Book Review: The Big Short

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I am a big fan of Michael Lewis' writing, starting with Liar's Poker in the late 1980's, The New, New Thing and Money Ball in the early 2000's. And The Big Short is perhaps the best book he has ever written. 

If you want to understand what happened to Wall Street and our economy over the last decade, then his book is the place to start. It is people that ultimately make the good and bad decisions about creating and selling financial instruments and the best and brightest were mostly on the sidelines (thanks, Alan Greenspan) when the creation of credit default swaps (CDSs) and Collateralized Debt Obligations (CDOs) proliferated and became the downfall of finance as we knew it.

Lewis does a superb job of following the fortunes of people on both sides of the trade--those on Wall Street who were creating these repackaged sub prime mortgages and those hedge funds and individuals who were betting against them. His narrative goes back and forth between the money hungry investment bankers who can't create the junk fast enough, the rating agencies who get convinced that this is all triple A rated debt, AIG who cannot insure the junk fast enough and a small group of contrarians who make massive bets against these new financial instruments (hence the title, The Big Short). You get to see all sides of the story in living color and gory detail.

The amazing part is the end when the bubble has burst and the shorts win. They do not feel victory or become heroes, having just witnessed the near collapse of the world financial systems. Sure, they made a lot of money but none seem very happy about it and either do their investors. A weird and tragic ending, since the whole story has yet to play out. FIVE STARS OUT OF FIVE...but depressing.

Comments

[Henry Bruce]

Agreed Dave. Catching up on Blogs so sorry for delay. Book actually made more angry than depressed.