It didn't take long in my journey as an economics student to learn that the stock market effectively means nothing to the economy. It has become something of a mantra for me that the economy is not the stock market and the stock market is not the economy. As such, one of my biggest pet peeves is whenever someone posits that the economy is good / bad and their first piece of supporting "evidence" is the performance of the stock market. The stock market, from an economic point of view, is essentially a game of chance that people play with their money that reflects how people are feeling any given day (an explanation which one of my friends beautifully summarized as "astrology for finance bros" when I was on my soapbox about this one day). I had never taken much time to learn about the bond market during or after school (my interests are more along the microeconomic lines of game theory / industrial organization / trade theory rather than financial economics), but I had always assumed that this market was a little more tangible than stocks. I likely could have seen this coming from the title alone, but it quickly became clear through reading this book that the bond market is just as much of a game as the rest of what goes on on Wall Street.

One of the pervasive themes of this book is the all-encompassing fixation that Saloman Brothers and the other large Wall Street investment banks have on money. This manifests itself in two main ways that I found pretty detestable. The first was a disregard for customers who were viewed as less important (i.e., those who had less money to spend). These customers were treated as expendable, and firms leaned on several euphemisms to disguise the financial ruin in which some of these customers were left. This kind of dehumanization was pretty upsetting, and to Lewis's credit, he did not attempt to mask any of this behavior. The second consequence was a toxic and contentious atmosphere within the firm, especially toward women and workers who were more junior (minority workers would have presumably been on this list as well, but there were very few of them working at Saloman Brothers in the mid-1980's, which is a problem in itself). Lewis spent a decent amount of time covering the harassment of junior workers, which is understandable considering he himself experienced this treatment, but he spent much less time on the systemic efforts to withhold women from positions with influence or power. I believe Lewis's general methodology was to simply present the facts and allow the reader to arrive at their own conclusions, which is an approach that I broadly agree with, but I felt that this issue deserved a stronger indictment.

Overall, despite the level of disdain that I felt toward the greed that motivates many of the people in this book (and the amount of money they make doing work I view as relatively non-value-additive that enables this greed), I still found this book eye-opening and worthwhile. I don't think I can broadly recommend this book to all readers as some of the technical descriptions of the bond market would likely bore some people, but I think anyone who has existing interest in this general subject matter would likely get something out of reading this book.

In 2007, super investor Warren Buffett of Berkshire Hathaway made a bet with some of the people over at the Protege Partners hedge fund. He wagered that over a period of ten years the S&P 500 (a passive index) would outperform a group of five hedge funds* handpicked by Protege, with the loser donating one million dollars to the charity of the winner's choice.

(*Hedge Fund: A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.)

With one more year to go (as of this writing), here are the results thus far: The hedge funds are up a cumulative 22 percent. The S&P? Up close to 66 percent.

So what does this have to do with Liar's Poker?

First, the prospective reader should understand what Liar's Poker is. It is a memoir by best-selling author Michael Lewis about his brief stint working for the investment firm Salomon Brothers during the mid-eighties.

So, you may well ask, what does this have to do with Warren Buffett?

Well, there are two connections. First connection: In 1987, Buffett was approached by Salomon Brothers (which was struggling against a hostile takeover attempt) and offered a deal. If Buffett would lend Salomon 700 million dollars in the form of a special bond—which Salomon would then use to buy back their own shares to fight the takeover attempt—then Buffett would have two options. Either (A) he could hold the bond in exchange for an interest rate of nine percent (a good return) or (B) he could, at any time before 1996, trade the bond in for Salomon common stock at $38 a share, only losing money if the company somehow went bankrupt.

The second connection, more poignant than the first, is this Buffett quote:

"There's been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities."

Which brings us back to Salomon Brothers.

Because Liar's Poker is their tale, the story of a group of traders and salesmen who at times not only did not make their customers money, but who on occasion used their customers as patsies in order to minimize their own losses (at their customers' expense) by selling said customers investment products that Salomon Brothers owned, and which Salomon knew were crap when they were sold, in order to get them off Salomon's books. It tells the tale of Michael Lewis, fresh out of Princeton and the London School of Economics, and his three year sojourn with what was (at that time) one of Wall Street's premiere investment firms, and how a combination of greed, stupidity and internal corruption almost destroyed the company.

Highly recommended reading for those folks curious about the goings on of a prominent Wall Street firm during the eighties, and who don't mind a behind-the-scenes look (metaphorically speaking) at how the sausage gets made.

The mid 1980s were a once in-a-lifetime opportunity for a few thousand of America’s Economics, Mathematics and Physics graduates to make more money at age twenty-three than their parents could accrue in twenty years. Nowhere is this better illustrated than in Michael Lewis’ excellent inside account of those profligate years at Salomon Brothers, the leading investment bank of its day before it surrendered its monopoly on the mortgage bond market and allowed its traders to take over the floor.
Liar’s Poker is a vivid account of the excess that characterised the age, and is also a useful study in how an organisation that grows exponentially over a short period of time becomes less accountable to its customers and its own producers (e.g. the traders and salesman bringing in the dough). Inside this adrenaline-fuelled world of risky dealing, macho posturing, high cholesterol bingeing and frantic ‘bid’ and ‘ask’ phone trades, Lewis takes us from his initiation and training right through to the days leading up to the spectacular 1987 Stock Market Crash that plunged the financial world into chaos, but made tonnes of money for his department’s long positions on the bond market. (Unlike stocks and shares, bonds go up in price when government interest rates go down. Investors taking big losses on equity will look for a safer yield in the bond market until things calm down. Those betting on prices going up – traders – will profit from selling their bonds when the price shoot up in value.)
The money-hungry college graduates that stalk the pages of this book have become stuff of legend, but no so much as the uncouth college drop-outs from Brooklyn who go from the company post room to the trading floor and the Executive Boardroom in the space of fifteen years. These are the obese traders with rolled up sleeves, appalling manners and awe-inspiring courage, who throw telephone earpieces at new starters and hollow down any one who walks through their department with a tirade of abuse. One of the author’s classmates is so scared to enter he does nothing for three days, but ride the elevator from the ground floor to the dreaded Floor 41. He’s not seen again, but he’s not the only casualty in a war with no rules or formal guidelines. Lewis, himself, learns quickly that he will need a mentor to survive; but how do you approach a senior trader on a busy trading floor to learn the ropes? Answer: you sit invisible for weeks on end, at the same desk, next to the same person, not daring to say anything until recognised. The relief comes when you’re finally instructed to get breakfast in for the other guys. This is the closest you’ll get to a polite ‘Hello.’ You have your acknowledgment. Perhaps they might even show how to make a trade or explain the jargon – not likely.
It’s a far world from the investment banking Lewis imagined after finishing his Master's Degree at the LSE in the early 80s. Like any graduate he assumed he would be meeting with the captains of industry and lending money to blue chip companies on projects that would change the world for the better. That department exists, his new employers tell him, but it’s for wimps. The WASPs with fine-manners, blonde hair and an expensive education work in Corporate Finance – they’re also the lowest of the low in the eyes of the traders. Lewis realises this when one of them stumbles into Floor 41 wearing a jacket (a big no-no to a trader) and is instantly shoulder-charged out of the way by a fat, no-nonsense salesman. This is the moment when he realises he’s becoming like one of the traders. They’re right - the guy’s a wimp.
Every page of Liar’s Poker will make you laugh, cringe and shake your head in disbelief. You can imagine the apprehension the author felt on his first day in the training programme. Already a hierarchy is formed with the hooligans at the back of the class deciding from day one it’s their job to intimidate and bully the swots with the MBAs on the front row. You have to be savage to be a trader, right? The Harvard alumni retain their own clique, listening to each lecture and imagining where each speaker stands in the power structure of the company. They draw organisational charts and try to work out where they will be in two years’ time. Next to them sit the Japanese – six graduates brought in to persuade Corporate Japan to return some of the stockpile of US dollars building up in their huge trade surplus. These guys are renowned for one thing – falling asleep during the training. Bets on what time Yoshi will nod off are the highlight of the morning. But with the exception of the Japanese, anyone who shows weakness is earmarked for a fate worse than dismissal – being sent off to Dallas to sell Equity. The woman who asks a guest speaker about the key to his success is castigated as a brown-noser and humiliated in front of the class. This is tame compared to what awaits them upon graduation.
At the heart of the book is a fascination that will continue to intrigue us as long as the capitalist system survives. How can people make millions of dollars doing nothing but speculating on price movements? And why would most of want to do the same if we had the opportunity? Though Lewis doesn’t rehearse any of the fatuous arguments about bringing liquidity to the market, you get the impression he is never going to stay in the game for the long haul. The back-stabbing, disloyalty, and jungle mentality of those around him is an accepted fact, but the consequences can be severe. One day a trader advises him to sell $3 million worth of AT & T bonds to an unsuspecting German investor, unaware his colleague has knowingly dumped a loss of 65,000 USD onto his customer. In any other industry he’d get sacked, but not at Salomon Brothers. ‘Who do you work for, this guy, or Salomon?’ is the trader’s retort. Easier said than done; Lewis has to take daily calls from an angry client who’s close to hyper-ventilating and eventually loses his job at his Austrian bank. His peers call this ‘blowing up’ a customer, e.g. wiping out the customer’s investment. It’s all part of the training.
Lewis is also keen to expose the mismanagement at Salomon Brothers, not to mention hubris. He’s astonished to learn that one of the Directors is trying to force the British Government to take back their $100 million shares in British Petroleum, sold to Salomon 24 hours before the 1987 stock market crash, and landing them with a $700 million loss. As the (presumably Jewish) Director says to his counterpart in London, ‘Your people better damn well pull it… If it wasn’t for us, you’d all be speaking German.’ Charming.
The brutal culling of 1,000 jobs over two days is another sorry episode in the firm’s crisis management. The news is leaked to the press a day before the event, and the Municipal Bond and Money Market Departments are fired en masse. Fortunately, most of the Municipal Bond staff are hired by Dean Witter, a firm that’s happy to fire its existing department to make way for the newbies. Such is the cold nature of Wall Street. To play tough is to survive. Sentiment is for losers.
As the number one best-seller of its day and seminal account of the mid 80s excess, Liar’s Poker is a book that will testify to a unique period in the Anglo-Saxon world when for a short time millions of dollars were flowing into the accounts of men in their early twenties and managing directors not much older. There’s no doubt they had to go through a harsh boot camp to get there, and the rewards were worth it. But for Lewis, it felt like an absurdity. ‘When you sit, as I did, at the centre of what has been possibly the most absurd money game ever, and benefit out of all proportion to your value to society… When hundreds of equally undeserving people around you are all raking it in faster than they can count; what happens to the money belief?’
The banking meltdown of 2008 may hold the answer. But does anyone expect the excesses to go away? Today’s money hungry graduates have already worked out that the real wealth is now in Hedge Funds, not investment banking.

This book is far more interesting than a book about life as a bond trader in the 1980s has any right to be. Michael Lewis is a captivating writer who experienced the highs and lows of working for one of Wall Street’s largest investment banks in the 1980s. He married entertaining anecdotes about working on a fast-paced trading floor with historical context on the creation of mortgage-backed securities and junk bonds in a way that kept me wanting more until it was over. I will definitely be reading his book The Big Short to understand what happened during the 2008 housing crisis.

I resonated a lot with Lewis’ take on what he calls “the money belief” (keep in my mind that he was making $200k+ per year at the age of 24 in 1985). “For me, however, the belief in the meaning of making dollars crumbled. The proposition that the more money you earn, the better the life you are leading was refuted by too much hard evidence to the contrary. And without that belief, I lost the need to make huge sums of money.” Little is more elusive and illusory than the pursuit of “enough money.” I’m convinced that you can only be satisfied with the amount of money you have if you truly don’t care about how much money you have.

My own brief foray into day trading using Robinhood was enough to convince me that speculation is not for me. It’s definitely exciting, but I think anything that gives you an outsized amount of money compared to the amount of effort you put into it inherently leads to an unhealthy view on money. From an eternal perspective, stumbling upon a large sum of money is no different than stumbling upon a large sum of video game currency. It can provide you with some temporary happiness, but when you leave the game it doesn’t mean anything.

I looked up the following terms while reading this book: dilettante, nouveau, pleb, penury, bête noire, reductio ad absurdum, gourmand, parochial, Teutonic, niggle, Canaletto, golden handshake, oleaginous, geld, xenophobia

A brilliant and funny memoir of life on Wall Street in the 1980s. Michael Lewis shows exactly how craven and self-serving his firm, Salomon Brothers, had become by the time of his arrival in 1985. Previously a backwater, Jewish-led, bond trading firm, Salomon rode the wave of leverage in the Reagan era to become the most profitable investment bank in the world. Yet part of that success came from keeping good deals on its own books and passing bad bets to its customers. Lewis describes his first qualms and eventual acceptance of "jamming" bad bond deals down the throats of European investors and the praise from his superiors whenever he had sold a horrible deal. For instance, after selling some crappy AT&T bonds to a German investor he was praised as corporate hero, though he had to endure the "primal Teutonic scream" of his irate customer on an almost daily basis thereafter. As one of the teachers at his training program told him "Some people were born customers," meaning born-suckers. (Not surprisingly, Salomon's irate customers soon stopped taking the abuse and not long after Lewis published this book it was bought up by Traveler's Group and later Citi.)

Perhaps most interesting for those reading the book today, Lewis takes a strange 100-page segue to describe the history of mortgage-backed securities, the first of which was sold by Salomon brothers trader Lewis Ranieri in 1979. He describes the MBS as an only slightly less important financial innovation than junk bonds, which, in light of current events, is an amazing understatement. Lewis, who has a fine eye for business culture, describes how Ranieri self-consciously assembled a group of fat, slovenly, back-office Italian traders (their words) to compete in the then impoverished mortgage market. He strove to create his own oppositional culture inside the increasingly WASPish firm, and, after Congress liberalized Savings and Loans investment rules in 1982, his band of misfits became some of the most profitable traders on planet earth. The rest is history.

Parts of the book move surprisingly slow (he takes almost a 100 pages describing his training program), and I wish there was more focus on his own experience as a salesman, but all of it is engaging and well-written. It's a great inside look at how Wall Street worked, and works.

A gripping page turner, I could not put this book down. I smoked a doobie and talked my head off about it. Easily the best book I have read since the Bible.


The high flying, off-the cuff-speech, quick and easy money of wall street is a world I oft romanticize.

This book described the stock market in the early gettings of globalization c. 1980. It was a time of unprecedented growth in certain industries. Those that moved the money took a hair off the top of every change. All they had to do was sit and watch their money skyrocket. Largely unregulated for this type of growth, the bond market went from $55 billion nationally in 1950 to $700 billion in 1976. Solomon brothers, primary loan lenders, went form biggest losers to hottest company on wall street overnight. Their training program was valued more than Morgan Stanley and Merrill Lynch.

Tidbits I hope to keep with me is:
mortgage loans are where most of consumer assets lie. there is more value in refinanced mortgages than the stock market. This is why huge economic disruption follow faults in law regarding mortgages lending. So many mortgages exist because of tax write offs and incentives the governments provides to feed growth of this asset. Thousands of mortgage <$100k @ 12% interest are packaged with a B-rating of fault/sporadic repayments; these are sold to big business at a high return. Pension plans, offshore freight handlers, and industry moguls buy and trade $billions in sub-prime loans.

Early regulations in 1977 of loans and savings (L&S) paid off any debt accumulated in buying a mortgage. Small L&S owners encouraged all their mortgages to refinance; also, they would buy neighboring L&S holdings for $100million and sell it to a bondholder $80 million. They were able to cut profit losses while gaining assets. Bondholders sold these to whoever could buy, and packaged it in different ways to have an array of products to sell. For example, they could sell just the interest, or just the premiums on a $500 million dollar AAA rated mortgage bond. Interest had growth possibility, premiums acted like run of the mill low interest bonds. L&S went from local to global overnight.

Junk bonds were next. Companies floundering on bankruptcy with piss poor rates were packaged and sold to investors. The US government bailed out these industry giants. So even with a decade of profit loss, these companies would stay afloat. The company would, therefore, be hugely undervalued just before it went under. The trick was finding which companies were on the verge of declaring bankruptcy. Entire teams of investors were on the front lines looking at declining working conditions and bad management for tells. They would then buyout the company and sell it to investors; bond traders made money in the buy and sell of say a $300 million dollar regional airlines. Investors made a quick turnover in their holdings, laughing all the way to the bank. The newly available global funding of junk bond holdings skyrocketed this once risky investment. Every pension plan and mogul's empire across the world could now be invested rather than sit in a savings.

Leveraged takeovers were the unregulated, titans of the late 1980s. Billion dollar takeovers of 3M, Xerox, and Tim Horton's, and $4.9 bill southland co. (7-11's proprietary holder) went largely unpaid and brought about the 1987 recession. An example of a leverage takeover: Buyers believed AT&T was undervalued; with a few sector furloughs, skimming the fat, and loading responsibilities, profits=revenue-cost would soar, and the company would be resold in a few years at huge margin.

Сначала меня долгое время терзали сомнения читать ли эту книгу, а точнее данного автора или нет. Почему то несколько обзоров о этой книге вместе с интуицией подсказывали воздержатся от прочтения. Сложилось впечатление, что многие больше полюбили не саму книгу, а автора с его весьма хорошо подвешенным языком и контрастными метафорами. Жаль, но я в большинстве опасений ошибался...

Книга получилась не только информативной, но и невероятно захватывающей. Описанная изнанка жизни воротил с Уолл-Стрит, самой компании Salomon Brothers, а также и конкретно маклеров и брокеров сказать что удивила всё равно что ни сказать ничего. Со взгляда законности и этики - это полный ужас и беспредел. Да нет, иначе как криминал который не выгодно замечать руководству компаний и активно его покрывать в том числе активно лоббируя законы для его скрытия, запутывания и создавая лазейки это назвать никак не можно. Именно так - криминал почти на каждом шаге.

Преступления от самого элементарного бесчисленного надувательства своих клиентов не то чтобы на сотни тысяч, но и даже на сотни миллионов долларов и аж до крупных махинаций в мировом масштабе. Я даже не упоминаю массу списанную денег со счетов собственной компании на красивую жизнь торгового отдела. А разговор о дикой корпоративной среде Salomon Brothers вызывает отдельное отвращения...

Льюис красиво вскрыл и описал ещё многое чего от чего волосы не раз становилысь дыбом. Стиль написания автора великолепный, плотность фактов, много острот, множество хороших шуток, применяемые великолепнейшие контрастные ассоциации делают Льюиса словно шеф-повара мирового класса, а его книга как вкуснейшее блюдо для его проголодавшегося по вкусностями читателя.

Я был прав только на половину. В той части, что автор мастер слова, но ошибался в качестве материала. А он весьма хорош. И если вам интересна изнанка Уолл-Стрит в начале и средине восьмидесятых в одном из его центров - несомненно читать стоит! Да и ещё потому важно прочитать, что по моему мнению атмосфера с тех времён сильно не изменилась и подобная жизнь царит и кипит там сейчас такая же как и тогда, если конечно не намного хуже...

I've been always interested in the 2008 financial crisis and in this book I learned the origin story of the monstrisity of the bond market that led to the financial crisis. Unfortunately I read it in my native language and the translation was quite horrible. But the book itself was entertaining and gave more insight of day to day on Wall Street and it's politics.

Love a book that reinforces my existing views

As always, a compulsively readable book from Michael Lewis. I knew that this would further indulge my distrust and resentment of Wall St. and it did just that. Also this was eerily prophetic with its explanation of the inception of mortgage backed securities and judgement of unsustainable finance strategies. Probably one a very few finance books that will make you laugh.

Having had some exposure to the world of finance, I did find this to be an interesting read. "Liar's Poker" brings readers an insight look into the world of banking during the 1980's in which greed, corruption, ego, and shocking excess were omnipresent on Wall Street. The book hinges on Lewis' real world experience in the industry, which certainly adds credibility to the sometimes unbelievable stories he recounts.

The most memorable takeaway was the shocking behavior of "Professionals" within the field, and the toxicity that money culture can create.

I will always be the top fan of "The Big Short" and "Moneyball", but those looking for more Lewis content should pick up "Liar's Poker".

4.5 Stars

A thrilling account of investment banking. The bottom line is don't do it lmao.