Liars Poker (Norton Paperback) By Michael Lewis

Petra has forgotten what being in love feels like

Update On Tuesday, March 1, 2016, I got a call, my banker resigned from Morgan Stanley. He said they wanted to put the commission and charges clients pay up too much and that it has become Corruption Central. He says he'll phone me when he finds a new company. Does anything change?

My son who is in his last year at law school has a job already with Goldman Sachs. Is he going to become very rich and very corrupt? Will I care as much when it is my son and not my money?
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Liar's Poker is the ultra high-stakes game played in Wall Street companies by the brokers with the obscenely high commissions they get from trading in the investment market.

What results is either extreme wealth and satisfaction - probably quite a few of these people are psychopaths or guilt and a change in career, or they become just like the
American Psycho, a rather fun fictional book on the ultimate psycho on Wall Street.

The book is highly recommended for lots of open-mouthed, "geez, people act like that", say things like that moments and because Michael Lewis, as always, knows his subject well and writes about it in a very entertaining and non-dry way. Great read.

The author quite obviously dislikes and has nothing but contempt for the banking industry - he resigned from Salomon Brothers to write this book but at the time was still married to Diana de Cordova, an investment banker with Morgan Stanley. I wonder if his book had anything to do with the marriage breaking down? He married twice more, both tv journalists, but got out of banking completely and into writing best-selling books. At least his time was his own.
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I've been reading other reviews of this book and I hadn't realised that it was over 20 years old. It reads like it could have been written about the overblown corruption of the Finance market right now that explodes into the press every few years. Plus ça change, plus c'est la même chose, at least with Wall Street.

Lobstergirl

21 years after publication, Liar's Poker feels both relevant and ancient. Relevant because it seems the Big Swinging Dicks of Wall Street are ever with us; ancient because of references to things like WATS lines and the lionizing of Salomon Brothers trader John Meriwether, whose Long-Term Capital Management would spectacularly implode in 1998, and Michael Milken, who apparently had not yet been indicted when the book went to press but got a 10-year prison sentence for securities violations.

Lewis is a raconteur more than a documentarian, which is both pleasing and irritating. Certainly raconteurs can sell more books. Most people don't want to read dry scholarly accounts of Wall Street. But there are times in the book (most of chapters 1-4) where his writerly persona is so big that it crowds out everything else. His tone is so arch, snarky, exaggerated, so swimming in eddies of simile and metaphor, that I don't completely believe him (though I'm sure the vague outlines of his story are true). He pairs bravado with disarming self-deprecation, telling us repeatedly how he was utterly green, knew nothing, stumbled his way through everything, yet brought a trader who had wronged him to his knees, and by the time he left Salomon was earning the largest bonus of his class (undeserved, he insists). He steps away from the tales of towel-slapping long enough to give a detailed history of the rise of mortgage trading at Salomon Brothers and how Salomon management allowed hegemony to slip through their fingers. (Raising the question, how did such a junior employee know so much about a) the mortgage market, and b) the internecine battles among Salomon bigwigs?) The portrait he paints of Salomon's chairman John Gutfreund is fairly devastating (though ancient history; Gutfreund would be forced out by Warren Buffett in 1991 after a Treasury bond scandal).

Some examples of his raconteurship:

Ranieri welded a coherent departmental personality out of two separate but equally gamy ethnic groups. (Italians and Jews, if you care.)

Buying whole loans (that is what the traders called home loans, to distinguish them from mortgage bonds) was an act of faith, like eating bologna.

For each step forward in market technology they [the traders:] took a step backward in human evolution...they became louder, ruder, fatter...

Their days began at 8 a.m. with a round of onion cheeseburgers. "We'd order four hundred dollars of Mexican food," says a former trader. "You can't buy four hundred dollars of Mexican food. But we'd try - guacamole in five-gallon drums, for a start. A customer would call in and ask us to bid or offer bonds, and you'd have to say, 'I'm sorry, but we're in the middle of the feeding frenzy. I'll have to call you back.'"

Rajat Ubhaykar

Atlas Shrugged for the philistine. It's subtle glorification of the greedy, underneath a veneer of hilarious sarcasm and grudging respect is the stuff financial Bibles are made of.

An interesting slice of financial history is captured succinctly, more precisely the development of Collaterized Mortgage Obligations in the 80's which also has direct relevance to the recent U.S housing crisis.

If you wish to get everything you can out of this book, get your Finance 101 straight. It'll be a lot more fun.

Walter Spence

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.

Ruben

This book surprised me. I read and enjoyed Lewis' Moneyball a while back, and thought I was getting another journalistic account, this time of a crazy moment in corporate culture. Instead, it's very much a memoir of that world. And I didn't care for it at first, since the group of people he writes about are so spectacularly awful. He brings a certain world of investment banking trainees home to you, and I wanted nothing to do with it. If that was the whole book, I don't think I could take it. Something like the way some people don't like The Office (esp. the BBC version); it's too painful to see such human lowness.

But I'm glad I stuck around, because he can really tell a story. The sense of battle, politicking, and putting up fronts. Wry observations. Big picture, little picture. He comes off as a whistle blower with no sense that he's betraying his world; just an inside man dissecting a world he finds amusing, deranged, and perversely fun.

Steven

pp 83 is a discussion of S&L's failure in the US.
pp 136 is the best explanation of CMO's I've ever read.

Great read. Initially loaned to me by a coworker. I went out and bought it shortly thereafter.

A former art student winds up becoming a bond salesman for Salomon Brothers in the mid 1980's. He sees a lot, and describes it vividly. Chernobyl. The October Crash of 1987. Gutfreund and Meriwether quibbling over how much to bet in one hand of the title game.

He introduces some terms to the lexicon that persist to this day: BSD- as used in the movie Boiler Room. Good deal of relevant information for both the average investor as well as the seasoned professional. When the news about Chernobyl breaks Mike's good friend has some advice for him, "Buy potatoes." This is a powerful illustration of how traders, not investors, think.

A spread, any spread...

Kate

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.

Elizabeth

When a single game of Liar's Poker is played with a million dollars at stake at a workplace, just what, or whom, in the world are you dealing with? The most money-hungry industry, probably. Wall Street, ding, ding!

Money is a nebulous thing, and when you start dealing in the millions, perhaps billions, over a telephone, what happens to you and your soul? When Savings & Loans managers sell out for a chance to play in the big leagues, the world slides into Pottersville. Liar's Poker makes you feel like there are no more George Baileys left, and that's a tragic and cynical view indeed. Aspects of bond trading are like the rest of Wall Street finance—one of those deliberately arcane subjects, meant to prevaricate and hoodwink. Michael Lewis gives you a true insider look at what goes on, uniquely positioned with his experience as a bond trader at Salomon Brothers when the firm was the king of trading back in the mid to late 80s. He reveals his serendipitous start and the series of playground-like rituals that governed a new class of "geeks" hell-bent on climbing the ladder to become one of those classic "corporate finance" people. It's a wacky combination of luck, self-aggrandizement, connections, and risk-taking. This story is not meant to be triumphant, yet nor does it fully succeed as a take-down.

In the aftermath of his time at Salomon Brothers, Lewis has enough self-awareness to remark: "Christ, if social contribution had been the measure, I should have been billed rather than paid at the end of the year." He has plenty of ascerbic commentary to go around, yet Liar's Poker simultaneously revels in the posturing and the culture of being on a trading floor: the desire of every trainee to become a BSD (aka Big Swinging Dick (classy, I know)); to ruthlessly demand a bigger bonus in the second or third year of working or threaten to leave the firm (which hordes of Salomon Brothers' employees did); to get away with screwing over as many customers as possible (pat on the back and a fatter paycheck if you exploit their weaknesses!). When Lewis was in the game of bond trading, he very much embodied the things that can seem so awful about investment firms. Much of them twenty-something-year-olds, poised as if on top of the world with a humanitarian streak nowhere to be found. Instead, the ~~streak~~ torrent of self-interest and entitlement harbored by all these individuals left an acrid taste in my mouth, only made less pungent by Lewis's natural humor, sarcasm, and self-deprecation.

This book will work for some people. I much preferred Lewis's
The Big Short: Inside the Doomsday Machine to Liar's Poker. This is really a "me, not you" problem. I find economics can be an interesting topic, but I personally don't think I cared enough about bonds in the way that I felt an abiding interest in the 2008 housing crisis. Here, you can see the disaster (the 2008 one, not just the stock market crash in 1987) in the making: absurdly irresponsible and profligate management while opportunistic ignorance and greed remained supreme. If there's a more positive way to describe Wall Street, please enlighten me...

I can only stomach that kind of subject material for so long. I only want to read about selfish and borderline detestable human beings for so long. The saddest realization is that it feels as if so little has changed or even that it has gone downhill, 30 years after this book has been published. 1980s Wall Street and today's Wall Street do not seem so different. There is always a Next Big Thing that rakes in the cash for the finance/investment industry. The entrance of junk bonds then, subprime mortgage loans in the 2008 crisis. When our stock market is careening up and down because of coronavirus right now and the coming year(s) of our economy look bleak, who knows what Wall Street is conjuring up right now? Experience would dictate that it's probably not good.

By the end of this book, I felt enormously wearied and disillusioned, much the way that Lewis felt when he quit his job. Would that he stayed, he could be much richer and the world would be much poorer. All the respect to him for leaving, but this book has also left me, inevitably, too cynical. I don't care if it's not Christmas right now; I need to go watch It's a Wonderful Life again.

Riku Sayuj

First book of this type I truly enjoyed. Thank you Lewis for opening up a new field of book to explore.

Mike

I'm a little torn by this book. It's well written, it's funny in places, some of Michael Lewis' observations are very astute and I'm sure that on some level this is an excellent commentary on the downfall of a once great company. Lewis was a trainee bond trader at Salomon Brothers when that firm was the most profitable on Wall St. He did very well out of his time there, and his analysis both here and in another of his works, The Big Short, pinpoints several of the problems that society has, or should have, with how the financial system works.

Yet, having read The Blind Side, Lewis' views on how one position, and in particular one person playing in that position, changed American football, before both The Big Short and then Liar's Poker, I can't help disliking the author. Intensely. His previous two books had given me no reason for this at all, with the possible exception of a little smugness in 'Short'. However, Liar's Poker drips with 'I could see it coming from the second it began', 'I hated screwing clients but it was what I had to do' (every uniformed low-level goon in a dictatorship's first excuse) and 'all these people [bankers] are so horrible'. The venom he has for banking and bankers made me laugh out loud when the final line of the book informed the reader that Lewis lives in London with his wife, an investment banker. When you factor in that Lewis made vast sums of money from the profession, it's easy to see all this as disingenuous, and that's my conclusion. Once it was popular to want to be a banker, so Michael Lewis became a banker, now it's popular to hate them, so he hates them. I can't help but think that if everyone said tomorrow that they'd made a huge mistake and bankers were not to blame and that they are in fact wonderful, that Lewis would call a few contacts and be back at his trading post in minutes.

Rohit Enghakat

This is the author's narrative of his experience working at Salomon Brothers, at one time the biggest investment bank on Wall Street and probably the world. The book is a sarcastic look into the world of high finance with wit and humor laced in the narrative. Investment banks are generally known as the hotbed of high net worth employees who sell products (equities, debt, bonds and mortgages here) to gullible, often clueless, investors at huge profits to satisfy their ever-increasing appetite for humongous profits. Corporate greed is the underlying message of the book and the cast of characters are the unscrupulous traders dotting the landscape.

The author is actually an art history student who somehow stumbles onto to the investment banking job, mainly just because every smart ivy League graduate seemed to be joining one. Somewhere down the years he is somewhat disillusioned by the profession and quits. The book is definitely insightful and educative. Some terms like CMOs, junk bonds etc are so lucidly explained that even a layman will be able to understand. Reading this book 30 years after it was first published. So many changes have taken place and so many firms have ceased to exist since. The book is funny at places but monotony of the narrative gets to you after a point of time.

Bertrand Jost

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.

A Man Called Ove

This was my 7th book by the author and I have loved all his earlier books. Even I was surprised how much I disliked this one.
Unlike the other books, this was a memoir of the author's days from investment banking. Remember U.S. Investment bankers ? The guys who paid themselves fat bonuses after the govt bailout in 2008. The guys who broke every barrier of greed in their insane lust for profits. This is about how one of the biggest investment banking firms "Salomon Brothers" worked in the 1980s.
Somehow, it failed to interest me.

Preston Kutney

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.

Darwin8u

Thank Jeebus and Gutfreund this early book was successful because it is hard to imagine experiencing this last bear market without the funny, clear narrative genius that is Michael Lewis.

Polly Roth

4.5 Stars

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

Brian

To write a non-fictional portrayal of your life during your 20s is not an easy task. To do this while still in your 20s, to have it be your first book, and to have the story revolve around bond trading / Wall Street - and not have the book be as dry as it sounds - seems an almost cruel undertaking. But Lewis managed to do this. Despite what would seem to be the worst idea for a first book, Lewis keeps the reader interested and turning pages, even with a cast of execrable people that are only made more loathsome by the fact that they do, indeed, exist.

With unwitting prescience, Lewis writes about the creation of the mortgage bond business in the early/mid '80s that would take center stage in 2008 during the global economic meltdown. The unadulterated, unchecked greed with which the bond traders knowingly fleeced "suckers" in the market is staggering not by the reaches of their malfeasance, but rather that those unsavory characters continue to exist, in increasingly more dastardly versions as the years go by, and in all areas of Wall Street, banking and government. I'm happy I read this book after
The Big Short: Inside the Doomsday Machine because it makes that more recent book much more poignant in retrospect. I can almost see Lewis' head shaking as he was penning "Big Short" realizing he had seen all of this first hand 20 years before, knowing that nothing would really be done to make meaningful changes to avert a future disaster, and that as this event plays out again and again into the future the reality is that there is going to be a time when the wheels come off for good - and no amount of government intervention or "market self correction" is going to fix the problem. Doomsday Machine, indeed.

Andrea Klear

I found this worn down bestseller in the investing for dummies section at the library. I read it in a few days and I have a short attention span so it's a good read. This could be easily made into a movie and the author has written books such as Blind Side and Moneyball which were turned into movies.

This is all about the life of a Wall Street bond salesman in a big firm called Salomon Brothers, the firm basically, in the 1980s. It mixes biography with the rise and fall of a company. The company still exists, so maybe not fall, but it's decline as being the top dog. A lot of ruthless horrible people just trying to make money basically.

If you are new to investing, it's a good read since it talks about some concepts that you may not have heard of such as junk bonds and selling mortgage bonds. I had to look up some of the terms.

All the short quick stories of where the term big swinging dick came from and him talking to his trader friend like two old Jewish grandmothers is entertaining. Just a lot of entertaining crazy day in the life of a big shot type of thing.

Martin Egeli

Good storyteller.
Slow beginning with many chapters to give historical context. Still very interesting, and I found myself shaking my head several times. Sometimes also humorous.

Combines great with "Barbarians at the Gate" to show the craziness of the 80s. Both are highly recommended.

Shreedhar Manek

A plot is set up, then things happen, and then finally there's a conclusion. That's what makes a story. Right? Wrong.

Michael Lewis is a brilliant writer. He catches the reader's fancy from the get go. But Liar's Poker doesn't really have a plot. It's not based on a singular event -- a market crash, a scam, or whatever. Instead, it's part memoir, part deep look inside the world of investment banking. Or maybe just one investment bank Salomon Brothers, where Lewis worked for ~2 years.

Liar's Poker is a primer into investment banking. He tells it like it is, there's no glorification, and no undue vilification of either the profession or any individual character. He knows how to tell a story, even if there's no plot, and there was not a single page in the book that dragged or felt like it didn't fit.

Most investment bankers, turns out, are just glorified salesmen. Bonds' salesmen, in this particular instance. They call up fund managers and try to feed them shit so that they buy whatever they want to sell. I mean, at least some salesmen do that. Or did that, this book was published decades ago.

Now why would a fund manager buy a bond or some other complex financial instrument out of nowhere 'cause some guy called him to sell it to whom? I really don't know. It's mostly greed. But fund managers do do that (or did that). And the investment banks where these salesmen work are darn fucking rich, so they have darn fucking good images (dapper suits and fancy restaurants help for sure). But the investment banks aren't the fund manager's friends. They're just middlemen with conflicts of interest at every point and you can never be sure of which interest they're furthering at which point in time.

Essentially, unless you're a big, big fish, dealing with investment banks is a massive gamble. They're not out there looking for your interests. As with any agent/broker/middleman.

Lewis intersperses his writing on how investment banks operate with his own moral dilemmas. Bankers love to think that they "deserve" all the money they end up making (hundreds of thousands of dollars, sometimes millions, back in the '80s!). Lewis is unambiguous in his thoughts that he didn't deserve it. He gives us a brief insight into his dilemma in the epilogue and I love the measured, reflective individual I see there.

Undoubtedly a classic for the ages. If you know nothing about finance, read this book, google a little, and you'll come out with both knowledge and emotions (and dazzled by the humour).

Jerry Rose

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.

Frank Stein

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.

Deepak

Ironically (you will understand why once you read the book), this was one of the suggested readings when I was interning with Goldman Sachs.

The book captures the experiences of Michael Lewis as a Salomon bond salesman. But what it includes in more excruciating detail is "the" truth about the glorified Wall Street (using this phrase in a rather generic sense to include markets in other locations as well), and the rise and fall of one of its inhabitants, Salomon Brothers, in the 1970s and 80s.

To be honest, having seen this industry pretty up-close probably makes this review a bit biased. In other words, for me it was not strictly an outsider's view of the world of investment banking. Having said that, however, I feel this book is good enough to capture the attention of the uninitiated, with its honestly brutal details and strikingly realistic delineations.

Some of my favorite quotes from the book:

"That was how a Salomon trader thought: he forgot whatever it was that he wanted to do for a minute and put his finger on the pulse of the market. If the market felt fidgety, if people were scared or desperate, he herded them like sheep into a corner, then made them pay for their uncertainty. He sat on the market until it puked gold coins. Then he worried about what he wanted to do."

"If you ever care to see how all the world's most awful jokes spread, spend a day on a bond trading desk. When the Challenger Space Shuttle disintegrated, six people called me from six points on the globe to explain that NASA stands for Need Another Seven Astronauts."

"Now I admit, even for a geek, it was a little embarrassing to let investors believe their white magic. But as long as the chartists placed their bets with me, my jungle guide explained, the reasoning of our customers was not for me to question."

"Most of the time when markets move, no one has any idea why. A man who can tell a good story can make a good living as a broker... Heavy selling out of the Middle East was an old standby. Since no one ever had any clue what the Arabs were doing with their money or why, no story involving Arabs could ever be refuted. So if you didn't know why the dollar was falling, you shouted out something about Arabs."

Loved it! Would definitely recommend it to those who are (or going to be) associated with the world of investment banking.

Flavio

Liar's Poker is a book about the days that Michael Lewis spent at Solomon Brothers as a Bond broker during the bond boom that took place starting in the 80's. The book is really entertaining and at the same time very informative. The book can be grouped into a few sections, that have very distinct focuses. The first is about the rise to prominence of Louie Ranieri to the head of the mortgage bond trading desk and his subsequent fall. The second is about Lewis' own experience in the London office of Solomon Brothers as a trader in the corporate bond department. The third section talks about Michael Milken , the junk bond czar, and his rise to power. I was amazed by the extent to which this whole industry is driven by Ego, cunning, opportunism, speculation, deceit, and street smarts. It is clear that the customer is a victim to be exploited by this industry.It is amazing to realize that institutional investors like pension funds and trusts make multi-billion dollar investments in some of these bonds which turn out to be little more than a speculative gambles of varying levels of risk. Some people become very rich some loose their shirts, and all the while the investment banks make huge profits. It is also thought provoking how laws enacted by the government can drive a whole industry. An example of this is home mortgages as a bond instrument.There is one characteristic of mortgages that make them uninteresting to the bond industry and that is the fact that they can be repaid at any time. Bonds are generally held to a maturity date. Who wants to hold a bond that can be repaid at any time ? The financial lobby tried like crazy to get congress to enact legislation to force a holder of a mortgage to hold it for full term or pay a penalty. This would make it more interesting as a debt instrument, to the detriment of the mortgage holder. This lead to a whole industry which is the CMO industry. Abuses in this industry ultimately lead to the housing bubble and the finanacial crisis 0f 2008. You can read Lewis' other book, The Big Short, for more details about this. In any case, if you want to read a first hand account of the inner workings of the wall street bond industry from an insider, this is a very good read.

Matt

This was a fascinating book to be reading in the midst of the biggest financial crisis of the past 75 years. Liar's Poker records the author's experience as a bonds trader for Solomon Brothers, at the height of the 80's trading explosion - an accurate, and frightening, account of the ludicrous nature of the whole industry. Perhaps the most shocking aspect of the book is the attitude of the traders: to make money at any cost, regardless of the consequences. In this world, it was perfectly acceptable to "blow-up" (bankrupt) a customer with a trade, because the company would make a hefty commission, regardless of the outcome for the others involved in the trade.

It's easy to see how the groundwork for our current financial mess was laid in this environment. Lewis talks about how new sources of income were constantly being made by cutting up bonds into new derivative securities - similar to the derivatives used from the sub-prime mortgages. When they mortgages collapses, so did all the derivative securities - but the obfuscation was deep enough so that many, many people bought those derivatives who should have known better.

Overall, Liar's Poker is well-written and entertaining enough to recommend to anyone, but it's also a disturbingly enlightening lens through which to see our current financial struggles.

Milan

Wall Street is a hub of financial experts. These experts keep finding some gaps in the market, which could be exploited to make loads of money. That is the story of Salomon Brothers as told by Michael Lewis in an amusing way.

Bond traders are known for their unusual habit of playing “Liar’s Poker” a one-of-a-kind game that pushes anyone beyond its limits and questions your ability to make split-second-decision, judge risk and increase/decrease your wealth.

The book shows the rise and collapse of Salomon Brothers. In general, it focuses on how they managed to increase their influence with the help of unethical methods and which resulted in their quick downfall. Before the crash in 1987, Salomon fired thousands of employees as a result of inadequate policies and practices used to regain control over the market. The time for growth ended, with the rise of other competitors who replicated Salomon Brothers’ methods to be used against them.

Liar’s Poker showcases the egocentric culture that prevails on Wall Street. The book describes the complete lack of etiquette and ethics among the traders. Lewis’s reflections on how the environment corrupted his soul makes it quite clear that an outsider has to be very skeptical of what Wall Street is trying to convince you of. They usually have but one interest - to make money at the other's expense.

Title	:	Liars Poker (Norton Paperback)
Author	:	Michael Lewis
Rating	:
ISBN	:	039333869X
ISBN-10	:	9780393338690
Language	:	English
Format Type	:	Paperback
Number of Pages	:	310
Publication	:	First published October 17, 1989

Liars Poker (Norton Paperback) by Michael Lewis

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