Special thanks to Sasha, Stacy and Stef for sharing the Audible experience with me and being the best of company during my recovery.
This is the story of a few guys who predicted the sub-prime bust and got rich from their prescience. It also details the stories of the people who resented these men; even as they made their doubters ridiculously wealthy. It further details the mass insanity of a world that naively held the view that a boom could be perpetual. The insanity brought about by the erosion of regulations, up to and including Glass-Stegall that eventually broke the world economy evolved from a belief that markets are omniscient. Which in the case of a basic honest market may be true. However given the roulette wheel that is Wall Street is not only a baseless assumption, but a dangerous one. This book detailed the myriad of ways in which the system was manipulated. The story of the 24,000 thousand dollar a year Strawberry picker who qualified for the 750,000 mortgage is indicative of the what the lack of accountability does to the marketplace. As always Michael Lewis does a great job in breaking down complex financial actions into easily understandable language. Like most of his books it is a five star effort.
Besides the perfect production of The Big Short, this is one of the most fascinating books I've ever listened to. We all have a general understanding of the cause of the economic recession of 2008, but it is rather small minded. We tend to think "oh, it was all those idiots taking out mortgages they couldn't pay for!" Or we thought "it was overspeculation on the housing market!" Michael Lewis provides an accurate look at the underlying problems, the real unfairness, and some priceless insight to the state of our economy and society.
Reads like a documentary
Many technical terms to learn
Lots of dry humor
Overall awesome book. I can't wait to get my hands on more.
I was able to learn about a subject I didn't have a lot of time to sit and read about. This allowed me to do two things at once. For me it's a whole new world of opportunity to continue learning. I have lots of time while I'm driving or doing chores etc. Fantastic!
It was current and hard hitting.
Oh he really brings the characters to life.
The ugly truth
Just loved the book and the ability to use Audible to listen to it because I may not have had the opportunity if not.
But depressing at the end to see the government bailout to companies who should have been allowed to fail.
I didn’t expect to enjoy this as much as I did. It’s nonfiction. It’s true stories behind three groups of investors who bet against the subprime mortgage market. It was well done and kept my interest. I was fascinated watching these groups, and it was fun seeing them “win” in the end. During the story I was amazed at the arrogance, incompetence, and bad judgment of AIG (the insurance company who offered this insurance and received premiums) and the large investment firms like Goldman Sachs and Morgan Stanley. I was also angry at the two rating agencies, Moody’s and S&P. They didn’t do their job. They gave high ratings to these loans, which meant outsiders would be willing to buy them. See below for more on this.
Then, I was depressed at the end of the book when the author talked about the bailout by the US government. Billions of taxpayer dollars were given to many different banks, brokerage firms, and companies. My personal conclusion is that SOME of these companies should NOT have been given bailout money. Some of those might have failed, but it wouldn’t kill our economy. Others could have absorbed the losses and still be around, but their management and shareholders would be a little poorer. For more on this see Wikipedia, search TARP.
Most of my reading is fiction for relaxation and fun. This book does not fit those criteria. It’s too cerebral. But I enjoyed it as an audiobook.
WHAT ARE SUBPRIME MORTGAGES AND THE BET:
This book is about the subprime mortgages causing (or making worse) the real estate collapse in 2007. An immigrant migrant farm worker comes to the US. He has no past credit history. An unscrupulous mortgage loan officer gives the worker a $750,000 loan to buy a house with low payments for two years, then huge payments would begin. The bankers group a thousand of these loans into one package and call it a bond. They sell the bond to others. Michael Burry was the first person who approached an investment banking firm asking if he could buy an insurance policy that would pay him the face amount of the loans if the loans went bad. In return Michael would pay a yearly insurance premium. AIG said we’ll take your premium payments and write the insurance for you. (This insurance policy is called a credit default swap.) Michael expected the loans to go bad at the two year mark, and then be foreclosed upon. Michael had nothing to do with the loans. He was like a gambler going to Las Vegas to place a bet.
I AM ANGRY AT THE RATING AGENCIES:
The two biggest rating agencies are Moody’s and S&P. Moody’s assigns ratings to bonds. Aaa is the safest, A is in the middle, B is the lowest. Most companies (and investors) have policies to only buy bonds with a certain rating. If the rating agencies had done their job, many companies would NOT have bought the bad bonds and not have needed the bailout.
Goldman Sachs (GS) and others did misleading things. That didn’t surprise me. I’m sure other companies and banks have plenty of skepticism when dealing with them. So the big problem here was S&P and Moody’s. I’m editing the following for brevity and clarity (page 171). Vinny asks the S&P analyst Ernestine for details about the loans behind one of these bonds, for example, the types of borrowers, terms, and property locations of the loans. Ernestine said she didn’t have that information. (Wall Street issuers like Goldman Sachs) “won’t give it to us.” Vinny said “You need to demand to get it!” She said “We can’t do that.” Vinny said “Who is in charge here? You’re the cop. Tell them to give it to you!!!” Vinny’s partner concluded that “S&P was worried that if they demanded the data from Wall Street, Wall Street would just go to Moody’s for their ratings.” An email was later produced in testimony to Congress from an S&P managing director (to his rating analysts) that said “Any request for loan-level tapes is TOTALLY UNREASONABLE!! Most originators don’t have it and can’t provide it. Nevertheless we MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method to do so.” (My thoughts: I was so angry at S&P and Moody’s! They are supposed to be the independent agencies telling us what we are buying. And they are not doing their job because they don’t want to upset who-is-paying-the-bill for the rating? I wonder what happened to the writer of that email?)
NARRATOR: Jesse Boggs was excellent.
GENRE: financial nonfiction.
I'm a geologist and I use Audible books to while away long hours on the road... My pickup truck is my reading room!
Michael Lewis is the preeminent critic of capitalist excess, and the credit bubble leading up to the 2008 crash was the preeminent capitalist excess of our lifetimes. So this book is bound to become a classic.
Lewis writes with his usual verve. More importantly, he sheds great clarity on a confusing subject. He explains what Credit Default Swaps are in a way that a layman can understand, and he manages to do so without making the people who invested in them seems smarter or more sophisticated than they are (a failing of many other books on the subject).
As usual, Lewis has written a great book. We can learn some of what happend and enjoy the lesson thoroughly. I recommend this book highly to anyone that is interested in business, the economy or simply what is going on in our world.
I normally pick books on guys like"Mitch Rapp" kicking butt and saving this nation, but I thought I should use a credit to educate myself. I have no idea how the big Wall Street firm's work, hedge funds, bond trading etc, and after listening to this book, I still don't. With that said, I was locked into this book. Michael Lewis did a great job of taking a subject that is designed to confuse the living daylights out of 99% of people and making you understand what occurred to get us into this mess. He established, three sets of modern day heroes who were screaming at the Wall Street Machine that what they were doing was wrong. When they wouldn't listen, they bet against them. I am floored at the level of deception and greed of so many different components to allow this to happen. How does Moody's and S&P do what they did and when confronted, not have the backbone to correct it? Why did they not have any repercussions and why didn't someone go to jail? How does the smartest people on Wall Street with Ivy league degree's allow this to occur and run their firms into the ground? Nice job guys. Do you think we really want to do business with any of you clowns after this? How does our Government and Alan Greenspan not recognize this and act? How does our Government bail out these inept Wall Street Firms and allow them to use that money and pay big executive bonuses?
I like to believe I am a Capitalist and believe in free enterprise with less Government. However, we read stories like this and it makes you wonder if their is something better. I have never placed a great deal of trust in banks and traders and after this book, I certainly have much less faith in them. They have truly earned the name "Banksters" and maybe we should have sent in "Mitch Rapp" to clean up the entire mess. That would be a good story!!!
I loved this book, and have been recommending it to friends and family. It's an incredible story and well told.
Old & fat, but strong; American, Chinese, & Indian (sort of); Ph.D. in C.S.; strategy, economics & stability theory; trees & machining.
This is a gripping story about a handful of traders who not only understood the housing bubble but had access to the technical apparatus to short the trend. Of course, they all became fabulously wealthy in a few weeks when Lehman Brothers revealed that the "Emperor had not Cloths".
This book has been much hyped, and I heard Dian Rehm interviewing the author on NPR; she ask him, "Aren???t you afraid that you book will inspire others to do the same" ??? I was shocked ??? The point of the book is that society needs more shorts.
Greenspan never quit argued that the market doesn't need regulation. His argument (even before his congressional testimony to the affect that he may have been partly wrong) was that although the market requires regulation, government regulation is less effective than the regulation of the marketplace (i.e., than private regulation). The primary way in which markets self-regulate is by allowing smart people to bet against the crooks; shorting the hucksters puts them out of business much faster than any government bureaucrat.
The troubling point, at least for me, is just how hard it is to short even a blatant fraud. The reasons range for trading technology to populist propaganda and are more implicit in this book, then actually enumerated. Greenspan argues that overpaid young cooks almost always (but not quite always) circumvent government regulators; this book shows that they almost as easily circumvent private regulators.
It also celebrates three instances where private regulators ???got their man???.