I usually don’t read books that profile people like Bill Gates, Warren Buffet or some Arab potenate who is rich beyond believe. Nor do I dive into books about finance or Wall Street.
But recently I picked up a copy of Michael Lewis’ “The Big Short”, the tale of how derivatives were created and almost took down the American economy.
It’s a compelling, complex and often murky read. The murkiness comes from the fact that there are so many intricate parts and details to the tale. So many that I think it would take at least two dozen business scholl professors at least twenty years to figure it all out.
Lewis does an admirable job at trying to untangle the financial web and for those who need help, as I did, go to http://www.businesspundit.com/sub-prime/ for a helpful guide through the morass of financial terms.
Most surprising is how Lewis jumped to “The Big Short”from making “The Blind Side” , which could have easily been a typical ready-for-Hollywood rags-to-riches yawner and made it into a decent read.
As it turns out, Lewis spent several years right out of college working on Wall Street. He went to The Street because he was like so many of his classmates at the time-interested in making a lot of money fast.
Later he became disenchanted with Wall Street and went into journalism. But he retained a keen insight into the financial markets and got close to many people who would play a key part in the eventual rise and crash of derivatives.
In one classic scene in the book, one trader tells another: “I’ll do the trade but only when you tell me how you plan to screw me in this deal.” Bottom line: everyone gets screwed on Wall Street.
“The Big Short” should be required reading for everyone who thinks Wall Street has the answers.
This article appears in May 6-12, 2010.
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Woodwizard,
Told you it was worth reading…did you make sure to get it back to the library on time after I lent it to you so my late mother the librarian doesn’t haunt us both?!
Gerry
Once you get tired of the stick figures in the Business Pundit’s web site, try this two year old, somewhat thick, but very revealing article on the game, especially as it was played by the rating agencies like Moody and S&P:
http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html?pagewanted=1&_r=1
My favorite line, “This is a classic sign of a bubble – lending on the belief, or the hope, that new money will bail out the old.”