The Big Short: Inside the Doomsday Machine
The credit crisis of 2007-2008 was largely unexpected and very damaging for the economy, especially as it came on the heels of one of the most optimistic bull markets we had seen up until then.
Well, unexpected, for most people.
In the book The Big Short, author Michael Lewis takes readers through the story of a small group of shrewd investors who predicted this crash, and the thought processes that led them there.
This is another easy read from Lewis. It quickly dives deep into their analysis of housing loans, the securities that were developed from them, and how they triggered a market-wide financial disaster.
While being suitable for a reader with only a novice understanding of financial markets since it explains each aspect in an uncomplicated manner, Lewis’ book also engages experts because it covers a lot of detail when explaining how these investors formed their contrarian viewpoint and ultimately developed a strategy to profit from the looming collapse they were predicting.
Although the book was made into a movie, the film doesn’t quite do it justice as it fails to include significant details that are crucial for giving viewers the depth of understanding of the situation, and the events that led to such a tremendous outcome.
The story serves as a sobering reminder to investors that sometimes it’s best to take a step back, dig under the surface, and always read the fine print.
The payoff might just be worth it.