Customer Reviews

The Big Short

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The Big Short is the best kind of investment book: it's entertaining, with larger than life characters in unimaginable situations; it's edifying (you won't even realize you're being schooled until after the fact); and it's a story no-one else has told ("The Greatest Trade Ever" comes closest). Readers can get structured narratives about the recent crisis through excellent tomes like Sorkin's "Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis -- And Themselves", or economist's critiques in books such as Stiglitz's "Freefall: America, Free Markets, and the Sinking of the World Economy", but you'll likely not find another book like this one; a stunning and jaw-dropping account by one of the best authors in the business.

Lewis is the same author who burst on to the scene with his first book, the instant classic "Liar's Poker", and who followed up with a string of excellent books, including "Moneyball" and "The Blind Side". "The Big Short" is Lewis at his best.

Lewis understands the investment business like the insider he was, but this book is very much from the perspective of a critic. It is much more direct in its criticism of the financial industry than was Liar's Poker. In that book he similarly crafted a terrific story, but with a bemused "can you believe we did that" tone. In this book, Lewis taps mainstreet's anger, and to great effect (sample quote, "... he was the walking embodiment of the bond market, which is to say he was put on earth to screw the customer"). It's hard for folks on mainstreet to know exactly who to blame, and exactly what Wall Street did to cause such a mess, and Lewis lays out in clear and entertaining detail who did what.

Who comes off looking badly? Wall Wtreet firms, rating agencies (Moody's, S&P, Fitch), the fixed income market, the SEC, Ken Lewis (no relation) of Bank of America, and the financial system in general.
Who are the characters? Steve Eisman, Dr. Mike Burry, and Greg Lippmann, none household names, but all memorable characters who become important cogs in the collapsing Wall Street machine. John Paulson (who, as referenced above, made the greatest trade ever) is featured in a small way, and is perhaps the only protagonist with any celebrity.

Eisman's story is centred on his bets against Collateralized Debt Obligations, or CDOs, an esoteric type of bond backed by assets such as sub-prime mortgagees. The second narrative thread follows Burry and the evolution of his fund in its bets against the housing bubble, and the impatience of his investors as the subprime defaults were slow to materialize. Lippman's story is even more unusual; an insider, the head subprime mortgage trader at Deutsche Bank, and one of the earliest to figure out the likely end to the subprime story. Lippman is willing to tell his story to anyone who would listen; unfortunately, that wasn't his employer.

As in Liar's poker, Lewis weaves his remarkable story around memorable characters, and through the telling of his story, he imparts an incredible amount of industry detail and insight into a very readable text. For example, in a few pages Lewis conveys the essence of options' mispricing, something it takes Nassim Taleb a book to do. The story contains both detail and context; individual transactions and broad commentary on the financial system, and neither individuals nor the system come off looking good.

For those looking for Wall Street conspiracy theories, Lewis provides a different angle than "Too Big To Fail". Goldman Sachs' sale to Burry of credit default swaps (CDS) on subprime mortgage bonds earned them a juicy sales commission, but it was an instrument they didn't back directly ('triple A' rated AIG backstopped most). Burry knew this, but was focussed on profiting from the obvious (to him) subprime credit bubble. When the credit bubble started becoming clearer to the investment banks, they too looked to load up on CDSs, with Goldman becoming one of the larger purchasers. It didn't occur to Goldman that the CDS securities might themselves be a bubble, and that the primary issuer of them (AIG) might itself face bankruptcy. Only the US government's bailout of AIG prevented Goldman and others from being caught in a classic squeeze: paying out on defaults and facing a bankrupt insurer on the other end. Goldman was lucky.

Lewis again on the dealers' modus operandi, "When you talk to the dealers, you are getting the view from their book. Whatever they've got on their book will be their view." "All that mattered was what Goldman Sachs and Morgan Stanley decided should matter." Whether it was true or not. When all the Wall Street firms were riddled with subprime exposure, they all had to say they were fine, there was no exposure. It wasn't fine, and it took time and effort for the shorts to prove them wrong.

A remarkable story of outsiders tilting at Wall Street when they had limited knowledge, access, and a system working against their interests. Turns out Wall Street was wrong.

It's anyone's guess how the collapse of the Wall Street will pan out this time round except to say that, whatever it looks like, the ordinary citizen world wide will be footing the bill for a very long time. Although everyone is complicit in this financial game of greed, the paradox is that the poor will continue to sustain the mathematically gifted few who essentially pilfer their wealth. Is there a lesson yet learned in all of this financial malfeasance? With what Michael Lewis has shown us in the Big Short, my hope is that we are preparing for something better than financial doom.

I love Michael Lewis books. Well researched, well written with a touch of humor. All his books are a must

This is a very informative book. Michael Lewis has brought to the surface
the hidden workings of those who corrupt the system. Those who put
absolutely nothing in yet take everything out. Fortunes are made upon the
backs of those who do not understand the greed of the elite, right down the
chain to those who are controlled by them. It should be criminal, the schemes
of the big money controllers,and really it is. Who can stop them?

Reading this book has further opened my eyes to the truth of Wall Street,
the wealthy top 1% and the manipulation involved. A book for anyone
wishing to take a look inside the makings of millionaires out of thin air.
I now call them, simply....Paper Millionaires.

Thank you to Amazon for thousands of informative books to choose from, and great service
for their products, I have purchased to many to list here, including dozens of
free download Kindle e-books.

This book was an insightful read. But, it gets repetitive and rather boring. I found it easy to start and hard to finish.

Reviewed by Mitchell Rhodes

The Big Short takes the reader on a fantastic ride inside the most recent, and many would say ongoing, financial crisis. Lewis introduces us to people who bet against the subprime mortgage market, in all its variations, and in doing so became unimaginably wealthy. They are presented as a few select heroes pitted against the corrupt and often stupid villains of Wall Street insiders and their legion of minions. Has anything really changed since then?

If Dr. Evil ever resurfaces in another installment of Austin Powers, puts his little finger to his mouth and makes a ransom demand for anything less than, “one gazillion dollars,” it will seem preposterous and, once again, a cue for all to laugh.

The shock and awe of billions or even trillions of dollars are past us. They are now just strings of meaningless zeros heading off into the vastness of infinity. Take for example the capitalized notional value of derivatives—pegged at 1.2 quadrillion dollars (December 2012). Really?

That’s the equivalent of 20 years worth of economic activity for the entire planet. And derivatives are only one asset class expecting a return on investment (ROI). When others classes, such as stocks, (traditional) bonds, money market instruments, real estate holdings, etcetera, are added to the mix, financial expectations, going forward, become even more unrealistic and ridiculous.

Due to a system of circular collateralization, debt, money and other financial assets essentially get boiled down to the same thing—mental constructs of value. The assigned values are now stratospheric. At best, they are delusional, dishonest and corrupt, and at worst, dangerously catastrophic.

It’s not the values in and of themselves that represent a threat; it’s the global financial system—and everyone in it expecting some sort of benefit, return or payback. Interest on global debt (estimated at $100 trillion), along with the expected ROI on other assets, requires continuous growth and a level of physical activity that’s beyond the productive capacity of a finite planet to produce it.

The level of physical activity being undertaken to meet the demands of the global financial system is literally killing off the natural capital that’s required to sustain human life. The ongoing financial crisis is not about strengthening banking regulations, reeling in reckless spending, evoking austerity measures or even curtailing greed, it’s how to deal with the consequences of a global capitalistic system that will ultimately fail. And along with that managing the psychotic state of human collective consciousness arising out of our committed efforts to try and save a doomed system.

For now, it seems, nearly everyone continues to be bullish on capitalism. Those with a desire to become gazillionaires are shorting natural capital markets and are betting that an ecological and social collapse can be avoided. Inherently, and by extension, they have deliberately and without shame or guilt shorted the rest of us too.

And yet, who’s effing who here? Each time we climb into the hamster wheel and begin to run, aren’t we also willingly putting everything at risk?

Most of what you've just read doesn't show up directly in The Big Short—rather it's been inspired by it. The story does tell of a select few who saw things differently and had the courage to act. I’ve taken a short position on capitalism. Crazy! Read The Big Short: Inside the Doomsday Machine and then judge.

Lewis spins out another great Wall Street story. This time it is all about a small group of unknown investors. These investors investigate; mortgage backed securities, the sub prime housing market, Wall Street investment banks, the ratings agencies, and even the SEC. They soon realize the entire housing market is a house of cards, that is just waiting to collapse. Then they position themselves, to profit from a fall in the housing market.

Some of the details Lewis uncovers, are rather shocking. S&P and Moody`s are basically a bunch lackeys, to the big investment banks. The Sec did nothing to monitor the quality of the Wall Street mortgage securities. The banking industry issued so-called liar loans to many home buyers. These people should have never been allowed, to take out a mortgage. And of course, the big investment banks knowingly issued all sorts of risky mortgage backed securities, that were rated as investment grade.

This was a very entertaining and informative read. In fact, I think this may have even topped Liar`s Poker.

I enjoyed the book. It's not Moneyball, but Lewis has a way with real characters that make them come alive. While others report the facts, Lewis' stories are about living/breathing characters. Having read other books on the sub prime crisis (i.e. The Greatest Trade Ever & On the Brink), this is certainly the most entertaining one, if not the most factual or data driven book - but pure research and fact is not the reason to read Lewis. He's a story man with a great ear for character.

I recommend it if you're a fan of Lewis.

The Big Short is an account of the guys who made a killing as Lehman Brothers, Bear Stearns, Merrill Lynch, Wachovia and other less renowned banking and investment names were being sucked down the tubes by the mega-leveraging of overvalued derivative paper. Those guys did it, of course, in accordance with the Michael Lewis mythology, the story that he tells and re-tells in all his ego-fronted books: quick, bright young deviants (the new kids) beat up on slow, old, established traditionalists. But The Big Short is different from Lewis's other work like Moneyball in that this time the mythology fits the reality of which he is giving an account. This time, the quick young deviants - nobodies with names like Steve Eisman, Mike Burry and Vinny Daniel - really did take the measure of the financial community's big dudes - Richard Fuld, Ken Thompson, John Thain. And though the big dudes were retired or fired on generous terms, they did not leave their executive suites wreathed in laurels, and they left their stockholders holding a lot of empty bags. In this book, reality and the Lewis mythology are together at last.
In the summer of 2010 David Brooks wrote a column in the New York Times contrasting Princes with Grinds (NYTimes, 13 July 2010). The Princes are people like John Thain and Bill Miller: gracious, widely informed, gifted in conversation, they are men you feel privileged to be with. Grinds, on the other hand, are brilliant but narrow and boring, often totally graceless. The heroes of Lewis's book are - to a man - Grinds, and Lewis does an excellent job of showing the degree to which their social dysfunctions equipped them to be the ultimate contrarians and ultimate winners in the subprime collapse. The book has other strengths as well: like the best economic historians (Keynes, Kindleberger, Galbraith, Fox and Bernstein), Lewis sees economic history as narrative, and he writes it that way. With its principal focus on the unforgettable Steve Eisman, the book enables Lewis to keep himself and his ego out of the way until the very last chapter, so that for 252 of its 264 pages the work is a splendid entertainment, full of the energetic vitality of the dysfunctional buccaneers who made a ton of money while the rest of us were hiding in the kneehole of our desk or being taken to the cleaners by the wrong hedge fund manager. Though I have long recoiled from the manner in which Lewis's books often impose his new-kid mythology on events to which it is not wholly suited, I have to regard this book as a genuine breakthrough for its author and his myth. In spite of my longstanding reservations about Lewis and his work, I must recommend The Big Short unreservedly.

And of course, they proved it by putting their money at stake, which paid off for them enormously. The surprising thing is how few people actually truly did understand what was coming. Some thought they did and ended up getting hurt anyway . . . this is a highly fascinating book that will make you shake your head when you come out the other side. You thought the people on Wall Street were smart . . . well, maybe they're too smart.