Pipeline Books

F.I.A.S.C.O.
Blood in the Water on Wall Street by Frank Partnoy

"The value system I had acquired in recent years included shooting at clients and blowing people up, all in the name of money..... Everyone I knew who had been an investment banker for a few years, including me, was an asshole.", Frank Partnoy, ex-Morgan Stanley investment banker in F.I.A.S.C.O. This book is a must read for anyone who wants to understand what caused hedge funds to collapse inwards on their own financial rot or why bankers could be sucked into lending to them.

Employment of excess financial leverage is one of the oldest and most destructive financial games we play. In F.I.A.S.C.O. , Frank Partnoy gives us a ringside seat to derivatives sales and trading, the new bloodsport on Wall Street. Those wagering their money in this suicidal financial game were either ideologically correct financial market theorists, dupes who didn't know any better, or riverboat gamblers hiding their bets from their unknowing bosses at stodgy financial institutions.

At first, I was tempted to throw this book into the twin categories of "Fallen Man/Woman Tells All" or "Revenge of the Derivative Nerd". Frank Partnoy had taken his training in economics, mathematics and law and thrown it into the sewer of Wall Street greed. The little guy from Kansas routine wore very thin. As I read on, however, I realized that I had made a brief visit to this smoke and world mirror of high margins, greed and bloodlust. I had attended the first Morgan Stanley derivatives conference in 1991,see "A Derivatives Vignette" a full two years before Partnoy started selling derivatives for Morgan Stanley.

But for the grace of the financial gods, my self-discipline and common sense, and ten years in the military could have gone I.

As a fundamental investor who stakes firm claims on high quality cashflows, I alternately reeled in horror at the closest thing I have read to "Stephen King writes financial horror" or laughed at the hilarious description of a food poisoned trading floor in "Scarecrow's Revenge".

Not being too literary, I loved the character "Scarecrow". He is the LCol Oliver North of finance, a one dimensional caricticture of a soldier. Smart enough to follow orders, but not smart enough to understand their evil. He is amoral and "punk-military", closer to the mad, ex-CIA mercenary in Under Seige than the real soldiers that I know.

This book let us know there was something very wrong in Wall Street America, well before the financial buffoonery and the debacle of Long Term Capital Management.

Financial Content:Required reading for anyone who hopes to understand derivatives and what the collapse of Long Term Capital Management means for the rest of us. As George Soros is quoted in F.I.A.S.C.O., "There are so many of them (derivatives), and some of them are so esoteric, that the risks involved may not be properly understood even by the most sophisticated of investors."

Review by: John Carswell, President, Canso Investment Counsel Ltd.

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F.I.A.S.C.O. Blood in the Water on Wall Street by Frank Partnoy

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