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The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market
As stock prices and investor confidence have collapsed in the wake of Enron, WorldCom, and the dot-com crash, people want to know how this happened and how to make sense of the uncertain times to come.
Into the breach comes one of Wall Street's legendary investors, Leon Levy, to explain why the market so often confounds us, and why those who ought to understand it tend to get chewed up and spat out. Levy, who pioneered many of the innovations and investment instruments that we now take for granted, has prospered in every market for the past fifty years, particularly in today's bear market. In The Mind of Wall Street he recounts stories of his successes and failures to illustrate how investor psychology and willful self-deception so often play critical roles in the process. Like his peers George Soros and Warren Buffett, Levy takes a long and broad view of the rhythms of the markets and the economy. He also offers a provocative analysis of the spectacular Internet bubble, showing that the market has not yet completely recovered from its bout of "irrational exuberance."
The Mind of Wall Street is essential reading for all of us, whether we are active traders or simply modest contributors to our 401(k) plans, as volatile and unnerving markets come to define so much of our net worth.
Into the breach comes one of Wall Street's legendary investors, Leon Levy, to explain why the market so often confounds us, and why those who ought to understand it tend to get chewed up and spat out. Levy, who pioneered many of the innovations and investment instruments that we now take for granted, has prospered in every market for the past fifty years, particularly in today's bear market. In The Mind of Wall Street he recounts stories of his successes and failures to illustrate how investor psychology and willful self-deception so often play critical roles in the process. Like his peers George Soros and Warren Buffett, Levy takes a long and broad view of the rhythms of the markets and the economy. He also offers a provocative analysis of the spectacular Internet bubble, showing that the market has not yet completely recovered from its bout of "irrational exuberance."
The Mind of Wall Street is essential reading for all of us, whether we are active traders or simply modest contributors to our 401(k) plans, as volatile and unnerving markets come to define so much of our net worth.
240 pages, Paperback
First published November 1, 2002
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Displaying 1 - 10 of 10 reviews
August 13, 2018
The market is driven by psychological factors just as much as by economic (rational) factors. Probably more irrational than rational.
For me that is the only takeaway other than a pretty interesting autobiography.
For me that is the only takeaway other than a pretty interesting autobiography.
November 13, 2019
如果你打開這本書是為了探尋「股票為什麼上漲」之謎，那八成要大失所望。
原文書名是 "The Mind of Wall Street" ，翻成「華爾街思維」興許會比較貼切，雖說這樣的書名要是真的放在書店平台上，八成會被淹沒，但我還是沒辦法喜歡這種亂取名字、誤導讀者的書。
整本書可說是作者 Leon Levy 個人的自傳， Levy 是共同基金的管理者，焦點主要都放在他在華爾街所做過的幾個大案子，講述他是如何從從垃圾裡找鑽石，買下一家股價被低估的公司，然後從中去套利，問題是即便你有辦法看出背後的隱藏資產，然而又有多少人能有這樣的資金規模有辦法買下一間公司？如果你是基金經理人或是背後有金主的話，那些或許是寶，但是對一般的小額投資人而言，幾乎可以說沒什麼實用性。如今來看，這樣的作法在美國已經是司空見慣的了，可以說並不新鮮，兼且其在道德上還是有一些疑慮存在的。只是這樣的操作在台灣的環境究竟適不適用，我想可能都還得打上一個大問號。
此外，故事的背景是發生在鐵路時代的美國，這似乎不是我們所熟知的時空背景，加上裡面實在談了太多股票市場外頭的事情，對我來說，有點空蕩蕩、摸不著頭緒的感覺。而他在裡面所談到的操作技巧迂迂迴迴的教人摸不清，而不是像《股票作手回憶錄》那樣直接了當的告訴你，倒像是怕人家知道他是怎麼操作似的， Barron's 雜誌總編輯在推薦序中說道：「最不可原諒的是那些身價上億的富有投資者所撰寫的爛書，這些書鉅細靡遺地描述他們的浮華成就和無趣思想。」某種程度，我懷疑那根本是指著桑樹在罵槐樹。如果對 Leon Levy 一生所做過的投資感興趣的話，那就是這本書了，若只是想了解「股票為什麼上漲」，勸你還是換本書吧！
December 17, 2024
Once in a blue moon, there’d be an incredible book with low ratings on Goodreads. And this book is one of them.
The author is a co-founder of Oppenheimers and has endured several market cycles. The author passed away in 2003, that is when the book mostly ended. The author envisioned going forward, the market will become more rational - as much as I believe the author is brilliant, the irrationality of the market will always prevail. Which, oddly enough, is the main theme of the book.
Here are few interesting takeaways I got from the book:
1) Diversify knowledge
Knowing just one discipline a bit too well will develop tunnel vision. The author believes that the acquisition of various disciplines are vital to understanding the border picture. Such as in the field of economics, he wrote that:
(With Kahneman winning the 2002 Nobel Prize, the field of economics is at least changing a little bit - still an useless subject but nonetheless they know they’re useless just a tiny bit.)
2) Future is unpredictable, and it’s pointless to predict
When investing, as long as the fundamental intrinsic value is undervalued, it’s pointless to predict what and when will happen next. Because there are too many unknown unknowns. In the author’s case, his investment in a near-bankrupted railroad company yielded 100 times in 10 years, not because he knew what would’ve happened to the company (change of regulation making the company a hot acquisition target, yielding significant return). He could’ve never predicted it anyways.
With many things in life, you simply would never know what will happen in the future. But with margin of safety, you simply have better cushion than otherwise.
3) On the side with the government
Just like the old market saying, “never fight the FED”. The author firmly believes that it’s always vital to be on the side of the government. This not just has to do with government regulation - never fight against their regulation. It also has to do with their tax law - doesn’t matter intended or unintended laws. Laws, once enacted, rarely get changed. It’s fruitless to levy on emotional tolls and rationality for what “ought to happen”, rather it’s much better to simply go with the flow.
4) On bankruptcy procedures: it might be fruitful to look into major bond holder’s intentions
Bankruptcy procedures could easily be time consuming as well as money consuming. However, if the bondholder notices that the other majority bond holder alliances have a great track record of recovery and/or value add, it might be rather fruitful to jump on their bandwagon and go along with their ride (since the bankruptcy judge has to sign on to any action).
5) Be patient
The author wrote:
The market is not efficient (more on that later). Which means that even if a said investment (especially if the security is not popular) has significant margin of safety (the author also noted that bankruptcy or near bankrupt securities tend to undervalue the security just investors are often obligated, or afraid to tackle bankruptcies). This echoed Peter Lynch’s observations too, that he often found his securities did not move for years - even half a decade - before their eventual ascend.
6) Efficient market theory is full of crap
Commenting on the LTCM collapse, the author wrote:
The author believed that the collapse of LTCM has to do with their fundamental thinking of the market being always perfectly rational and efficient. And one security would have never affected other securities that have nothing to do with each other. But time and time again we see that the world is vastly more connected, in addition, humans are vastly less rational than we’d think.
Some other takeaways
- In August 1998, spread between Treasury and riskier bonds narrows even though the fundamentals don’t align - eventually market did correct itself
- The author noted that even he, too, was charmed by Enron’s CFO (and he lost money on the deal he did with Enron’s CFO). Which reminds me of another Peter Lynch’s observation, which is that staying close to management is not beneficial. If anything, it could derail one’s rational thinking and make one jump onto the management’s bandwagon. It’s much better to observe things from a distance, and use cold GAAP metrics to evaluate one company against another (when we encounter humans, we can’t help ourselves but try to compare the charm of one execs against another. But charm can’t make money.)
- During good times, people will always use accounting gimmicks to tell you pigs can fly. Stay away from the fad metrics
The author is a co-founder of Oppenheimers and has endured several market cycles. The author passed away in 2003, that is when the book mostly ended. The author envisioned going forward, the market will become more rational - as much as I believe the author is brilliant, the irrationality of the market will always prevail. Which, oddly enough, is the main theme of the book.
Here are few interesting takeaways I got from the book:
1) Diversify knowledge
Knowing just one discipline a bit too well will develop tunnel vision. The author believes that the acquisition of various disciplines are vital to understanding the border picture. Such as in the field of economics, he wrote that:
It also helps to have a broader perspective. Indeed, I think that one of the greatest mistakes of economics was to separate itself from other disciplines.
(With Kahneman winning the 2002 Nobel Prize, the field of economics is at least changing a little bit - still an useless subject but nonetheless they know they’re useless just a tiny bit.)
2) Future is unpredictable, and it’s pointless to predict
When investing, as long as the fundamental intrinsic value is undervalued, it’s pointless to predict what and when will happen next. Because there are too many unknown unknowns. In the author’s case, his investment in a near-bankrupted railroad company yielded 100 times in 10 years, not because he knew what would’ve happened to the company (change of regulation making the company a hot acquisition target, yielding significant return). He could’ve never predicted it anyways.
With many things in life, you simply would never know what will happen in the future. But with margin of safety, you simply have better cushion than otherwise.
3) On the side with the government
Just like the old market saying, “never fight the FED”. The author firmly believes that it’s always vital to be on the side of the government. This not just has to do with government regulation - never fight against their regulation. It also has to do with their tax law - doesn’t matter intended or unintended laws. Laws, once enacted, rarely get changed. It’s fruitless to levy on emotional tolls and rationality for what “ought to happen”, rather it’s much better to simply go with the flow.
4) On bankruptcy procedures: it might be fruitful to look into major bond holder’s intentions
Bankruptcy procedures could easily be time consuming as well as money consuming. However, if the bondholder notices that the other majority bond holder alliances have a great track record of recovery and/or value add, it might be rather fruitful to jump on their bandwagon and go along with their ride (since the bankruptcy judge has to sign on to any action).
5) Be patient
The author wrote:
... time frame of an investment. It was several years before the bonds and stock moved at all significantly, which means that for a while the investment was a drag on our investors’ return on capital.
The market is not efficient (more on that later). Which means that even if a said investment (especially if the security is not popular) has significant margin of safety (the author also noted that bankruptcy or near bankrupt securities tend to undervalue the security just investors are often obligated, or afraid to tackle bankruptcies). This echoed Peter Lynch’s observations too, that he often found his securities did not move for years - even half a decade - before their eventual ascend.
6) Efficient market theory is full of crap
Commenting on the LTCM collapse, the author wrote:
What can be made of this chain of events? First and foremost, never have more than one Nobel laureate economist as a partner in a hedge fund. LTCM had two. Having had one Nobel prize winner as a limited partner over the years, I can say that had our firm followed his advice, we too might have lost a lot of money.
The author believed that the collapse of LTCM has to do with their fundamental thinking of the market being always perfectly rational and efficient. And one security would have never affected other securities that have nothing to do with each other. But time and time again we see that the world is vastly more connected, in addition, humans are vastly less rational than we’d think.
Some other takeaways
- In August 1998, spread between Treasury and riskier bonds narrows even though the fundamentals don’t align - eventually market did correct itself
- The author noted that even he, too, was charmed by Enron’s CFO (and he lost money on the deal he did with Enron’s CFO). Which reminds me of another Peter Lynch’s observation, which is that staying close to management is not beneficial. If anything, it could derail one’s rational thinking and make one jump onto the management’s bandwagon. It’s much better to observe things from a distance, and use cold GAAP metrics to evaluate one company against another (when we encounter humans, we can’t help ourselves but try to compare the charm of one execs against another. But charm can’t make money.)
- During good times, people will always use accounting gimmicks to tell you pigs can fly. Stay away from the fad metrics
August 19, 2020
The many similarities between other market cycles are very striking. As of now, the forward P/E for the S&P 500, despite the pandemic, is of around 25x. The debt levels, both in the private and public sectors, are extraordinarily large all over the developed world.
A few phrases have particularly stood out for me:
*On market cycles*
"Therein lies one of the remarkable similarities between the 1920s and the 1990s: Then, as now, capital spending fueled profits and growth, and then, as now, investors and companies took on more and more debt, believing that this growth would continue forever because the fundamental rules had changed".
"As good times roll along, people lose sight of risk (...) Eventually, these excesses lead to a point where people can't meet their obligations, and the bad times begin".
*On nationalism*
"Nationalism is the measles of civilization" (a quote of Albert Einstein, apparently)
*On investor fads*
"The uranium bubble serves as a reminder of how an infatuation with new technologies can eclipse the reasoning ability of the most sober investors. This bubble, a minor star compared with the supernova of the Internet bubble, grew from America's short-lived love affair with the nuclear age"
*On risk-taking*
"If you want to follow a stock, the best way is to take a small position; practitioners always outperform professors. You must put yourself on the line".
A few phrases have particularly stood out for me:
*On market cycles*
"Therein lies one of the remarkable similarities between the 1920s and the 1990s: Then, as now, capital spending fueled profits and growth, and then, as now, investors and companies took on more and more debt, believing that this growth would continue forever because the fundamental rules had changed".
"As good times roll along, people lose sight of risk (...) Eventually, these excesses lead to a point where people can't meet their obligations, and the bad times begin".
*On nationalism*
"Nationalism is the measles of civilization" (a quote of Albert Einstein, apparently)
*On investor fads*
"The uranium bubble serves as a reminder of how an infatuation with new technologies can eclipse the reasoning ability of the most sober investors. This bubble, a minor star compared with the supernova of the Internet bubble, grew from America's short-lived love affair with the nuclear age"
*On risk-taking*
"If you want to follow a stock, the best way is to take a small position; practitioners always outperform professors. You must put yourself on the line".
August 30, 2020
Levy comes across as a likeable chap, with a deep instinctive understanding of how markets work.
He has some amusing anecdotes about some larger-than-life characters he encountered in a long career on Wall Street, which he mixes with comments about how things look at the turning point of economic cycles.
He finished this book in 2001, just after the Dot Com bust, which he is very good on. He had a great track record, in terms of making money but admits that his forecasting record was patchy, making money because he had more leverage when he was right than when he was wrong.
Books on the sociology of finance tend to be entirely negative or entirely positive. Levy describes developments which make Main Street better off, and quite a few which make it worse off, making this an unusually balanced account.
Oddly enough, Levy was quite wrong in his predictions about what would follow 2001, showing that with all his experience, and theoretical support from his brother's economic research, the best informed insiders can still be very wrong in their forecasts.
I enjoyed reading this and would recommend it as an introduction for a young person who wonders what the financial sector is really like to work in. It refers to a long-gone period, of course, but the principles of raising finance have not changed that much, fundamentally.
He has some amusing anecdotes about some larger-than-life characters he encountered in a long career on Wall Street, which he mixes with comments about how things look at the turning point of economic cycles.
He finished this book in 2001, just after the Dot Com bust, which he is very good on. He had a great track record, in terms of making money but admits that his forecasting record was patchy, making money because he had more leverage when he was right than when he was wrong.
Books on the sociology of finance tend to be entirely negative or entirely positive. Levy describes developments which make Main Street better off, and quite a few which make it worse off, making this an unusually balanced account.
Oddly enough, Levy was quite wrong in his predictions about what would follow 2001, showing that with all his experience, and theoretical support from his brother's economic research, the best informed insiders can still be very wrong in their forecasts.
I enjoyed reading this and would recommend it as an introduction for a young person who wonders what the financial sector is really like to work in. It refers to a long-gone period, of course, but the principles of raising finance have not changed that much, fundamentally.
July 25, 2021
Interesting book with chronologically ordered anecdotes about his life thrown in. It’s a little messy, but I think the lessons are pretty clear:
1. The markets do crazy things and are largely influenced by psychology.
2. Margin can cause a lot of problems.
3. It’s hard to read crooks. They are experts at manipulating people and can seem like good people before taking your money.
4. It’s hard to forecast the economy or great companies. As of 2002 he said there would be a prolonged recession which never happened under his parameters. He also said Amazon wouldn’t amount to anything.
It’s a fun read but there aren’t many new insights I gathered from it.
1. The markets do crazy things and are largely influenced by psychology.
2. Margin can cause a lot of problems.
3. It’s hard to read crooks. They are experts at manipulating people and can seem like good people before taking your money.
4. It’s hard to forecast the economy or great companies. As of 2002 he said there would be a prolonged recession which never happened under his parameters. He also said Amazon wouldn’t amount to anything.
It’s a fun read but there aren’t many new insights I gathered from it.
This entire review has been hidden because of spoilers.
June 22, 2020
I got this book from my father who got this at a finance convention. The book wasn’t too complex of a read. I took this book as more of a autobiography then a practical book about the psychology of Wall Street. The book wasn’t stellar but it also was not bad. There were a few interesting parts mixed in with boring ramblings. I wouldn’t recommend this book but at the same time there is nothing negative about reading it. If you have access to this book and have time, read it. Otherwise I wouldn’t even bother.
April 9, 2023
I really enjoyed this book. As a reader of 50+ books either directly or peripherally related to investing, I carefully consider whether another book in the genre will be worth my time, particularly one that is -20 years old. But, I had heard good things about this book, an under-the-radar favorite of industry insiders and perhaps, minor classic. A memoir imbued with Leon Levy’s investment philosophy, The Mind of Wall Street was a terrific read. As old-timers from the hedge fund industry know, Levy and his partner Jack Nash were legends and it was fun to get to know their backstory.
October 8, 2017
Wonderful. Leon Levy describes some of the developments in the markets during his career with incisive wit and demonstrates a remarkable knack of reducing the complex to the simple. Not a how to guide for investing, but a pithy reminder to experienced investors of some of the recurring themes in markets and investors' psychology.
April 20, 2015
A bit hard going - but I enjoyed it - once I got into it, that is!
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