All Cheap Books

Living the Lie (2009-06-30)
This book is your primer to what happened to the US economy long after it was penned.

As a financier who worked amongst all of the moving parts herein defined, I can spell it out to you in simple terms: If loan becomes more valuable than its collateral, it's worthless.

Liar's Poker is now a period piece which unintentionally disected the groundwork for the disasterous bogus inflation of mortgage values, which pushed up home values, in the buildup to the 2008 crash.

The author seems to have been intent on just getting inside as an employee long enough to write the book, but he did manage to pull off more of an expose than I believe he even thought himself.

The history of the notorious invention of "traunching" mortgage risk, by Solomon Bros in the 1980's, was later unleashed to its full capacity for destruction by the elimnation of related regulation and monopoly regulations in the 2000's. In hindsight, it's rediculously obvious.

On a dive boat with one of the employees of the the primary character in 1998, he told me they were 'knocking it out of the park' by making mortgages to 125% of value. That's when I got out.

A great read, written with great humor, this book is an educational classic I recommend all the time.

Profound Examination of Wall Street in the 80's (2009-06-29)
Liar's Poker is a fantastic chronicle of the rise and fall of Saloman Brothers during the 1980's. It cannot be possible to write a book about bond trading that is both so entertaining and informative. If you want to understand the cultural shift regarding debt in America over the past 30 years, I think you'll find this story to be alarmingly relevant.

I also believe it is worth mentioning that writing this book took a lot of guts, especially since it was published in 1989 (he left his job in 1988). I for one am thankful Lewis decided to "tell the story rather than go on living the story".

eh (2009-06-26)
Paid for a newer edition, recieved the older one. Could have ordered the older edition for less from someone else.

It happened before, it's hapenning now, and it'll happen again (2009-06-25)
This book helped me to actually understand wall street better than any experience in the past. (And that's saying a lot since I used to work for a firm which audited some of those firms, have had many friends on WS, etc.). Notice I didn't say this book helped me to understand stocks, bonds, markets, or investing though - just wall street and it's culture.

From the outlandish behavior, over the top pranks, abuse of newcomers, and obsession with money, Michael Lewis describes the culture of Wall Street in a way that will feel oddly familiar because you understand the archetype, even if you've never been there.

One of the best parts of the book is the history it gives. Lewis described the creation of thinks like mortgage backed securities and America's infatuation with junk bonds. He chronicles how the market crashes in the 80s affected Salomon brothers, and the forces that led to it. What he couldn't have known at the time of course was the havoc that mortgage backed securities would lead to decades later, but he explains how they came to exist, sets the stage, and leaves you with a better appreciation for the origins of our current economic troubles. Even though this book doesn't talk directly about our current economic problems (because it was published in 1989), it gives a better understanding of the root causes (the culture, the incentives, the short term thinking, etc.) than many other books I've read. It also has the advantage of not suffering from revisionism due to hindsight - for example many of the benefits of mortgage backed securities are mentioned. In my opinion, this is a much fairer and better look at wall street than almost anything else I've seen.

Hello Suckers! (2009-05-31)
Liar's Poker is a bluffing game played by the stock and bond traders at Salomon Brothers. There is series of arbitrary numbers -- the serial numbers on dollar bills -- that the associates make bids on. No one has any idea what the other players are holding, so the actual numbers are less important than the traders' abilities to bluff each other. The game is how they learn and practice putting one over on each other.

The game is also the title and central metaphor for Michael Lewis' 1989 memoir about becoming a bond trader at Salomon Brothers. His book pops up on a lot of best-of-business writing lists. It may seem odd to be reading it twenty years on, but if you really want to understand how the seeds of our current economic crisis were sown, you should read it.

Salomon Brothers basically invented the "mortgage backed security" that are one of the major causes of our economic problems.

What is revealing and relevant about Lewis' book is the dissection of the structure of the brokerage house and the attitudes that dominate it. The company, trader, and salesman's best interest are often at odds with those of their customers. The basic principle of trading is this: bluff the customer into placing big bets on stocks and bonds and take a commission on the sale. If the bet "blows up" the customer, well, "Hey, it's the market. It is unpredictable. Who knew?" (But the company and trader got their piece of the action.) If the bet produces a big return for the customer, then the customer has more money to use to make bigger bets with the now "proven" financial adviser.

In the lexicon of Salomon Brothers, "blowing up a customer" is when the customer loses their entire investment. It is commonly known in the industry that associates fresh from the training program will "blow up" most of their customers for about six months. Salomon Brothers only allows these green traders or "geeks" access to small investors to prevent damage to their big institutional investors, the organizations that will make bets in the tens of millions to billion of dollars.

The working class and middle class salary men who have bought into the common wisdom that the market always goes up over time and will beat inflation get fed to the "geeks" who are the most likely to blow them up. The trader/salesman gets his percentage. The company books the business. The investor takes all the risk and loss.

Lewis' own description of the practice: "In need of a euphemism for what we did with other people's money, we called it arbitrage, which was just plain obfuscation. Arbitrage means 'trading risklessly for profit.' Our investors always took risk; high-wire act would have been more accurate than arbitrage. In spite of the responsibility implied by my job, I was ignorant and malleable when I advised my first customers. I was an amateur pharmacologist, prescribing drugs without a license. The people who suffered as a result were, of course, my customers."

Lewis extends the metaphor. The brokerage house is basically a casino. The traders and salesmen are dealers. The markets, like the odds of winning a game of chance, are vaguely knowable, but entirely unpredictable. The investors are gamblers.

The difference, though, between Vegas and Wall Street is that people who go to Vegas know that they are gambling. People who take their money to Wall Street have been told that they are investing.

Lewis, to his credit, quits his job.

If you find yourself a little flummoxed by all of the financial reporting about our current economic meltdown, read Liar's Poker. It will help you make sense of it all.