Liar's Poker

Brilliant. Michael Lewis's first book describes his experiences as a bond salesman at Salomon Brothers in the 1980s and it's simultaneously funny, engaging and profound.

Details well the positives, especially the innovators and innovations of the time - e.g. Lewis Ranieri, and collaterised mortgage obligations, and the negatives: the back-stabbing, the hubris, the mismanagement at the highest levels, the obscene salaries, the unethical treatment of clients. All done in a way that is constantly interesting and often funny.

A great book that is easy to read and informative at the same time. Fun and enlightening. The one part that was a bit lacking in my opinion, was the depth of the explanations given to the financial instruments talked about here. It was nice and simple, one gets what the author is talking about, but it didn't quite satisfy my interest in the subject. Otherwise a great piece to understand Wall Street culture during the 80's.

The author talks about his experiences on Wall street since he joined there straight out of college and quit once he got enough of it. He describes the investment banking in general and briefly goes over the landscape and main events of investment banking around the 70s until the 1987 crash.

Overall it's a good and interesting read but personally i feel that i have picked the book a little early in my learning curve of finance and economics. As long as you are comfortable with the basic concepts like different types of bonds - junk bonds, mortgage bonds etc., thrifts and thrift managers etc., Even though the author makes an effort to explain them up, it still wasn't a very smooth read for me without apriori knowledge.

There are some books about finance and economics that are so well written and fundamental in their arguments that they withstand the weight of time, becoming atemporal sources of market wisdom. Michael Lewis’ Liars Poker, unfortunately, is not one of those books.

Reading it almost 4 decades later makes it hard to buy into the importance of the events being portrayed. The descriptions of traders and salesmen moving millions through phone lines or the mentions of old Wall Street heroes long forgotten are so removed to the point of being useless for any modern student of capital markets.

As a depiction of the Wall Street toxic money-chasing macho culture the book is excellent. But years later several books and movies - some by Michael Lewis himself - would come out as much better portraits of that culture.

The book does contain, to my pleasant surprise, one of the best primers on the creation of the mortgage bond market. It describes with good detail the events and financial rationale that led Lewi Ranieri and his team at Salomon to create a market for mortgage bonds. Said market would eventually grow and mutate into the cacophony of fraud and greed that underpinned the 2008 financial crisis. But, in many ways, the first symptoms of what would later become a systemic problem can be seen in the book (the poor risk-rating process, the financial shenanigans to cater to many investors, etc).

The book is mildly funny, but often Lewis’ personal dialogue and self evaluation during his salesman days become a little annoying. The social dynamics of his training class at Salomon is also a little overplayed. Lewis’ writing style gets much lighter and funnier in some of his later books such a as The Big Short or Flashboys.

The book was a great success after its publication in 89. It was one of the first books tailored to the general public that portrayed with great detail the culture of Wall Street, the market evolution of the 80s, and the shenanigans of some of the biggest names in finance at the time. But today it feels like a relic; made of names long gone, their interactions on a finance stage that now looks very different, and a culture that, in many ways, remains, but is better portrayed in other mediums.

A nicely written book on saloman brothers and the start of its downfall. lewis has penned what goes in an investment bank in a very witty manner which keeps the reader curious about what's gonna happen next. Not a very technical book but has described beautifully what different jargons that goes on a trading floor means. Would recommend anyone who is interested in knowing how it was to work on a trading floor back then. Although things have changed a lot in the last decade with algo trading replacing the conventional traders..

A book of religious quality. Filled with useful titbits about John Gutfreund, and SB top trader John Meriwether (had the vital attribute of being able to hide his state of mind) and just the general life of an investment bank in the 1980s.

First rule. Never mention that you are motivated by money and highlight instead that you are motivated by the thrill of the chase. Second, when interviewed for the trainee position (bitch) on the 41st floor, never use a chair to smash the window you have just been asked to open and that you find is impossible. It was a favourite interview question.

Michael Lewis charts how:
1.tPaul Volker (Fed chairman in 1980’s) liberalised interest rates and enabled debt markets to boom, which became the strength of SB.
2.tHow the equity department attempted to snatch trainees from the trading floor to the most boring department (equity research) and became so desperate they hosted a boat party where all the traders attempted to hide.
3.tThe power of the back row in the presentation classes at SB. They pissed off the goody two shoes front row equity trainees “those who say don’t know, are those who know don’t say when asked for their opinion''.
4.tThe bitter battle between traders and salesman. Salesman wanted the best for clients, traders wanted profits, yet traders would screw over clients (selling bonds to A&T knowing the price would go down having shorted them). Traders invariably won, as they generally acted in the “best interests” of the company. Salesman did not as they only acted for themselves.
5.tHow Lewis Ranieri revolutionised SB and what a Big Swinging dick he was (would eventually get asked to leave SB when it rapidly declined). Michael Lewis eventually leaves SB, which is then acquired by Citi.

Classic Quote:
SB has the temperament of a Lebanese taxi driver, they either had our foot slammed down on the accelerator, or on the brake. We knew no moderation and had no judgment.

Why am I languishing here, making approximately $0 dollars as a librarian? Why was I not a Wall Street investment banker?! These guys were having all the fun. In his introduction to the Big Short, Lewis writes that he was dismayed people took Liar's Poker not as a cautionary tale, but as a how-to manual for their careers. But I can totally understand why! He makes the trading floor sound like the place to be, the absolute center of the universe.

He's also got a real knack for explaining something in one or two sentences, and then providing a brief anecdote or lively quote to illustrate the thing described. It's literally never boring. I've heard people say that his writing is successful because it makes readers feel smart, and I get that. Although sometimes, when you have failed to understand something so colorfully and breezily explained, it can actually make you feel...less smart. I read one particular page about the rise of junk bonds three times, and then just gave up.

In a previous review, I talked about The Bonfire of the Vanities and about the mastery of Tom Wolfe in crafting his characters, the story line and the various social types he described there. There was one aspect of that book that I did not talk much about and yet which was prevalent in my attraction to the story: not only it is one of the iconic stories that symbolizes Wall Street in the 1980s but it is also taking place at a very specific time when Wall Street was actually part of History. Indeed, Wall Street was at that juncture the mighty knight that was spearheading the victory of capitalism over communist. It was backed by the arrogant success of the money business of these days, that Ronald Reagan and Maggy Thatcher overpowered their arch enemy and delivered the final blow to the crumbling Soviet Union. No moral judgement of good or bad here, just an observation of a given point in history.

I love history and I work in New York, at the core of the world’s financial center. Therefore when Finance becomes part of history, I feel as if I can touch history up close. This is why I was looking for another story in that vein and I found it with the Liar’s Poker.

Like myself, Michael Lewis was writing as an insider and therefore what he writes feels very real. I prefer fiction and therefore I would have liked it more if he had turned the book into a novel but it is nevertheless very good. Lewis describes his experience as bond salesman on Wall Street during the late 1980s. This book too is considered iconic of the Wall Street of these days with all the excesses of greed, the ruthless race among competitors to be the first to rip the shirt off each client:

P22 “To succeed on Salomon Brothers trading floor a person had to wake up each morning ‘ready to bite the ass off a bear.’”

Once the wolves were let loose there was no mercy to expect:

P200 “like all of us, he lived by the law of the jungle and the law of the jungle said Geek salesmen are red meat for traders. No exception.”

P208 “the best thing was to pretend to others at Salomon that I had meant to screw the customer. People would respect that. That was called jamming.”

P274 “’Every company has got people sitting around who do nothing for what they get paid’ says Joe Perella. ‘If they take a lot of debt, it forces them to cut fat.’ The takeover specialists did for debt what Ivan Boesky did for greed. Debt is good they said. Debt works.”

In these days, Salomon Brothers’ mortgage department made history because it was successful, obnoxiously, filthily successful at taking advantage of the deregulation by selling big chunks of mortgages like bonds. As a result, individuals that were not particularly polished in the first place to say the least turned into a crowd of grotesque Jabba the Hut who suddenly could leave their shady pubs and have their moment of glory at the top of the world:

P89 “If you fuckin buy this bond in a fucking trade, you’re fucking fucked. And if you don’t pay fuckin attention to the fuckin two-year you get your fuckin face ripped off.”

P214 “The only thing that saved me in meeting after meeting in the early days at Salomon was that the people I dealt with knew even less. London was or is a great refuge for hacks.”

So why would there be an interest for the average reader to dive in this world of slobs and frat boys? Well, why would an honest Roman citizen be interested in a detailed description of a barbarian tribe living somewhere off in the forests of Germany? He wouldn’t except at the very moment of the barbarian invasion when those slobs are about to take over the whole world and impose a new world order and this is exactly what had happened back in the eighties.

These “big swinging dicks” as they called themselves triggered the first business revolution of the post cold war world. They would have a massive impact on the economy. There would be other such revolutions in the new globalized jungle created by ruthless capitalism of course such as the dot-com bubble that I witnessed up close and that I described in my novel “Bubble Boys” and of course the leverage revolution and its subsequent liquidity crisis of 2008.

Each time, the world shook harder, a little like these barbarians who, from invasion to invasion, come every time a little closer to Rome. So what will be the next financial crisis about and what impact will it have on history? Some of the clues are right there, in Michael Lewis’ book. A must read.