Ah-h-h once again we have picked a light, frothy summer title. "The Big Short" by Michael Lewis. I have started the book for a second time because my brain wasn't working very well the first time I picked it up. I do like the fact that on page 77 our author congratulates any reader who has gotten so far and offers them a gold star.
He does a very good job of explaining a complicated topic by telling the story through a few colorful characters.
Steve Eisman is in New York investigating the growing subprime mortgage industry.
"...subprime financiers had been sunk by the small fraction of the loans they had kept on their books" but now the market had learned a complicated lesson, "you can keep on making these loans, just don't keep them on your books. Make the loans, then sell them off to the fixed income department of big Wall Street investment banks, which will in turn package them into bonds and sell them to investors." This is the "originate and sell" model.
Mike Burry is in California figuring out how to make money from this time bomb ready to blow up.
" 'What you want to watch are the lenders, not the borrowers.' (Burry) said. 'The borrowers will always be willing to take a great deal for themselves. It's up to the lenders to show restraint, and when they lose it, watch out.' By 2003 he knew the borrowers had already lost it, By early 2005 he saw that the lenders had, too"
At this point I am reminded of a story Michael Lewis tells in his book, "Liar's Poker", about his career as a Salomon Brothers bond trader. He discovered that the traders who knew nothing talked on and on, but the traders who really knew what was going on said very little.
I'll just take this advice and keep this short.
More to come!
He does a very good job of explaining a complicated topic by telling the story through a few colorful characters.
Steve Eisman is in New York investigating the growing subprime mortgage industry.
"...subprime financiers had been sunk by the small fraction of the loans they had kept on their books" but now the market had learned a complicated lesson, "you can keep on making these loans, just don't keep them on your books. Make the loans, then sell them off to the fixed income department of big Wall Street investment banks, which will in turn package them into bonds and sell them to investors." This is the "originate and sell" model.
Mike Burry is in California figuring out how to make money from this time bomb ready to blow up.
" 'What you want to watch are the lenders, not the borrowers.' (Burry) said. 'The borrowers will always be willing to take a great deal for themselves. It's up to the lenders to show restraint, and when they lose it, watch out.' By 2003 he knew the borrowers had already lost it, By early 2005 he saw that the lenders had, too"
At this point I am reminded of a story Michael Lewis tells in his book, "Liar's Poker", about his career as a Salomon Brothers bond trader. He discovered that the traders who knew nothing talked on and on, but the traders who really knew what was going on said very little.
I'll just take this advice and keep this short.
More to come!
