The Big Short: Inside The Doomsday Machine

A brilliant account—character-rich and darkly humorous—of how the U.S. economy was driven over the cliff. When the crash of the U. S. stock market became public knowledge in the fall of 2008, 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: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can't pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren't talking. The crucial question is this: 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? Michael Lewis turns the inquiry on its head to create a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 best-selling Liar's Poker. Who got it right? he asks. Who saw the real estate market for the black hole it would become, and eventually made billions of dollars from that perception? And what qualities of character made those few persist when their peers and colleagues dismissed them as Chicken Littles? Out of this handful of unlikely—really unlikely—heroes, Lewis fashions a story as compelling and unusual as any of his earlier bestsellers, proving yet again that he is the finest and funniest chronicler of our times. .

Reviews

.....people just keep trying to sort this out for the masses i guess! keep writing and throwing it against the wall and maybe the pundits who don't get it may stop and read one of these books and something will stick. we have a lot of opinions not worth listening to and are leading the dim bulbs to rally as if they really know what they are talking or writing about.

the quote by Leo Tolstoy explains this for me.

"The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of a doubt, what is laid before him." Leo Tolstoy, 1897

this is why Michael Lewis wrote this book and i enjoyed reading it......never assume you know it all.
Superior.Finally puts to rest the blame assigned to the CRA, for the mortgage meltdown.Right wingers and suscribers to Milton Freedman economics, AKA Free markets beware.For those of you who subscribe to the notion that the markets will correct on their own without regulation wake up .
Do not let the star ratings guide you.These are angry Kindle idiots that cannot download this Book.THIS BOOK IS A MUST READ.
If you want another expose of the free market insanity, read Naomi Klines "Shock Doctrine"

Michael Lewis has an incredible gift of taking complex issues and synthesizing them into easily digestible, engaging narratives that entertain as well as informs his readers. "The Big Short" describes the recent collapse of the financial market at the hands of subprime lending. Lewis relates the rise and fall of subprime lending through the stories of three groups of investors that grasped the potential consequences of what would happen should borrowers begin to default on their loans. Utilizing credit default swaps, these investors were able to buy insurance at pennies on the dollar against the default of the residential mortgage bonds backed by portfolios of individual subprime loans. Once the subprime loans started failing, the bonds would default and the holders of the credit default swaps collected on the entire value of the bonds that defaulted, as if they owned the bonds. This enabled investors to make bets on specific bonds defaulting and paid on huge multiples of these bets once these bonds collapsed. As many people have described it, it was like an investor buying fire insurance on their neighbor's house. If the house burnt down, they would collect the payment for the insured value, even though they did not experience any direct losses because of the fire.

Lewis goes into detail to describe everyone's role within these transactions but places a significant amount of the blame on the investment banks. Published in 1989, Lewis' first book, "Liar's Poker," offered readers in inside glimpse into the world of investment banking. At that time, nearly all investment banking firms were privately held partnerships, thereby exposing only the individual partners to the risks the firms took on. Today, nearly all investment banking firms are publicly traded companies. This dramatic change in ownership structure has created a huge moral hazard issue whereby the firms have an incentive to take extreme risk in order to participate in the upside of the trade, but do not have to worry about the economic consequences if the trade does not pan out. This is precisely what happened once the subprime market collapsed. The economy was already heading towards a recession due to the drop in residential home values. The entire destruction of the economy was a direct result of the collapse of the house of cards the investment banks created.

Like all of Lewis' previous works, I thoroughly enjoyed this book and highly recommend it to anyone.

I've never read any of his previous books, but since I am a hedge fund manager, I decided to pick up this book. The start of the book was somewhat dry, but once I got past the first chapter, things started to get interesting. But again, I am in the investing business, so I can relate to what the author was writing about. But for those that aren't in the finance industry, it is worth the read to educate yourself on what happened during the real estate boom and bust
Reads like a book report of Gregory Zuckerman's book "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History".

I bought both from Amazon. I couldn't get into the "The Big Short" after reading "The Greatest Trade Ever"