F.I.A.S.C.O. : The Inside Story of a Wall Street Trader
by Frank Partnoy
Good read on derivitives
amazon.com
Reviews
Book Description
FIASCO is the shocking story of one man's education in the jungles of Wall Street. As a young derivatives salesman at Morgan Stanley, Frank Partnoy learned to buy and sell billions of dollars worth of securities that were so complex many traders themselves didn't understand them. In his behind-the-scenes look at the trading floor and the offices of one of the world's top investment firms, Partnoy recounts the macho attitudes and fiercely competitive ploys of his office mates. And he takes us to the annual drunken skeet-shooting competition, FIASCO, where he and his colleagues sharpen the killer instincts they are encouraged to use against their competitiors, their clients, and each other.
FIASCO is the first book to take on the derivatves trading industry--the most highly charged and risky sector of the stock market. More importantly, it is a blistering indictment of the largely unregulated market in derivatives and serves as a warning to unwary investors about real fiascos, which have cost billions of dollars.
Synopsis
In this behind-the-scenes look at one of the world's top Wall Street investment firms, Partnoy recounts his experience during the annual drunken skeet-shooting competition where he and his colleagues sharpen the killer instincts they're encouraged to use against competitors, clients, and each other.
Fiasco is an insider's diary, a shocking education in the jungle of high finance in the 1990s from New York to Tokyo. It tracks the progress of a young Morgan Stanley salesman as he learns the ropes of this sophisticated and ruthless web, where billions of dollars are lost in the creation and trading of securities so unlikely and so complicated that almost nobody understands them. Frank Partnoy presents a world filled with feral "rocket scientists" - the clever masterminds who persuade unsuspecting victims to buy derivatives (whose value is linked to or "derived" from some other security). These salesman often joke about their creations as weapons of mass destruction; and, in fact, the clients are often "blown up" or have their "faces ripped off." Against such well-trained salesmen, buyers often don't stand a chance, and the actual fiascos involve well-publicized losses at Orange County, Barings, Procter & Gamble and many others. Frank Partnoy's book is partly comical and brims with incredible characters, but his revelations should stir fear in anyone who owns mutual funds, stocks, or even insurance.
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Customer Comments
Average Customer Review: Number of Reviews: 13
A reader from New York , October 1, 1999
A junior employee's limited view of investment banking
This book is not an informative treatise on structured products or even on the basic mechanics of Wall Street. It reads like a Liar's Poker retread. It's a disgruntled and not very sucessful junior employee's view of the financial world. His financial insights show a limited grasp of the basics. His major beef seems to be that his colleagues are intelligent, competitive time pressured people. Surprise! One question, though. Is Janet Tavakoli, the author of Credit Derivatives, the "Queen of the RAV's"? That book is worth reading, and is a treatise on Credit Derivatives.
Tim Triche, Jr. (jabbo@yahoo.com) from San Francisco, CA , September 20, 1999
The funniest, most enjoyable book I've read in a long time
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.
A reader from Sydney, Australia , September 16, 1999
fascinating candour
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.
A reader from Center City, Phila. , September 2, 1999
Well written but oddly negative about a zero-sum game.
The author sold emerging markets derivatives at First Boston and then sold turbo-charged derivatives at Morgan Stanley. The latter included various structured derivatives, which I assume are like structured notes with cash flows that can range from highly predictable (plain vanilla) varieties to highly uncertain (so-called exotic or toxic-waste) species. Not all derivatives are going to have cash flows, but some forward derivatives are based on T Bonds or CMOs and would prob. have cash flows, so that may be what a structured derivative is. Most of the usual derivatives (forwards, futures, options, swaps) represent a zero-sum game, so why was he so negative on Morgan Stanley? All firms sold derivatives, but not all derivatives were exploding derivatives. The foreign exchange risk associated with various derivatives could work either way. I don't really see the problem. Some derivatives might have foreign exchange risk as well as interest rate risk, but that should be cyclical and should not necessarily spell financial ruin like his book suggests. No one should buy forwards, futures, options, or swaps without an exit strategy. The author implies that Morgan Stanley traders & salesmen only sold nuclear-waste derivatives that exploded in the face of their clients (i.e., inverse tequila floaters). The book is, however, well written, and there is a lot of useful info in the book (PV, CF, convexity, duration, forward yields, arbitrage, Brady bonds, etc.), but his "ripping the face off" comments attributed to Morgan Stanley traders are clearly taken from Liar's Poker, and Morgan Stanley traders & salesmen were no different than those at Merrill Lynch or Goldman Sachs.
foda@maths.mu.oz.au from Melbourne, Australia , August 14, 1999
A hate letter from a writer to his ex-colleagues
The writer clearly detests his Morgan Stanley ex-colleagues at a deeply personal level. The book is not only void of a single kind remark on any of them, but it also contains a number of surprising low-level shots. For example, by the end of the book we are given the extension number of the derivatives division at Morgan Stanley. What purpose can that serve? In fact, some of people that he does his best to portray in a most damaging manner, come through as normal though rather eccentric people operating under great stress. Finally, I felt that the writer has oversimplified derivatives beyond recognition. Yes, there is more to bonds than "positive convexity is good"! On the other hand, I enjoyed reading the descriptions of certain derivatives products if only because such information is not available in the textbooks. All in all, my impression is that this was an attempt to write a second 'Liar's Poker', but the attempt is not successful.
axel@mail.org from Tokyo , July 14, 1999
Good introduction to the derivatives business
I found this a very useful introduction to derivatives on a practical level. The examples are illuminating and frightening at the same time. In comparison to "Liar's Poker" this book is more technical and not quite as hilarious. It doesn't bother people with the author's general socio-moral opinions (Mr. Lewis in "Liar's Poker" did go on about that "value" a person contributes to society) which I was thankful for. The only annoying part of the book is Mr. Partnoy's shameless exhibition of his own provincialism when he describes his excursion to Tokyo. He pesters the readers with details (and inaccuracies) on the earthquake-(non-)proofness of his hotel, the consumer price level in Japan, the impossibility to watch an American baseball game live on Japanese TV (now that's really too bad!) etc. etc. But this is only a small part of the book. All in all, recommended reading. Being a headhunter in the financial industry I learnt a great deal about the people who are my clients and candidates.
1kamel@cyberia.net.lb from Saudi Arabia , June 25, 1999
A MUST FOR NON-AMERICANS DEALING WITH US INVESTMENT BANKS
This extremely well written book is both serious and funny. Forigners dealing with US investment banks and bankers must get this glimpse into "explosive" derivatives sales and trading floors of some of the world leading financial institutions. One will learn what it means to get "your face ripped-off", things that happen to unsuspecting international and even American investors!!
A reader from New York City , June 7, 1999
Much better read than Liar's Poker
If you really want to learn about street trading, this book is a definite read. From my experience, this book offers a more factual account of sales and trading as opposed to Liar's Poker. It's extremely funny, but at the same time really interesting. |
