I WAS GREATLY amused by the many affirmative greetings I received – largely from the more mature collective of market players – following last week’s “grumpy old man” reflection on the way in which traders are trained and work has changed over the three-and-a-bit decades I have been hanging around the City. I also received some support from the buyside where proper, old-style market making is most sorely missed.
One thing that comes with being a grumpy old git with a long memory is all and sundry demanding that I write a book about how it was, about some of the characters I have known and about what ridiculous things we used to get up to.
Who, today, can imagine a trader standing up in the evening and calling “Blues Brothers tomorrow!” and the entire trading floor turning up the following morning in tight suits, narrow ties, sunglasses and trilbies? Who can now imagine the catering manager arriving on the floor after a good new issue has been placed with a trolley of champagne and cheese straws, or a strip-o-gram arriving and doing her thing in the middle of the floor on the head trader’s birthday?
THEN LAST WEEK, somewhat out of the blue, I found myself being pointed in the direction of an article in The New Yorker by Gary Sernovitz titled “Goodbye to Wall That: The Decline of the Trading Floor Memoir”. He begins with “Liar’s Poker”, Michael Lewis’ masterpiece.
I well remember the book coming out. It was quite a sensation. It made Salomon Brothers sound like a Wild West show which, of course, it was not – it was actually the most admired and feared bond house in the world and its people had forgotten more about taking and managing risk than most of us were ever going to know – but it nonetheless went some way to define how we hoped to be seen. Suddenly everyone wanted to be a “Big Swinging Dick”.
I believed at the time that I had joined that category when I bought and sold a 2-1/2-year piece of a Mexican FRCD at “11 over” and sold it, back to back, at “7 over”. Hard to believe it nowadays, but that was 11% and 7% over – not basis points.
Some 400bp take-out on a 2-1/2-year floater translates into a full 10 points of profit? Yes, I made for my firm US$100,000 by trading, risk free, just US$1,000,000 bonds. I must add, in self-defence, that I never represented a price to either party. I simply showed the piece to the potential buyer, a specialist in Mexican risk, asked him what he’d care to pay for it, then took a buy order and a sell order and filled them both at the respective counterparties’ chosen price. Oh, and just to assure you that the poor old seller didn’t get legged over either, it was the Mexican bond trading desk at an American bank which was offering me the paper that way.
There is a kind of romanticism for the age when people stood up on their hind legs and hollered across the floor
ANYHOW, THE ARTICLE in The New Yorker wonders how come it is that, nearly 30 years after it was written, Liar’s Poker is still the most read book on the subject of life and love on a trading floor and how come newer kiss-and-tell stories such as Greg Smith’s “Why I Left Goldman Sachs” or John LeFevre’s “Straight to Hell: True Tales of Deviance, Debauchery, and Billion-Dollar Deals,” never really quite captured the imagination.
And yet there is no need, so Sernovitz notes, for an updated version of “Liar’s Poker”. He writes: “And a story of an ending will never be as inspiring to aspirants as a story of a dawn. This, above all, is why those two recent books won’t be anyone’s earnest answer to an interview question in twenty years. Which might be okay. We still have the original, which holds surprises on each re-reading. We don’t need a new ‘Liar’s Poker’ if we have fairer and more efficient financial markets. We don’t need a new ‘Liar’s Poker’ if it means fewer memoirs whose showy debauches are paid for by unexceptional financial services. And we aren’t going to get a new ‘Liar’s Poker’ if the current trends in securities trading continue. For that new ‘Liar’s Poker’ would be the autobiography of a computer, talking to other computers, with no hijinks to report amid their silent hums.”
I SUPPOSE THERE is a kind of romanticism for the age when people stood up on their hind legs and hollered across the floor. That meant that others knew what was going on. Happenings on the floor were a communal experience which led to banter. Heaven help a trader or salesman who dared to make any noise on the floor now. They have become like libraries in which the loudest sound is the clicking of keyboards. The 1980s were the Wild West in trading terms where the long bond trader was the chief gunslinger. It is the age when the interest rate swap was invented and when repo settlements were calculated by long hand.
In truth, it’s no great surprise that aspiring graduate trainees want to read and memorise the story of what a wild and fun place the trading floor is, not how miserable and corrupt it can be. The bits about cocaine and lap-dancing are getting boring and most people on the Street – and they are the principal buyers of books about the Street – want to hear things they didn’t know and not a repeat of the same old rubbish about drugs, booze and misogyny.
Quite where that leaves the prospects for my book – if I ever get round to writing one – I’ll leave for you to decide.
