The Big Short: Inside the Doomsday Machine

The Big Short: Inside the Doomsday MachineThis book made me want to vomit, then take a bath in a tub of bleach Not because it s not well written, but because the story is so repugnant and grotesque.Lewis last book The Blind Side told the stories of a lot of people who, when faced with impossible situations, chose to do the right thing and or work harder This book exclusively features people who were criminally stupid, those who were just flat out criminals, and the scumbags who were smart enough to profit from it when the financial world was burning down.One sweetheart described himself as orgasmic when he received reports on the failing housing market This guy Eisman, who Lewis places centrally in the story as if he was some kind of hero, sniffed out the giant steaming pile of crapulence early and bet heavily against it There is no mention that Eisman ever made any attempts to contact regulators or even reporters, only that he wanted to obscure what he was doing so that he could do it longer and for increasingly greater amounts He walked away from the debacle with a 500 million profit and has the gall to give interviews to Michael Lewis, all indignant about how the banks were victimizing the poor It s psychopathic.In addition to Eisman, several other folks in the narrative also figure out what going on Unfortunately, none of them worked for the SEC, the Federal Reserve, the FBI or the Wall Street Journal they all worked for hedge funds They all actively participated in the machinery, reaped returns in the hundreds of percent on their investment, and clearly pat themselves on the back for getting out while the going was good As the final slap in the face, the government swoops in in the third act to pass out pallets of cash to sinking banks with almost no strings.Yes, Main Street America got taken for a ride Most of the people who took out these subprime loans probably had no idea of the massive financial malfeasance going on several rungs up the ladder And the same population that saw their savings wiped out and their homes repossessed will now have the pleasure of paying for the bailout with their tax dollars for the next century.But some of the blame lies at Main Street America s door as well So Average Joe doesn t understand complex derivative products He surely understands too good to be true Some people took interest only, floating rate, negative amortizing mortgages Did they really think, I can borrow buckets of money, truly insane multiples of my gross income, make miniscule payments to start, and have the rest of what I owe rolled into a bigger principal, the interest rate on which I don t even know this is going to end well I occasionally watch Suze Orman s show, and get the feeling that some Americans truly don t understand the difference between being able to afford something, and being able to afford the minimum payments on something.That this catastrophe happened within a decade of Enron is unfathomable And the scariest thing is, it doesn t sound like anyone not the public, the banks or the government learned enough to prevent this sort of thing from happening again Apocalypse is coming, y all. Original review May 4, 2010Lewis has a talent for making his readers feel smart Taking in his best works, you re granted kinship with the elite Like a trader at Salomon Brothers, you might laugh at the chumps in the bond market or like the money constrained boss of the Oakland A s, you might cobble together a winning line up by way of statistics or like a genius of modern day football, you would recognize the importance of a great left tackle in protecting your quarterback s blind side Now, with The Big Short, you will have no doubt foreseen the folly of investing in subprime mortgages with their impending defaults He does this in a very readable way, too The characters are all interesting often genuinely quirky And his vantage point as a quasi insider signifies the straight scoop Whatever the topic, he explains its subtleties well enough that you can paraphrase it to impress friends over cocktails Our man Lewis was clever to focus on the winners of the bet As he explained in an interview, those were the ones who were willing to talk to him They saw what became obvious in hindsight that many of the loans backing mortgage securities were originated with very low standards applied by firms who didn t have to eat their own cooking , were issued with teaser rates that would soon adjust up, and were likely to default as soon as the air started coming out of the big housing balloon For reasons Lewis explains well, the bet against the bubble was not so apparent to many These securities were hidden in tranches of complicated mortgage backed securities with obscure features that made it harder to do proper due diligence They were also rated too high by Moody s and SP for the default potential they contained partly because the agencies were easily duped by the Goldmans of the world who were paying their fees and wanted AAA assets to vend Plus, there was little to go on from past default data because such high levels of credit unworthiness had never before been experienced Modeling assumptions were poor, too For instance, it was thought that diversification across regions would reduce risks The widespread downturn in housing showed otherwise, of course Default correlations were high It hurt the cause, too, when some of the strongest personalities in the business, like Cassano at AIG and Hubler at Morgan Stanley, were also some of the wrongest.The misdeeds on Wall Street were spotlighted well I couldn t help feeling, though, especially at the end, that Lewis had overstated his case There were times when he claimed the investment banks were stupid for not knowing the true value of these assets and at the same time duplicitous in passing them off to customers You can t have it both ways, at least not in that case I was also hoping that he would weigh in on some of the other factors that contributed to the crash, such as the role of government with its CRA program and the poor oversight of its sponsored enterprises, toxic waste makers Fannie Mae and Freddie Mac Other points Lewis made against the investment banks were deserving, I thought, among them, the fact that they are no longer partnerships where any losses would truly hit home , but rather corporations with limited liability Agency theory in economics points to the problem of employees receiving a much bigger share of the upside with bonus structures as they are , and a lot less of any downside Riskier strategies result That doesn t explain everything, though Several of the notable blow ups included principal architects who were also major shareholders For instance, Richard Fuld lost over half a billion in share value when Lehman went under.The other thing I thought was noteworthy about Lewis s critique was something he alluded to in the introduction He said when he wrote Liar s Poker that he intended for it to be a finger wagging at the industry s bad behavior Many read it instead as a how to manual This disconcerted him, and it was apparent that he went to greater lengths this time to dwell on the negatives That said, might we still get the sense that he wants it both ways His descriptions are alluring, the language of the cognoscenti is enticing, the personalities are bigger than life, and the market savvy that decides who wins the pot is celebrated Wittingly or not, there s an extent to which he glamorizes I ll take him at his word that he doesn t want to see bright young people flocking to Wall Street any, but it seems there s a small, slightly disingenuous part of him that still finds it all pretty fascinating.In summary strongly recommended as a guidebook on the crisis, very entertaining, but maybe not the one stop shopping it might have been for assigning all warranted blame.Addendum 1 26 2016I never would have guessed this book had movie potential And I never would have thought that if it was adapted, that they d bring in the director of Anchorman and Talladega Nights to do it Now I half way expect the Farrelly brothers to counter with a version of Think and Grow Rich Or maybe those guys who made Airplaneand the Naked Gun movies could team up to put Who Moved My Cheeseonto the big screen Now that I m thinking of it, does Mickey Mouse still do movies From The Author Of The Blind Side And Moneyball, The Big Short Tells The Story Of Four Outsiders In The World Of High Finance Who Predict The Credit And Housing Bubble Collapse Before Anyone Else The Film Adaptation By Adam McKay Anchorman I And II, The Other Guys Features Academy Award Winners Christian Bale, Brad Pitt, Melissa Leo And Marisa Tomei Academy Award Nominees Steve Carell And Ryan GoslingWhen The Crash Of The US Stock Market Became Public Knowledge In The Fall Of , It Was Already Old News The Real Crash, The Silent Crash, Had Taken Place Over The Previous Year, In Bizarre Feeder Markets Where The Sun Doesn T Shine And The SEC Doesn T Dare, Or Bother, To Tread Who Understood The Risk Inherent In The Assumption Of Ever Rising Real Estate Prices, A Risk Compounded Daily By The Creation Of Those Arcane, Artificial Securities Loosely Based On Piles Of Doubtful Mortgages In This Fitting Sequel To Liar S Poker, Michael Lewis Answers That Question In A Narrative Brimming With Indignation And Dark Humor there s a difference between an old fashioned financial panic and what had happened on Wall Street in 2008 In an old fashioned panic, perception creates its own reality Someone shouts Fire in a crowded theater and the audience crushes each other to death in its rush for the exits On Wall Street in 2008 the reality finally overwhelmed perceptions A crowded theater burned down with a lot of people still in their seats Every major firm on Wall Street was either bankrupt or fatally intertwined with a bankrupt system The problem wasn t that they had been allowed to fail The problem was that they had been allowed to succeed.I must just have a thing for any work having to do with the Doomsday Machine that was our economy at and around the Great Recession Not only did I thoroughly enjoy this book and learned a hell of a lot from it as well but I also would putCarousel Court , a fictional account of the Great Recession, in my top 5 reads of 2016 There are 2 major reasons for why I m so enthralled by this phenomenon that occurred in our country and had ripple effects throughout the world economy 1 When this was happening in 2007 and 2008, I was in college Just another undergraduate student with big dreams and small money I didn t notice what was going on, as so many around me didn t, because I was used to living off of Ramen noodles and Red Bull, me and 5 of my friends piling into my sedan to go to parties, then still holding down jobs we hated on top of it all The struggle was real and it was normalized at that point in our lives, so, at that time, it didn t occur to me that what was going on around me was not the norm But now, in retrospect, with the sharpened eyes and heightened cultural awareness I have now, it enthralls me for another reason too 2 because the greed, stupidity and raging capitalism that brought this country to its knees only for our taxpaying dollars to bail it out and pick it back up again, of course is what I came to understand that we are widely known for and understood as the world over during my time living overseas Not the Recession itself, but the mentality that got us there To see it here, to experience it as close to the inside as I can be, so many years removed, through Michael Lewis The Big Short is to understand what has become our weakness and our strength depending on who you ask and a global caricature of our s, our values and our very personalities greed to the point of raging ignorance.Don t worry, I won t soapbox here unless you ask me to.The basic idea here stemmed from what we already know of America it is a land where quite often the rich do get richer while the poor do get poorer, and, because of that, there opened up a market for subprime lending like a yet undiscovered sea full of plentiful fish just waiting to be pillaged and plundered by Wall Street and the big banks Not only that, but the big banks functioned like dope boys, essentially, flipping their profits at the buyers expense, destroying their surroundings as they did so only, these flips yielded billions upon billions, and the companies lost billions upon billions as well The system was set up to profit from others losses as homeowners went into default, homes were lost and lives derailed, there was always someone else there on the other side of the bet or swap to get rich off of their loss by buying and betting on the debts of average Americans The subprime market tapped a segment of the American public that did not typically have anything to do with Wall Street the tranche between the fifth and twenty ninth percentile in their credit ratings That is, the lenders were making loans to people who were less creditworthy than 71 percent of the population.I can t even go into the ratings companies, Moody s and SP, who should have been policing this, but were instead lining their own pockets by selling AAA ratings for fees and looking the other way And, I won t even further comment on how the mortgage bond market was born and allowed to grow to the size that the U.S economy came to depend on its stability, all out of greed and ripping off subprime borrowers Nope, won t do it but what I will do is say that anyone who s never read this book, anyone who is still scratching their heads and trying to figure out, What the hell was that about should pick up this book and read it Not only was it a phenomenal read wholly entertaining, comedic even but it was also very insightful I guarantee you, love this country though we do, you ll understand the next time you re abroad and you get the side eye glance from the natives Our reputations precede us, and this is only one of a million reasons why An easily earned, happily given 5 stars FOLLOW ME HERE Art Deco Agency Book Blog Twitter Instagram Art Deco Publishing Agency Update Christmas greetings to those of you who celebrate Paul and I are seeing this movie today I m guessing the movie will be great Hasn t everyone read this book In my area extra copies could be found at bus stops around town on tables in Star Bucks I wouldn t have been surprised if books were added to people s grocery bags At one time this was the it book to read The Big Short was everywhere Michael Lewis became a popular household name.Hugely entertaining and informative look at the current economic shambles If you have not read this yet go to your local library I m sure you can find a free copy and refresh your history with the financial disaster which touched touches our livesBEFORE seeing the movie this year The movie looks great Almost as wonderful as Michael Lewis is at being a storyteller. Be fearful when others are greedy and greedy only when others are fearfulWarren BuffettSome of the most essential financial lessons I ever learned came from comic books back in the 90s when a bubble fueled by idiotic speculation on crappy books marketed as collector s editions eventually burst It left me with several copies of all the variant covers for Jim Lee s X Men 1, and the realization that something is only as valuable as what someone will actually pay you for it It was also eye opening to discover that a large company like Marvel would cut its own throat in the long term by compromising quality which alienated its most loyal readers for a short term gain and resulted in the company filing for bankruptcy in 96 Don t worry They landed on their feet A decade later I didn t pay much attention to the real estate market because I wasn t a home owner at the time, but occasionally I d see or read some news about the fantastic housing market that was booming People were seeing the value of their homes skyrocket, house prices were soaring, they were still selling, and a whole lot of people were getting very rich as analysts promised that the gravy train would roll on forever Well, that s not gonna end well, I d think remembering all those bagged copies of The Death of Superman and Image comics sitting in my parents basement Sadly, it didn t occur to me to try and capitalize on those idle thoughts, but I d like to think that if I had met any of the guys featured in this book about that time I d have drawn on that experience and handed them my every dime I had to bet on the whole thing falling apart.Michael Lewis has written a succinct and fascinating explanation as to why and how a handful of people recognized the coming financial crisis years before it hit and found ways to profit enourmously from it Some were smart and cynical Wall Street insiders who knew that a whole lot of people in their industry didn t even realize the risk that their institutions had taken on when they were buying up blocks of subprime mortgages An eccentric former medical doctor turned hedge fund manager was sure mortgages being handed out to anyone who asked would became a wave of defaults when the low teaser interest rates expired after a couple of years A couple of outsiders who had made a small fortune by playing stock market longshots saw the upside in laying out a relatively low amount of cash that would pay off big if things went south You might wonder at why no one sounded an alarm if they saw the collapse coming, and the short answer is that they couldn t get anyone to listen to them when they tried It was so inconceivable to the banks and Wall Street that the real estate market might collapse that these people pretty much had to invent ways to bet on it happening Even the ones who could see the writing on the wall would find themselves frequently shocked at the levels of greed and stupidity they d encounter as well as the utter lack of government oversight that might have prevented it There s a lot of fascinating human elements behind all of these stories, and Mike Burry, the doctor turned financial guru, is a particularly interesting person to read about Obviously there s many complex financial pieces that have to be explained and much of it was so complicated that even the people involved didn t understand all of it So there s a few parts where I found myself scratching my head However, just as he made the story of finding new ways to measure the performance and value of baseball players in Moneyball interesting Lewis also manages to make his explanations of things like credit default swaps readable It s slightly depressing to read since it s a reminder of the whole meltdown in 2008, but it s nice to hear that at least a few deserving people got something out of the whole mess.I d also highly recommend the film adaptation of this which mined the story for black humor and found very clever ways to explain the financial pieces. Remember that point, in recent years, when we all started to notice something strange Houses were getting and expensive, interest rates were dropping and , and most of us knew someone who had no money, but was able to get a huge mortgage And then there were all the stories of people buying houses with no money down and interest only payments for three years How exactly were these people expecting to make principal payments in three years And why was anyone lending them money In The Big Short, Michael Lewis explains that all of this was just the tip of an iceberg an iceberg floating in exceedingly murky water There was a reason for all of the bad mortgages The people making the mortgages were selling them, so they didn t care how bad they were The mortgages were being bought by companies that bundled them and turned them into bonds which they were able to sell, so they didn t care how bad the mortgages were either.In order to be sold, the bonds had to be rated by one of three rating agencies In a reasonable financial system, rating agency analyst would be the career the most ambitious business students aspired to As it is, these analysts are some of the lowest paid and least respected employees in the financial world The smartest and most talented people on Wall Street are never at the rating agencies They tend to become bond traders The agencies are paid to rate bonds by the very companies that produce the bonds As mortgage bonds were a new kind of bond, they needed help understanding them So the same companies also explained the bonds to the rating agencies None of this was illegal in fact, it is standard practice.Not surprisingly under the circumstances, a great many of these bonds which increasingly consisted of utterly worthless mortgages were rated triple A, the highest possible rating The bonds that consisted of the absolutely worst mortgages were given a triple B rating But the financial companies soon realized that triple B rated mortgage bonds could in turn be bundled into another financial product, a collateralized debt obligation CDO Presented with the CDOs, the rating agencies tended to give them triple A ratings which suggested that they were as safe an investment as U.S Treasury bonds Shockingly, very few people, at any level of the financial world or the U.S government, understood that the ratings and the bonds they described were worthless.This is a book about many things, but it is particularly a story of incentives, and the calamitous effects of incentivizing irresponsible behavior In a system in which virtually everyone had an incentive to do the wrong thing, almost everyone did and almost everyone, from mortgage lenders to the Fed, failed to understand that disaster was imminent The Big Short describes the very small and very eccentric group of people who saw it coming.The cast of characters begins with Steve Eisman, a socially inept hedge fund manager, who had turned cynic after witnessing a flagrant case of fraud on which the government refused to take action Mike Burry is a brilliant hedge fund manager who is virtually incapable of human relationships, a problem which he blamed on his glass eye but turned out to be undiagnosed Asperger s syndrome Charlie Ledley and Ben Hockett were two rather aimless friends who proved to have an uncanny ability to work the financial market Greg Lippmann was a cynical Deutsche Bank bond trader who realized that the market was unsustainable.They shared a key insight that the market was going to collapse, and therefore the only safe bet was a bet against the market To short a bond is to bet that it will lose value Michael Lewis rivetingly describes how they first made, and then won, this bet, becoming extremely rich in the process.Recently at Politics Prose Bookstore, at an entertaining event with Michael Lewis Joel Achenbach said that this book had undermined his belief in capitalism, and asked if we should all become socialists It was a joke, but it s also a fair question Lewis depicts a system in utter disarray, where financial products are too complex to be understood by either buyers or sellers the agencies in charge of evaluating these products are both under valued and embroiled in a serious conflict of interest and there are no incentives to encourage responsible behavior All of this links the health of the U.S economy to a large gamble in which virtually no one has any idea what he is doing It is to be hoped that this book will help foster a movement toward a truly sane financial system. Wall Street is probably best known for the movie quote Greed is good But after reading The Big Short, Michael Lewis excellent book about the lead up to the 2008 global financial crisis and the small group of people who saw the collapse coming and bet against it, I think Wall Street needs a new saying Y all are a bunch of greedy assholes I ve read several Michael Lewis books, and he does a good job explaining complex subjects to lay people I d recommend this book and the quirky movie based on it to those interested in trying to understand the last financial crisis Because based on the large number of greedy assholes in Wall Street, it will probably happen again.Meaningful Passage The line between gambling and investing is artificial and thin The soundest investment has the defining trait of a bet you losing all of your money in hopes of making a bit , and the wildest speculation has the salient characteristic of an investment you might get your money back with interest Maybe the best definition of investing is gambling with the odds in your favor The people on the short side of the subprime mortgage market had gambled with the odds in their favor The people on the other side the entire financial system, essentially had gambled with the odds against them Up to this point, the story of the big short could not be simpler What s strange and complicated about it, however, is that pretty much all the important people on both sides of the gamble table left rich. The Subprime Mortgage Crisisit s too easy to just lay blame on a cabal of greed constipated Wall Street sphincters who unzipped their consciences, yanked down their morals and dropped a huge deuce on the U.S financial system In many ways it s TRUE and it feels REALLY good to saybut it s too easy There were clearly some major crooks, scumbags and swindlers involved in this monetary atrocitya number of whom should have been taken out to the desert and shot, in my very pissed off opinion However, than anything else, the crisis was caused by monumental stupidity, a lack of proper checks and balances and a blind, mindless momentum that, once started and fueled by quick profits, became an unstoppable force dragging down the economy Michael Lewis opens up the windows on this malodorous morass and let s some of the stink out by giving us an easily understandable, and eminently readable, synopsis of the financial ponzi scheme that produced the most astoundingly epic financial crisis in U.S history Told through the lens of a small cast of brilliant, eccentric and highly entertaining money mavens who were the first to see that the Subprime emperor was naked and dangerously out of control, Lewis traces the crisis from its origins in the mid 1990s through the bursting of the bubble that began in 2007 and is still leaking all over us Lewis does a terrific job making this painful, and still fresh memory, an enjoyable read He also should be complimented on making the extremely compmlicated financial instruments and inner workings of the crisis understandable to the lawman by showing us their origin through the major places of the time The primary viewpoints used include Those that were Right Steve Eisman An anti social, verbally abusive hedge fund manager with no ability or desire to filter content from his thoughts to his words Reading about Steve is hysterical as he would offend almost every Wall Street type he came in contact with and he was usually right Dr Michael Burry A trained neurologist with Asperger s Syndrome and one eye who picked stocks in his spare time and eventually formed one of the most successful investment firms Scion Capital in the country by making large, large, LARGE bets against the Subprime Mortgage market Meredith Whitney a banking analyst who rose to fame when she predicted, in 2007, the massive failures of Citigroup and Bear Stearns based on their involvement in the Subprime Mortgage market Those that were Wrong Wing Chau Head of Merrill Lynch s CDO Collateralized debt obligations Group who knew that he was so right about the viability of the Subprime lending market and the sustainability of housing prices that he ended up losing Billions and bankrupting his employer Howie Hubler Not content to half ass it, Hubler went ahead and lost 9 Billion Dollars on a single trade involving credit default swaps While there are a book s worth of details, in essence a credit default swap agreement is an insurance policy whereby one party the buyer pays the insuring party the seller a series of fees like an insurance premium and the insuring party agrees to pay the buyer the face amount of a home loan if it defaults When foreclosures escalated in the subprime mortgage market, the seller s of these agreements, which included most of the major WallStreet firms, were SCREWED Very badly screwedalong with the rest of us Joseph Cassano Nicknamed Patient Zero of the meltdown, Joe was the executive at AIG in charge of the company s subsidiary AIG Financial Products Corporation that issued billions in credit default swaps many to Steve Eisman and Michael Burry that ended up coming due when the housing market tanked One of the most interesting aspects of the book for me was how eccentric the people on the right side of the crisis were Lewis shows us just how bold and anti herd mentality a person has to be in order to be convinced that everyone else in the market is crazy and that they are right The people in this tale are very, very unique individuals and it makes the reading a lot of fun This is a terrific book Well written, thoroughly engaging and paced very, very well It entertains while showing us succinctly how we went for economic robustness to just bustness Now, there are aspects of the financial meltdown that I would have liked to have seen discussed though I will not call their absence a gripe on my part A book dealing with all of the permutations and trickle down effects of the mortgage crisis would have looked like a multiple volume encyclopedia and would be a tough read I just would have liked a little on the breadth and depth of the disaster that the subprime mortgage market created The meltdown in the residential housing market following the massive short term appreciation in the housing market caused by the proliferation of sub prime mortgages rippled through the entire economy including the massive increase in the value of raw land for residential housing developments that eventually bankrupted so many home builders who spent ungodly amounts per acre on property based on the continuing increase in home prices the related surge in the price of commercial and industrial real estate that followed close behind the jump in residential land prices and led to the largest batch of commercial industrial foreclosures in U.S history There is no aspect of the U.S economy that was not significantly impacted by the greed fueled, short sighted debacle of the sub prime mortgage crisis and no guarantee that there is not significant pain still to come Still, for what this book does, it should be applauded For the reasons stated above, and because it is a terrifically told story, you should read this book 4.0 stars HIGHEST POSSIBLE RECOMMENDATION Michael Lewis looks at a handful of people who saw what was happening in the US economy, tried to sound an alarm, but also used their knowledge to make barrels of cash If the tales told here, following the fiscal 9 11 that is Wall Street ethics, do not scare you away from investing with any Wall Street firm, I do not know what will Lewis may single handedly revive stuffing cash in mattresses as a savings option What becomes clear is that there is no substitute for doing the hard work of gathering and analyzing data That, really, is what the people portrayed here did And they were confident enough in their analysis that they used it to personal advantage Not all are Gordon Gecko types, sociopathic greed machines Some even tried to warn legislators and corporations at risk just how crazy the bubbling market had become I suppose it should come as no shock that short term gain, even if based on insanity, will always triumph long term rationality if it means reducing the next quarter s profits Well, almost always One key is the willingness of ratings agencies, like Moody s and SP, to hold their noses and rate as triple A offerings that should have been rated as triple crap As long as the ratings agencies are reliant on businesses which bring products to them to rate, it is difficult to see how meaningful change can be effected Lewis has produced a very interesting portrait not only of a group of super bright analysts, but of Wall Street gone wild The book offers insight into the details of how the mess was made possible It is one of the best looks at the financial crisis I have seen Maybe I should invest in a better mattress 1 22 16 Saw the film tonight, and it is fracking brilliant

Michael Lewis, the best selling author of Liar s Poker, The Money Culture, The New New Thing, Moneyball, The Blind Side, Panic, Home Game, The Big Short, and Boomerang, among other works, lives in Berkeley, California, with his wife and three children.

❰Reading❯ ➿ The Big Short: Inside the Doomsday Machine Author Michael   Lewis –
  • Paperback
  • 320 pages
  • The Big Short: Inside the Doomsday Machine
  • Michael Lewis
  • 09 March 2017
  • 9780393353150

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