Book: Den of Thieves
Author: James B. Stewart
Key takeaways:
So much has been written about the book already that I won’t take any effort to expand on what’s already out there. If you have already read the The Predators’ Ball by Connie Bruck, you’re 70% there in terms of what the book talks about, as is revolves around Michael Milken and the junk bond empire he built at Drexel. But there are details about other players, Ivan Boesky included, and goes into much detail about how the various players operated, and when some crossed the line, they did with an over-arching sense of “this-is-okay-because-everyone-else-is-doing-it”. It’s a very interesting read, and though I won’t summarize it, I did want to write three interesting notes for myself –
#1 – The mantra that was repeated by the high-yield/junk bond crowd was that the default rate of the junk bond issuers is very small compared to what may be interpreted from the yield on the securities. This is true, but this was helped significantly in part by the fact that Drexel’s selling machine was able to refinance a number of issues when they ran into trouble, and thus avoiding default. This tells us how important the operating dynamics of a time can significantly impact time series of some of the most basic metrics.
#2 – There’s a part in the book which talks about what Don Engel, one of the sales-person/consultant at Drexel, thought about the raiders. According to the book, Engel went for clients who were short, unhappily married and insecure, and this was the profile of the the “ideal raider-client”. Engel and Milken manipulated insecurities and egoes of these guys, who were always looking to one-up their rivals, to do deals.
#3 – Rep. Don Dingell’s office was known for his investigative staff. This is a very interesting way of looking at companies facing Congressional hearings; if are being investigated by representatives known for solid investigative staff, they’re more likely to face the wrath of law.
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