Customer Reviews

Fiasco: The Inside Story of a Wall Street Trader

5 star:		(32)
4 star:		(17)
3 star:		(4)
2 star:		(2)
1 star:		(1)

 

 

There are several very interesting parts of this book, the most notable being the chapters (4, 7 - 10) in which Mr. Partnoy gives a high level description of some of the transactions that he was involved in. Some of his anecdotes, particularly those in which he discusses the atmosphere in an investment bank around bonus time (pg.40 - 42, 202 - 205), are pretty amusing and dead on accurate. The author's descriptions of some of his deals are clearly told from a junior banker's perspective, but they do a good job of putting forth what was being done, how it was being done, what everyone's perceived incentives for the transaction were, the work required to get the deal done, what kind of money, and importantly what kind of fees were involved. In this regard, the book offers more than both "Liar's Poker" by Lewis and "When Genius Failed" by Lowenstein.

Like all books written by former investment bankers the book contains liberally sprinkled anecdotes regarding job interviews from hell, the ridiculous daily escapades that can occur on a trading floor, strip clubs, the lack of personal lives, gambling trips and other stories which could easily have been pulled from the pages of Mr. Lewis's book or "Monkey Business" by Rolfe and Troob. All of these shenanigans culminate around the bank's (in this case Morgan Stanley), or more specifically, his group's annual sporting clay outing, FIASCO. The book also suffers from a somewhat poorly defined timeline and the lack of a defining event which drives the story. Due to these faults, it is at times little more than a book about the evils of investment bankers, the ignorance of their customers, all put forward to enforce Mr. Partnoy's somewhat guarded thesis; Derivatives are used by organizations that are legally prevented from investing in certain areas in order to skirt those laws.

This is a good book that could have been better, the occasions where it shine through make it worth reading, but also unfortunately let us know the author could have produced a somewhat better product.

My younger brother has decided that business is highly amusing, and after reading this book of his, I have to agree. A while back, I picked up and studied a mathematical book on finance (_Investment Science_, by Luenberger, if you're interested; quite good) that covered pricing, immunization strategies, lattices, the Black-Scholes equation for options valuation, and other aspects of modern finance. So I had a decent feel for what derivatives *are* prior to reading this book. However...

I can't remember the last time I laughed out loud at a book on such an ostensibly dry subject. Partnoy has an amazingly dry, amoral, detached style of narration that only adds to the surreal quality of the book. He is a gifted writer; I plowed through this absorbing read in the course of a little over a day. I have since started simply buying copies for my friends, since my original strategy of buying one floating copy has failed -- it never returned.

Especially if you are investing for yourself, but even if you are just looking for an engrossing book to pass the time, buy a copy of this book and give it to a friend when you're done. It's hysterical, disturbing, unsettling, and superb.

The book was published in 1997. I found it and read it in a day. Now that we are in the midst of another derivative crisis and we are watching our politicians on both sides of the aisle falling over themselves to bail out Wall Street under the guise of helping the homeowner....I am thinking that this book should have been required reading before the more recent crisis. I don't know if Bernanke has read this but it might be a good idea for him. If the characters and motivation and compensation of these clowns are anything like this book suggests, and the news media suggest it is the case, the average American should be outraged. These salesmen have even forced the US Government to do their will. In any event a short, quick, well written and humorous read that seems strangely prescient.

This book is a rarity in the financial world: blessed both with fascinating subject matter and a gifted author. Frank Partnoy takes the reader through his experience on Wall Street, most of which was spent in Morgan Stanley's nascent but lucrative derivatives group. Partnoy tells the story through the entertaining personalities of those he worked with, and his explanations of the derivatives transactions his firm sold in the latter half of the nineties gives a magnificent introduction to the basics of how derivatives work. Along the way, Partnoy amicably illustrates the global-economic oddities that predicated these derivatives transactions' creation, the contempt their creators had for those who would be buying them, and the oddities of a corporate world awash in money but barren of values. I enjoyed Partnoy's account wholeheartedly, and I consider it an instant member of the Liars Poker/When Genius Failed canon.

I love starting a review with a few memorable quotes because if you read the book the quotes will bring it all back no matter how long its been since you read it, and if you did not read the book and are intrigued by the quotes you'll buy it on the spot (at least I do). So here it goes:

Pg. 126 Frank quotes Warren Buffett, "If you don't know who the sucker is, it is you".

Pg. 130 Quoting another bond salesman, "Let me tell you something, If a bond can not be sold with two hockey tickets and a good bottle of wine, the bond can not be sold"

Pg. 176 "The involvement of European issuers seemed fitting. The first active derivatives market had opened in Europe in 1688, when traders on the Amsterdam Stock Exchange began writing derivative contracts...Derivatives were returning home"

Pg. 182 Talking about Mexican Banks, "They craved risk...they wanted to gamble. They wanted, they demanded, "leverage"-the ability to borrow to take on greater risk"

Pg 205 "Out of curiosity I asked everyone what other jobs they would be willing to take instead of their current jobs at Morgan Stanley if the pay remained the same...Would you rather work at McDonalds or at Morgan Stanley? For the same pay - McDonalds, without a doubt...Shoveling manure or Morgan Stanley? Manure sounded pretty good to everyone."

Pg 226 Talking about packaging a product for the purpose of creating an illusion of a gain, which happens to create the largest fee's ever ($75 million), "Of the $571 million, the investor immediately realized a huge gain, roughly $400 million."

- This was a totally smoke and mirrors gain done strictly for the purpose beefing up returns.

Pg. 247 At the end of his 3 year stint on the Street, "I now believed everything was a fraud, and I had a well founded basis for my beliefs. Derivatives were a fraud, investment banking was a fraud, the Mexican and the Japanese financial systems were frauds..."

Epilogue Pg 251 "What lessons did I draw from my experience selling derivatives? I believe derivatives are the most recent example in the history of finance: Wall Street bilks Main St."

Pg 252 "Could a $70,000-a-year Securities and Exchange Commission investigator ever catch a $700,000-a-year derivatives salesman?"

Pg. 256 "70% of derivatives professionals say they expect big losses in the coming year"

Pg 277 "If the SEC and the U.S. Attorney's office are busy prosecuting basic cases-insider trading, the mafia selling non-existent stocks-how can they possibly compete against the big boys, especially when the big boys are tucked away in Grand Cayman, protected by special tax legislation, insulated from disclosure requirements and hidden from the public view with a P.O. Box address?"

Charlie Munger, who is Warren Buffets partner in Berkshire Hathaway recommends this book highly. (See my other reviews and my blog for a complete list of his recommendations ( bloglines.com/blog/KevinKingston ). This book gives you a great understanding of the products that Wall Street firms are putting together and the reasons they are doing it. For example a LIBOR-Cubed Hedge and other supercharged, super leveraged and super dangerous, for those that don't understand them, which is most people. It also describes the frequency that even the packager, Morgan Stanley could not put a value on the complex derivative products.

By Kevin Kingston, Author of: A 20,000% Gain in Real Estate

This book provides an excellent expose of the derivatives and investment banking trade in surprising detail. I found the step-by-step explanations of how the derivative products were engineered and where the banks were making money most fascinating! The author has confirmed my personal belief that investment banks,just like the 'banker' in a casino,clearly has the upperhand when it comes to derivatives trading. Play at your own risk.

Finally, if anyone doubts any of the facts presented, one bank (mentioned in the book) was recently suspended in Japan for engaging in one of the very derivatives scams highlighted by the author.

This is a pretty important book for most investors out there. As the author points out, this includes millions of Americans who own mutual funds or certain equities. As far as I know it is the best book on derivatives. I had little understanding of these financial weapons of destruction and was glad to learn more through this book. Warren Buffett talks about the dangers of derivatives in his shareholder communications. Autobiographies often can be self promoting and have hidden agendas, but I did not find this book to be annoying. The author kept it entertaining by exposing some of the characters and culture in investment banking.

As other reviewers have pointed out, FIASCO is a lot like Liar's Poker. At times I cringed at the level of copying (ie: phrases like "rip someone's face off" or clients getting "blown-up"). If you haven't read Liar's Poker or are not too bothered by copy-cats then you shouldn't care about this point. After all, Michael Lewis, the author of Liar's Poker does not mind it and praised FIASCO (see the book's back cover). He realizes that copying is a complement. In any case, the copying takes little away from the educational value of this book and perhaps enhances the entertainment value. If you enjoyed FIASCO, I also recommend:

When Genius Failed
Den of Thieves
Liars Poker

This is the only book which I bought because of the recommendation of a bookstore salesman. Thanks to him, I got a much insightful opinion of what went wrong in Asia starting summer 97 in Thailand which later smashed the entire Asia except perhaps PRC and Taiwan. As a professional spot and futures trader, I seldom trade derivatives. After reading the book, I become more skeptical of placing any bet on that, especially through Morgan Stanley, ha ha. Anyway, Fiasco is the kind of book you cannot miss, if you are a serious investor. BTW, I do feel very sorry for those who admire the big names (like Morgan Stanley, Goldman Sachs) so much. They are doomed! I mean the investors, of course.

This book has two parts. The first would be the stories of the interaction with eccentric Wall St. characters. I enjoyed this part, just like I liked similar parts in books about high finance. The other part, the explanation of how derivatives were created and rated, was interesting but frigging confusing! I felt as though I needed a Yale Law degree (like the author) to grasp the financial language. I also understood how investors could be duped by these investments, because even after reading this book from an insider who wanted me to understand, I have very little retention of the technical side of what I read.

Overall a good book and a good look into the derivatives craze.

I wouldn't buy it new. I really wanted to give it three and a half stars. The book is entertaining and does give one an insider's look into Wall Street and the derivatives market. However, the tangents the author takes the reader down often had no purpose. They were more the type of story the author and some of his cronies would enjoy laughing about over a cold beer, but they lost something in print. Overall I have a better understanding of the derivatives market and enjoyed hearing about Wall Street in the early 90's.