Friday, June 8, 2018

Friday Feature Book Review: "CDO: How I Caused the Credit Crunch" : Tetsuya Ishikawa CDOリーマンショックの物語: 石川哲也

It is now almost 10 years after Lehman Brothers went bankrupt. However, with the global bond markets at near zero rates, a new credit bubble is forming. Around 10+ years ago, the world had a similar bubble with CDOs. This is a great look back at the Lehman Brothers crash and the Bear Stearns rescue by JP Morgan, now almost a decade ago. This amusing novel gives a real insider's view on how the very frothy credit markets got there in the first place. It all lead to the Great Financial Crisis, and many new financial compliance rules that we still follow today.

For those who were just making a solid living in equities, fixed income and credit was a ticking time bomb. The author Tetsuya Ishikawa, is a Japanese British citizen, who worked at Goldman Sachs. He directly worked with collateralized debt obligations, better known as CDOs, that all blew up later on.

This is a great in-depth answer to those wondering about what a credit job in a global financial institution would have been like. This is a pleasant read if you like "The Wolf of Wall Street" style stories. It is full of slices of the excesses of money, booze, strippers, drugs and fine hotels, but not really strong in substance or market insight. 

The odd feeling you get by reading this book now though, is how few people seemed to have been aware of the clouds on the horizon. There may have been worry and concern over the amount of risk, but not enough to lose sleep over. The reality of the melt down turned out to be a much bigger event than anybody seemed to have anticipated.

The Top 3 Takeaways from this book that really impact any reader are:

1) There seemed to be no clear understanding by traders of how badly any abuse of credit via CDOs could end.

2) The focus on making as much money as possible personally, seemed to be the only religion at the time within Finance.

3) How interconnected the global world of finance really became, was not truly understood, only suspected.

You also learn more about how to survive within investment banking office politics, a very essential and much needed skill. It is critically important to know, how to make sure you can "get recognized" enough by the Managing Directors who write the checks, in order to get paid that mythical 7 figure income, but little else. 

It gives a curious account of one man's view of his role in a huge event, but is kept at the main character's human level. This is much less about how the big picture of the global credit crisis really came together in any clear form. When you are in the center of things, you often do not realize the size of the market all around you.

For anybody who has spent a few years in any front office role, the descriptions all ring true, and the author has clearly been there. However, there was nothing really new or too insightful, just great observations of a certain point in time. I found it similar to a trash magazine snack for the mind, a sugar rush equivalent. 

It was hardly a satisfying mental meal, but that was not the point. Like a fast food burger, it still satisfied a certain need with enough written details to quench a thirst for a financial story break over the weekend. Highly Recommended!

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