Thursday, March 31, 2005

Liars Poker
It refers to a version of poker that is popular among the traders of Wall Street, especially those in Bond Trading. It is a way of bluffing your way all the way to six figure bonuses while dealing with bonds, instead of cards. They deal with millions of dollars, and bluff about the demand and supply of bonds, and the intrest rates charged, to get unholy profits. The haggling is worse than a downtown Calcutta fish market. Each of them try to outwit the other, they do it for fun in-house and seriously while with the clients or other fund houses. A lot of these clients do get rip-offed by the bond investment guys. CRM is obviously not their forte. It is on a deal-to-deal basis. With traders having nicknames like Human Piranha and big swinging dicks, you dont expect much sympathy. Maybe things have changed now , since this an account written in the late 80s. The book is basically about the Bond market in Wall Street and London seen through the eyes of a trader in Salomon brothers, the top investment banking firm in 80s. Has sunk without a trace now. He also talks about the decline.
I read this book courtesy a friend who is going to JP Morgan in London to do his summer training in Bond market derivatives.Maybe he was trying to learn a trick or two.
The book starts with a hilarious account of the training sessions in Salomon where the back benchers used to bet on the Japanese guys flopping off in the first bench, reminded me of a lot of company training sessions.No one said anything to the Nips (thats the nickname for the japanese, a short form of Nippon) they were a protected species, as Japan had large trade surplus with tons of money to invest and Salomon wanted a foothold in the Japanese market.
He speaks of the burdened young market analysts who were a forsaken lot, working more than 90 hours/week, poring over reports, and financial stuff; always at the beck and call of the managers, they were completely stressed out.
Bond trading was the in-thing in the 80s, a pile was waiting to be made due to wild fluctuations of the interest rates,equity also called ticker trade was a boring job, staring at the flickering screen. Whereas bond trading was a continuous passing the buck or playing Liar's poker, and finding the fool in the market.
He pokes fun at the Savings and loans banks, which just did plain vanilla banking, also called 3-6-3 ( borrow at 3%, lend at 6% and at the golf course at 3). Salomon used to fleece these guys, giving them turkey deals. Salomon consolidated the mortgage market, in the USA by allowing its trading by creating a special type of bond for it.This became the most lucrative business. Though later they mised the junk bond wave which led to their downfall.
Written in a brutally frank and sarcastic manner, it gives a interesting picture of life in the bond trade. Though there is lot of financial jargon, but he has explained it well. A good read overall.


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