Liar’s Poker (Michael Lewis) #2

Trading money was nonetheless trading. It required at least one iron testicle and the same peculiar logic as bond trading. Witness: One day earlier in his career Dall was in the market to buy (borrow) fifty million dollars. He checked around and found the money market was 4 to 4.25 percent, which meant he could buy (borrow) at 4.25 percent or sell (lend) at 4 percent. When he actually tried to buy fifty million dollars at 4.25 percent, however, the market moved to 4.25 to 4.5 percent. The sellers were scared off by a large buyer. Dall bid 4.5. The market moved again, to 4.5 to 4.75 percent. He raised his bid several more times with the same result, then went to Bill Simon’s office to tell him he couldn’t buy money. All the sellers were running like chickens.

“Then you be the seller,” said Simon.

So Dall became the seller, although he actually needed to buy. He sold fifty million dollars at 5.5 percent. He sold another fifty million dollars at 5.5 percent. Then, as Simon had guessed, the market collapsed. Everyone wanted to sell. There were no buyers. “Buy them back now,” said Simon when the market reached 4 percent. So Dall not only got his fifty million dollars at 4 percent but took a profit on the money he had sold at higher rates. That was how a Salomon bond trader thought: He forgot whatever it was that he wanted to do for a minute and put his finger on the pulse of the market. If the market felt fidgety, if people were scared or desperate, he herded them like sheep into a corner, then make them pay for their uncertainty. He sat on the market until it puked gold coins. Then he worried about what he wanted to do.


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