A review of The Big Short by Michael Lewis
Mike Burry began his professional career as a doctor -- brilliant and driven, yet unable to look anyone in the eye due to his own childhood loss of one -- but soon became disenchanted with the healing profession. He moved on to his next obsession: the bond market. After creating Scion Capital, a hedge fund, he quickly became involved with buying up a new product called credit default swaps or insurance on bonds created from sub-prime mortgages. Mike Burry is just one of the key players in Michael Lewis's chronicle of the Wall Street debacle that precipitated the US financial crisis of 2008/2009.
For someone who began his career as a investment analyst at Salomon Bros., Lewis is a master story craftsman; and what a story he has here to tell. I barely understand a thing about Wall Street, and Stock Exchanges; not to mention derivatives, CDO's, credit default swaps, and AAA rated tranches, but Lewis really piqued my interest. Suddenly, I was enthralled with the stories of Steve Eisman, Greg Lippman, Vincent Daniel, and other bond traders, hedge fund analysts, et al. It is fascinating as Lewis reveals how everything converged into a perfect storm of doom for Wall Street and the US economy. How, among others, the rating agencies (Moody's, Standard and Poor"s) the fed chairman (Greenspan), and key investment banks (Deutsche Bank, Goldman Sachs, Bear Stearns, etc...) all contributed to the downfall of not only US but world markets.
After reading The Big Short, I still do not purport to understand how everything in the financial world works, but I am a hell of a lot more informed; informed enough to stay away from Wall Street investments for now, and to highly recommend this or any other book by Michal Lewis. In the Epilogue, Lewis tells of his recent lunch with his old boss at Salomon Brothers, John Gutfreund. He hadn't seen him since he had quit Wall St years before and had been asked to explain to the CEO his exotic dealings in derivatives with a European hedge fund. When Liar's Poker, Lewis's first book which exposes Gutfreund and Salomon Brothers, came out, Gutfreund told the press he'd never met Michael Lewis. Gutfreund was later forced to resign as CEO of Salomon. At the lunch, after some formalities, the discussion turned nostalgic. Gutfreund says:
"'I think we can agree about this: your f***ing book destroyed my career and it made yours.' with that the former king of a former Wall Street lifted the plate that held his appetizer and asked, sweetly, 'would you like a deviled egg?'"And it is sweet, in this case, to hear the vanquished offering up to the victor, the spoils; even if it only is a deviled egg.
~Book Jones~ 4 Stars