Reviews for Fundamentals of Corporate Finance (Financial Management FE 323)

The average rating for Fundamentals of Corporate Finance (Financial Management FE 323) based on 2 reviews is 4.5 stars.

Review # 1 was written on 2013-06-03 00:00:00 Drahoslav Reznicek I gave this book five stars, not because it's a brilliant piece of literature, but because everyone should read it. This slim tome was just what I needed in seeking behind-the-scenes info on stock trading. Besides explaining halfway comprehensibly what derivatives bloody well ARE, Frank Partnoy shows exactly how junk bonds are designed (you take some bad-risk instrument and give it a cool-sounding name), given AAA ratings (you pay the ratings agencies), and sold (call your most unsavvy clients and talk meaningless jargon really, really fast). Most illuminating, though, is the insight he offers into the world view that pervades the industry: pure hostility toward you and me. If that last statement sounds harsh or paranoid, consider the conversation Partnoy recounts with another trader in his early days with Morgan Stanley (once the industry's bastion of integrity). The guy described how he did exactly the above with a corporate client who "obviously didn't understand" that he had bought $85 million worth of an extremely high-risk bond, instead of the safe, government agency bond the agent had implied. When the bond became nearly worthless within a few weeks and the client called in a panic, the agent cooly told him he had simply "made a big foreign exchange bet, and you lost." As head of an insurance company, which isn't even allowed to invest in foreign exchange (something the agent undoubtedly knew), the client was dumbfounded. The agent, who of course had made a huge commission on the deal, howled with laughter as he related this story to Partnoy. Then he introduced Partnoy to an expression traders commonly used when describing how they conned uninformed clients this way. "Frank," he said, "I ripped his face off." It would seem we are not, in fact, in good hands with Allstate -- or with pension funds, unions, municipalities, state or even national governments (can you say Greece?), and certainly not with the investment banks who "help" these entities to invest their funds judiciously. But, according to Partnoy, we can't point the finger solely at institutional sleaze. When the first edition of this book came out in 1997, Partnoy discovered that betting on public reaction was riskier than any derivative. "Derivatives outsiders howled they were sick, sick, sick," he writes, "not about the excesses of the derivatives market -- but about not joining up sooner." The fictitional Larsen E. Whipsnade said that you can't cheat an honest man. I don't put the blame for the 2008 financial meltdown on consumers, as so many mortage companies, pundits, and politicians rushed to do. But I don't absolve "Joe Sixpack," either. Wall Street is guilty of extreme fraud and thievery, and it's been going on for 30 years, but I seriously doubt it could have reached this level if not for the larceny that resides, cherished and safe, in every person's heart. Bottom line lesson from this book: Do NOT expect good faith efforts of financial reform from decision-makers -- demand them. Then do your part: Stop expecting your conservative investments to yield too-good-to-be-true returns.

Review # 2 was written on 2013-10-12 00:00:00 David Tereschuck As a young salesman at Morgan Stanley in 1994, Frank Partnoy had a ringside seat to some big derivatives deals, but not the ones that made the news for being such disasters: not the bankruptcy of Orange County, California, helped along by Merrill Lynch, nor Gibson Greetings, suckered by Bankers Trust, or Procter & Gamble, also Bankers Trust, or Barings Bank, brought down by rogue trader Nick Leeson. He discusses those, as well as the ones Morgan Stanley worked on. His tone is cocky and snarky and while I have no doubt that many traders and salesmen were disgusting, reprehensible assholes, engaging in locker room antics, as he says, the book also seems rife with caricatures and exaggerations, somewhat like Liar's Poker. The cocky tone also struck me as odd given the rest of his resume; deciding the life of an asshole was not for him, he left Wall Street after quite a brief stint and founded the Center on Corporate and Securities Law at the University of San Diego. His discussions of derivatives deals are actually fairly detailed and complex. I wouldn't recommend this to someone looking for a light read. The 2009 edition has an afterward which does a good job of explaining collateralized debt obligations and credit default swaps and how they acted as financial WMDs in 2007-08.