Traders, Guns Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

Traders, Guns Money: Knowns and Unknowns in the Dazzling World of Derivatives Reviews

• 
  Steve

  All but a few financial storytellers fall short in comparison with Michael Lewis. Satyajit Dasis is no exception. Like the others who failed, he was not Lewis-like enough to carry the narrative. On the plus side, I give Das credit for his clear explanations of the many derivative products that are out there today. Let’s award points, too, for his title, even though the book couldn’t quite live up to the humor it was meant to project. As for the shortcomings, the worst, I thought, was the short shrift he gave to the more human elements. Lewis can get you involved with the people – smart or naïve, honest or corrupt, successful or beaten to a pulp. You want to know what happens to them in the unfolding story. Your understanding is helped by the fact that whole messy business has been personalized. With Das, it’s more just a laundry list of the financial products and recycled press accounts of famous meltdowns. Whenever he does involve people, they’re either fictitious stick figures or categories of investment subspecies lumped together a little too conveniently into bins of disrepute. I’m sure he has a point when he says many of today’s financial instruments can postpone tax bills, shift risks to less savvy clients, and obfuscate product deliverables, but in my mind he overplayed his cynicism and lost credibility in the process. Not all M&A activity is cannibalism, not all derivatives were created to dupe someone, and not all people in the industry are crooked. He weakens his case when he implies as much.
• 
  Lobstergirl

  Das, a derivatives and risk expert, takes a very snarky look at these complex products that exploded the financial world in 2008 (though he is writing in 2006). Few people understand them, but whenever investors are flush with cash, money has to end up somewhere, and it's often seeking the highest return. The quants who create them may understand the equations, but not the real world consequences. The salespeople who sell them don't really understand them, and the buyers - in a system ruled by asymmetric information, where the seller always knows more than the buyer - rarely ever do. Although not as dull or abstruse as a textbook, which Das also writes, this book does go into the weeds, and readers who have no knowledge whatsoever of derivatives will find themselves floating on a sea of mysterious acronyms, coupled with diagrams and flow charts.
  
  Das keeps it punchy with chapterette headings such as "Rough Trade," "Bondage," "Dukes of Hazard," and "Tranche Warfare." He tells us that heading into a trial preparation as a plaintiff's expert witness, where an Indonesian noodle company that had been snookered on some derivatives was suing the issuer, he had looked up Portia's "quality of mercy" speech from The Merchant of Venice as a precaution.
  
  The book is plagued by typos: missing apostrophes and quotation marks, and astonishingly, a consistent misspelling of Warren Buffett's name. Former Salomon head John Gutfreund is repeatedly referred to as "John Gutenfreund."
• 
  Bradley

  This book gets very technical and it is obvious that the author adapted his style to be similar to Nassim Taleb. If you can put up with it, Das gets into several very good explanations about the many types of derivatives used to bend tax-laws, redirect risk, and confuse investors.
• 
  Themistocles

  Definitely not one of the better books on the subject. There are two major faults with this one:
  
  First, the writing is all over the place, with the author jumping hither and thither every other paragraph, with almost no cohesion.
  
  Second, there are a great deal of technical bits that are not explained well at all, and some times they don't even need to be that technical.
  
  Some interesting anecdotes and case studies, all marred by these downsides.
• 
  Richard Thompson

  I did learn a few things about derivatives from this book. For example, I had not previously realized how mark to market accounting can be used to inflate profits and traders' bonuses and can lead to margin calls on illiquid top level CDO tranches when the failure of lower tranches causes a ratings downgrade in upper level tranches that would probably actually pay full value if held to maturity, so even if the models were right in predicting tiny risks of default, the accounting rules helped to accelerate the financial crisis. The book does a good job in showing how derivatives can create an economic house of cards rather than having positive value in increasing liquidity and stability. But in trying to be light and humorous, the author frequently becomes too cynical and snarky. And he could have gone a bit deeper than he did in explaining the math and the modeling. Surely it can't all be as much of a shell game as the author suggests, or if it is, I wish that he would have given me a little more substance to reach that conclusion on my own.
• 
  Rohit Nair

  Let me put it like this: TG&M is 'Liar's Poker' for the financial industry. Technicalities were never this much fun. Satyajit Das reveals the shenanigans behind the murky world of high finance and gives us a good laugh at the same time. What makes this book even better is that the first edition came out in 2006, just before the world went into hell. Everything was hunky-dory at the time and this book shows us, in retrospect, it wasn't. Wonder how many people even considered this book at the time. Of course, now we know what happened, this looks like the work of a genius. The book is genuinely funny, which is nothing short of a miracle considering the sheer amount of financial technicalities included in the book. If you're working in the financial sector, or plan to, read this book.
• 
  J Roberts

  And you thought a book on derivatives and option trading would be boring. WRONG! How can wiping out the global economy ever be boring? Oh sure, Option Trading is a wonky subject, and I’ve read many a dry book on the subject, but this one breaks the mold. It really does help you understand the mechanics of the derivative world as well as show you real world applications in a hilarious manner. Well, hilarious if you weren’t the one losing all your money in the deal. Or if somehow you weren’t part of the global economy within the last decade.
  
  Let me step back at this point. Options. Basically, they’re for farmers. You plant a crop, spend all year tending to it, and need to be certain of a profit. Rather than relying on the weather and gods, you enter a contract. You limit your maximum profit, but put a floor on the downside. The baker does the same… he needs to ensure the price of flour stays low enough to keep his business going down the line. He enters into a buy contract for the farmer’s goods. Simple enough. And sure, why not scale that concept into new industries as well? Think fuel costs for a transportation company… now you’re getting the idea.
  
  But here’s the thing. Why shouldn’t Wall Street take advantage of such a simple thing? I mean, little risk and profits from the sale of the contracts. How could these masters of the universe fuck that up? Just like everything else they touch, it’s gotta turn to gold for them. And that’s why this book shines.
  
  When you seriously get to the causes behind all the messes caused by these guys, you’ll laugh so hard that you’ll cry. Mostly because a little part of you died on the inside and you were already crying to begin with. But you’ll laugh too! Now, I work on the ass end of this machine, but I’m still an insider. The book made me look around my office and laugh. Then cry.
  
  You see, the formula is the same no matter where you go in this industry. A bunch of young know nothings running around selling crap that even their PhD financial quant engineers can’t understand. It’s perfect, the kids, most all who are in their 20s, peddle weapons of mass destruction to anyone dumb enough to buy their bomb. I see it every day at work. Kids ruining client’s people’s retirements because they’re just too stupid to…. Nah, wait, not stupid. They just don’t care. Either way, the stupid/not caring allows them rack in major paychecks. Wealth is not created by the financial industry, it is simply moved about.
  
  Now you’re thinking, “Hey, great idea… let’s get smart people in there instead?” Wrong again, my friend. See, knowing ‘stuff’ in this industry is a bad thing. If you know stuff, you make the salesman feel bad about what they’re doing. This goes up the chain of command too. The author points out how management is based on hitting sales goals instead of skill or experience, because obviously this is a way to run the global economy. But it is. Sure, not everyone is horrid asshole when it comes to this industry, but we’ll never get far enough in this corporate climate to change things.
  
  Given the fact that this book was written pre Great Recession, one could almost say it serves as a witty warning of things to come. Too bad that I’m writing this follow up in 2014… because I can tell you first hand that nothing has changed. And it’s not the industries fault. It’s yours. Yep, you know that boring guy you ignored when you tried to talk finance…? Remember how you brought all your money over to the 20 year old who kept blowing smoke up your ass instead?
  
• 
  Radhika

  A humorous account of the post crisis financial institutions. While the key concepts around derivatives i.e. weapons of mass destruction are explained without use of jargon, it get repetitive and tedious towards the later chapters.
• 
  Tom

  Great book. I learned a ton, but it jumps around a little and could use another review by the editor to clean up some typos.
• 
  Matthew

  I take back what I said earlier, which is that Traders, Guns and Money is rather disappointing for such a critically acclaimed book.
  
  I still stand by what I said about the book's tone -- from the punchy three-word title you could recognise it for the way it reads, sort of a stand up comic routine on the derivative markets. The first half wasn't especially compelling, as the castigation of financial professionals is so generalised. You have to be offensive to be funny, I guess.
  
  Once you get past that, the second half rocks -- perhaps because I don't take any personal offense, not being involved in derivatives. It's a great insider's view of how and why derivatives evolved, with great and simple (and cynical) explanations of why various structures were created (generally, to evade taxes, get around trading regulations, and other ways to give investors more yield and earn banks more fees). The anecdotes and narrative read like a late-night drink confessional -- probably exaggerated but sounding true enough in essence, and deeply educational.
  
  As mentioned previously, it doesn't claim to be a rigorous, comprehensive risk management textbook (which Das has written) so it won't be that sort of educational if that's what you're looking for.
  But through anecdotes it gives a sharp sense of the culture of the people involved, something you could never find even in very good textbooks.
  
• 
  Fab

  I love a book written by someone with deep experience in a field but who is cynical of the industry, they tend to have the best stories. The tone of this book is quite funny. It points out how most financial derivatives are just a sophisticated form of gambling but one where the house edge is often very unclear. You probably need a basic understanding of finance and derivatives to enjoy this book because it can get a little technical. I certainly learned a lot more about derivatives after reading this. Some chapters get a little repetitive but overall the book is really interesting. The examples of companies using derivatives to inflate their balances sheets or to comply with EU regulations before a merger just go to show how much craftiness and deception can come from the finance industry. A better title for this might be “everything you wanted to know about derivatives but were too afraid to ask”.
• 
  Stuart

  "Good reminder that derivatives, securitization, financial engineering, excess liquidity, leverage, lax regulation, compromised rating agencies, and culpable home buyers were key factors in triggering the financial meltdown in 2008. ABS, RMBS, CDO, CMO, CDS, SIV, mezzanine tranches, warehouse loans, risk transfer, etc. No matter how hungry investors are for yield, if you don't understand the product, don't buy it"
• 
  Eugenio Gomez-acebo

  Detailed book on derivatives. Although it is an interesting read, it is so caustic in the generic description of the derivatives chaos that it quickly loses credibility. The author uses its experience to attack all bankers and financial institutions under all available lenses. Banking practices are joked about. Excesses, fraud and wrongdoing are not distinguished from serious, ethical work. It is hard to differentiate the joke from the reality.
• 
  Faisal

  The book literally gave me the opportunity to get an insider's look into quantitative finance. At some point while reading, however, I felt The author sounded a bit delusional, especially when describing the people that ran exotic options and futures desks at big institutions and hedge funds. Overall, it's pretty much an average book. Expected better than this.
• 
  Ken Nickerson

  Some new information in here about trading that was from a direct, "hands-on" perspective that I was lacking. A quick read that's both informative and enjoyable.
• 
  Alex Gleason

  Three and a half. Pretty great.
• 
  Berk Gurhan

  Best book on finance that I have read
• 
  Aaron

  I'll be blunt: sometimes this book is painful to read. It isn't because the author is a bad writer, I think it's just because he has no central narrative beyond "finance is a crapsack world". He also has no central story: it's basically a loosely (sometimes whiplash inducing) collection of short stories and narratives about his experiences in the derivative trading Universe.
  
  Some of these would make GREAT articles. Collectively, they do not make a good book or a good read.
  
  HOWEVER, the content, if you can slog through the books flaws, is excellent. They are, in fact, ideas and observations several years ahead of their time.
  
  Nearly everything banking related that would go wrong in the great recession is talked about in this book, and that makes it an asset.
  
  It also explains derivatives contracts and financial trading strategys EXTREMELY well, so in that respect, it is also an asset.
  
  However, I cannot give it more than 3 stars. That's being generous.
  
  However, it's a 3 star book that I will proudly keep stored in my library, so perhaps that can be considered a endorsement of sorts.
• 
  Chris

  The Skinny: Fun, fast read about the wild world of derivatives. Essentially a series of mini stories through which different derivatives are explained.
  
  The Good: First off, the fact that this was written right before the global financial crisis makes it extra interesting. As you read the stories all I could think about is how the derivatives for the GFC were being created. I think The Big Short may have gotten some inspiration from this book. Overall the book is a good read. The stories are humorous, the material is digestible, and it sheds a lot of light on a sector that is often super confusing. Laughed out loud more than I expected for sure.
  
  The Bad: You will need some passing familiarity with derivatives to appreciate it properly but most concepts are explained well enough to follow, although you will still get confused here and there. Some parts are certainly more interesting than others. Too many gosh darn grammar and typos.
• 
  Jeannie Hardeman

  This book is a very cynical (yet I suspect highly accurate) account of derivatives trading from a guy that's been there and done that. You do not need to be a financial geek to appreciate this book. It is written in a very entertaining way. For those that are interested you can expend some mental effort and get a basic understanding of derivatives, but you can ignore the details and still enjoy the story. The chapter on credit derivatives is particulary entertaining given the recent meltdown
• 
  Charvak Patel

  This book is long and I wished it was longer.
  
  This book does it all. Goes into details when necessary, throws quips when required, uses anecdotes and personal experience in a wonderful and enjoyable way.
  
  This book has long chapters but divided into sections in a manner that makes this book very much digestible despite its size.
  
  Even if you don't want to know about derivatives, this book is worth reading for the author's sense of humor.
• 
  Nam KK

  Hilarious. Never read a derivatives book that readable. I took several classes on Derivatives during my MBA, and after having worked through assignments, I didn't feel like I understand the products at all. The author has a straight forward way of analyzing derivatives to make key points very accessible.
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