October 18, 2010

The Big Short - Michael Lewis

The subprime crisis of 2008 through the eyes of successful hedge fund managers. This books has a timeline of about 2005 - 2010. It weaves through the origin of the subprime mortgages and the events that lead to the eventual financial collapse. The author does a great job of conveying the events in the form of a fast-paced novel.

The author explains financial terms in a very simple manner and shows how major banks and Wall Street manipulate them. It gives a glimpse into the system from the eyes of hedge fund managers such as Steve Eisman, Michael Burry and others. The author points out that some financial instruments can be made so complex, that even the best minds would not be able to perceive the actual risks. He points out the basic flaws in assumptions by many firms. He describes how major banks, rating agencies and the government acted and reacted to the unprecedented events.

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