A little over a month ago, I finished reading one of Michael Lewis’ first books, Liar’s Poker. A few days following, I finished reading another one of his books, The Big Short. It was that good.
When the book first began, I was a little disappointed. Since Liar’s Poker was written in first person, from Michael Lewis’ point-of-view, I thought the so-called sequel would be similar. It instead explains the financial meltdown from several viewpoints, all of which saw the calamity coming. Though it’s not from his own eyes, it’s still in his own words.
For those that have no idea what the book is about, Wikipedia is here for you. I’m only here to highlight some of my favorite quotations.
In reference to the ignorance of ratings agencies and inability to understand what they were rating:
You know how when you walk into a post office you realize there is such a difference between a government employee and other people. The ratings agency people were all like government employees. Collectively they had more power than anyone…but individually they were nobodies. They’re underpaid. The smartest ones leave for Wall Street firms so they can help manipulate the companies they used to work for. There should be no greater thing you can do as an analyst than to be a Moody’s analyst, but instead it’s the bottom!
In reference to forever rising home prices:
Digging deeper, he called S&P and asked what happened to default rates if real estate prices fell…Their model from home prices had no ability to accept a negative number. They were just assuming home prices would keep going up.
In reference to Steve Eisman’s disbelief about Wall Street CEO’s lack of knowing what was going on:
Once, he got himself invited to a meeting with the CEO of Bank of America, Ken Lewis. I was sitting there listening to him. I had an epiphany. I said to myself, ‘Oh my God, he’s dumb!’ A lightbulb went off. The guy running one of the biggest banks in the world is dumb! They shorted Bank of America…
In reference to Dr. Michael Burry’s successful prediction of the meltdown:
A trade magazine published the top 75 hedge funds of 2007, and Scion was nowhere on it – even though its returns put it at the very top. It was as if they took one swimmer in the Olympics and made him swim in a separate pool. I was looking for recognition. There was none. I trained for the Olympics, and then they told me to go and swim in the retard pool.
In reference to Wall Street incentives:
What are the odds that people will make smart decisions about money if they don’t need to make smart decisions – if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they’re still all wrong.
I read this book as a recommendation from a fellow blogger. Do you readers have any suggestions as to what book I should read next?
