Flavio's Reviews > Liar's Poker

Liar's Poker by Michael   Lewis
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Dec 24, 2011

really liked it

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.
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message 1: by Flavio (last edited Dec 24, 2011 08:40AM) (new) - rated it 4 stars

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.


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