A section from
‘A Jedi shall not know hatred, nor fear… nor love.’ from Star Wars Episode II
MICHAEL LEWIS’ LIAR’S POKER
“This isn’t some fucking story about a bunch of fat analysts sitting around an ofiice,” he said over the music. “It’s not a bunch of big swinging dicks making bets on the serial numbers on dollar bills.”
I smiled at the allusion. He was referring to Michael Lewis’s Liar’s Poker, probably the definitive book on the culture of the financial industry. In it, Lewis described the casino that was Wall Street through the eyes of the macho traders who made billion-dollar deals from behind their computer screens, then went home to their mansions in Connecticut. The book had spawned a decade of Wall Street tell-alls, covering nearly every aspect of the financial industry. If a broker had scratched his ass while shouting Xerox, someone somewhere had written a book about it.
Foolish names and foolish faces often appear in public places.
The larger the number of people involved, the easier it was for them to delude themselves that what they were doing must be smart. 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.
The men on the trading floor may not have been to school but they have PhDs in Man’s Ignorance.
In any market, as in any poker game, there is a fool. The astute investor Warren Buffet is fond of saying that any player unaware of the fool in the market probably is the fool in the market.
Ask any astute trader and he’ll tell you that his best work cuts against conventional wisdom. Good traders tend to do the unexpected.
The firm’s management created a training programme, filled it to the brim, then walked away. In the ensuing anarchy the bad drove out the good, the big drove out the small, and the brawn drove out the brains.
Then bosses wanted him not for any other reason, but simply because other bosses wanted him.
Those who say don’t know, and those who know don’t say.
In joining equities we could be a part of something far larger than ourselves. I’m not sure we could conceive of anything much larger than ourselves.
Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience.
The only thing that history teaches us, a wise man once said, is that history doesn’t teach us anything.
What was the secret to dealing with assholes? “Lift weights or learn karate.”
I was fascinated by Ranieri. For several years running he and his traders made more money than anyone on Wall Street. I didn’t like them one bit, but that was probably a point in their favour. Their presence was like a sign of health of the firm, just as mine was the sign of the illness. If the mortgage traders left Salomon, I figured, we’d had it. There would be nothing remaining but a bunch of nice guys.
‘I don’t do favours. I accumulate debts’ - Ancient Sicilian motto
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 them like sheep into a corner, then made them pay for their uncertainty. He sat on the market until it puked gold coins. Then he worried about what he wanted to do.
‘If it weren’t for the fact that I can do anything I want around here, I’d quit.’
“All that stuff about me in the mail room is true,” says Ranieri. “And when I ran mortgages I religiously picked people from the back office. At first I did it for moral reasons. But it worked. They appreciated it. They didn’t feel like the world owed them a living. They were more loyal.”
Stupid customers (the fools in the market) were a wonderful asset, but at some level of ignorance they became a liability - they went broke.
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