Reading Order
The Big Short Reading Order
Michael Lewis's The Big Short: Inside the Doomsday Machine (2010) tells the story of the small group of investors who saw the 2008 financial crisis coming and bet against the mortgage bond market — providing a narrative account of how the housing bubble was inflated, why conventional wisdom missed it, and how the people who understood it profited from its collapse.
Where to start
The Big Short
Complete The Big Short Book List
- 1Buy
The Big Short
Michael Lewis·2010·The complete standalone book. Start here. - 2Buy
Liar's Poker
Michael Lewis·1989·Lewis's debut memoir of his years as a bond salesman at Salomon Brothers in the 1980s — the Wall Street culture that The Big Short traces to its disaster. Read first for the historical backstory. - 3Buy
Flash Boys
Michael Lewis·2014·Lewis's account of high-frequency trading and the market structure it produces — the next Lewis book after The Big Short in his examination of how Wall Street works and fails.
The Big Short — Frequently Asked Questions
What is a credit default swap?
A credit default swap (CDS) is a financial instrument that functions like an insurance policy on a bond: the buyer pays a periodic premium, and if the bond defaults, the seller pays the buyer the bond's face value. The short sellers in The Big Short used credit default swaps on mortgage-backed securities — paying premiums to financial institutions like Goldman Sachs and Deutsche Bank who believed the housing market would never collapse — and collected enormous payouts when the housing market did collapse and the securities defaulted. The irony Lewis emphasizes is that the sellers of these swaps (the major investment banks) didn't believe the underlying securities could default, and the buyers (the short sellers) did.
Who were the real people in The Big Short?
The major figures in The Big Short are Michael Burry (a one-eyed former neurologist turned hedge fund manager at Scion Capital who was among the first to recognize the housing bubble), Steve Eisman (a skeptical Wall Street analyst who ran a hedge fund called FrontPoint Partners), Charlie Ledley and Jamie Mai (two young investors who ran a tiny fund called Cornwall Capital from a garden shed), and Greg Lippmann (a Deutsche Bank trader who sold credit default swaps to Eisman and others while himself betting against the same securities he was selling). The 2015 film adaptation starred Christian Bale as Burry, Steve Carell as Eisman (renamed Mark Baum), and Ryan Gosling as a Lippmann-inspired character.
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