Book Review: The Big Short Inside the Doomsday Machine
August 31st, 2010After reading “The Big Short” this past week, I couldn’t help but picture it as a thriller movie (except without car chases or crashes). Michael Lewis, the author of “Liar’s Poker”, brings to life the subprime mortgage-backed securities financial meltdown of 2007-2008 in his latest book.
Lewis interweaves the points of view of three very different investors (an Asperger’s syndrome doctor in Silicon Valley, three very geeky guys in Berkeley, CA and a skeptic of Wall St. managing a hedge fund) as they uncover the riskiness behind collateralized debt obligations (CDOs). Each one is swimming against the current, often being mocked by elites and Wall St. insiders as they prod and investigate.
They each find ways to bet against the market, betting against the ever-increasing housing prices and easy credit ideology that is taking over the U.S. Each character has his own reason for making this bet, and it isn’t all in the numbers.
Lewis draws a humorously, sad caricature of the investment industry: how they were blindsided by the subprime mortgage CDOs because of their hubris and ignorance.
Unfortunately, these Wall St. institutions were subsidized when they were bailed out by the U.S. taxpayer. Lewis shows us how middle-class Americans are shafted every day by these elites who manage their money, and create financial shenanigans that hide the real risks. They even benefit even when they lose millions or billions of dollars of their investor’s money.
Interestingly, Lewis was influenced by a 22-year old Harvard student who uncovered the story underlying the CDOs — her name is A.K. Barnett-Hart. The Wall Street Journal interviewed her in March of this year when the book came out. Read her thesis here.
And check-out the book,
