I just finished reading Liar’s Poker by Michael Lewis. Liar’s Poker is Lewis’s account of his four years (from 1984-1987) working on Wall Street for Salomon Brothers. This book is also on the Sharpe Investing Recommended Reading List. Lewis details his career from the first days of training to his later success in bond sales and trading.

The book is filled with Wall Street greed, trickery, deceit, innovation, and power struggles. I think this book is an excellent and very enjoyable read, and I would highly recommend Liar’s Poker to anyone interested in trading, investment banking, or other Wall Street careers. Like many of these books though, it is important to take the actual stories in the book with a grain of salt, as the book represents one person’s experience at one Wall Street firm.

Liar’s Poker also contains some interesting trading insights. First, some of the most successful trades were made by buying what everyone else was selling. In times of panic, asset often become very undervalued and this can present a good time to buy. Currently, vulture funds have formed, hoping to purchase undervalued assets devalued from the sub-prime and credit scare. This demonstrates a current example of the idea to buy what everyone else is selling. I generally think timing the market is not a wise investment idea, but investors should be aware of very unpopular investments and do extensive research to determine if the investment is prudent.

Another important investing lesson from Liar’s Poker was to do your own research. Frequently, investors follow the advice of Wall Street “experts” or other finial professionals providing advice on financial news programs, magazines, and newspapers. It is important for average investors to do their own research determine if the specific investment has merit. Frequently, the motives of the financial professionals recommending particular investments don’t match the best interest of the investors.

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