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Panic: The Story of Modern Financial Insanity
The New York Times bestseller: A masterful account of today’s money culture, showing how the underpricing of risk leads to catastrophe.
When it comes to markets, the first deadly sin is greed. In this New York Times bestseller, Michael Lewis is our jungle guide through five of the most violent and costly upheavals in recent financial history. With his trademark humor and brilliant anecdotes, Lewis paints the mood and market factors leading up to each event, weaves contemporary accounts to show what people thought was happening at the time, and, with the luxury of hindsight, analyzes what actually happened and what we should have learned from experience. .
When it comes to markets, the first deadly sin is greed. In this New York Times bestseller, Michael Lewis is our jungle guide through five of the most violent and costly upheavals in recent financial history. With his trademark humor and brilliant anecdotes, Lewis paints the mood and market factors leading up to each event, weaves contemporary accounts to show what people thought was happening at the time, and, with the luxury of hindsight, analyzes what actually happened and what we should have learned from experience. .
400 pages, Paperback
First published December 1, 2008
About the author
Michael Lewis
40 books13.6k followersMichael Monroe Lewis is an American author and financial journalist. He has also been a contributing editor to Vanity Fair since 2009, writing mostly on business, finance, and economics. He is known for his nonfiction work, particularly his coverage of financial crises and behavioral finance.
Lewis was born in New Orleans and attended Princeton University, from which he graduated with a degree in art history. After attending the London School of Economics, he began a career on Wall Street during the 1980s as a bond salesman at Salomon Brothers. The experience prompted him to write his first book, Liar's Poker (1989). Fourteen years later, Lewis wrote Moneyball: The Art of Winning an Unfair Game (2003), in which he investigated the success of Billy Beane and the Oakland Athletics. His 2006 book The Blind Side: Evolution of a Game was his first to be adapted into a film, The Blind Side (2009). In 2010, he released The Big Short: Inside the Doomsday Machine. The film adaptation of Moneyball was released in 2011, followed by The Big Short in 2015.
Lewis's books have won two Los Angeles Times Book Prizes and several have reached number one on the New York Times Bestsellers Lists, including his most recent book, Going Infinite (2023).
Lewis was born in New Orleans and attended Princeton University, from which he graduated with a degree in art history. After attending the London School of Economics, he began a career on Wall Street during the 1980s as a bond salesman at Salomon Brothers. The experience prompted him to write his first book, Liar's Poker (1989). Fourteen years later, Lewis wrote Moneyball: The Art of Winning an Unfair Game (2003), in which he investigated the success of Billy Beane and the Oakland Athletics. His 2006 book The Blind Side: Evolution of a Game was his first to be adapted into a film, The Blind Side (2009). In 2010, he released The Big Short: Inside the Doomsday Machine. The film adaptation of Moneyball was released in 2011, followed by The Big Short in 2015.
Lewis's books have won two Los Angeles Times Book Prizes and several have reached number one on the New York Times Bestsellers Lists, including his most recent book, Going Infinite (2023).
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Displaying 1 - 30 of 218 reviews
February 29, 2016
"No one believes the original assumptions anymore. It's hard to believe that anyone-- yes, including me-- ever believed it."
- John Seo, Fermat Capital, Quoted in 'Panic' by Michael Lewis
I'm not giving this book 3 stars because the writing is bad. Much of the writing is very, very good. I'm just giving it three stars because it technically is only an anthology edited by Michael Lewis. It is just a a collection of stories written by the author and many other financial writers divided into Four major parts/panics:
1. 1987 Black Monday
2. 1997 Asian financial crisis
3. 2000 Dot-com collapse
4. 2007-8 Global Financial Colapse
Lewis, apparently, got the idea of this anthology from a discussion with Dave Eggers. Dave offered up a "McSweeney's Intern" to compile and I'd assume edit and get permissions, Lewis would contribute an introduction and some transition writing, and obviously, some of his own pieces from each of these four panics. The book's proceeds would go to 826 National to fund relief in New Orleans (you can't strike a bargain with Eggers without it ending up benefiting someone) and boom! Book.
Anyway, if I was reading it as a textbook, I'd give it four stars, but it just seems a bit too easy, too forced, not enough original Lewis material to really give it much beyond the three stars I gave it. If you want great writing on panics, I'd just go read some of Lewis' original long-form pieces, books (Liar's Poker, The Big Short: Inside the Doomsday Machine, Flash Boys: A Wall Street Revolt), etc. If you want a survey from a bunch of good financial writers on recent panics, well ok, this one will do it and the money does go to a good place.
- John Seo, Fermat Capital, Quoted in 'Panic' by Michael Lewis
I'm not giving this book 3 stars because the writing is bad. Much of the writing is very, very good. I'm just giving it three stars because it technically is only an anthology edited by Michael Lewis. It is just a a collection of stories written by the author and many other financial writers divided into Four major parts/panics:
1. 1987 Black Monday
2. 1997 Asian financial crisis
3. 2000 Dot-com collapse
4. 2007-8 Global Financial Colapse
Lewis, apparently, got the idea of this anthology from a discussion with Dave Eggers. Dave offered up a "McSweeney's Intern" to compile and I'd assume edit and get permissions, Lewis would contribute an introduction and some transition writing, and obviously, some of his own pieces from each of these four panics. The book's proceeds would go to 826 National to fund relief in New Orleans (you can't strike a bargain with Eggers without it ending up benefiting someone) and boom! Book.
Anyway, if I was reading it as a textbook, I'd give it four stars, but it just seems a bit too easy, too forced, not enough original Lewis material to really give it much beyond the three stars I gave it. If you want great writing on panics, I'd just go read some of Lewis' original long-form pieces, books (Liar's Poker, The Big Short: Inside the Doomsday Machine, Flash Boys: A Wall Street Revolt), etc. If you want a survey from a bunch of good financial writers on recent panics, well ok, this one will do it and the money does go to a good place.
December 18, 2023
"Panic" is particularly relevant due to its timing, released shortly after the 2008 financial crisis. It offers insights into the factors and systemic issues that contributed to the crisis, shedding light on the inner workings of financial markets.
August 4, 2010
The parts of this I liked the least were the parts where people, including the editor, decided it was time to do some satire. Obviously, there is nothing funnier than a good bit of satire. And over the years I’ve really enjoyed some very funny pieces of satire(I miss you Max Gillies). The problem is that, for it to be funny, satire needs to be the powerless laughing at the powerful. So, jokes about how the poor have hurt your stock portfolio by loosing their houses aren’t so much satire as, well, obnoxious. I know it is hard to spot the difference between these at times, but there is a difference and it is one that should be respected. The ‘how to make money in real estate’ piece by Dave Barry also suffered from the same ‘rich people laughing at poor people’ problem and therefore had the same ‘yuck’ factor.
The parts where this book was particularly good were when an article illuminated things to do with the various crises that I’d never thought of before or never in that particular way. This is a book about a series of financial crises since the mid-1980s and as someone says of them, not only do they never repeat, they don't even rhyme. The causes of each crisis have been quite different and each has caused its own special kind of disillusionment.
I think the thing I was most surprised at learning was that when Russia defaulted on its debt in the late 1990s that it did so in debts it had run up in Russian Rubbles. I had always just assumed that it had debts in foreign currencies and didn’t have any of those currencies to be able to meet its obligations – but how a country can’t meet its obligations in its own currency really is a mystery. All the country would need to do is fire up its printing presses. And before you say that would have made matters worse, I have to say, worse than what? Defaulting? Does it get worse for a country than that?
Yes, I know, you’ve heard enough about this crisis – but if you are feeling bored and would like to learn more about just how crazy the whole sub-prime fiasco was then this article, reprinted in the book, from the New York Times, is fascinating. http://query.nytimes.com/gst/fullpage...
The nature of the failure of the rating agencies and their double role (is that a conflict of interest you have in your AAA or are you just happy to steal from me?) does make you wonder what the difference between a dead person and a financial regulator must be. The articles on Bear’s collapse would make a fantastic film – there is pure humour throughout, although, obviously, the laughter does dry up quickly when you think about the harm these bastards have done with their utter neglect.
This book is written very much from the perspective of the insiders – there are many moments when Capitalism is praised and defended, it is never really 'attacked' and is alway defended (sometimes with logic twists that almost had me clapping). But there is enough here to make any reader question unmitigated greed as a virtue – and so I guess that has to be good.
The parts where this book was particularly good were when an article illuminated things to do with the various crises that I’d never thought of before or never in that particular way. This is a book about a series of financial crises since the mid-1980s and as someone says of them, not only do they never repeat, they don't even rhyme. The causes of each crisis have been quite different and each has caused its own special kind of disillusionment.
I think the thing I was most surprised at learning was that when Russia defaulted on its debt in the late 1990s that it did so in debts it had run up in Russian Rubbles. I had always just assumed that it had debts in foreign currencies and didn’t have any of those currencies to be able to meet its obligations – but how a country can’t meet its obligations in its own currency really is a mystery. All the country would need to do is fire up its printing presses. And before you say that would have made matters worse, I have to say, worse than what? Defaulting? Does it get worse for a country than that?
Yes, I know, you’ve heard enough about this crisis – but if you are feeling bored and would like to learn more about just how crazy the whole sub-prime fiasco was then this article, reprinted in the book, from the New York Times, is fascinating. http://query.nytimes.com/gst/fullpage...
The nature of the failure of the rating agencies and their double role (is that a conflict of interest you have in your AAA or are you just happy to steal from me?) does make you wonder what the difference between a dead person and a financial regulator must be. The articles on Bear’s collapse would make a fantastic film – there is pure humour throughout, although, obviously, the laughter does dry up quickly when you think about the harm these bastards have done with their utter neglect.
This book is written very much from the perspective of the insiders – there are many moments when Capitalism is praised and defended, it is never really 'attacked' and is alway defended (sometimes with logic twists that almost had me clapping). But there is enough here to make any reader question unmitigated greed as a virtue – and so I guess that has to be good.
January 20, 2019
Objective Summary
This book compiles news articles about four instances of financial panic: the Black Monday crash of October 19, 1987; the Mexico, Russia, and Asia panics of the 1990’s; the internet bubble and bust in the late 1990’s and early 2000’s; and the real estate bubble and bust in the mid-2000’s. Lewis writes a few pages of introduction, but the bulk of the book comes from excerpts from other authors. The articles demonstrate the difficulties in identifying a bubble in real time and the causes of a burst even in hindsight.
As a compilation of articles, the book lacks a unifying theme or argument. The best lesson—perhaps the only lesson—may be that no one knows why the market acts as it does or where it will go. A combination of fear, greed, ignorance, and corruption influences people’s thoughts, and therefore guides the market’s actions. Add in complicated regulations, financial instruments, and mathematical formulas and you have a recipe for opacity. Some investors, through skill or luck or corruption, profit from the opacity and their wagers. Additional points on each of the four crashes follow.
October 19, 1987 crash:
• No one knows why the crash occurred when it did. The Brady Commission, a presidential commission set up to investigate the crash concluded there were many reasons, one of which was portfolio insurance.
• Portfolio insurance was an idea based on the Black-Scholes options pricing model that suggested an investor could hedge against losses by rapidly short selling index futures through program trading. When many investors tried to do this simultaneously, however, there were not enough buyers to meet the demand of the sellers and stabilize prices, so prices continued to fall.
• The reason for the precise timing of the crash is indiscernible, but the average P/E ratio of stocks was 20 while interest rates on bonds were around 10%. Thus, it took $20 of stock to earn $1 of earnings at the same time it took $10 of bonds to earn $1 of interest. This revealed that stock prices were overvalued and a correction was due. For why would an investor buy stock as a residual claimant when he could have a better return and higher priority claim to company assets as a bondholder?
Mexican, Russian, and Asian crashes of the 1990’s:
• Developing countries had high debt to GDP ratios.
• The International Monetary Fund encouraged developing countries to open their financial markets to international investment and to pay high short-term interest rates while their currencies were fixed to the US dollar. Investment poured in to gain the high interest rates, and a combination of crony capitalism (i.e., payments to politically well-connected individuals and businesses) and subsequent devaluing of currencies pulled money out just as rapidly.
• Russia assigned ownership of its vast natural resources to a politically created oligarchy after the collapse of the Soviet Union. Russia devalued its currency and defaulted on its debt.
• Long-term Capital Management, a large US hedge fund invested in interest rate swap arbitrages, collapsed.
New New Panic, or the internet bubble of the late 1990’s and early 2000’s:
• Internet stock mania began with the IPO of Netscape in April 1995.
• Investors did not fully understand the ramifications of the internet on global commerce, but many people were blindly bullish and jettisoned traditional measures of company value such as P/E ratios and even profitability. One example involves Books-a-Million’s stock tripling shortly after it announced merely that it was revamping its website. This book retailer trailed behind Barnes & Noble, Borders, and Amazon in sales, and online sales were only a small part of its business, but investors bought into the bubble and belief that any action involving the internet was a sure thing.
• Marketing hype and jargon allowed companies to raise vast sums of money to try to build or bluff their way to legitimate businesses. Most failed. Smalltime internet companies like computer.com, ourbeginning.com, and pets.com spent large portions—sometimes half—of their working capital on single advertisements during the 2000 Super Bowl with nothing to show for it.
• The internet revolutionized commerce. Amazon is a resounding success, and its lower overhead allowed it to compete with Borders, Books-a-Million, and Barnes & Noble. But businesses still eventually require profitability, and they take time to improve their business models. One particularly bad business model was AllAdvantage, which paid customers by the hour to surf the internet. The idea was that the company could collect user data and sell it to advertisers, but the company burned through its startup capital too quickly and never developed a means to monetize the data it collected.
• Jack Willoughby’s March 20, 2000 article “Burning Up,” in Barron’s gave a potent prick to the internet bubble. It laid out the 200 or so internet companies that were burning through cash the fastest and noted that many of them would be out of cash within months. Such companies had to raise new capital simply to survive. The longer the companies continued without profitability, the more expensive it was for them to raise cash, and many could not raise additional cash at all. Insiders began dumping stock, which is never a good sign.
The People’s Panic, or the real estate bubble in the mid-2000’s:
• The real estate bubble burst sometime around 2007. Once again, the exact causes are unknown, but there are many theories and contributors.
• Interest rates were kept low by the Federal Reserve, permitting excess investment. Government policies from Clinton and Bush encouraged homeownership. Government sponsored entities like Fannie Mae and Freddie Mac bought loans, alleviating underwriters from the risks of keeping the increasingly unsound loans. Builders and realtors loved the action because of the revenue and commissions they received. Builders paid inspectors to value properties above market rates, and inspectors complied. Investment banks created and sold new financial instruments, such as mortgage-backed securities and collateralized debt obligations, to investors as products with higher returns and lower risks because they were backed by mortgage payments, which were historically sound investments. Ratings agencies like Standard and Poor’s and Moody continued to rubber stamp risky investments as triple-A rated under faulty assumptions about the strength of the housing market and because the Wall Street banks that brought them the instruments for ratings paid them to do so. As the real estate markets in places like New York, Florida, and California heated up, speculators came in with the hope of buying a house, holding it for a limited amount of time, and cashing out on the resale.
• Wall Street firms heavily invested in subprime mortgages lost money. Bear Stearns and Lehman Brothers went bankrupt. Jim Cramer from CNBC’s show “Mad Money” looked foolish claiming that Bear Stearns was a buy at $62/share when it ended up selling to JP Morgan Chase for $10/share. Some people, like John Paulson, a hedge fund manager who bet against the housing market through newly invented instruments like credit default swaps, made lots of money. Paulson in particular made $3 or $4 billion.
Subjective Thoughts
Lewis is a fantastic writer, but this book sucks because Lewis didn’t write it. No one person wrote it, so it lacks coherence. It’s like a subreddit on financial panics without the witty commentary. It was frustrating not to have a unifying position or lens through which to filter the deluge of information, and I took away only a handful of tidbits. First, no one knows anything for sure when it comes to financial panics. People who got it right once may not be right again. Second, people who provide cocksure assessments of where the market is going should be embarrassed when their predictions prove woefully incorrect—I’m looking at you, Jim Cramer and David Pidwell (the venture capitalist who first funded AllAdvantage). Third, government involvement reliably leads to complexity, debt, and bubbles. Without government manipulation of economics, there would be fewer and less painful distortions. The use of force and the size of government interventions must, by their very nature, lead to distortions away from the preferences of the market. The government has no business pushing homeownership on people who would not otherwise choose it, or childbirth, or education, or green energy, or any of the myriad other choices people make to pursue happiness. Even goals that sound good come with unforeseen consequences and costs that others were unwilling to pay in the absence of force. Stay out of the way. Keep the rules simple and transparent. And, for the love of everything holy, do not bail out anyone for their bad decisions.
Regarding the specifics of this book, I had more familiarity with the internet and real estate bubbles, so those sections were easier to follow. The selection of articles regarding foreign financial crises was much harder for me to understand, and I know little more now than I did at the beginning of the book. Paul Krugman’s and Chris Dodd’s contributions were worthless, in my eyes, because their championing of government action creates the problem. Finally, Dave Berry’s ‘How to Get Rich in Real Estate’ from Dave Berry’s Money Secrets was worth the price of admission ($2 from the clearance section of Half Price Books) for me. This hilarious satire skewers the lunacy of charlatans making money in real estate during the bubble. It also identifies the downsides of homeownership, like costs and maintenance, which rarely get told.
Someone much smarter than me might be able to piece together useful lessons from this book and make a killing during the next bubble. I can't. I'm just a common man hoping my 401(k) rises over the next 30 years. And the NFL playoffs are calling to me now.
Revealing Quotes
“Be wary of Wall Streeters threatening crashes. They are tempted to do this whenever you encroach on their turf. But they can’t cause a crash any more than they can prevent one.”
“From the Amsterdam tulip mania of 1637 to the bursting of London’s South Sea Bubble in 1720 to the Wall Street crash of 1929, the history of capitalism is replete with market panics. What is unusual is not that there was a crash in 1987 but that capital markets functioned for nearly 60 years without one.”
“[T]he techniques of program trading and the software used to practice them are very much human creations. Like all expert systems, they merely mimic the actions of a human expert, in this case a broker. The computer can only respond to events that have already happened and act according to the rules built in to the program by the broker. Thus, to blame the market’s rapid fall [on October 19, 1987] on the fact the computers are automatically executing decisions that brokers would have made anyway is to make the common mistake of blaming the tool for the actions of the people using it.”
“I want to step back a bit and try to put the various studies [of the October 19, 1987 crash] in perspective. Each was originally commissioned to determine what caused the crash. After some 2,000 or 3,000 pages the answer is, we still do not know what caused the crash. Much has been said about speculative euphoria, excessive price-earnings ratios, and the like. But the bottom line is that no one knows.”
“One of the implications of that disaster [i.e., the privatization of Russian natural resources after the fall of the Soviet Union] is that the Russian government not only acted corruptly, not only built up a new oligarchy of billionaires out of nothing, basically, but also gave away its most valuable financial assets—its ownership of the huge natural resource sector in Russia. Those resources could have been turned into real money, to be used to pay pensions, to close the budget deficit, to keep inflation low, to get the reforms underway. But they gave away those natural resources, and ended up instead relying on borrowing from international speculators and investors, at very high interest rates, on very short-term debts.”
“Like everything in advertising, someone does something differently, and it works incredibly well because no one else is doing it, and then everyone rushes to copy it, and it stops working because everyone is doing it. That’s basically the history of advertising in a nutshell.”
“The winners [of the late 1990’s and early 2000’s tech bubble] were the ones who took advantage of their irrational valuations to grow their own businesses and acquire assets of genuine value. . . . You could argue that this is what AOL did when it hooked up with Time Warner. And you have to admire the way Cisco used its stock, which was trading at mind-boggling multiples, to buy its way into a position of market dominance that has made those multiples halfway plausible. The savvy entrepreneurs converted fool’s gold into the 24k kind. So who’s the fool now?”
“What distinguished Silicon Valley from everyplace else on the planet was a) it had lots of start-up capital and b) the people who controlled that capital understood that, if you wanted to win big, you had to be willing to fail. Failure on Wall Street has always been construed as a crime. Failure in the valley was more honestly and bravely understood as the first cousin of success.”
“The 1987 stock market crash was blamed on program trading; the Asian currency crisis was blamed on some combination of hedge funds and IMF-induced policies; the Internet bubble was blamed on Wall Street analysts. The subprime-mortgage panic has yet to find its one big culprit, and I’m not sure it ever will. I’ve tried to include a glimpse of all the putative villains, but the task has proved impossible.”
“During the past decade, the Clinton and Bush Administrations have pursued the goal of increased homeownership by encouraging Fannie Mae and Freddie Mac to expand their lending. ‘Owning something is freedom as far as I’m concerned,’ President Bush said recently. ‘It’s part of a free society.’ Thanks to low interest rates and to Fannie and Freddie, sixty-eight out of every hundred American households now own their homes, but worthy policies can have unintended consequences. Cheap money and declining lending standards are often associated with speculative peaks, which invariably are followed by busts.”
“Like many legendary market killings, from Warren Buffett’s takeovers of small companies in the ‘70’s to Wilbur Ross’s steelmaker consolidation earlier this decade, Mr. [John] Paulson’s sprang from defying conventional wisdom. In early 2006, the wisdom was that while loose lending standards might be of some concern, deep trouble in the housing and mortgage markets was unlikely. A lot of big Wall Street players were in this camp, as seen by the giant mortgage-market losses they’re disclosing. . . . George Soros invited Mr. Paulson to lunch, asking for details of how he laid his bets, with instruments that didn’t exist a few years ago [e.g., credit default swaps]. Mr. Soros is famous for another big score, a 1992 bet against the British pound that earned $1 billion for his Quantum hedge fund.”
This book compiles news articles about four instances of financial panic: the Black Monday crash of October 19, 1987; the Mexico, Russia, and Asia panics of the 1990’s; the internet bubble and bust in the late 1990’s and early 2000’s; and the real estate bubble and bust in the mid-2000’s. Lewis writes a few pages of introduction, but the bulk of the book comes from excerpts from other authors. The articles demonstrate the difficulties in identifying a bubble in real time and the causes of a burst even in hindsight.
As a compilation of articles, the book lacks a unifying theme or argument. The best lesson—perhaps the only lesson—may be that no one knows why the market acts as it does or where it will go. A combination of fear, greed, ignorance, and corruption influences people’s thoughts, and therefore guides the market’s actions. Add in complicated regulations, financial instruments, and mathematical formulas and you have a recipe for opacity. Some investors, through skill or luck or corruption, profit from the opacity and their wagers. Additional points on each of the four crashes follow.
October 19, 1987 crash:
• No one knows why the crash occurred when it did. The Brady Commission, a presidential commission set up to investigate the crash concluded there were many reasons, one of which was portfolio insurance.
• Portfolio insurance was an idea based on the Black-Scholes options pricing model that suggested an investor could hedge against losses by rapidly short selling index futures through program trading. When many investors tried to do this simultaneously, however, there were not enough buyers to meet the demand of the sellers and stabilize prices, so prices continued to fall.
• The reason for the precise timing of the crash is indiscernible, but the average P/E ratio of stocks was 20 while interest rates on bonds were around 10%. Thus, it took $20 of stock to earn $1 of earnings at the same time it took $10 of bonds to earn $1 of interest. This revealed that stock prices were overvalued and a correction was due. For why would an investor buy stock as a residual claimant when he could have a better return and higher priority claim to company assets as a bondholder?
Mexican, Russian, and Asian crashes of the 1990’s:
• Developing countries had high debt to GDP ratios.
• The International Monetary Fund encouraged developing countries to open their financial markets to international investment and to pay high short-term interest rates while their currencies were fixed to the US dollar. Investment poured in to gain the high interest rates, and a combination of crony capitalism (i.e., payments to politically well-connected individuals and businesses) and subsequent devaluing of currencies pulled money out just as rapidly.
• Russia assigned ownership of its vast natural resources to a politically created oligarchy after the collapse of the Soviet Union. Russia devalued its currency and defaulted on its debt.
• Long-term Capital Management, a large US hedge fund invested in interest rate swap arbitrages, collapsed.
New New Panic, or the internet bubble of the late 1990’s and early 2000’s:
• Internet stock mania began with the IPO of Netscape in April 1995.
• Investors did not fully understand the ramifications of the internet on global commerce, but many people were blindly bullish and jettisoned traditional measures of company value such as P/E ratios and even profitability. One example involves Books-a-Million’s stock tripling shortly after it announced merely that it was revamping its website. This book retailer trailed behind Barnes & Noble, Borders, and Amazon in sales, and online sales were only a small part of its business, but investors bought into the bubble and belief that any action involving the internet was a sure thing.
• Marketing hype and jargon allowed companies to raise vast sums of money to try to build or bluff their way to legitimate businesses. Most failed. Smalltime internet companies like computer.com, ourbeginning.com, and pets.com spent large portions—sometimes half—of their working capital on single advertisements during the 2000 Super Bowl with nothing to show for it.
• The internet revolutionized commerce. Amazon is a resounding success, and its lower overhead allowed it to compete with Borders, Books-a-Million, and Barnes & Noble. But businesses still eventually require profitability, and they take time to improve their business models. One particularly bad business model was AllAdvantage, which paid customers by the hour to surf the internet. The idea was that the company could collect user data and sell it to advertisers, but the company burned through its startup capital too quickly and never developed a means to monetize the data it collected.
• Jack Willoughby’s March 20, 2000 article “Burning Up,” in Barron’s gave a potent prick to the internet bubble. It laid out the 200 or so internet companies that were burning through cash the fastest and noted that many of them would be out of cash within months. Such companies had to raise new capital simply to survive. The longer the companies continued without profitability, the more expensive it was for them to raise cash, and many could not raise additional cash at all. Insiders began dumping stock, which is never a good sign.
The People’s Panic, or the real estate bubble in the mid-2000’s:
• The real estate bubble burst sometime around 2007. Once again, the exact causes are unknown, but there are many theories and contributors.
• Interest rates were kept low by the Federal Reserve, permitting excess investment. Government policies from Clinton and Bush encouraged homeownership. Government sponsored entities like Fannie Mae and Freddie Mac bought loans, alleviating underwriters from the risks of keeping the increasingly unsound loans. Builders and realtors loved the action because of the revenue and commissions they received. Builders paid inspectors to value properties above market rates, and inspectors complied. Investment banks created and sold new financial instruments, such as mortgage-backed securities and collateralized debt obligations, to investors as products with higher returns and lower risks because they were backed by mortgage payments, which were historically sound investments. Ratings agencies like Standard and Poor’s and Moody continued to rubber stamp risky investments as triple-A rated under faulty assumptions about the strength of the housing market and because the Wall Street banks that brought them the instruments for ratings paid them to do so. As the real estate markets in places like New York, Florida, and California heated up, speculators came in with the hope of buying a house, holding it for a limited amount of time, and cashing out on the resale.
• Wall Street firms heavily invested in subprime mortgages lost money. Bear Stearns and Lehman Brothers went bankrupt. Jim Cramer from CNBC’s show “Mad Money” looked foolish claiming that Bear Stearns was a buy at $62/share when it ended up selling to JP Morgan Chase for $10/share. Some people, like John Paulson, a hedge fund manager who bet against the housing market through newly invented instruments like credit default swaps, made lots of money. Paulson in particular made $3 or $4 billion.
Subjective Thoughts
Lewis is a fantastic writer, but this book sucks because Lewis didn’t write it. No one person wrote it, so it lacks coherence. It’s like a subreddit on financial panics without the witty commentary. It was frustrating not to have a unifying position or lens through which to filter the deluge of information, and I took away only a handful of tidbits. First, no one knows anything for sure when it comes to financial panics. People who got it right once may not be right again. Second, people who provide cocksure assessments of where the market is going should be embarrassed when their predictions prove woefully incorrect—I’m looking at you, Jim Cramer and David Pidwell (the venture capitalist who first funded AllAdvantage). Third, government involvement reliably leads to complexity, debt, and bubbles. Without government manipulation of economics, there would be fewer and less painful distortions. The use of force and the size of government interventions must, by their very nature, lead to distortions away from the preferences of the market. The government has no business pushing homeownership on people who would not otherwise choose it, or childbirth, or education, or green energy, or any of the myriad other choices people make to pursue happiness. Even goals that sound good come with unforeseen consequences and costs that others were unwilling to pay in the absence of force. Stay out of the way. Keep the rules simple and transparent. And, for the love of everything holy, do not bail out anyone for their bad decisions.
Regarding the specifics of this book, I had more familiarity with the internet and real estate bubbles, so those sections were easier to follow. The selection of articles regarding foreign financial crises was much harder for me to understand, and I know little more now than I did at the beginning of the book. Paul Krugman’s and Chris Dodd’s contributions were worthless, in my eyes, because their championing of government action creates the problem. Finally, Dave Berry’s ‘How to Get Rich in Real Estate’ from Dave Berry’s Money Secrets was worth the price of admission ($2 from the clearance section of Half Price Books) for me. This hilarious satire skewers the lunacy of charlatans making money in real estate during the bubble. It also identifies the downsides of homeownership, like costs and maintenance, which rarely get told.
Someone much smarter than me might be able to piece together useful lessons from this book and make a killing during the next bubble. I can't. I'm just a common man hoping my 401(k) rises over the next 30 years. And the NFL playoffs are calling to me now.
Revealing Quotes
“Be wary of Wall Streeters threatening crashes. They are tempted to do this whenever you encroach on their turf. But they can’t cause a crash any more than they can prevent one.”
“From the Amsterdam tulip mania of 1637 to the bursting of London’s South Sea Bubble in 1720 to the Wall Street crash of 1929, the history of capitalism is replete with market panics. What is unusual is not that there was a crash in 1987 but that capital markets functioned for nearly 60 years without one.”
“[T]he techniques of program trading and the software used to practice them are very much human creations. Like all expert systems, they merely mimic the actions of a human expert, in this case a broker. The computer can only respond to events that have already happened and act according to the rules built in to the program by the broker. Thus, to blame the market’s rapid fall [on October 19, 1987] on the fact the computers are automatically executing decisions that brokers would have made anyway is to make the common mistake of blaming the tool for the actions of the people using it.”
“I want to step back a bit and try to put the various studies [of the October 19, 1987 crash] in perspective. Each was originally commissioned to determine what caused the crash. After some 2,000 or 3,000 pages the answer is, we still do not know what caused the crash. Much has been said about speculative euphoria, excessive price-earnings ratios, and the like. But the bottom line is that no one knows.”
“One of the implications of that disaster [i.e., the privatization of Russian natural resources after the fall of the Soviet Union] is that the Russian government not only acted corruptly, not only built up a new oligarchy of billionaires out of nothing, basically, but also gave away its most valuable financial assets—its ownership of the huge natural resource sector in Russia. Those resources could have been turned into real money, to be used to pay pensions, to close the budget deficit, to keep inflation low, to get the reforms underway. But they gave away those natural resources, and ended up instead relying on borrowing from international speculators and investors, at very high interest rates, on very short-term debts.”
“Like everything in advertising, someone does something differently, and it works incredibly well because no one else is doing it, and then everyone rushes to copy it, and it stops working because everyone is doing it. That’s basically the history of advertising in a nutshell.”
“The winners [of the late 1990’s and early 2000’s tech bubble] were the ones who took advantage of their irrational valuations to grow their own businesses and acquire assets of genuine value. . . . You could argue that this is what AOL did when it hooked up with Time Warner. And you have to admire the way Cisco used its stock, which was trading at mind-boggling multiples, to buy its way into a position of market dominance that has made those multiples halfway plausible. The savvy entrepreneurs converted fool’s gold into the 24k kind. So who’s the fool now?”
“What distinguished Silicon Valley from everyplace else on the planet was a) it had lots of start-up capital and b) the people who controlled that capital understood that, if you wanted to win big, you had to be willing to fail. Failure on Wall Street has always been construed as a crime. Failure in the valley was more honestly and bravely understood as the first cousin of success.”
“The 1987 stock market crash was blamed on program trading; the Asian currency crisis was blamed on some combination of hedge funds and IMF-induced policies; the Internet bubble was blamed on Wall Street analysts. The subprime-mortgage panic has yet to find its one big culprit, and I’m not sure it ever will. I’ve tried to include a glimpse of all the putative villains, but the task has proved impossible.”
“During the past decade, the Clinton and Bush Administrations have pursued the goal of increased homeownership by encouraging Fannie Mae and Freddie Mac to expand their lending. ‘Owning something is freedom as far as I’m concerned,’ President Bush said recently. ‘It’s part of a free society.’ Thanks to low interest rates and to Fannie and Freddie, sixty-eight out of every hundred American households now own their homes, but worthy policies can have unintended consequences. Cheap money and declining lending standards are often associated with speculative peaks, which invariably are followed by busts.”
“Like many legendary market killings, from Warren Buffett’s takeovers of small companies in the ‘70’s to Wilbur Ross’s steelmaker consolidation earlier this decade, Mr. [John] Paulson’s sprang from defying conventional wisdom. In early 2006, the wisdom was that while loose lending standards might be of some concern, deep trouble in the housing and mortgage markets was unlikely. A lot of big Wall Street players were in this camp, as seen by the giant mortgage-market losses they’re disclosing. . . . George Soros invited Mr. Paulson to lunch, asking for details of how he laid his bets, with instruments that didn’t exist a few years ago [e.g., credit default swaps]. Mr. Soros is famous for another big score, a 1992 bet against the British pound that earned $1 billion for his Quantum hedge fund.”
August 22, 2022
This is a collection of articles written about financial bubbles, just ahead of the historic housing loan crisis of 2008. It goes through the series of lesser burst speculations (remember the "dotcom") and generally is interesting to me. However, the multiple writers (Lewis' vignettes are best) are uneven and often highly technical. This is the one just before The Big Short, a much more entertaining and informative read. It was worth the effort, I always learn a lot about financial markets and how money moves around. It makes one doubt the experts, however, who mostly failed to understand and anticipate what was in front of their eyes. Or, more cynically, bankers and professional investors understood the hype and simply profited from it before the schemes collapsed. Not his best, but Lewis is always good.
It was a bit of a slog in many places, but the experts would no doubt appreciate it. I need finance for dummies. It made me more cautious with my own investments & wondering when the next big one is coming.
It was a bit of a slog in many places, but the experts would no doubt appreciate it. I need finance for dummies. It made me more cautious with my own investments & wondering when the next big one is coming.
November 15, 2015
Another 'hindsight' review, this time of a collection of material from 2008, largely contemporaneous articles curated by Michael Lewis, one of late capitalism's best known chroniclers.
The material covers the stock market crash of 1987 (blamed at the time on automated trading), the Asian currency crisis and the problems at Long Term Capital Management in 1998, the internet stocks boom and bust in 2000 and the sub-prime mortgage market collapse in 2007.
Lewis' underlying thesis is what you would expect from an anarcho-capitalist - these were crises that failed to dent the underlying viability of capitalism and are just part of the creative destruction necessary to economic innovation.
Unfortunately, he published this book after the Bear Stearns crisis but before the bankruptcy of Lehmann so his four tales now look more like pre-shocks to the 2008 earthquake rather than relatively benign if troublesome shifts in the tectonic plates of the global economy.
Do not be put off by the initial articles on equity trading which are filled with technical information. The book does not continue in this vein by any means.
Although of rather antiquarian interest (in market terms), there is some fine and even amusing writing in these 55 or so news items, extracts from reports, satires and features. I learned a great deal about events I thought that I had lived through at the margin.
It is, however, a potboiler. The author was right to give his profits to charity rather than stake a claim to original work. His introductory comentaries are certainly a little perfunctory and even perhaps lazy. The book is really about the contributions of others.
Do we learn anything fundamentally new from this book? Not really. The education is in the detail and about the psychology of Wall Street. The bottom line is that American capitalism works as a form of punctuated equilibrium, learns by doing and corrects itself in the end.
Even the suffering aspects do not look quite as bad when some crises are presented as redistributions from rich investors to other rich investors, entrepreneurs (the internet boom) and the poor (or so Lewis claims a little unpersuasively in relation to the sub-prime crisis).
The cloud over the more Polly-Anna-ish aspects of the book is, of course, what happened in the year of publication (2008) from which the West is still not recovering seven years later - not really a global depression but a sort of lop-sided permanent doldrums.
The recent Legatum Institute Report suggests that the enthusiasm for capitalism of those years has somewhat dissipated but not in the direction of socialism - people just seem to want a capitalism that actually works.
Whether investors will go back and risk all on the next wave of technologies - AI, nano and bio - is an interesting question to ask. Perhaps the doldrums derive in part because the ordinary investor is risk-averse, nervous of the Wall Street insiders taking him for a ride.
Still, an entertaining slice of documentary history but really only one for people who are interested in markets and capitalism and as an adjunct to broader and wider reading elsewhere. It won't tell you much about the prospects for global recovery - if it ever comes.
March 16, 2009
An anthology of magazine articles, newspaper articles, and blog posts chronicling four recent market panics put together by McSweeney interns and Michael Lewis. All proceeds go to charity, though I got my copy from the library.
These are the four recent market panics:
1. Black Monday 1987
I was in college during this crash. I remember my college roommate watching TV and getting very upset that he lost the meager savings (from our summer co-op jobs) that he invested in mutual funds. I thought he was stupid for saving his money instead of buying guitars, guitar magazines, guitar effects, and records like I had. (I'm pretty sure my 1972 Les Paul turned out to be a better investment -- plus there are no management fees.)
2. 1997 Asian financial crisis-> Russian default -> LTCM crisis
In August 1998, Diana and I were vacationing in Santorini while we were waiting to move in to our new house. (We'd rather stay in a hotel in Santorini than Pacifica.) When called our loan broker from a pay phone to lock in interest rates, she said that there was a big problem with interest rates right now and to call back a week later. A week later everything was fine, and we locked in a low rate. I guess it had something to do with this Russian default thing.
3. Dot com crash
This one we were right in the middle of. Our net worth went wildly up and down, all on paper. The article about Books A Million going up ~900% because they updated their web site made me feel kind of nostalgic for both the boom and the crash.
One of the articles has a some quotes from Bernard Madhoff saying that he was selling Amazon and other Internet stocks. We now know that he did no such thing.
4. Investment bank failures and subprime mortgage problems
Thankfully this panic hasn't touched us. Property values are holding up here in Elysium. Fortunately we lost all our money in the previous crash, so we weren't invested in any mortgage-backed securities.
This series of articles was my favorite of the four. There's a fascinating article about the Bear Stearns CEO playing bridge with no phone or email access as the company cratered. And there's a New Yorker article that basically predicted the whole thing (and put the blame on Alan Greenspan) a few years before the crash.
If you are not already sick of reading dire business news then check out this book. However, if you are sensitive to fraud, chicanery, and schadenfreude this is not the book for you.
These are the four recent market panics:
1. Black Monday 1987
I was in college during this crash. I remember my college roommate watching TV and getting very upset that he lost the meager savings (from our summer co-op jobs) that he invested in mutual funds. I thought he was stupid for saving his money instead of buying guitars, guitar magazines, guitar effects, and records like I had. (I'm pretty sure my 1972 Les Paul turned out to be a better investment -- plus there are no management fees.)
2. 1997 Asian financial crisis-> Russian default -> LTCM crisis
In August 1998, Diana and I were vacationing in Santorini while we were waiting to move in to our new house. (We'd rather stay in a hotel in Santorini than Pacifica.) When called our loan broker from a pay phone to lock in interest rates, she said that there was a big problem with interest rates right now and to call back a week later. A week later everything was fine, and we locked in a low rate. I guess it had something to do with this Russian default thing.
3. Dot com crash
This one we were right in the middle of. Our net worth went wildly up and down, all on paper. The article about Books A Million going up ~900% because they updated their web site made me feel kind of nostalgic for both the boom and the crash.
One of the articles has a some quotes from Bernard Madhoff saying that he was selling Amazon and other Internet stocks. We now know that he did no such thing.
4. Investment bank failures and subprime mortgage problems
Thankfully this panic hasn't touched us. Property values are holding up here in Elysium. Fortunately we lost all our money in the previous crash, so we weren't invested in any mortgage-backed securities.
This series of articles was my favorite of the four. There's a fascinating article about the Bear Stearns CEO playing bridge with no phone or email access as the company cratered. And there's a New Yorker article that basically predicted the whole thing (and put the blame on Alan Greenspan) a few years before the crash.
If you are not already sick of reading dire business news then check out this book. However, if you are sensitive to fraud, chicanery, and schadenfreude this is not the book for you.
March 19, 2009
Interesting, well-chosen collection of newspaper and magazine pieces, a couple by the editor but most of them not, from before/during/after some recent business/$-related crises (oct. 1987 stock market crash, Asian markets crash late 90's, tech bubble of 2000 or so, housing bubble, subprime mortgages......). Nice balance in that it's not absolutely current, which means there is a chance with hindsight to get a better perspective on what happened, how bad it got, how long it took to recover, etc., but a lot of the topics/patterns/institutions are still relevant.
I'm finding that a lot of the TV/newspaper journalism about current crisis is either bogged down in the hour-by-hour changes ("how will businesses react to the Fed's decision of this morning? Let's hear some speculation from one alarmist and one reassuring, avuncular person.....") or at the other extreme (much like my "no Lionel Richie" policy guideline for managing the car radio in the 1980's, I now manage my attention by discontinuing my reading of any article that brings up the Dutch tulip craze of the 1600's). This book avoids either extreme. To a large extent it's reassuring, in that you can see from the contemporaneous writing that people really thought the economic world was coming to an end, whereas markets eventually stabilized and recovered. For time being, I'll take comfort in this.
I'm finding that a lot of the TV/newspaper journalism about current crisis is either bogged down in the hour-by-hour changes ("how will businesses react to the Fed's decision of this morning? Let's hear some speculation from one alarmist and one reassuring, avuncular person.....") or at the other extreme (much like my "no Lionel Richie" policy guideline for managing the car radio in the 1980's, I now manage my attention by discontinuing my reading of any article that brings up the Dutch tulip craze of the 1600's). This book avoids either extreme. To a large extent it's reassuring, in that you can see from the contemporaneous writing that people really thought the economic world was coming to an end, whereas markets eventually stabilized and recovered. For time being, I'll take comfort in this.
January 16, 2009
Lewis believes that recent costly financial upheavals (crash of 1987, Russian default of 1987,, the Asian currency crisis of 1999, and the current subprime) were caused by a recurring problem of models underestimating the risk of rare events, thereby encouraging investors to take more chances than they rationally would.
It is difficult book to understand because it is collection of essays. Michael Lewis is the editor of the book, and did not write it. I was very disappointed that the book did not answer what is happening today with the sub-prime loans.
It is difficult book to understand because it is collection of essays. Michael Lewis is the editor of the book, and did not write it. I was very disappointed that the book did not answer what is happening today with the sub-prime loans.
November 21, 2015
Un montón de artículos periodísticos, muy bien elegidos, sobre las últimas crisis que hemos vivido (el crash del 87, la crisis de Asia de los 90, el crash de las puntocom, el crash de las hipotecas subprime). Hay algunos artículos que, con el paso de los años, no hacen más que ganar. Lo lees y piensas que lo que decía el periodista era demasiado obvio y, por supuesto, terminó ocurriendo. Otros artículos son de análisis y nos ayudan a entender matices y detalles sobre lo que ocurrió. Una lectura muy interesante y muy entretenida.
June 7, 2023
A collection of essays about modern economic declines in USA focused on the The dot-com bubble and by far Michael Lewis' worst book as this really is just a collection of opinion pieces with no story. The audiobook has clear narration and the essays are written by famous writers so this is all a quality product. But this didn't make me smarter on anything. No opinion piece does. You may as well read a random WSJ opinion piece. Again, it will be good writing and some clever ideas, but this is not exciting stuff and there is little to no connection between the opinion pieces. Plus we can't pick and choose what to read here while on WSJ you have the choice.
Frankly these sort of books are never great. They also feel dull and repetitive. Instead of one person exploring a story from 13 angles we have many people exploring the same story from the same angle with too few stories and facts. It feels like Michael Lewis just used his own huge name to release a book he felt was good enough. But considering me may be the greatest writer of all time this is a letdown and clearly not something that will become yet another blockbuster in Hollywood as there is no story here. I will read everything he publishes, but this should have been a skip.
Frankly these sort of books are never great. They also feel dull and repetitive. Instead of one person exploring a story from 13 angles we have many people exploring the same story from the same angle with too few stories and facts. It feels like Michael Lewis just used his own huge name to release a book he felt was good enough. But considering me may be the greatest writer of all time this is a letdown and clearly not something that will become yet another blockbuster in Hollywood as there is no story here. I will read everything he publishes, but this should have been a skip.
August 9, 2021
Bubbles, panics, and crisis occur because of an underestimation of unlikely events. Benefits of particular model, stock, or asset are promoted while their problems and limitations are ignored until after the panic. Anyone arguing against the espoused models or assets during their rise, becomes a claim against their own intelligence. Although some provide general contours of a future crisis, predicting the unexpected is fraught cautions. Many people claim to have seen the crises coming after the crisis, but wrote history books about the crisis rather than use their knowledge to make money. During some crises there are perpetrators. During other crises there are no perpetrators. The question is what can be learned about any given crisis, if anything can be learned at all.
This book showcases an anthology of articles before, during, and after four financial crisis which occurred late 1980s, late, late 1990s (Asian Crisis), early 2000s (Tech or Dot-Com Crisis), and the 2007-09 Crisis. Although the articles are by different people showing different ways to think about each crisis, it seems insufficient. The transition between each article is poor. To understand each crisis, if that is possible, would require alternative books about each.
This book showcases an anthology of articles before, during, and after four financial crisis which occurred late 1980s, late, late 1990s (Asian Crisis), early 2000s (Tech or Dot-Com Crisis), and the 2007-09 Crisis. Although the articles are by different people showing different ways to think about each crisis, it seems insufficient. The transition between each article is poor. To understand each crisis, if that is possible, would require alternative books about each.
February 26, 2024
I've had this book on my shelf for more than a decade and I've forgotten why. I finally flipped through it; it was kind of neat to understand the crashes I didn't know as much about and see some overwrought contemporaneous commentary ("how the 1987 market crash will mark the end of yuppie spending", "why Amazon was clearly overvalued at $400") but I'd prefer an actual synthesis of what happened.
October 10, 2023
Cool blend of the author's own thinking and assembled thinking from the day- it is just as interesting to read about a panic as it occurs as to read about it 10 years after the fact
December 18, 2020
Not up to the standard of Liar's Poker. Shame.
May 29, 2018
A re-tread of some of the themes and material Lewis has explored at other venues more engagingly. Still a good compilation of the evolution of his own writing over the years.
March 29, 2016
I didn't have any particular interest in the stock markets or economics in general, but my standard interest in learning about stuff led me to this compilation of newspaper articles, essays and book extracts covering notable crashes of recent years.
I wondered at first whether I'd be able to stick it out, as a lot of the prose was comprised of various stock valuations and fluctuations - prices going up 30 points, decreasing by 25%... then there's lots of talk of hedge funds, selling stocks short, going long... things that are kind of explained in the glossary, but not really clearly enough to leave the layman with any clear idea of what they are or how they work. But that's kind of the point... that these traders are doing their research, gambling, and making (and losing) vast amounts of money, but they don't really know what's going on, and it's all likely to fall apart as everyone jumps on the bandwagon and then panics and tries to get out all at the same time.
So in spite of all that, it's a lot more interesting than it sounds. I've learned a little bit - by which I mean I have a kind of subconscious idea of how the stock markets work (but not a concrete one), and an interest in finding out more. I actually didn't need to refer to the glossary all that frequently - not because I could tell you what all the terms mean, but because I felt I understood much of what I was reading. I was also pleased to find that I wasn't just skipping to the end of particularly difficult paragraphs - I was slowing down and reading them two or three times, instead of just giving up.
Of course, there's plenty more to learn, but at least now I know a little about the dot com market collapse, the crash in East Asia and, more pertinently, the housing market crash that has plunged us all into so much misery over the last 8 years. In all then, it was a couple of quid in the charity shop well spent.
I wondered at first whether I'd be able to stick it out, as a lot of the prose was comprised of various stock valuations and fluctuations - prices going up 30 points, decreasing by 25%... then there's lots of talk of hedge funds, selling stocks short, going long... things that are kind of explained in the glossary, but not really clearly enough to leave the layman with any clear idea of what they are or how they work. But that's kind of the point... that these traders are doing their research, gambling, and making (and losing) vast amounts of money, but they don't really know what's going on, and it's all likely to fall apart as everyone jumps on the bandwagon and then panics and tries to get out all at the same time.
So in spite of all that, it's a lot more interesting than it sounds. I've learned a little bit - by which I mean I have a kind of subconscious idea of how the stock markets work (but not a concrete one), and an interest in finding out more. I actually didn't need to refer to the glossary all that frequently - not because I could tell you what all the terms mean, but because I felt I understood much of what I was reading. I was also pleased to find that I wasn't just skipping to the end of particularly difficult paragraphs - I was slowing down and reading them two or three times, instead of just giving up.
Of course, there's plenty more to learn, but at least now I know a little about the dot com market collapse, the crash in East Asia and, more pertinently, the housing market crash that has plunged us all into so much misery over the last 8 years. In all then, it was a couple of quid in the charity shop well spent.
Read
January 21, 2016Once again Michael Lewis helps the average Jane and Joe understand the complex world of high finance. Since the mid 80's the US markets have been more volatile than the best amusement parks. In this book, Michael Lewis has gathered a collection of short stories from editorial financial gurus such as Paul Krugman and Lester Thurow, and many others to recreate the modern financial time-lines that show the re-occurring financial panics.
He takes us through each financial boom and bust. With each cycle the stories give us some insight about the possible causes and changes made to the financial system to limit these trends from happening again. However, the world of finance adjusts to these changes and repeats the trend all over again.
This book travels through the crash of 87, the Asian crisis, the dot com bubble and all the way till the current crisis in the mortgage markets. Along the way we meet the masters of the universe of finance from all walks of life. Hedge fund traders and how they influence the bond markets, online day trades and how they ran Books-a-Million up over 500% in two days, and how it crashed just as fast. We learn about computer trades programs and real estate developers who build modern day ghost towns.
This book was slow reading in the beginning part, though it picks up speed and interest as it comes up to the present. If you like learning a bit more about the financial markets, this book will give you a new view of the landscape.
He takes us through each financial boom and bust. With each cycle the stories give us some insight about the possible causes and changes made to the financial system to limit these trends from happening again. However, the world of finance adjusts to these changes and repeats the trend all over again.
This book travels through the crash of 87, the Asian crisis, the dot com bubble and all the way till the current crisis in the mortgage markets. Along the way we meet the masters of the universe of finance from all walks of life. Hedge fund traders and how they influence the bond markets, online day trades and how they ran Books-a-Million up over 500% in two days, and how it crashed just as fast. We learn about computer trades programs and real estate developers who build modern day ghost towns.
This book was slow reading in the beginning part, though it picks up speed and interest as it comes up to the present. If you like learning a bit more about the financial markets, this book will give you a new view of the landscape.
June 4, 2014
This book felt like a flashback episode of a tv show. You sit down on the couch and get ready to sink into a new episode of your favorite show and about 15 minutes into the show you realize all they are doing is flashbacks to episodes you've already seen. There is nothing wrong with this type of tv show or book if you know what to expect going in, but much of the complaints I've seen about Panic are that most folks think it is a "new" Michael Lewis book rather than an re-packaging flash back style combination of previously written work. Sprinkled into his previous writing that you may or may not have already read are great pieces from other writers.
So, if you know all that going in you'll tend to like this book. I especially liked the part on the crash on the Asian Markets, as I didn't know much about them before this book. Of the 4 Panics explored in the book the Asian Market Panic is probably the least well known. The explanation of currency arbitrage using the red dollar/ blue dollar model is very helpful on page 137. The only other piece I picked out as really special was on page 245 where Lewis explains how Silicon Valley in was not in a bubble during the late 90's which is an interesting take on things.
Well done here again by Lewis who has written and compiled a great collection of short stories, which are easily digestible on a long cross country flight.
So, if you know all that going in you'll tend to like this book. I especially liked the part on the crash on the Asian Markets, as I didn't know much about them before this book. Of the 4 Panics explored in the book the Asian Market Panic is probably the least well known. The explanation of currency arbitrage using the red dollar/ blue dollar model is very helpful on page 137. The only other piece I picked out as really special was on page 245 where Lewis explains how Silicon Valley in was not in a bubble during the late 90's which is an interesting take on things.
Well done here again by Lewis who has written and compiled a great collection of short stories, which are easily digestible on a long cross country flight.
April 1, 2015
I generally like Michael Lewis's books, but this one was not my favorite. For one, it is not really a book but rather a collection of writings from before, during, and after each of the most recent US economic boom/bust cycles. Most of the articles are from other famous writers of note. I did find some interesting ideas in here, including (what I take to be) the main thesis.
One of these ideas that deserves more investigation than this book gave it was that sometimes boom/bust phases might actually be good for society as a whole even while many individual investors may suffer. It seems like this might have been the case in the last two cycles since the .COM boom actually spurred innovation that didn't disappear with the bust. Then, the housing boom/bust may (although the book was written too early to catch this) ultimately lead to some lower-income workers ending up with houses on the dime of wealthy real-estate speculators. ( http://www.nytimes.com/2015/03/30/bus... )
I'm pretty sure that you cannot make a blanket statement on the social value of a boom/bust cycle. But, I would love for someone smarter than me to see if they are ever of any value and what the common features of a valuable one are.
One of these ideas that deserves more investigation than this book gave it was that sometimes boom/bust phases might actually be good for society as a whole even while many individual investors may suffer. It seems like this might have been the case in the last two cycles since the .COM boom actually spurred innovation that didn't disappear with the bust. Then, the housing boom/bust may (although the book was written too early to catch this) ultimately lead to some lower-income workers ending up with houses on the dime of wealthy real-estate speculators. ( http://www.nytimes.com/2015/03/30/bus... )
I'm pretty sure that you cannot make a blanket statement on the social value of a boom/bust cycle. But, I would love for someone smarter than me to see if they are ever of any value and what the common features of a valuable one are.
April 10, 2010
AUDIO -- Michael Lewis, author of "The Blind Side" and "Liar's Poker," tries to put some perspective on the on-going financial meltdown by collecting in book (and audio) form articles written about the various past financial meltdowns and how they are similar and different from today's situation. Some of the pieces were written by Lewis for Bloomberg News and other outlets while others were done by other writers for The New York Times, Fortune, Forbes, etc. If anything, "Panic" puts the lie to the concoction from sources high and low that no one saw the current crisis coming. There are plenty of examples of writers pointing early and accurately to the housing bubble and its poor financing and financial structure as a huge accident on its way. It's difficult not to feel both disbelief and disgust at the governmental operations and the Wall Street (among other locations) machinations that allowed unending credit and cheap money to nearly sink the U.S. economy. The book in this form does not have an ending but does include in its writings plenty of warnings of things to come if there are not better controls from the sources of lending and spending.
December 9, 2010
A collection of newspaper, magazine articles, book exceprts, etc that were originally published through out three main events in the recent history of finance:
1. Plummeting values of foreign currencies namely in Soviet Union and Asia
2. Warp speed growth of internet usage and dot com stock craze/crash
3. Housing bubble, mortgage backed derivatives, crashing home values
I did not read the 3rd part. Having already read "The Big Short" I thought more commentary by Micael Lewis was time spent on overkill.
It was at least interesting to relive all the chaos and nuttiness as I read the articles from the mid 90's through 2001. Specifically what I enjoyed was reliving the Internet craze, as people traded stocks and commodities by the second from their homes. Pricing changes by the nanosecond all day and night became an issue. Problems and tensions that the securities exchange had to adjust for. All the insane stock values hundreds of dollars of value per one dollar of earnings.... or in most cases loss. Fortunes made and lost on internet sites and other companies with no real production capital, just a server that takes orders.
1. Plummeting values of foreign currencies namely in Soviet Union and Asia
2. Warp speed growth of internet usage and dot com stock craze/crash
3. Housing bubble, mortgage backed derivatives, crashing home values
I did not read the 3rd part. Having already read "The Big Short" I thought more commentary by Micael Lewis was time spent on overkill.
It was at least interesting to relive all the chaos and nuttiness as I read the articles from the mid 90's through 2001. Specifically what I enjoyed was reliving the Internet craze, as people traded stocks and commodities by the second from their homes. Pricing changes by the nanosecond all day and night became an issue. Problems and tensions that the securities exchange had to adjust for. All the insane stock values hundreds of dollars of value per one dollar of earnings.... or in most cases loss. Fortunes made and lost on internet sites and other companies with no real production capital, just a server that takes orders.
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January 9, 2022I borrowed this book from Charlie's bookshelf, and I will return it to him. The copyright is 2009. This book was edited by Michael Lewis, an author I really enjoy and I know you have read his latest book. He took four financial panics from the 80's through the 00's and reprinted newspaper articles and contemporaneous commentary, including his own articles, for each of the panics. He had worked as a trader in the early 80's before leaving the business to pursue his writing career - first as a journalist before becoming a best-selling nonfiction author. As a result, he has an insider's view of the business that he is skeptical of. The writing was pretty technical about the world of finance and markets, which is not the most interesting subject to me. But the book provided an interesting perspective especially nearly 15 years after the last panic covered in the book. I had already adopted his viewpoint from having seen him interviewed on TV that no one on Wall Street really understands what's going on, let alone have an ability to make predictions, but this book confirmed that point of view.
December 12, 2011
I was initially disappointed when I realized this book I had hastily picked up at the library was an anthology and not a book written by Michael Lewis. I was hoping to read a Michael Lewis and see for myself why people swoon over his stuff (at least at the movies).
Once I got over my initial disappointment, I decided I actually liked the book. He describes four economics panics in our recent history. Although given that I had not received my first payment for the first, second, or third panic, I didn't really know much (or anything about the first three). The fourth panic was obviously the whole real-estate, CDO thing. The essays chosen to represent these panics give a very well rounded picture of the scene and Lewis should now be commended not just on writing books that get turned into movies that people really like but I haven't seen but now on editing anthologies.
Once I got over my initial disappointment, I decided I actually liked the book. He describes four economics panics in our recent history. Although given that I had not received my first payment for the first, second, or third panic, I didn't really know much (or anything about the first three). The fourth panic was obviously the whole real-estate, CDO thing. The essays chosen to represent these panics give a very well rounded picture of the scene and Lewis should now be commended not just on writing books that get turned into movies that people really like but I haven't seen but now on editing anthologies.
November 19, 2009
What's classic about this book is the misleading cover which barely acknowledges that Michael Lewis EDITED it and did not WRITE it. But it's for a good cause and publishers are struggling too I suppose. Just like this entire country.
This is a collection of articles that cover the biggest crashes in our recent history - the glutinous wallow in easy money followed by the shocked and devastated portraits of victims.
I found the initial articles about the 1987 crash to be nearly impossible to understand. The terminology was foreign to me but I pushed through, using the handy glossary. By the end of the book a picture had emerged through the haze - the credit and investment industry have created the products that destroyed us - plain and simple.
This is a collection of articles that cover the biggest crashes in our recent history - the glutinous wallow in easy money followed by the shocked and devastated portraits of victims.
I found the initial articles about the 1987 crash to be nearly impossible to understand. The terminology was foreign to me but I pushed through, using the handy glossary. By the end of the book a picture had emerged through the haze - the credit and investment industry have created the products that destroyed us - plain and simple.
October 23, 2010
This book is a collection of about 50 magazine & newspaper articles patched together.
A few of them were written by Lewis.
I found the few by Lewis to be extremely insightful,
the others were a mixed bag.
At the end of the book Lewis poses the question that everybody should be asking:
Is wall street providing anything of value to America?
If wall st. is just going to be a casino where traders can make billion or trillion dollar bets on derivatives, and the traders can grab mega million dollar bonuses if they GUESS right,
then they are of no value to the rest of us.
Oct 2010, it appears that nothing has changed on wall st.
and we should be thinking about how to tax/regulate them out of existence.
A few of them were written by Lewis.
I found the few by Lewis to be extremely insightful,
the others were a mixed bag.
At the end of the book Lewis poses the question that everybody should be asking:
Is wall street providing anything of value to America?
If wall st. is just going to be a casino where traders can make billion or trillion dollar bets on derivatives, and the traders can grab mega million dollar bonuses if they GUESS right,
then they are of no value to the rest of us.
Oct 2010, it appears that nothing has changed on wall st.
and we should be thinking about how to tax/regulate them out of existence.
March 1, 2016
It wasn't necessarily terrible, but it certainly wasn't what i expected. Not as readable as other Michael Lewis productions, by far, and this was unequivocally attributed to the fact that in "Panic," he has essentially just curated a bunch of news articles and essays from the 1987, 1998, 2000, and 2008 financial boom/busts. Now, I've read enough financial/banking/wall street related books to know that the reason "Panic" wasn't readable for me is not because I don't understand the concepts, but rather that the history was presented in a sloppy way. On top of that, he included articles that included charts which were not properly explained and did not belong in a Michael Lewis book. Come on, Mr. Lewis. I expected more of you.
July 6, 2015
Not a book written by Michael Lewis but just edited. Its a collection of articles pre and post the various stock market and financial market crashes. It covers four major panics of the modern financial history, namely the Black Monday, The Asian Financial Crisis, The Dot Com Bubble and the most recent Sub Prime Mortgage Crisis. Its a wonderful collection of very relevant articles and how the history looks in hindsight. Once again the magician that Michael Lewis is --- his articles featured in the book stand out. One more of those books which tries to explain how no one - absolutely no one in this big wide world knows how & when the market will go up or down and how a bubble forms and when the bubble will go bust!
July 14, 2009
I originally expected this book to be a great book for reading on the bus. It's a compilation of over 50 short exceprts from various past publications detailing the financial meltdowns that have happened in the past. It starts back during the 1987 crash and documents 3 other periods including the mst recent crash of 2008.
This book lives up to expectations that it is a good one to pick up and read a little at a time, but this is also it's downfall. I'm a fan of Lewis' previous works, but this book just felt like a more random collection of short pieces and it never really seemed to grip me or flow like I like. THe end result was that it felt extremely dry reading in the end.
This book lives up to expectations that it is a good one to pick up and read a little at a time, but this is also it's downfall. I'm a fan of Lewis' previous works, but this book just felt like a more random collection of short pieces and it never really seemed to grip me or flow like I like. THe end result was that it felt extremely dry reading in the end.
January 9, 2016
I enjoyed this book most of the time while reading. It offered a collection of different sources before, during, and after each financial crash. I found some of the sources hard to follow and boring. A lot of it was redundant (which is bound to happen when different sources attempt to offer a coherent picture). I would say there are parts of each crash that went undescribed. Some of the sources were extremely dry with no real substance to them.
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