Top positive review
Incredibly entertaining and mind boggling read
23 January 2016
Knowing we were going to see the movie in the coming weeks, I thought it was wise to read the book beforehand. It's quite an extraordinary read hard to believe the financial collapse & the run-up to the housing collapse of 2007-2008 actually happened - you really couldn't make this stuff up. Houses weren't merely expensive, they were insanely expensive. Yet just when it seemed that prices couldn't go higher, some fool would come along and pay an enormous sum more. You didn't have to be a genius to realise that real estate was overvalued. It did, however, take something special to figure out how to make money off the madness. A group of between ten and twenty people did just that, making the bet of a lifetime that author Michael Lewis calls "The Big Short".
The cast of characters in Lewis's very readable & entertaining chronicle of the collapse includes a misanthropic former medical resident, a money manager who saw himself as Spider-Man, and a pair of men in their thirties who started with $110,000 in a Schwab account they managed from a backyard shed in Berkeley, California. "Each filled a hole," Lewis writes. "Each supplied a missing insight, an attitude to risk which, if more prevalent, might have prevented the catastrophe."
Ever since he left Salomon Brothers in 1989 Lewis has been waiting for a day of reckoning. Little did he realize that it would be decades before it happened. By 2007, Wall Street had morphed into a financial Frankenstein, a "black box" filled with complicated bets that few understood and even fewer would pick up to understand.
The first to figure out how to use the system against itself was a man named Michael Burry, who once described himself in an online personal ad as "a medical student with only one eye, an awkward social manner, and $145,000 in student loans." While working the grueling schedule of a medical resident, Burry started writing about stocks in an online forum. When he quit medicine to start the hedge fund Scion Capital, admiring investors tracked him down and gave him money.
When Burry started buying insurance in 2005 on nearly two billion dollars' worth of bonds backed by lousy mortgages, his investors thought he had gone nuts and nearly mutinied. But in 2007, when the housing market began to crumble and Burry's bet paid off, everyone realized that his predictions weren't crazy so much as a sane interpretation of a market gone mad.
Burry might have set the trade in motion, but he was no salesman. The one who took his idea and ran with it was a bond salesman at Deutsche Bank named Greg Lippmann, who went around telling everyone he could that "the end was near". Only a few took his advice, but most who did became extremely rich. Lewis reserves special scorn for the biggest banks. It's appalling, but not much has changed. Most Wall Street CEOs who set a course for the iceberg remain in power today. The blind are still leading the blind. At any rate, as Lewis observes, "they still can't see things any better than a one-eyed former medical resident". I am seeing the movie today, can't wait.