In the investment management firm created by Mike Vranos, the former Kidder Peabody trader who was one of that market's most prominent figures in the early 1990s, visitors are offered slices of melon. This is a different era, and the polite partners of Ellington Management, in open-necked shirts and affable to a man, say they have banished junk food from their trading desk. Fashions in financial markets change. That is clear in the market for collateralised mortgage obligations (CMOs) - the financial instruments which once made Vranos, still only 35, one of the highest-paid bond traders on Wall Street.
And where fashions change, there are often big investment profits to be made. Just two years ago, CMOs were at the heart of much of the mayhem that followed a historic slump in the fixed income markets. These instruments are created out of mortgage-backed bonds, which are pooled and used as security to back new instruments.
CMOs come in many shapes and forms. In the debacle of 1994, though, many shared similar characteristics: with their considerable leverage and derivative-type characteristics, they became highly illiquid and prices plunged. Some of the most notable investment management disasters of that period involved funds which held CMOs, among them Askin and Piper Jaffray.
Kidder itself suffered losses and was eventually sold - though the bank blamed rogue trader Joseph Jett, rather than Vranos, for its problems.