This book should be rated 6 stars if such rating existed. Michael Lewis manages to top his masterpiece Liar’s Poker with an even more thrilling account of the events that led to the recent financial crisis. Although most of us are aware of the fundamental cause of the crisis being the sub-prime mortgages, this book sheds light on the pivotal role that the rating agencies played in creating it. Michael presents the events from both angles, the entities that were long and the shorts who were betting on the melt-down of the financial system. Through reading this book, one does not only learn the events, but learns how to analyze like the financial managers on Wall-Street. This book can be viewed as an investor’s guide to irrational market. Michael does a great job at the end to relate this piece of work to Liar’s Poker and to show how what he talked about then, came to life now in the form of a crisis. One quote I particularly enjoyed is:
“The line between gambling and investing is artificial and thin. The soundest investment has the defining trait of a bet (you loosing all of your money in hopes of making a bit more), and the wildest speculation has the salient characteristic of an investment (you might get your money back with interest). Maybe the best definition of “investing” is “gambling with the offs in your favor.”
In short, if you wanted to read one book to truly understand the financial crisis, this should definitely be the one. Highly recommended!