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The Big Short – Michael Lewis

THE BIG SHORT – Michael Lewis

Since the financial crisis, experts keep popping up out of the woodwork to say “I saw it coming”.

Max Keiser, Dr Doom, Michael Ruppert… as the stock markets have crashed, their credibility has risen.

This book is also about a number of people who also saw it coming. The difference is they bet on it. This is the ‘big short’ of the title.

And what a cast of characters it is. There’s the compulsively rude, foul-mouthed Steve Eisman; Dr Michael Burry, a one-eyed eccentric who later finds out he has Asperger’s Syndrome (As Lewis remarks: “Only someone who has Asperger’s would read a sub-prime mortgage-bond prospectus”); and the three kids from California who traded stocks in a shed behind a friend’s house in Berkely, before moving to a Greenwich Village art studio.

Up against this cast of oddballs and weirdos are the arrogant, know-it-all bankers: whether it’s alpha-male Howie Hubler at Morgan Stanley who shouts down those who dissent from him or Wing Chau, a snake-oil salesman who has turned his marketing skills to mortgage bonds.

This is what gives the book such life. Because we know that taxpayers are those who will end up footing the bill for the bankers’ stupidity and corruption, when you read an article about the financial crisis each page is another reason to slit your wrists. But in this account, you’re rooting for the underdogs: anti-social outcasts rejected by the society in which they find themselves striving to make their fortune. Instead of growing feeling of fear and disaster, you’re willing it on. Crash! Crash! Crash!

But it’s a bumpy ride. One of the best chapters is Lewis’ account of Dr Burry struggling to keep his fund alive in 2007. Longtime investors are losing faith in his strategy to “short” the housing market and are demanding their money back. His fund is draining money, yet if he can only hold on they’ll be a big profit to be made. Not that his investors are thankful. Even at the end once he’s made a $720 million profit, not one of his investors call to say thank you.

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