Skip to main content

Straight to Hell by John LeFevre

A strange book: think of the movie The Wolf of Wall Street, but instead of retail brokers on Long Island, it's the institutional bond syndicate desk at a major bank. But the pranks, the drugs and the ludicrous behavior are all the same. 

Straight to Hell is crass, outlandish, instructive at certain points[*] and genuinely comedic at others--but I wish I hadn't read it. It's hard to tell what the author is trying to do exactly (moralize? satirize? shock? warn?), but ultimately the book leaves you with a gross feeling: for the author, for all the people in the story, and for yourself as the reader.

For readers interested in this genre: stick to Michael Lewis' classic Liar's Poker. 

[*] Instructive, that is, if you're curious how an institutional sell-side bond house works; how bond issuance deals are won and lost; how major sell-side firms both compete and cooperate as they fight over deals; how these deals, once won, are then doled out to institutional investor clients. I can't imagine many readers would share this curiosity, however--and you have to fight through a lot of unsavory stories to satisfy it.

Notes: 
1) Now that I've read my fair share of works about Buddhism (see in particular Thich Nhat Hanh's The Heart of the Buddha's Teaching) I'd consider this book an example of "bad intellectual nutriments."

2) Early on you can tell this book is unlikely to interest somebody from outside the business.

3) The author starts at an intern, then does the company training program (note the ruthlessness the company uses to weed out underperformers), he survives his first few years, then moves up to join the fixed income syndicate desk, a big job.  

4) "Statistically speaking, you shouldn't worry about what your first wife's mother looks like." I had to think about this one for a while before I got it.

5) On winning the right to offer a deal on behalf of a bond issuer (getting the client "pregnant") and then "we'll moonwalk them back once we win the deal" to agree to more realistic deal terms (on interest rates for example, or deal size). Also you control the client by suggesting it would signal weakness or be embarrassing to cancel a deal after a long roadshow, the client might lose "access" to capital markets, etc.

6) The deal process--everything from bakeoff to roadshow to deal allocation--is all well explained, but will likely be over the head of most readers outside the industry.

7) The mechanics of a bond deal that goes badly: just the same as a bad IPO. When clients get a "full allocation" they instantly know the deal is bad.

8) Note also the game theory aspect of bond issuers who frequently need to access capital markets: See the Thai telecom company with debt maturities that need to be "rolled" in each of the next few years; we thus have a game theory situation with repeated iterations, so the parties involved can only screw each other over to a certain point! They know they have to play the game again soon. Equity deals are less like this. 

9) See also certain interesting agency problems here: say you work for a sell-side bond shop and your client (a company that wants to issue bonds) comes to you, thinking of doing a bond issue between October and December. Well, how does your P&L look? Is your bonus already set for this year? Then encourage the client to wait for January so that deal would show up in next year's bonus numbers--plus you start the year with a great-looking deal pipeline.

More Posts

Inflation: The Problems It Creates and the Policies It Requires by Arthur M. Okun, Henry H. Fowler, and Milton Gilbert

This book is a transcription of a lecture series on inflation given at New York University back in 1969 by speakers Arthur Okun, Henry Fowler and Milton Gilbert. These three men, all important "experts" in their day on managing the economy, and all speaking with great confidence in the correctness of their policy prescriptions, had no idea how wrong they would be--about everything. As a result, this book indirectly teaches humility, and it once again teaches how incredibly useful it is to read books outside of the time period in which they were written. Each speaker holds forth on various orthodox economic ideas of that era: presumed trade-offs between inflation and unemployment, how to "fine-tune" the economy, and (most hilariously) the critical importance of gold as the foundation of the international monetary system.  Today, we can look back on these confidently-given speeches with rich irony, knowing that in less than a year, the 1970s would dunk on all three sp...
Read more

Merchants of Grain by Dan Norman

[Recommended for investing geeks and students of power structures. Everyone else can take a pass.] Certain industries or companies need to be "visible" and in the public eye. See, for example, story stocks like Nvidia, or branded consumer products companies (which require name recognition and habit formation in order to sell product), or any company run by a celebrity CEO. Think of this as one level of visibility. Note also: any publicly traded company--even if it has a name or a CEO nobody's ever heard of--must file financial reports and other filings. To have access to public equity markets and have your stock trade on an exchange, your company has to "come in and register" (to borrow the phrase from incompetent SEC Commissioner Gary Gensler), and this means putting a lot of information about your business out in the open. Now anybody can look at your filings, see your profitability metrics, see who your managers and directors and large shareholders are, and s...
Read more

The Swiss Family Robinson by Johann R. Wyss

Reading this famous book opens a window into the cultural and ethical milieu of early 19th century Europe. We see an idealized family facing severe challenges in an unknown and exotic part of the world, and doing so without despair or pessimism. To a modern reader, the Robinson family might resemble  The Cosby Show : the father comes across as a bit of a pedant, the children speak in complete and grammatically-correct sentences [1] , and the family solves problems in the book-chapter equivalent of a 30 minute TV segment. Other dubious elements of the story might amuse the adult reader: see for example their island's impossible array of wildlife and botany, or the family's ability to MacGyver almost anything out of anything. And yet one can easily see how this would be a wonderful and ethically nutritious story for a young person to read (or have read to him or her), as it conveys a range of non-cynical messages that are rapidly disappearing from the modern era: on not being id...
Read more