Junk-bond

Lederman and Sullivan have crafted an insightful review of the High Yield market in the early '90's.
Contributed chapters from thoughtful sources.
This is a MUST own for junk bond junkies.

This is a superb introduction to lucrative opportunities in securities which you are not likely to read about in the popular press. The common denominator amongst all the opportunities is VALUE --getting a dollar's worth of goods for 50 cents or so. Although the book was published originally in 1991, most of the priniciples Seth Klarman expounds are timeless. In fact, his discussion of thrift conversions (p. 182-189) is about the only portion of the book which is more or less outdated.

The book's only flaw is that the third section of the book, "The Value Investment Process", which discusses the search for value opportunities in spin-offs, arbitrage, rights offerings and bankruptcies, is not as detailed as value-investing neophytes are likely to want. Still, it's a great start to anyone looking for alternatives to momentum-buying in securities.

Few people outside the value investment arena know who the author is, but take my word for it: he's an investment superstar. Seth runs a private investment firm in Cambridge, MA called the Baupost Group, and isn't soliciting your money! Klarman is on par with Buffett, Ruane & Cuniff, et. al. His book is a MUST read for it's intelligent, frank discussion of intrinsic value investing. Don't look for this book if you're long E-Bay right now. You can probably find the book in a large library, I would look for it if you already found your way to this review!

Watch out when an economist begins talking about law (or, like Posner, a lawyer talking about economics).

Another good book in this general line is Fenton Bailey's "Junk Bond Revolution". Very well written, probably by a ghostwriter.

A useful counterweight to conventional received wisdom, but, keep in mind, that experts are hired mouthpieces, and Alan Greenspan once testified on behalf of Charles Keating.

I bought this book, looking for a history of Drexel and Milken, and what they did, and what junk bonds were.

I found a defense of Drexel and Milken, and a rebuttal of the charges against them.

Most of the book is a description of their trials, and how they defended, and how the charges were 'put up' by attorney Guilani.

But, I think the book went too far in the last 100 pages. Having run out of things to say about Drexel and Milken, the author diverted his attention to the Savings & Loan scandal, and has the gall to defend Charles Keating, and then go on to defend other S&L 'criminals'. What this has to do with Milken or Drexel is beyond me, and thus only the first 2/3rds of the book lives up to its title.

Also, he never concretes the evidence that there is a conspiracy, only that a top guy in government (who is jealous of Drexel), and Ralph Guilani, (not to mention the government's policies) are against Drexel.

Michael Milken, so says David Kelley, has done more to help humanity than Mother Teresa ever did (it'd be interesting to hear what Christopher Hitchens has to say about it). He could be right; Milken's ideas about an overlooked "niche" in corporate paper - the region known as "junk" - turned the staid banking industry on its head, and in the process cleaned house in a number of other industries. MCI and McCaw cellular were created with Milken's help, and put an end to the AT&T monopoly; indeed, many people today are disconnecting their wireline phones as they talk on a cell and surf on a cable modem. T. Boone Pickens was able to bring the oil industry to a more rational level after it overbuilt for the 70's oil crisis. Ted Turner took a little TV concern in Atlanta to a nationwide audience, then went on to start CNN, and today the cable industry is far more interesting than the Big 3 networks.

In the process, Milken made many powerful enemies, who eventually turned to the federal government, and an ambitious prosecutor by the name of Rudolf Giuliani (who wanted to become Mayor of NY, NY) to pay Milken back. Milken's marketable and profitable bonds were known as junk because Standard & Poor's and Moody's services often overlook talent and entrepreneurial vigor in favor of longevity. It was only government interference in the market in the late 80's that brought down the market (by such atrocities as FIRREA); this fact did not stop critics of Savings and Loans from blaming Milken for that fiasco. Fischel explains the major S&L trials, as well as the Milken trial, and finds the government guilty of propping up an industry that was insolvent by 1980, made no sense after Congress bailed it out, and ultimately cost taxpayers more than if Congress had merely let it die in 1980.

Still, the conspiratorial tone is a little much, and Fischel accepts a fool's errand in trying to defend people whose names have become euphemisms for greed. People actually think that the Michael Douglass character in Wall Street, Gordon Gekko, was a real person. It would be worth reading Burton Folsom's _Myth of the Robber Barons_ and understand his differentiation between business entrepreneurs and political entrepreneurs before reading _Payback_.

In my opinion, Junk isn't as good as other books. It is a book, written for young people and about the life of young people. But you always know, what will happen next. We read this book in school, and it was very interesting, but the suspense is only in the first ten chapters. If you have nothing to do, you can read it, but there are more better books to read.

Jan-Oliver Ohloff

I can't say enough about this book. The book is suprisingly easy to read, and uncovers insights from some of the most prominent names in HY research. A must for HY analysts, MBAs, and CFOs.

I have had the privilege of reading the galley proofs of this book and find it to be THE definitive word on High Yield Investing. This book develops the blueprint for how to navigate, understand, and analyze High Yield Bonds. A must for MBA students, a requirement for anyone in the field already, and a vital tool for investors.

The book's three authors (The George Washington University Business School, Georgetown Business School, and 20+ years High Yield Experience) have used their knowledge and connections to get the best information available

This book, Liars Poker, Den of Thieves and Barbarians at the Gate are the books that define Wall Street in the 1980's. This book was an outstanding coverage of the age of the junk bond raiders. Junk bonds were the favorite financial tool of corporate raiders everywhere. The junk bond was also used to finance many new businesses (Donald Trump,Atlantic City and MCI are the most memorable to me). This book also covers Michael the driving force behind Drexel Burnham and the King of the junk bond.

The book is focused on the rise and fall of Drexel and the associated personalities of the firm. The author does a very good job of illustrating the power Milken had within Drexel, how his office on the West Coast went from being a backwater to accounting for the bulk of the firms revenue, and how Milken's subsequent removal left Drexel crippled past the point of healing. I felt that the book does a good job of explaining the brilliance of Milken and the high-yield bond market that he created and nurtured, and the catch-22 that led to his criminalization.

At the end of the day I find these kind of books to be financial humor more than anything because 1) these guys worked their butts off (2) made tons of money and then (3) a lot of them lost their shirts, ran into difficulties or (3) ended up in jail. Yes, they are rich by the boat load but it isn't the way I want to make a living.

This book, "Barbarians at the Gate" by Burrough and Helvar, and "Den of Thieves" by Stewart fully depict the defining events of Wall Street in the 1980's. Of this triumvirate, Ms. Connie Bruck's book is the only one that is more read than reported (both "Barbarians" and "Thieves" were written by WSJ reporters), and it really delves into the personal lives and backgrounds of the major players at Drexel. In reading this text you are provided with a full description and understanding of Milken and the driving forces behind the firm, above all, you understand the trap he worked himself into through his own success and how he wound up victimized by the financial system that he worked within.

My version of the text is labeled on the front cover as, "The Book Wall Street Couldn't Stop," in reference to attempts to prevent its publishing. I believe that those persons that wanted to do so are now content with their failure, as the book does a good job of explaining the brilliance of Milken, the market that he created and nurtured, and the catch-22 that led to his criminilization. As someone who works in banking, it is awe-inspiring to read the descriptions of Milken's deal-making capabilities and strategies, and at the same point disappointing to see how he slipped from operating in shades of grey to areas of wanting morals. The author does a very good job of illustrating the power Milken had within Drexel, how his office on the West Coast went from being a backwater to accounting for the bulk of the firms revenue, and how Milken's subsequent removal left Drexel crippled past the point of healing. The inter-office dynamics that Ms. Bruck writes on are present everywhere, but it is difficult to imagine anywhere that they are seen in such extremes.

I highly recommend this book.

The book is great but it leaves you shaking your head in disbelief. One must conclude that there is no effective control by the SEC over companies on the NYSE and NADAQ.

I found this to be just a riveting book to read. It reminded me of the movie Wall Street although from what I gather Michael Milken at Drexel Burnham was not as good looking as Michael Douglas and he wore a hair piece and drove an older Oldsmobile, not a Ferrari.

Milken while reading the Wall Street Journal and similar material on the bus going to business school in Philadelphia came up with this idea of selling the junk bonds. Once he graduated and was employed he pushed that idea, similar to the way Fred Smith pushed Fed.Ex. - another college idea. It comes clear in the book, just shouting out at you, that he had lots of help. Banks helped him, brokers helped him, other companies helped him, he opened a new office for Drexel in LA and in general just took over that company - all because people knew and appreciated that he was going to make buckets of money. His whole scheme was in fact similar to a pyramid scheme with everyone getting fat fees that were supposed to be re-paid down stream by the successful company. The Predator's Ball did exist as real annual social get together where the bankers, brokers, and the borrowing companies got together for a night of partying. The victims - the shareholders - were not invited.

Like every Ponzi scheme at some point reality had to set in and it failed. That is what this book is about. Sure we can learn but apparently we are immune or unable to learn from history because the market over inflated itself and the Nasdaq went to 5000+ a decade later, and we had World Com and Enron. It is also remarkable that after taking so much money he got off with a light jail sentence and a big fine ($500. million) that Millken could pay.

Entertaining read.

4 stars.

Jack in Toronto

Quite obviously Ms. Bruck did her homework on this book because there is much detail. However, her continual usage of the word "junk" to always refer to any type of high-yield security shows that she has passed sentence before the trial.
Most of the book is a very detailed account of what happened, but clearly she does not understand the economics or the legal aspects of any of the deals therein. She portrays Michael Milken as a devious crook, yet reality characterizes him much differently. Ms. Bruck attacks the deals but has no idea what makes them good or bad, so she assumes wealth-making to be evil.

If you love Milken and Boesky and inspired to be one,this book is for you. In this book God had give us the answer why you and and me cannot be billioinaires.Look at page 10."Breakfast was served at 6 A.M., a concession to popular tastes by Milken, who was at his desk each day by 4.30 A.M."

For those interested in the Wall Street culture of the '80s, where Michael Milken was "King of the Universe", this is a must read. It's a page turner. Superb read. It details the deals and operations of how Michael Milken became the Junk-Bond King... and so called "King of the Universe". Milken was able to raise almost unlimited amounts of capital by cleverly convincing practically everyone on Wall Street that junk bonds offered one of the best returns on Wall Street while at the same time supposedly having historicly very low default rates, which turned out to be the grand lie. He used this capital to fund the corporate take-over mania of the '80s, which dozens, maybe hundreds of S&L's participated in, and ultimately led to the bankruptcy of the S&L industry, and U.S. S&L bail-out mess.

Other required reads: "Den of Thieves": Once upon a time in the '80s, four men nearly destroyed Wall Street. How they made billions and how they got caught. by James B. Stewart. Superb, outstanding nonfiction book by an outstanding journalist, written in storybook fashion, which makes for a can't put down, page turner about Michael Milken: head of high yield securities, Ivan F. Boesky: arbitrageur - investor, Martin Siegel, investment banker with Kidder Peabody, Dennis B. Levine, investment banker. Must read.

Another must read: "A License to Steal: The untold story of Michael Milken and the Conspiracy to Bilk the Nation, by Benjamin J. Stein. Another outstanding book on the operations of Milken.

I've read these three outstanding books. Any other outstanding books on Michael Milken???

This book has a somewhat too academic feel. Meant more as a history book than a treatise on HY bonds - it does provide an excellent backdrop for future thought processes and how the current market's recent tightening fits with empirical analysis.
I recommend this book for any junk trader or bond manager with manadates for HY as a must-read for added perspective BUt do not expect to be over-whelmed by insights into CDOs, CSOs, or trading strategies in the current markets.

False assumptions leads one to false conclusions. The author has not done their homework in researching exactly what happened.
To say Milken precipitated the S&L crisis is simply not true and ignores the facts. But then again, authors need to sell books.
Less fodder and more critical thinking would have been appreciative.

A loose account of innuendos woven together haphazardly without illuminating the reader with anything even remotely substantive or factual. To say Milken caused, or had anything to do with the S&L crisis, is not only wrong, it is insulting to anyone who has taken the time to study the events and understand the facts. The author has evidently decided to rely on hearsay evidence to back up pre-assumed (and ultimately false) conclusions.

The back of the book highlights are the tip of the iceberg to a great book... and is right on:

"The world of Michael Milken--a world in which he could:

*Orchestrate the creation of a whole network of federally insured saving & loans to which he could sell vastly overvalued Drexel junk bonds--at a cost of billions of dollars to depositors and taxpayers;

*Pump up from nothing an insurance company network, induce it to buy his junk bonds, and then watch it fail, throwing hundreds of thousands of policyholders into panic;

*Own a powerful stake in a prestigious bond-rating house that actually rated his own bonds;

*Take a well-regarded national chain of daycare centers and make it a captive of the Drexel machine, force-feeding it junk until it collapsed;

*Command a national network of journalists who would write that Milken was doing good works even after he was in prison.

This is the world of Michael Milken, a financial manipulator so powerful that he was, in the words of the author, Benjamin J. Stein, "...almost a force of nature." " This is a great book! Get it.

Other suberb, outstanding must reads on the Milken subject: "Den of Thieves" by James B. Stewart; and "The Predators's Ball" by Connie Bruck. Three great reads on Michael Milken. Any other recommended good books on the subject?

This is not a treatise nor a source of knowledge per se. It consists of 2 transactions - a vc deal and a junk bond deal and a bunch of appendices with statutes. It is designed for class room use - this is the student text and there is, apparently, a teacher's text available. The first 150 pages has some nice, simple corp.fin. information. Not much use if you're a practitioner and want to know how a junk bond deal is put together. It's pretty easy to find 85% of the material in this book for free and just print it out. The other 15% is not worth the $90 this thing costs.

Reading this guy's work is a real testimony to the staying power generated by doing something first. His 1967 paper on bankruptcy was the first to estimate a multivariate default prediction model. THAT'S 35 YEARS AGO. Things like computers and more data make both his estimation algorithm and parameter estimates relics of little significance, and his inability to recognize this is symptomatic of a more cluelessness exhibited in his discussion of other matters (he doesn't simply reference the old model; it's now irrelevant structure is examined and built upon throughout the book).

Very little of what is here is new, and what's new isn't that good either. Freshmen looking for succinct references to someone their professor has heard of but not read will appreciate this volume. I suggest reading S&P or Moody's research instead.