Whilst on the beach in Spain back in July I finally got around to reading Michael Lewis’ book Liar’s Poker where he goes over his experience working for Salomon Brothers in the 1980s. The book is written in 1989 but the settings, the people and their activities are reflective of our own time and the financial world is very similar but obviously not as evolved (or perhaps devolved) product wise. The product evolution is one of the main topics of the book and Lewis spends much of his time talking about the evolution of Asset Backed Securities (ABS) and the creation of mortgage backed securities (MBS).

Lewis does not only focus on the development of the ABS but also spends significant time on his experience within the Salomon training scheme. He does an excellent job of portraying the mentality of the people in the program and how it would translate over to their roles within the firm.

One of my favourite things about reading the book was how in the early 80s bonds were king and equities were crap since I’ve only lived through a time were equities (and equity options) were the top investment assets except for the last four years were CDO took over and now bonds are back on top.

This book is a great read for anyone wanting to get insider knowledge of the trader mentality along with a brief overview of the evolution of ABS to include MBS and other similar products. The book also does a good job of explaining the decline of Salomon through out the 80s with their lack of focused management decisions and reluctance of embracing change in the market place and financial product evolution.

Related posts from the blog:

• How I caused the Credit Crunch
• Financial Shock