and the story is still developing. I will be watching it closely, and if the company is “false” I am going to bet that some of the analyst and investors will continue to stand behind it until it turns to dust. Denial is a very powerful defence mechanism.
It raises the question though, do investors (and analysts and funds for that matter) know what they are investing in? Do they know who is running the company and what their track record is? Do the financial statements and filings make sense? Taking a quick look at the company filings and googling some of the key information can tell you a lot. I wrote an article about researching penny stocks — a bit tongue in cheek — but there is some truth to it. I have found some interesting, scratch your head information about companies just by doing a web search. If you are investing in individual companies, you might want to try it just for fun.
Which brings me to some of my favorite reads about stock market shenanigans. If you are interested in the dark side of high finance, like me – I promise you will enjoy them. Some of them may be out of print, but used copies may be available or you can pick up a copy at your local library.
In no particular order and littered with Amazon affiliate links for your convenience:
High Finance Scandals
Anatomy of Greed: Telling the Unshredded Truth from Inside Enron
This book made me laugh out loud. If you want to understand the experience of the front-line staff as the company they work for implodes around them, Brian Cruver has done a great job of capturing it. Life inside the “crooked E” was truly a farce.
Michael Lewis does a remarkable job of showing us the origins of the great financial crisis and the disease that was the sub prime mortgage market. We cannot help but root for the underdogs that uncovered some of the irregularities, bet against it and waited for it to disintegrate and waited some more. Absurdity at its finest. If you enjoy this one, you might also like Liar’s Poker, a behind the scenes look at his time as a bond salesman. A great book for those that fantasize about a career in high finance.
Please take your blood pressure medication before you start reading this book and don’t say I didn’t warn you. This one might make your blood boil. Bruce Livesey covers a smorgasbord of scams, frauds, and people behaving badly. Everything from Global Crossing to Nortel and the apparent lack of oversight and repercussions for those involved.
What if one day all your money was gone? It happened to Geneen Roth, a successful author and speaker and Bernie Madoff victim. What do you do when you learn ALL your savings are gone? Go shopping. This is a first hand of how the author was forced to come to terms with her relationship with money after losing it all. This book is written from a woman’s point of view and I believe it will appeal more to a female audience.
Happy Reading! I wonder if there will be a book about 21Vianet added to this list one day?