Michael Lewis's "The Big Short" tells a rather disturbing tale of some of the biggest profiteers of one of America's worst financial crisis, which we are likely still in the midst of. The amazing thing cleverly illustrated by Lewis, is that while most of the brightest minds in America woke up to our shocking decline once it was too late, a small handful of speculators not only called it correctly, some became fantastically wealthy. The question that nagged me throughout the book was how should I feel about people who just made a killing while most of us watched our retirements suffer alarming declines, and witnessed friends & family lose their jobs and houses?
Greg Lippmann is credited with being the first to expose the weakness in the market around 2006. He pitched the idea to hundreds of financial groups, but most seemed to invest in insurance policies to protect their exposure.
"A smaller number of people -more than 10, fewer than 20- made a straightforward bet against the entire multi-trillion dollar subprime mortgage market and, by extension, the global financial system. The catastrophe was foreseeable, yet only a handful noticed. Among them: Whitebox hedge fund, The Baupost Group hedge fund, Passport Capital hedge fund, Elm Ridge hedge fund, a gaggle of NY hedge funds, Elliott Associates, Cedar Hill Capital Partners, QVT Financial, and Philip Falcone's Harbinger Capital Partners. What most of these investors had in common was that they had heard, directly or indirectly, Greg Lippmann's argument."
Mr. Lewis is a fun and witty writer and his energy in The Big Short is very reminiscent of Liar's Poker, but I really found something morbid and unappealing about this subject. Reading about Paulson's $15 billion killing in 2007 had a different feel than say Soros in the `80's & `90's, but maybe now I know how the English & Indonesians felt? Our society is bred to believe that hard work and ingenuity are rewarded, but in this case there is a tangible human tragedy as a consequence of speculators earning a massive imbalance of wealth in relation to the rest of the population.
All of the speculators Mr. Lewis uses as examples technically did the right thing and chose wisely. Some were more sophisticated than others, but they all have one thing in common: they all made an obscene amount of money betting America would be brought down to its knees. I am also even more disgusted now with the rating agencies that were super-slick in stamping AAA ratings on what was absolute garbage in hindsight.
I found the book both fascinating and disturbing. I think it is now clear to me that financial speculation that doesn't promote sustainable growth needs to be addressed and properly dealt with, and that adequate steps have not been taken. Lewis definitely added a new layer to my awareness of the credit crisis, and covered some fresh ground beyond typical news. I recommend the book if you want to gain a deeper understanding of the sucker punch that just hit most of us.
This review is the subjective opinion of an ourinterestingworld member and not of ourinterestingworld LLC
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