The clever investors who made fortunes from the Great Recession

Great Recession

If you’ve heard of Michael Burry, Steve Eisman, Charlie Ledley, Jamie Mai, or Ben Hockett, there may be something wrong with you. Knowing one or more of these characters might suggest you’ve spent far too much time on the fringes of Wall Street, because it’s unlikely you would have encountered any of them unless you were tightly wrapped up in the subprime mortgage mess that practically overturned the global economy in 2008.


The Big Short by Michael Lewis

@@@@@ (5 out of 5)


It’s these marginal players who populate the pages of Michael Lewis’ masterful study of the decline and fall of Wall Street, not their much better-known counterparts who played such leading roles in making the mess that has been troubling us all ever since. This delightfully entertaining book explains how that handful of marginal actors in the financial markets anticipated the collapse of the subprime mortgage market and its dire consequences — and walked away with tens of millions of dollars each while the rest of us were counting our losses.

What a fascinating bunch of people they are! There’s Michael Burry, a physician turned stock-picker with Asperger’s Syndrome who found it exceedingly difficulty to interact with other people and supremely easy to focus on obscure details no one of sound mind would ever consider. And Steve Eisman, a Wall Street wizard with a genius for financial analysis and a seemingly boundless talent for pissing people off. And Jamie Mai and Charlie Ledley, who started off in a Berkeley basement with $110,000 and a vague notion that they could (perhaps, maybe) build their little nest-egg into something a little larger. Every one of these unlikely seers was absolutely right in calling the decline of the subprime market, years ahead of others who gained the attention of the news media. And, in Lewis’ telling, every one of them greeted with astonishment the disbelief and ostracism they faced for their views.

To the author, Michael Lewis, The Big Short is a sequel of sorts to his breakthrough 1989 bestseller, Liar’s Poker, the first of his thirteen books, which was based on his eye-opening experiences at Salomon Brothers in the go-go years of Gordon Gekko. In an epilogue to The Big Short, recounting an awkward recent lunch with John Gutfreund, the disgraced former CEO of Salomon Brothers and Lewis’ first boss  in the industry, Lewis finds the roots of the financial meltdown of 2008 in decisions Gutfreund made at Salomon in the 1980s.

The Big Short is a joy to read because of Michael Lewis’ easy way with words. It’s also one of the most insightful of the many recent books that have examined the financial implosion, and unlike many of those other books, this one pulls no punches about who is to blame, and why they did what they did.

For additional reading

This is one of 7 insightful books that explain what caused the Great Recession and of the many Good books by Berkeley authors reviewed on this site.

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