First I read When Genius Failed which was about the rise and fall of Long-Term Capital Management - a hedge fund. Then I read a book about the scandalous rise and fall of Enron called The Smartest Guys in the Room. And now I have just finished this book about a business development company (BDC) call Allied Capital. This was just not any BDC, but the second largest in the country.

The things I have read in this book are truly incredible. Many times I just had to shake my head in disbelief. This is a book about a company that made, and continues to make it appears, unscrupulous loans to businesses, if that's what you can call some of the entities they loaned money to. This book details the corruption that took place in this business and its controlled company BLX. We also learn about the inaction at the Small Business Administration (SBA), and USDA loan program in the light of serious problems with the loans they backed. What is really sad about this is the hundreds of millions of dollars that these government organizations paid out, and when their reserves are exhausted, tax payer money foots the bill.

It appears that David Einhorn has spent considerable time, effort and money to bring this information to the appropriate authorities, but the result reminds me of the title of Part Three of the book: "Would Somebody, Anybody, Wake Up?" As the book's jacket cover stated, "This revealing book shows the failings of Wall Street: its investment banks, analysts, journalists, and especially our government regulators."

It was a very interesting read, and I would recommend the book.

I am one of David's investors. First, let me state he is one of the kindest, most gentle, not to mention smartest people, I have ever met. He is extremely charitable, and serves on the board of directors of the Robin Hood Foundation, a New York based charity started by Hedge Fund managers many years ago. Robin Hood has raised hundreds of millions to help inner city families and children. They are currently building a new high school in Brooklyn.

David is basically a long investor, not a short selling rabble rousing activist. In order for a great manager like David Einhorn to go short, he has to find something really out of the ordinary. He stated during one of our partner dinners "he prefers not to be an activist investor because it involves so much work". This book proves that, and is a must read for all investors and anyone interested in politics, especially behind the scenes Washington.

If, like me, you read this book because you know about Einhorn's record, you will probably find the beginning parts about the founding of Greenlight and some of their successes most interesting. Not because it offers any particularly useful insight, just because it's a peek inside a successful fund.

The middle part of the book drags, because detailing the various accounting 'techniques' Allied uses, while necessary for completeness, gets repetitive. The last third of the book grabs your attention again when it takes its turn for the most appalling, with revelations about the endemic corruption at: the SEC, media, SBA, DOJ, Congress, Wall St, [insert your choice]. Allied's stock option conversion program was a nice finishing touch.

Sadly, I find it laughable that a hedge fund manager and 18th-in-the-world ranked poker player could be as naive as Einhorn presents himself in this book. His conclusions about the govt are vastly beyond the comprehension of the average human, and in many ways this confession has meant nothing. How many other little know three letter agencies are out there wasting taxpayer money? How many more will be launched in 2009?

Real eye opener...makes you question the value of your IRA / 401 K nest egg

Jim T.

I have not read an investment related book since Liar's Poker which I wanted to keep reading and finish in a single day. I liken this book to Michael Lewis' work only in that it will likely stand as equally as much of a "must read," however one important distinction should be made - this book dives much deeper into the actual investment premise and process of a position. It is just as much educational as it is truly entertaining. For anyone in the investment business, you will get something out of it above the inevitable a laugh or gasp at some of what went on at Allied Capital. I found myself exclaiming out loud that some of what went on was just too ridiculous to be true. Unfortunately it did indeed happen, and the book is full of supporting evidence. Further, it details a culture of inaction at regulators, which comes at the expense of taxpayers. The combination of dishonest management and lapses on the part of the watchdogs is enough to make anyone mad.

David's writing style and voice are excellent. The story told was exciting. I would recommend this book strongly to anyone who has ever looked at investing in a company in any capacity, especially those who have sat through the conference calls and taken management at face value. It inspires a healthy dose of skepticism which we should all have when we make investment choices, and as I see ALD indicated to open near to its lows seen since the Fall '07 credit crisis, it shows that real digging and sweating over research can result in picking the right names to be long or short in.

Fooling Some of the People All of the Time takes one on a remarkable journey through the failures of some of the financial institutions we rely upon. This is a wakeup call that now is the time to rejuvenate these agencies. While Enron spurred new laws, it turns out that enforcement of existing laws may be of greater significance. This book is both enjoyable and a must-read for all long and short investors. This is a great ride, and the story is not yet complete.

Einhorn's book is an excellent walk through investment analysis, critical thinking, and common sense. Whether you side with him or not, there is certainly much to be learned. That Einhorn released this book in the middle of the saga is a major plus. We can continue to follow the story in the news, on the message boards, and of course by watching ALD's stock price.

If you manage your own investments, and especially if you buy individual stocks, this book is a "must read" for you. It will open your eyes about the risks of owning individual company stocks. Few people have the ability to research a company the way the author's hedge fund can. Even with those resources Greenlight hasn't been able to force Allied Capital to come clean about their dishonest accounting practices. The only hope individual investors have is to stay clear of companies like this.

It would suffice that this book is well-written, engaging and informative, but it is more than that. It is an important book, for two reasons. First, it shows how much of an investment edge it can be to employ deep research and critical thought. The fact that many other investors continued to be fooled by the company even after Einhorn published his analysis may seem frustrating to the reader, but as an investor I view that reaction as confirmatory that there will always be lots of ways for independent, meticulous thinkers to make money. Second, the book demonstrates how difficult and lonely it can be to engage in activist investing, especially from the short side. Consistent with the story in this book, I have almost invariably found that the more correct the activist's views are, the more likely s/he will be subjected to ad hominem attacks; and that, when presented with cogent evidence of a serious problem, government officials either do nothing or protect the malefactor. Indeed, the business news of the last nine months is replete with examples of this. I am unaware of another book on investing that captures this second element. It is all the more commendable that Einhorn can tell this incredibly frustrating tale calmly, resisting the temptation to engage in histrionics or self-righteousness.

Virtually all of the current reviews accurately describe this book. The individual who pans it, declaring that Allied's long history of paying dividends invalidates Einhorn's thesis, either likely didn't actually read the book or doesn't understand the fact that the funds garnered from Allied's constant chain of secondary offerings have essentially been used to pay all those dividends through deceptive if not fraudulent accounting. This is the classic description of a Ponzi scheme.

One of the weaker points of the book as a complete report on the rationale for shorting ALD is that it is primarily an indictment of BLX, Allied's Small Business loan subsidiary. Since BLX is a minor (but hardly insignificant) portion of ALD's 'assets', the reader is left to guess at what the value of the rest of ALD's current portfolio may be. Based on this book though, one is almost forced to conclude that ALD is rotting from within.

Another conclusion that one takes away is that as always, when the government is subsidizing/guaranteeing anything (in this case small business loans through the SBA) it is inevitable that waste, abuse and outright fraud will result as the incentives to abuse the program are so much greater than the incentives to detect and prosecute the abusers and too many (bureaucrats, politicians and regulators) are dependent on the resulting stream of money that flows from these programs and their clients. Of course the taxpayer ends up holding the bag.

The audience for this book is probably quite limited as you need a fairly sophisticated financial background and some persistence to get through it, but I highly recommend it. Certainly every taxpayer and shareholder of Allied should (but likely won't) read it. Thank you Mr. Einhorn for bringing this story to light and for pledging your eventual profits (if any)from your ALD short to charity.

Virtually all of the current reviews accurately describe this book. The one person who pans it, declaring that Allied's long history of paying dividends invalidates Einhorn's thesis, either likely didn't actually read the book or doesn't understand the fact that the funds garnered from Allied's constant chain of secondary offerings can essentially be used to pay all those dividends through deceptive if not fraudulent accounting. This is the classic description of a Ponzi scheme.

One of the weaker points of the book as a complete report on the rationale for shorting ALD is that it is more of an indictment of BLX, Allied's Small Business loan subsidiary. Since BLX is a minor (but hardly insignificant) portion of ALD's 'assets', the reader is left to guess at what the value of the rest of ALD's current portfolio may be. Based on this book though, one is almost forced to conclude that ALD is rotting from within.

Another conclusion that one takes away is that as always, when the government is subsidizing/guaranteeing anything (in this case small business loans through the SBA) it is inevitable that waste, abuse and outright fraud will result as the incentives to abuse the program are so much greater than the incentives to detect and prosecute the abusers. Of course the taxpayer ends up holding the bag.

The audience for this book is probably quite limited as you need a fairly sophisticated financial background and some persistence to get through it, but I highly recommend it. Certainly every taxpayer and shareholder of Allied should (but likely won't) read it. Thank you Mr. Einhorn for bringing this story to light and for pledging your eventual profits (if any)from your ALD short to charity.

So few individuals think clearly on Wall Street that when one of them actually lays it out in a book as Einhorn has the effect is to give us valuable lessons in developing the clear thinking necessary to work through the sea of mediocrity on Wall Street with its multi-level hidden agenda and sales oriented analyses. I rate Einhorn a superior thinker and an excellent writer-a great combination.

The book is really close to being 2 or 3 books in one. Initially heard about the book in the WSJ, I pre-ordered it on Amazon and took a few weeks to read.
In the first part Mr. Einhorn writes several chapters aimed at a non-professional investor to build the background of how a hedge fund invests, building the reader's knowledge from zero to fluent enough to understand the book. There's a glossary in the back of the book to refer to if you forget any of the terms. In fact, later on Mr. Einhorn's open and full disclosure of his investing philosophy, technique, and results contrast with those of Allied Capital and its collection of LLCs.

The second part of the book builds from a small trickle to a river of fraud, and frankly this is the hardest part to get through. You're directed to watch Mr. Einhorn's speech on the web in order to understand a dissection of reactions that follow, and I admit that I felt as if I was reading a story from somebody who was picked on too much in the schoolyard and is taking revenge by writing a book. As I kept reading the chapters the story suddenly took me by surprise (around P.200 or so).

It then becomes a story of how, if you were to implement a business poorly and needed to keep it going no matter what, you would do whatever it took to keep paying a dividend to keep your stock from tanking. You might start by fibbing on the health of the business one year, sell healthy companies to hide your true results a few years later, and start directing campaign donations to the right parties a few years later. In for a penny, in for a pound. Mr. Einhorn didn't mention, but in years past I have read, that Enron kept going for so long because they did a good job spreading their money around to both the politicians and the local community. Mr. Einhorn does mention how much many parts of the US (Wall Street, the various parts of government, and mom-and-pop investors) want to continue the company so as not to lose whatever interest they have vested into the company or system.

In the end I feel educated about his hedge fund, I feel in over my head on how to value a company's investments if the company is similar to Allied Capital, I feel a bit angry on how narrow the scope and small the punishment delivered (but not surprised - I've seen how narrow the scope of investigations of companies are before), and I feel that Mr. Einhorn has, for lack of a more subtle way of putting it, wasted enough of his life worrying about this company. You're not going to get back the years you've spent. You should go on to enjoy something else in life (but I appreciate the sacrifice you made so I could read about this in a book).

I received this book around lunchtime and read it cover to cover by the end of the afternoon. It was a riveting read - I found myself shocked at the lengths a company management would go to discredit detailed research that pointed to both corporate deception and a tolerance of a culture of fraud, but more than anything disgusted by the laziness of the investigators who could have put a stop to this behavior. I am hopeful this important book makes a difference in both corporate governance and government oversight.

I just finished reading this book and can say it is one of the best books I've read in a while. Accounting rules are not perfect and can often distort economic reality. While the fundamental short thesis for Allied is simple (as most should be), the key issues are so much more profound. Perception versus reality. Allied used accounting rules to distort the economic reality of the business. The book examines the conflicts of interest within the capital markets and does not dismiss the actions are various participants, but tries to understand their rationale by examining incentives within the system. David Einhorn's book highlights the importance of a strong accounting background and the need to question so called "truths". The most disheartening outcome of the allied situation is that even though an investment thesis may prove to be correct, it does not necessarily mean you will get paid on the idea. Allied stock should have gone to $3 dollars and its CEO should have gone to jail. While the truth may not win in every situation, I think it does in the long run and his MBIA short is an example of that. We should all work towards being as diligent and as patient as David Einhorn is in every aspect of our lives.

I was lucky enough to get a hold of an advance copy of the book from Amazon. Couldn't put it down. Finished it and went out and bought one for everyone at our company. Then went and bought more over the weekend to hand out to folks. It is an absolutely terrific book, and thank you, David Einhorn, for writing it. I loved the first few chapters on Greenlight and was absolutely mesmerized by the rest. One of my colleagues has gotten about half way through and said he did not realize that folks could "not get it" when faced with compelling evidence. I told him to read on, and that his disbelief will get much worse. I think that it is a stunning example of the concept of cognitive dissonance (at best, and probably being very kind with that). Writing this book took a great deal of courage and I know I am a better investor for having read it.

Einhorn is not alone in believing that financial statements are sometimes a form of creative writing. But dividends are not; when a dividend check successfully clears, there can be absolutely no doubt that the money really was in the bank. And given that Allied Capital not only pays a hefty dividend but has also defended and increased its hefty dividend for more than four decades, it is simply silly to mount the kind of bear raids that Einhorn has repeatedly mounted on Allied Capital during the last decade. All he has done has been to make it possible for savvy investors to get pieces of a very successful enterprise at bargain prices.

Ever wonder how the Internet bubble REALLY formed? How Enron got away with fraud for so long? Do you think that the truth always comes out eventually? And that the good guys win in the end?

Read this book and see how even the free American economy can't handle bad news about its companies. How companies are able to hide the truth from investors and how some on Wall Street and even the government end up helping them out.

This true story is Kafkaesque. The writing is easy to understand. And the ending is a wakeup call.

David Einhorn makes the complex simple, and the sad truth irrefutable.
His work should instigate significant change in our financial governing agencies.
Those who do not read this book risk maintaining dangerous misunderstandings about the governance of our corporations and our financial markets.

His astonishing story teaches a harsh reality - that America's assumptions about corporate honesty and government protection are simply wrong.
His experience of SEC unresponsiveness to corporate fraud, exactly the situation we expect them to protect us against, is so well grounded in fact that page after page I kept asking myself, "could there possibly be more???"

A fascinating story told at the intersection of investing, accounting, regulation, business interests, greedy management, private investigators and government malfeasance.... A tale of how the real world works and how there are a few souls fighting on our behalf.

In a world where the answer to every vexing economic problem seems to be "Deregulation" (if not lower taxes!) here comes a wildly successful hedge fund manager (of all things!) to show us that in a world where the current crop of referees are either incompetent, asleep or bought off, the solution is hardly to wish for a world with no referees and/or no rules. Indeed, a Wall Street world without proper rules and vigilant rule-keepers is a scary and dangerous place--as the current Credit Crisis makes well clear. If this book was only about one duplicitous company called Allied Capital and Einhorn's awful experience shorting its stock, it would still be a provocative and insightful read by an unusual insider-as-outsider. But it is more than that. It is the story of the how truly skewed things can get when our government chooses to look the other way. Einhorn doesn't start the story as a true-innocent--no hedge fund titan, however young, is that--but it is amazing what happens once his speech about the company (for a charity, no less!) starts this book, and his world, spinning: it is as if he's fallen down a rabbit hole and finds himself on some surrealistic, subterrean level beneath Wall Street. Nothing like being investigated by the S.E.C. for having the termerity to short a stock and the "unpatriotic" cojones to talk about it. Einhorn points out that free speech, in certain circumstances, is not so very free but gets quite expensive...so much so that it gets quashed.

The book might have more accounting arcana than some readers would wish, but one can easily fast-forward through those sections and still get the meat of Einhorn's argument. Since hedge fund managers are being blamed for everything from the housing bust to raising the price of high-art (sharks in formaldehyde) and other assorted commodities (corn, oil, Ferraris) it's a bracing surprise to be presented with a book that is as useful, as righteous, and as necessary as this one.

Einhorn's pain is our gain.