Lewis’s “The Big Short”

I’ve been meaning to do a quick book review post on “The Big Short” for the past few months but these posts are kind of time consuming.  A couple weeks ago NPR’s Planet Money team did a ‘Deep Read’ interview with the author Michael Lewis.  If you’re not familiar with Lewis he is an author who wrote an iconic book about Wall Street Finance in the late ’80s called “Liar’s Poker” which I reviewed HERE.  It just so happened that Lewis was working for Salomon Brothers in the ’80s where the Mortgage-backed bond was created.

“The Big Short” deals with the collapse of the subprime mortgage-backed bond market so as NPR’s Jacob Goldstein points out he basically wrote books about the alpha and omega.  Although this topic may sound dry and boring Lewis writes in a narrative style and does a great job of capturing the culture of Wall Street then and now.  Lewis himself claims in the interview that he doesn’t like writing about money but instead likes writing about subjects which offer an insight into the social culture of a specific time and place.

I have too many notes to list in this post but I highly recommend the book.

Here are just a few excerpts that I’ll share:

*Quoting a financial professional: “…Any business where you can sell a product and make money without having to worry how the product performs is going to attract sleazy people.

*A hedge fund manager pontificating on Buffett (had to include this quote): “At one point I recognized that Warren Buffett…did not copy Ben Graham, but rather set out on his own path, and ran money his way, by his own rules…I also immediately internalized the idea that no school could teach someone how to be a great investor.

*A recount of the madness: “In Bakersfield, California,  a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $724,000.

*Monetary losses caused by the sumprime era: “…the International Monetary Fund…out losses on US-originated subprime-related assets at a trillion dollars.” (Keep in mind that this was not the amount of the underlying mortgages.  This tally got so high because investment banks were selling Credit Default Swaps and other derivatives that were effectively bets on how the underlying mortgages would perform.)