Michelle's Reviews > The Big Short: Inside the Doomsday Machine

The Big Short by Michael Lewis
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Jun 05, 12

bookshelves: 2012, non-fiction
Read from June 03 to 05, 2012

“How do you explain to an innocent citizen of the free world the importance of a credit default swap on a double-A tranche of subprime-backed collateralized debt obligations?” If this sentence reads like gobbledygook then pick up this book. Hell, even if it does makes sense, read it anyway. I feel as though people don’t appreciate/realize what really happened when the CDO/CDS/MBS market imploded and why we’ll be paying for it for years to come.

Having spent a career in financial services (private equity, investment banking, though thankfully not bond trading) and now currently dealing with Wall Street on a daily basis while at a publicly traded company whose clients are (wait for it) actually originating mortgage loans, I was familiar with much of the concepts/people/etc. in this book. I had a clear understanding of what went down when it went down, though unfortunately not beforehand as it would’ve been nice to take a $1 billion short position on these CDOs, not that I have $1 billion available to me for shorting.

I loved this book and gasped several times, even as I retreaded old information. I actually thought I’d find much of it boring, expecting lowest-common-denominator explanations of how the various CDO/CDS tranches worked. But Lewis makes even the old (for me) seem interesting. I was familiar with several of the players, but not all of them, and they are definitely reminiscent of characters you might find in a novel. This is a ridiculously fascinating (and scary) tale and should be required reading for anyone engaged in any part of the U.S. economy (e.g. you fund your 401k or have ever taken out a mortgage). I think most Americans probably don’t understand what happened beyond the “Wall Street v. Main Street” rhetoric. I will be pushing this on my friends even in the non-financial services industry. Great book for anyone.
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