The Big Short Book Review

the big short book review

Read this book review to see if The Big Short is for you…

The Big Short, by Michael Lewis, is a look “Inside the Doomsday Machine.”

So if you ever wondered why the global economy melted down in 2008, The Big Short is exactly the book you’ve been looking for. And as you probably know…

Michael Lewis is an incredibly talented financial journalist and author. So his recount of how the financial crisis of 2008 unfolded is absolutely fascinating. He has an impressive knack for turning complex stories into compelling narratives. And The Big Short is no different.

So in this book review, I’ll share a summary of The Big Short, including both my favorite parts, and where the book came up short. Sound good?

Let’s get into it then…

Why The Big Short is a Great Read:

The Big Short is an entertaining, illuminating and educational look at the activities of Wall Street leading up to the financial crisis of 2008. And since almost everyone you know has been influenced in some way by this most contemporary stock market crash, The Big Short makes for really interesting reading.

More specifically…

The Big Short starts by giving some background information and explaining how credit default swaps (CDS) came to be created. While innocent enough at first, these CDS derivative products were quickly abused by investors, bankers and deal-makers all over the globe.

The book makes a strong case for how these products of financial engineering were in large part responsible for the mortgage crisis of 2007-2010. From there…

The Big Short goes on to look at some of the key players who predicted the mortgage crisis. Now-famous names like Meredith Whitney were on the fringes of the financial community. And The Big Short does an amazing job illustrating the challenge of butting heads with the status quo.

Along the same lines:

The Big Short does a fantastic job highlighting the international complacency that marked the credit-frothed years of the early 2000s. Going against the grain wasn’t easy when so many people were making so much money with it. And The Big Short does an exemplary job showing how otherwise responsible investors were willing to do away with due diligence and blindly trust the rating agencies.

The Big Short has a lot of set-up, and when the crisis hits things unwind quickly. Along the way The Big Short shows a couple speculator blow-ups, including some of the biggest trading losses in history. It’s hard not to smile as these aggressive traders get their comeuppance.

So now that you have a basic idea of what The Big Short covers, let me share the best part with you…

My Favorite Part of the Big Short:

The Big Short really does a phenomenal job recounting the entirety of the 2008 financial crisis. But one of the things it really does best is help illustrate the true complexity of mortgage-backed-securities and the surrounding derivatives.

The Big Short makes it clear…

Most people didn’t really have an iota of an idea of what they were buying, when they were investing in all of these mortgage-backed securities. The folk-lore, common-sense time-tested wisdom that “houses are sources of equity that will never go down” got pushed to the brink using insane math that was beyond the understanding of most investors and ratings agencies (before snapping back hard).

It’s hard to believe.

But it happened!

And The Big Short makes a compelling case for what occurs when investors get in over their head and start buying stuff they don’t truly understand. It also reminds us that arguments based on “this time is different” don’t usually work.

It’s these “take home” lessons that really contributed to my enjoyment while reading The Big Short. But I should warn you…

One Word of Warning About The Big Short:

The Big Short does a good job breaking down the derivatives market, as well as the process of securitization. Michael Lewis is as capable as anyone in terms of making this exotic and arcane stuff understandable.

But I should probably mention…

Even with the expert guidance of Lewis, The Big Short is still a little bit confusing at times. And if you don’t have any prior experience with financial terminology it might be a little bit much to bite off. While I found the book relatively straightforward I had a few friends who were somewhat overwhelmed with all of the acronyms, terms and lingo.

So while Lewis does as good a job as anyone at helping you see the truth, it’s still a lot to handle if you don’t have any kind of financial vocabulary. Make sense?

Now let’s wrap up this Big Short book review…

The Big Short – The Final Word:

The Big Short is probably the best retelling of the 2008 financial crisis, and what caused our markets to go bust. For that reason alone,  I think it’s worth buying The Big Short on Amazon.

And beyond the history lesson, The Big Short does an effective job helping readers take away key points from this stock market crash to help you protect yourself in the future.

If you’re still looking for more information on The Big Short, I encourage you to watch the video book review below…

The Big Short Video Book Review:

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