Nov 07

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Book Review : Liar’s Poker by Michael Lewis

Lewis’ book is a frank account at his time at Salomon Brothers, the investment bank that made it’s name in MortgageĀ  Bond Trading and eventually got swallowed up by a series of acquisitions in the 90’s.

The book is an excellent and entertaining insight into a number of areas of investment bank trading. That said, Lewis’ points out that Salomon were different than other investment banks. Salomon tried to resist the big bonus culture in the 80’s which really was the precipice of their collapse as wave after wave of talent left the firm to the competition to cash in on their ability.

This book was written in 1989 so before the banking collapse of 2008 in main due to complex mortgage based securities (CMO’s). These were in fact invented by Salomon in 1982 after the US Govt allowed Ginnie Mae and Frannie Mae mortgages to be packaged up and sold as Bonds to encourage continual growth in the property sector. Which is why, I guess, Lewis was well placed to write up the recent collapse in his book “The Big Short”.

The book, I feel, wasted alot of time on explaining these CMO’s arrangements which was interesting but could have been done in a page or two than a third of the book. I wish Michael had spent more time on his actual experiences as a salesman on the Salomon desks as when he did describe the various deals they were hilarious. How he managed Big Swinging Dick status with his deal made with a Frenchman and $80m of junk bonds was a classic tale.

He describes some great characters from “Alexander” his mentor, Dash Riprock and the Human Piranha! An illuminating insight into the world of trading in the big firms. Charts and technical tools of trading were mentioned with derision in the book, but then if your firm had to get rid of several million $’s of bonds into the market over several weeks, charts are not really a help.

A good read but not the best.

Liar's poker

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