"Between 10 and 20 investors ... at most"
-- Michael Lewis on 60 Minutes, estimating how many people saw the financial crisis coming.
This painfully small group of financial crisis winners is the focus of Lewis' new book, The Big Short: Inside the Doomsday Machine. When Michael Lewis visited the Fool offices in the summer of 2009, he mentioned he was working on a book focused on the financial crisis. Back then, I was excited for the book to come out, but I wondered what new spin he could bring to the crisis.
I shouldn't have doubted my favorite financial raconteur.
You may know him from books such as ...
If you're unfamiliar with Lewis' work, he's the guy who semi-autobiographically chronicled the surreal world of 1980s Wall Street in Liar's Poker, explained the contrarian sabermetrics-focused success of Oakland A's general manager Billy Beane in Moneyball, and helped Sandra Bullock get her Oscar for the movie version of his book The Blind Side.
Lewis has a knack for illuminating abstraction via masterfully chosen human examples. We saw it in the animalistic Salomon Brothers traders in Liar's Poker, the Greek God of Walks (aka now-famous Kevin Youkilis of the Boston Red Sox) in Moneyball, and the rags-to-riches man-child Michael Oher in The Blind Side.
King of the shorts
Expect more brilliance from The Big Short. Instead of giving us yet another rehash of how we all lost a ton of money, Lewis shines a reflective light by highlighting those who made a killing effectively shorting the financial markets.
The memorable character from this book will likely be Michael Burry. I can picture the future movie trailer (from the writer of The Blind Side):
In a world where housing prices could not fall. Where down payments and heartbeats were optional, but interest-only half-caff-mocha-3-year ARMs were mandatory. One man ... ONE MAN ... stood against the subprime tide. Neurosurgeon-turned-hedge-fund-manager Michael Burry, suffering from Asperger's syndrome and equipped with only one functioning eye, dared to take ... The Other Side of the Trade.
That last line, the one describing Michael Burry, is 100% true (Zeke Ashton, in a 2003 Motley Fool article, wrote: "he may be the finest money manager I know"). He saw the problems AIG (NYSE: AIG ) , Moody's (NYSE: MCO ) , and Citigroup (NYSE: C ) did not. Burry didn't invent credit default swaps, but he invented credit default swaps on subprime mortgage bonds. By convincing Goldman Sachs (NYSE: GS ) and Deutsche Bank (NYSE: DB ) to make a market for him, he cheaply bet against the housing market and made an absolute fortune. Basically, he is to credit default swaps on mortgage-backed securities what Liar's Poker hero/villain Lewie Ranieri was to mortgage-backed securities.
Share your shorts
So it is with great excitement that we welcome Lewis to Fool HQ on Thursday. He'll be telling us more tales of the financial crisis and answering our questions. We'll share a summary of his best insights with you later in the week.
For now, help us get in the Michael Lewis spirit by sharing what you would short now. We're thinking more broadly here rather than individual companies.
Maybe you want to go anti-Moneyball and short the Oakland A's. Or the U.S. dollar. Perhaps the prospects of any meaningful health care or financial regulation. Or Ashton Kutcher's career. Maybe your lazy son's future prospects. Anything's fair game. Leave us a comment below with what you would short now, and the top five responses -- as judged by The Motley Fool's editors -- will get a signed copy of The Big Short!
Have at it in the comments section below!