The Big Short

Answer 1

If you're interested in learning more about the origin of the current economic woes affecting the U.S. and the collapse of much of the financial system a great book to check out is Michael Lewis' The Big Short. Lewis, the author of Liar's Poker, Moneyball, and The Blind Side, retells the story of many of those involved in figuring out what was happening within the subprime mortgage market, the investment houses that securitized pools of the mortgages, and the ratings agencies that blindly rated what amounted to utter junk as AAA bonds.

Lewis takes you inside the minds of several interesting and somewhat unorthodox institutional investors as they begin to play amateur sleuth in the world of collateralized debt obligations and credit default swaps. But you don't have to know your CDOs from your CDSs to enjoy this book. The writing style is very engaging and Lewis takes great care to explain some of the most complex financial instruments in language that can be understood by almost anyone.

Despite much of the book happening in a world that none of us will ever visit, that of the inside of the large investment banks on Wall Street, the book makes it clear to the average investor how the inner workings of those banks affect those of us outside that world. This valuable clarity alone would be enough reason to pick this book up and give it a read. Indeed it was the reason I started reading it. However, soon I found myself reading this book more out of pure enjoyment of Michael Lewis' storytelling ability and the simple way in which he broke down the complex machinations of Wall Street than for any insight into the investment world. Insight did come, but it was as an added bonus to the pure fun of reading The Big Short.