Liar's Poker

by Michael Lewis

Trading money was nonetheless trading. It required at least one iron testicle and the same peculiar logic as bond trading. Witness: one day earlier in his career Dall was in the market to buy (borrow) 50 million dollars. He checked around and found the money market was 4 per cent–4.25 per cent, which meant he could buy (borrow) at 4.25 per cent, or sell (lend) at 4 per cent. When he actually tried to buy 50 million dollars at 4.25 per cent, however, the market moved to 4.25 per cent–4.5 per cent. The sellers were scared off by a large buyer. Dall bid 4.5. The market moved again, to 4.5 per cent–4.75 per cent. He raised his bid several more times with the same result, then went to Bill Simon’s office to tell him he couldn’t buy money. All the sellers were running like chickens. “Then you be the seller,” said Simon. So Dall became the seller, although he actually needed to buy. He sold 50 million dollars at 5.5 per cent. He sold another 50 million dollars at 5.5 per cent. Then, as Simon had guessed, the market collapsed. Everyone wanted to sell. There were no buyers. “Buy them back now,” said Simon, when the market reached 4 per cent. So Dall not only got his 50 million dollars at 4 per cent, but took a profit on the money he had sold at higher rates. That was how a Salomon bond 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 th...