Category: Books

Books that we read and our thoughts about them.

Book Review: The Only Game in Town

The Only Game in Town (Amazon,) walks us through how Central Banks picked up the slack when elected governments dropped the ball after the global financial crisis. Excerpts are here.


Central Banks acted as drug dealers when both banks and governments binged on credit. Greenspan and his Fed were so Randian that they turned a blind eye toward the principal-agent and moral-hazard problems that their endless bailouts and light-tough regulation was stoking. When the system imploded, their actions prevented a much-need rewrite of the status quo. We now have a world economy that is even more deeply hooked on easy credit, thanks to Central Bank interventions. Central Banks continue to enable governments to sweep deep-rooted problems under the rug. They do not deserve credit for “saving” the global economy that they collectively pushed over the cliff.

“I tried to drown my sorrows, but the bastards learned how to swim…” ~ Frida

Book Review: In-N-Out Burger

In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules (Amazon,) lays out the inside story of the family behind the California-based hamburger chain with a huge cult following. Excerpts are here.


Father starts a business. Son expands it. Grandson destroys it. It is an extremely common story. From the book:

According to the Family Business Forum at the University of North Carolina, only 30 percent of all family businesses are successfully transferred to the second generation, while only 12 percent make it to the third. After that, less than 3 percent make a successful transition to the fourth generation.

The saving grace of the In-N-Out Burger story is that they did not IPO or take in outside capital. Unlike so many of family owned Indian businesses that plough through minority shareholders (United Breweries, the Tata conglomerate, the Congress Party, etc…)

Scions of successful business family should be allowed to cash their trust fund checks while sipping cocktails in the Côte d’Azur. Either leave the business to be run by professions or sell out. Life is too short to be spent in a golden cage.

Book Review: The Dao of Capital

The Dao of Capital: Austrian Investing in a Distorted World (Amazon,) gives an overview of Austrian economics and discusses how one can use that to invest in the markets. Excerpts are here.


The Austrian school of economics is very similar to Ayn Rand’s laissez-faire version of capitalism. Both do not address how the less fortunate among us are supposed to survive in their version of the world. Neither do they discuss the role of policemen in society and how they get paid.

Leaving Rand aside, the biggest beef that the Austrian school has with the current version of capitalism (based on Keynesian economics) is on the role of the central bank. They don’t see a need for it because they believe that interest rates should be set by the market, not by a top-down bureaucracy. Here, I agree with the author that the Austrian school hasn’t been able to garner enough resources to push the philosophy forward in academia. Their philosophy seems frozen in time – stuck in what Mises though in the 40’s/50’s.

Keynesian economics has had the (mis?)fortune of being widely adopted. Anything that is deployed in the real world will necessarily be modified (bastardized?) to fit ground realities. This allows people in the sidelines to profess “purity” while criticizing the mainstream.

The author then proceeds to illustrate how Austrian economic philosophy can be applied to investing, mainly along:

  1. Credit cycles
  2. Buying OTM puts
  3. Value

None of these are particularly “Austrian.” And, I call bull-shit on buying OTM puts.

First, the author’s back-test over 100 years is meaningless. There was no practical way to implement this strategy even 10 years ago, leave alone 100. Until recently, the brokerage along would have eaten away whatever profits one might have had.

Second, it is a costly bet to go long volatility even if the world does blow up. In the low volatility decile, in order to break even on a protective put strategy with 5% out-of-the-money options, a 1987-type black swan would have to occur every 21 years. (AA)

Overall, the book was useful in filling some gaps in my knowledge of economic history. It also highlighted the need to formally keep track of the credit cycle in major economies and our own.