F.I.A.S.C.O.: Blood in the Water on Wall Street

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.

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 S

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.

Obviously Mr. Partnoy lacks one important requirement to continue as a derivatives broker: he possesses a conscience. I have never directly traded derivatives, and after reading this honest expose I never will. In fact, I will never trust ANY full service broker again. Although at times almost benighted in literary quality, Mr. Partnoy's mea culpa reveals far more than it detracts. It is fundamentally a study in the arrogance and aggression of human nature, driven by greed, ego, and the stupidity of youth. It should be required reading by our securities regulators and our representatives on capitol hill.

A very good introduction to derivatives (and even some general finance for novices) and one of the better looks at how degenerate Wall Street culture can be. Though comparisons are frequently made to Liar's Poker, I found FIASCO to be a more useful read, even though it's not quite as funny as Liar's Poker was at its best. The usual tales of arrested development among Wall Street's community are here, but there's a much more gripping and sobering tale of how rapacious greed knows no bounds, and how a large number of actors, including large multinationals and even governments, ultimately pay the price. Partnoy doesn't tell his story as smoothly as he could, and his narrative sometimes feels larded with anecdotes that don't add much color or relief. He also struggles at times to weigh his role in the big picture. Overall though, he describes his experiences and general Wall Street culture with enough insight that you can feel his disgust, and applaud when he eventually steps away from it all.A great business book, flaws and all, and a perfect antidote to all the puffery surrounding coverage of financial markets and Wall Street these days. Now when will we see a book of investment banker/derivatives trader jokes, to add to all the great lawyer joke books?