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p24: The first thing you learn on the trading floor is that when large numbers of people are after the same commodity, be it a stock, a bond, or a job, the commodity quickly becomes overvalued.

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Liar's Poker is a personal account about Michael Lewis' experience as a trader in Salomon Brothers in mid 1980's. The book follows two different story threads, though not necessarily in chronological order.
The first thread is autobiographical, and follows Lewis through his career at Salomon Brothers. It starts with his recruiting experiences in Princeton and at the London School of Economics, his training in 1984 and his career as a bond salesman in Salomon's London office. This part of the book gives a first-person account of how bond traders and salesmen truly work, their personalities, and their culture. Some highlights of this section include:
(1) The recruiting process, the mindset of those who joined IB and their ambition, their interview techniques (aggressive style, inexperienced interviewers);
(2) The attitude of the trainee class, the front row and the back row, with a somewhat childish mentality. Michael connects this attitude to a rapid expansion of Salomon's rankings and the change of culture from loyalty to greed;
(3) The need to network and schmooze to get the internal position that you want after the training program. It describes all the politics involved;
(4) The number of good traders who left the firm to find places where they were better paid;
(5) The relationship between traders and salesman;
(6) The conflict of sales: "who do you work for, the client or Solomon?".
The second thread is a sort of history of Salomon Brothers and an overview of Wall Street in general, especially how the firm created a market for mortgage bonds and made the firm wealthy, only to be outdone by Michael Milken and his junk bonds. This thread is less dependent on Lewis' personal experience and features quotes apparently drawn from interviews with various relevant figures. Some highlights include:
(1) The relationship between corporate financing (issuing bonds and equity) and sales & trading in the 1980's. It does not talk about M&A until close to the end of the book and depicts it as a sub-product of the junk bond market;
(2) The raise of the bonds market in the late 1970's, how it was boring in the beginning until the FED changed its monetary policy and allowed interest rate to float, transforming bonds from conservative to aggressive gambles;
(3) The relationship between the corporate, government and mortgage bond departments;
(4) The development of the mortgage unit by Ranieri. It first accounts the pooling of several mortgages that depersonalized them and allowed trading as a bond. The Ginnie Mae, Freddie Mac and Fannie Mae's and how the government guaranteed the loans, allowing them to have high credit ratings. The CMOs and how they divided the maturity of the mortgages into tranches to solve the problem of early repayment embedded in mortgages in US;
(5) The culture of the mortgage trading, telling stories on the pricks, the gluttony, etc;
(6) The junk bond and the raise of the LBO deals.

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a good intro to the world of wall street bond investing.

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