Liar’s Poker by Michael Lewis – Book Review

Publisher’s write-up:

‘From mere trainee to lowly geek, to triumphal Big Swinging Dick: that was Michael Lewis’ pell-mell progress through the dealing rooms of Salomon Brothers in New York and London during the heady mid-1980s when they were probably the world’s most powerful and profitable merchant bank.’

Liar’s Poker is a book on investment banking and bond markets written by the American banker, Michael Lewis based on his experiences at Salomon Brothers, a leading merchant bank in the United States during the 80s.

The book could be split into three parts; where the first part would deal with the author’s experience as a trainee in the bank; followed by elaborating on how the mortgage trading division grew in the bank and the internal tussles among the top management and finally, the author’s own experience at the firm, starting as a geek fresh till the point of becoming a fairly successful banker.

I liked the way in which the author had structured the book, starting with his interview and from thereon, his cynicism was visible throughout the book. I liked the way in which he was expressed the cynicism too, often with sarcastic jibes, funny anecdotes and yes, certain remarks on the practices of the people in the trade which would be regarded as unforgivably indiscreet by his employers which is perhaps the reason why he had to quit the bank in order to write the book. I also felt he gave a good insight as to how the bond trading flourished in the United States during the 80s and how Salomon Brothers exploited the fears of the investors. This book is in no way a tell all book on Wall Street corruption but the author has given enough content for the readers to understand why the corruption takes place in Wall Street.

However, I have got to say that I am least interested in knowing about the ego clashes amongst the top management of Salomon Brothers and a third of the book was spent on that and those were possibly the dullest pages of the books. While I understand that the author tries to make it as friendly as possible to even those who are not literate in finance, the feedback I have received from some of my friends who are not from the field of finance is that they don’t understand his jargons which was something I felt too; that the book is difficult for a layman to appreciate but then, to answer the question as to whether the author has satisfied his own community; I would speak for that; the answer is not entirely. The book could have gone into deeper aspects of bond trading, interest rate fluctuations, etc. instead, the author throughout the book; starts off with a technical aspect but eventually digresses into how things are done at Salomon which would not be entirely relevant.

To conclude, I would say that this is a good book for someone who knows about the jargons in the field and could be thoroughly enjoyed had the second part of the book not been there at all for I also felt that what the author said there was not specific to investment banks, but any corporates.

I would rate the book a six on ten.

Rating – 6/10

Have a nice day,
Andy

Dirty Money by Ramesh S Arunachalam - Book Review

Publisher's write-up:

'Over a fourteen-year period from 1999 to 2013, one hedge fund carried out an investment strategy utilizing hundreds of millions of trades, virtually all of which lasted less than 12 months, and characterized the vast majority of the resulting $34 billion in trading profits as long-term capital gains ... resulting in estimated tax avoidance of more than $6 billion."- Permanent Subcommittee on Investigations, United States Senate, 2014This publicly recorded statement exposes the shocking truth about how Wall Street, and the billionaire class, have continued to manipulate and exploit the financial system, taking advantage of loop holes to pull the wool over the eyes of the Internal Revenue Service (IRS)'

Dirty Money is a book exposing how various players of the Wall Street of dubious repute have a significant say in the electoral process of the nation who project themselves as the flag bearers of democracy. 

The book starts with a dedication to the citizens of the United States and then proceeds to explain how campaigns of politicians are financed, often with money from manipulative players in Wall Street who fund the campaigns breaking all political barriers. The book has its focus on tax evasion, corporate crime, how they route money to foundations of the candidates and of course, the involvement of Wall Street.

I liked the way how the author brought out the flaws of the present system, especially, the use of basket options to claim benefit of a long term capital gain and setting off the same, often creating fictitious capital losses. The former was explained by citing the example of Renaissance Technologies said to have avoided around 6 billion USD in taxes and the latter was explaining the activities of the businessman Haim Saban. The author also has backed up all his figures and details with citations from reliable sources, including from committees set up by the government. The author often quoted Bernie Sanders and stressed on the cause that former candidate was trying to push for; reforms in Wall Street and the desperate need for them. Last, the author also brought out the issue of conflict of interest and how the financial regulatory framework has been systematically made pro Wall Street by repeatedly appointing Wall Street players to the state Treasury. I also appreciate the fact that the author maintained neutrality and throughout the book, did not endorse either candidates even though he did question the conflicting promises of Hillary Clinton on cracking down on tax evaders and at the same time and bringing in tighter regulations to Wall Street and the same time, delivers paid speeches to top executives, the transcripts of which are not released, akin to Donald Trump's tax returns.

While I praised the author for not endorsing a candidate, I couldn't help but feel that nearly 90% of the focus was on Hillary Clinton and despite Donald Trump making promises, especially his tax policies which very much raises the question of conflict of interest as it turns out that such policies tend to benefit him personally but then, it was hardly touched upon. Donald Trump's misdeeds, through the Trump foundation, was not part of the book at all but right here I shall end talking about what was not in the book and focus on what was there.

I do agree that the author did give citations to most of his text but then, the words often used were 'reported, alleged, named, tax issues' and not convicted and very rarely, were they convicted tax frauds. Moreover, the author spoke about exploitation of loopholes; and legally, exploitation of loopholes is not tax evasion but rather, tax avoidance and the same could be corrected only by an amendment to the law, even though I agree that the author did emphasise on the need for a radical reform through to the laws and regulations governing the industry. Also, in many of his individual examples, the author quoted donations in four figures, which is totally insignificant considering how someone as insignificant as Governor Martin O'Malley could raise close to 6.3 million USD.

On a side note, I would also say that this book is not something meant for an average person because it deals with a lot of intricacies such as tax laws, SEC norms, derivative instruments, etc. and fortunately, since I have done a couple of SOX audits, I am broadly familiar with the SEC requirements and thus, could appreciate the book.

While Clinton or Trump could become insignificant after November 8th, 2016, the issue raised by the author in this book is a matter for serious consideration and one could hope that the next President of United States, after she gets elected by a huge majority manages to implement these reforms, at least to keep the Bernie Sanders bloc of the Democrats at bay.

After the Witney by-election in UK, Bernie's brother, Larry, who contested for the Greens to replace David Cameron as MP for the constituency had this to say about how both brothers ended up on the losing side:

'He lost better and he will be probably the second-most important politician in America. So that’s not too bad. I won’t be.'

I really hope Bernie is, and the system is reformed.

Coming back, to conclude, I would award the book a six on ten, it gave a pretty good insight as to how Wall Street influences elections but then, I would have liked it if there was reasonable focus on both candidates.

Rating - 6/10

Have a nice day,

Andy