"Firefighting" by Ben Bernanke, Timothy Geithner, and Henry Paulson

JFK once said "The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity." For an investor, crises are an opportunity to buy into good businesses at reasonable - or at least not ridiculous - prices. That is why, after three years of struggling to find opportunities, I made more investments over the last month than I had made over the last five years. Vladimir Lenin supposedly said that there are some decades when nothing happens, and some weeks when decades happen. From my experience with this crisis, the first of my still-short investment journey, I have learned that in times of crisis, lots happens - or at least, for an investor, a lot (of buying) should happen! 

When you are choosing to invest at a time of crisis, you are catching a falling knife. You do this because you believe the world will bounce back, because it always does. Indeed, human inventiveness, solidarity, and our sheer will to 'live to fight another day' have always come to the rescue. But, it is important to note that this recovery is aided by the tireless work of policymakers, who seek to limit the damage caused by the fire (crisis) at hand. It is important to understand this damage control aspect of crises.

So during the ongoing COVID-19 crisis, I decided to read Firefighting, a page-turner which tells the story of the 2007-2009 Great Financial Crisis from the perspective of the three fire-chiefs who spearheaded the United States government's response. As something of a neo-classicist myself, I found it tempting to cry moral hazard on many instances while I was reading the book; however, I am nevertheless fascinated by the success of the unprecedented measures taken (and arguably needed) to contain the crisis and right the economy. 

I am fascinated by the way in which greed and fear, and exuberance and panic result in credit cycles. That is why I have thoroughly enjoyed reading Galbraith's A Short History of Financial Euphoria and Krugman's The Return of Depression Economics, and watching HBO's Panic: The Untold Story of the 2008 Financial Crisis. And that is also why I have loved learning from Firefighting. Buffett said "[Firefighting's] cautions for the future should be required reading for all policy makers". They should be required reading for all investors too!

When I read, I like to pick out nuggets of wisdom, quotations that beautifully state or explain a seemingly basic, but in fact profound truth. So, here are a few of my favourite quotations from Firefighting (I promise you being this selective was far from easy - in fact it was pretty damn tough):

Financial Crises will never be a thing of the past. Long periods of stability can create overconfidence that breeds instability. We are later told: The enemy is forgetting. 

Risk, like love, tends to find a way. 

Bad news about one segment of the housing market [created] the E.coli effect, where rumours about a few incidents of tainted hamburger frighten consumers into abandoning all meat rather than trying to figure out which meat...is actually tainted. So, as the authors later note, investors began to shun entire classes of financial products, whether they were contaminated with subprime or not, which depressed prices and made them even more toxic. It was as if avoiding meat caused E.coli to spread. 

Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone. 

If you've got a squirt gun in your pocket, you may have to take it out. If you've got a bazooka, and people know you've got it, you may not have to take it out. 

Capitalism without bankruptcy is like Christianity without hell. 

Capital cushions can seem safe and adequate until suddenly they aren't. 

We spend a lot of time looking for systemic risk, but it tends to find us.