Recently read: The Big Short
The Big Short, by Michael Lewis
This is Michael Lewis's take on the recent crisis in the financial and housing markets. There were a few people who saw the crisis coming, and The Big Short centers on their stories. For some reason the people he chronicles are highly unusual characters: That's presumably partially because they're more interesting to describe, but more because anyone willing to bet that Wall Street has collectively lost its mind must be out-of-the-ordinary.
Two examples that particularly stuck in my mind are Cornwall Capital, and also Dr. Mike Burry. Cornwall Capital started out as two guys in a Berkeley garage with $110,000. They wound up with a strategy involving options: Find things that are 10-1 long shots, but priced as if they're 100-1. They were lucky enough to be right three times in a row, giving them enough capital to matter. Dr. Burry was an even less likely investor. As a medical intern, he started blogging about investments in his free time (medical interns essentially don't have free time). At some point he decided to start a hedge fund instead of being a doctor, and did so successfully.
Much of the story details how the securitization ecosystem worked, with all the pieces from the originate-and-sell lenders, the investment banks, the insurers (AIG), the largely-duped rating agencies, and the final buyers of the destined-to-collapse CDOs. There are a number of lessons to be learned there, including that Wall street is neither as efficient or as simple as it looks.
Highly recommended
This is Michael Lewis's take on the recent crisis in the financial and housing markets. There were a few people who saw the crisis coming, and The Big Short centers on their stories. For some reason the people he chronicles are highly unusual characters: That's presumably partially because they're more interesting to describe, but more because anyone willing to bet that Wall Street has collectively lost its mind must be out-of-the-ordinary.
Two examples that particularly stuck in my mind are Cornwall Capital, and also Dr. Mike Burry. Cornwall Capital started out as two guys in a Berkeley garage with $110,000. They wound up with a strategy involving options: Find things that are 10-1 long shots, but priced as if they're 100-1. They were lucky enough to be right three times in a row, giving them enough capital to matter. Dr. Burry was an even less likely investor. As a medical intern, he started blogging about investments in his free time (medical interns essentially don't have free time). At some point he decided to start a hedge fund instead of being a doctor, and did so successfully.
Much of the story details how the securitization ecosystem worked, with all the pieces from the originate-and-sell lenders, the investment banks, the insurers (AIG), the largely-duped rating agencies, and the final buyers of the destined-to-collapse CDOs. There are a number of lessons to be learned there, including that Wall street is neither as efficient or as simple as it looks.
Highly recommended