Everything you wanted to know about the subprime mortgage fiasco is in here. The chain of events is well documented. At times I had to read a page or two over again to grasp all the subtleties. Though you probably won't read this book cover to cover in one sitting, it is very informative and never dull.

The Big Short is the best kind of investment book: it's entertaining, with larger than life characters in unimaginable situations; it's edifying (you won't even realize you're being schooled until after the fact); and it's a story no-one else has told ("The Greatest Trade Ever" comes closest). Readers can get structured narratives about the recent crisis through excellent tomes like Sorkin's "Too Big To Fail", or economist's critiques in books such as Stiglitz's "Freefall", but you'll likely not find another book like this one; a stunning and jaw-dropping account by one of the best authors in the business.

Lewis is the same author who burst on to the scene with his first book, the instant classic "Liar's Poker", and who followed up with a string of excellent books, including "Moneyball" and "The Blind Side". "The Big Short" is Lewis at his best.

Lewis understands the investment business like the insider he was, but this book is very much from the perspective of a critic. It is much more direct in its criticism of the financial industry than was Liar's Poker. In that book he similarly crafted a terrific story, but with a bemused "can you believe we did that" tone. In this book, Lewis taps mainstreet's anger, and to great effect (sample quote, "... he was the walking embodiment of the bond market, which is to say he was put on earth to screw the customer"). It's hard for folks on mainstreet to know exactly who to blame, and exactly what Wall Street did to cause such a mess, and Lewis lays out in clear and entertaining detail who did what.

Who comes off looking badly? Wall Wtreet firms, rating agencies (Moody's, S&P, Fitch), the fixed income market, the SEC, Ken Lewis (no relation) of Bank of America, and the financial system in general.
Who are the characters? Steve Eisman, Dr. Mike Burry, and Greg Lippmann, none household names, but all memorable characters who become important cogs in the collapsing Wall Street machine. John Paulson (who, as referenced above, made the greatest trade ever) is featured in a small way, and is perhaps the only protagonist with any celebrity.

Eisman's story is centred on his bets against Collateralized Debt Obligations, or CDOs, an esoteric type of bond backed by assets such as sub-prime mortgagees. The second narrative thread follows Burry and the evolution of his fund in its bets against the housing bubble, and the impatience of his investors as the subprime defaults were slow to materialize. Lippman's story is even more unusual; an insider, the head subprime mortgage trader at Deutsche Bank, and one of the earliest to figure out the likely end to the subprime story. Lippman is willing to tell his story to anyone who would listen; unfortunately, that wasn't his employer.

As in Liar's poker, Lewis weaves his remarkable story around memorable characters, and through the telling of his story, he imparts an incredible amount of industry detail and insight into a very readable text. For example, in a few pages Lewis conveys the essence of options' mispricing, something it takes Nassim Taleb a book to do. The story contains both detail and context; individual transactions and broad commentary on the financial system, and neither individuals nor the system come off looking good.

For those looking for Wall Street conspiracy theories, Lewis provides a different angle than "Too Big To Fail". Goldman Sachs' sale to Burry of credit default swaps (CDS) on subprime mortgage bonds earned them a juicy sales commission, but it was an instrument they didn't back directly ('triple A' rated AIG backstopped most). Burry knew this, but was focussed on profiting from the obvious (to him) subprime credit bubble. When the credit bubble started becoming clearer to the investment banks, they too looked to load up on CDSs, with Goldman becoming one of the larger purchasers. It didn't occur to Goldman that the CDS securities might themselves be a bubble, and that the primary issuer of them (AIG) might itself face bankruptcy. Only the US government's bailout of AIG prevented Goldman and others from being caught in a classic squeeze: paying out on defaults and facing a bankrupt insurer on the other end. Goldman was lucky.

Lewis again on the dealers' modus operandi, "When you talk to the dealers, you are getting the view from their book. Whatever they've got on their book will be their view." "All that mattered was what Goldman Sachs and Morgan Stanley decided should matter." Whether it was true or not. When all the Wall Street firms were riddled with subprime exposure, they all had to say they were fine, there was no exposure. It wasn't fine, and it took time and effort for the shorts to prove them wrong.

A remarkable story of outsiders tilting at Wall Street when they had limited knowledge, access, and a system working against their interests. Turns out Wall Street was wrong.

Michael Lewis sure knows how to spin a yarn out of complex, potentially dull topics. This book was a treat to read--entertaining and informative. I had trouble putting it down. Lewis anchors the narrative on a small cast of real-life characters who spotted the inherent weakness of the complex financial products constructed out of the subprime mortgage industry, and bet against them. By the time I finished the book I understood what collateralized debt obligations, credit default swaps and synthetic derivatives are, and how they brought the world financial system to its knees. He doesn't have much in the way of policy recommendations, but if you want to know what happened to the economy in the fall of 2008, this book is a great place to start.

Michael Lewis, author of such books as "The Blind Side" (recently made into a movie that got Sandra Bullock her Oscar), has written a riveting book on unusual investors who bet against the US sub-prime mortgage market and won big time. All investors aren't even remotely connected to each other but all came to the same conclusion that there was going to be a big crash in the mortgage market. So, they all bought "credit default swaps" - default insurance - knowing that their underlying investments were junk. That's like buying fire insurance on a real clunker of a new house, knowing that it will be destroyed by a forest fire this summer. Then you win big time.

In this case, the clunker of a new house are investments in "basement grade" mortgage securities - real junk that's been rated at the bottom of the scale at BBB - but which have been repackaged by the Wall Street investment banks, and re-rated as penthouse grade AAA (duh, how did that happen!!??) by the bond rating agencies.

The story is a bit complex and may take a bit of re-reading if you're not familiar with CDO's MBS's and CDS's and how the bond market works. It gets bogged down towards the end as Lewis relates what these 6 investors had to go through as the US economy ticked towards the Spring of 2007 (yes, the market crashed 15 months before September of 2008). Would you believe the hoops, loops and barrels they had to go through to try and find out the details of these junk mortgages? Quite an interesting story just on this.

It is quite amazing that nobody - not even the Securities & Exchange Commission - would even give these 6 guys 2 minutes of their time to listen to what they had to say.

A well written story (unfortunately or fortunately, depending on whether you had bet with or against the market). If you've seen "The Blind Side" and have taken any business admin or finance courses, you'll love this one. Economics 101 like your prof could never teach about the money markets.

Post script - The US Securities & Exchange Commission recently laid charges against Goldman Sachs for betting against both sides of the sub-prime mortgage market. For an understanding of how Goldmans did this, this book is a "must-read". It will provide you with the insight necessary to understand what is going on in this legal case. And other big losers (international banks) are lining up against Goldmans after the SEC has finished their legal action.