Lewis thought it was a period which would end but nothing has changed, in the investment world over 20 years later.
Lewis who had a degree in art history from Princeton university decided to take up a job in investment banking. He joined the merchant bank Salomon Brothers, as trainee geek but soon rose to the top to became a “Big Swinging Dick” bond dealer in what was the world's most powerful and profitable merchant bank. His book will be an eye opener for anyone who thinks that the professional Forex traders in banks or any other financial trading firm, are serious guys who make big money for investors. After reading this book, you will come away from it believing that not only should you never trust anyone again with your investments but you can become a successful Forex trader. The book is vastly entertaining but also carries a very serious message, about the murky world of so called professional traders.
The Real World of Investment Banking and Trading
The book Liars Poker is a timely reminder of never to trust investment advisors and banks. In fact today, its very topical. Today the global banking system is in crisis, after years of greed and bad investments, its now plunging the world into a financial crisis which could spell the biggest recession since the 1930s. The build up to the 2008 crash he covers in his new book The Big Short: Inside the Doomsday Machine and we have covered this in another book review but now let's go back to the vastly entertaining Liars Poker.
"When I wrote Liar's Poker [published in 1989] I thought it was about a period that was coming to an end. I thought a system that paid a 24-year-old like me money to give financial advice must be crazy, but I never thought it would last." (Michael Lewis Interviewed in the Guardian)
A Culture of Greed and Juvenile Behaviour
Well it still does go on today, the salaries paid in banks are enormous but the skills of these people are low and greed and arrogance are all around. I read the book around the same time as the Film Wall Street came out, with Michael Douglas playing the fantastic character Gordon Gekko and I thought it must be exaggerated but I got a job as a sales person in a commodity brokerage. Just like Lewis, I could believe how much we were being paid for what we did and how much money the company was losing for clients. The world Lewis describes is one which is insular, arrogant with the majority consumed by their own self importance in a culture of greed and juvenile behaviour.
'If you thought Gordon Gekko of the Wall Street movie was an implausibly corrupt piece of fiction, see how you like the real thing. This rip-the-lid-off account of the bond-dealing brouhaha is the work of a real-life bond salesman ... Read all about it: headlong greed, inarticulate obscenity, Animal House horseplay ...' (The Sunday Times )
Lewis was amazed when he was in training sessions at how, his fellow workers through spit balls at each other, insulted the people teaching them, phoned sex chat lines and broadcast them over the intercom and made bets on the behaviour of others in the group such as, how long it took them to fall asleep in lectures.
An Entertaining Read but a Serious Message
“I want to be an investment banker. If you had 10,000 sheres (sic) I sell them for you. I make a lot of money. I will like my job very, very much. I will help people. I will become a millionaire. I will have a big house. It will be fun for me” (Seven Year Old Minnesota School Boy)
The above quote, was taken from the cover of Liars Poker and goes with Lewis's view that anyone could have done what he did – you just had to be in the right place at the right time. Michael Lewis left the bank and is main reason was he couldn't equate the dollars he was making to his contribution to society and couldn't see how his job of selling bonds to customers produced much goodness in the world.
When I look around the Forex industry today, I see brokers and vendors talking of sure fire strategies which make money which the big banks and Hedge funds use and you can make money with them. Of course these systems are not from any banker or Hedge fund manager but if they were, after reading Liars Poker you wouldn't be trusting them.
Success in Forex trading is about having a simple trading system and trading high odds trades for profit. Being patient and waiting for the right opportunities. Its simple to do and anyone can do it and not only can you win you can make more money for yourself, than an investment advisor ever will.
Bonfire of the Vanities was a great book of fiction, Liars Poker is real. The world of investment banking and the characters who worked in it are bought vividly to life. This book is one that I think anyone should read. Not only does it teach you, how bad most professional investors are, its laugh out loud funny so:
'As traders would say, this book is a buy' (Financial Times)
An important book on understanding the world of so called professional investing and while the book focuses on bond selling, I can confirm the culture was the same in Forex and other derivatives from my days in the industry. The book should become a film shortly and I can't wait to see it.