I am finishing Andrew Ross Sorkin’s book, “Too Big to Fail,” touted as the “inside story of how Wall Street and Washington fought to save the financial system … and themselves.”
I almost decided to skip reading the book. I thought that it would be informative, but I also had lived through those times personally, professionally and through the eyes of my clients. The financial crisis of 2008 was a historical period and one that I hope we don’t forget for generations.
Nevertheless, it was a painful time for the country and not that much fun to revisit. Then my niece, Kirk, who is a former editor for a major publishing company and is not easily impressed by the written word, asked if I had read the book. I said no and she encouraged me to read it. It was well-written and read like a novel, even though the facts were backed up by 42 pages of notes, sources and bibliography.
I decided to read the book because I did not want to disappoint my niece and, more than that, I respect her opinion. I am glad I read it because it was a good choice. I thought that I knew much of the inside workings of the financial crisis of 2008, but there was so much going on behind the scenes that was truly amazing even for those of us who live in this world every day.
The big picture view of what needed to be done ruled in the end. From the leaders of Wall Street, the White House, the Treasury, the Fed and to Congress, this country put aside its myriad points of view, philosophical differences and basic dislike for the other side and did what it felt it had to do to keep this country afloat.
It was impressive, it was reassuring and it scared the heck out of me. Sorkin’s book will show you that no matter how closely you followed the events in September of 2008 that led to the demise of Lehman Bros. and changed the landscape of the financial industry for the foreseeable future, you couldn’t have had a clue of what was really going on behind the scenes.
I remember when we started the second war with Iraq and people would ask what I thought about the U.S. going to war. My response was, “I can’t really tell you what I think because I don’t have the information the president has, and if I did, my view might be much different.”
Taking hard stands on subjects where you have little real information can get you in a lot of trouble.
Long ago I decided to not get sucked in by the white noise of the Wall Street press. I listen to CNBC and Bloomberg for the facts that they give out, but I try to be very selective of the advice that is given out hour after hour by those that say they know more than we do.
This book makes the point clear that even those who claim to be on the inside had very little understanding of what was going on behind the scenes in Washington and on Wall Street. What I have found is that successful investing for the long term requires an understanding of the history of the financial markets and how they have reacted at certain times.
Seeing the big picture and understanding why markets do what they do is within your reach. Combining that understanding with a portfolio that is diversified well enough to take away security risk and manager risk will get your portfolio a long way down the road to whatever goals you have.
And if you ever thought that you had the inside track on what is going on in the financial world, reading “Too Big to Fail” ought to bring you back to reality pretty quickly.
Scott Reed, CIMA, AIFA, is CEO of Hardy Reed Capital Advisors in Tupelo.