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The New York Times bestseller: A masterful account of todays 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 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. .


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The New York Times bestseller: A masterful account of todays 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 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. .

30 review for Panic: The Story of Modern Financial Insanity

  1. 4 out of 5

    Darwin8u

    "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 "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.

  2. 4 out of 5

    Trevor

    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 Ive 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 arent so much satire as, well, 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.

  3. 5 out of 5

    Toe

    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 1990s; the internet bubble and bust in the late 1990s and early 2000s; and the real estate bubble and bust in the mid-2000s. 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 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.”

  4. 5 out of 5

    David

    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/$-related crises (oct. 1987 stock market crash, Asian markets crash late 90's, tech bubble of 2000 or so, housing bubble, subprime mortgages......). Nice balance in that it's not absolutely current, which means there is a chance with hindsight to get a better perspective on what happened, how bad it got, how long it took to recover, Interesting, well-chosen collection of newspaper and magazine pieces, a couple by the editor but most of them not, from before/during/after some recent business/$-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.

  5. 5 out of 5

    Ann

    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 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.

  6. 4 out of 5

    Addi

    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.

  7. 4 out of 5

    Tim Pendry

    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 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.

  8. 5 out of 5

    Neil Cake

    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 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.

  9. 5 out of 5

    Jerel Bonner

    Once 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 Once 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.

  10. 4 out of 5

    Mark Ruzomberka

    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 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.

  11. 5 out of 5

    R. Andrew Lamonica

    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 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.

  12. 4 out of 5

    Tom Emory Jr.

    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 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.

  13. 4 out of 5

    Adam

    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 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.

  14. 4 out of 5

    Jen

    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 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.

  15. 5 out of 5

    James

    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 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.

  16. 4 out of 5

    Ankur Maniar

    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 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!

  17. 4 out of 5

    Kid

    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 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.

  18. 5 out of 5

    Sophia

    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 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.

  19. 4 out of 5

    Wayne

    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 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.

  20. 5 out of 5

    Alex Ryan

    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.

  21. 4 out of 5

    Jerry Peace

    Best quote, from Frank Nothaft, chief economist at Freddie Mac, from 2002: "The single-family housing market is not in a bubble, and I don't think it is susceptible to a bubble.....We are not going to see the price of single-family homes fall. It ain't going to happen." Don't you just love experts?

  22. 5 out of 5

    Simon

    An interesting collection of articles about 4 different financial crises, starting with the stock market crash of 1987 and ending with the recent housing market crash of 2007. At times I missed a common thread, but nevertheless, the editor, Michael Lewis, managed to create a gripping chronology of the accelerating boom and busts of our financial and economic system. Can definitely recommend it.

  23. 4 out of 5

    Tim O'Hearn

    A pretty good supplement to Liar's Poker (somewhat), How Genius Failed, The New New Thing, The Big Short, and Boomerang (barely).

  24. 5 out of 5

    Thomas Dale

    A very useful guide to what caused the global economic mess we are in today.

  25. 5 out of 5

    Steven

    The least of the outstanding Michael Lewis oevre. Compendium of familiar and dated articles on financial markets, etc. Should not have been published

  26. 5 out of 5

    Sanford Chee

    A look back at the financial panics since '87. Reminds me of what Jeremy Iron's character John Told said in 'Margin Call': "So you think we might have put a few people out of business today. That it's all for naught. You've been doing that everyday for almost forty years Sam. And if this is all for naught then so is everything out there [points to the skyline of New York City]. It's just money; it's made up. Pieces of paper with pictures on it so we don't have to kill each other just to get A look back at the financial panics since '87. Reminds me of what Jeremy Iron's character John Told said in 'Margin Call': "So you think we might have put a few people out of business today. That it's all for naught. You've been doing that everyday for almost forty years Sam. And if this is all for naught then so is everything out there [points to the skyline of New York City]. It's just money; it's made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat. It's not wrong. And it's certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987 - Jesus, didn't that fucker fuck me up good - 92, 97, 2000 and whatever we want to call this. It's all just the same thing over and over; we can't help ourselves. And you and I can't control it, or stop it, or even slow it, or even ever-so-slightly alter it. We just react. And we make a lot money if we get it right. And we get left by the side of the road if we get it wrong. And there have always been and there always will be the same percentage of winners and losers, happy fuckers and sad suckers, fat cats and starving dogs in this world. Yeah, there may be more of us today than there's ever been. But the percentages-they stay exactly the same." Crash of '87 - almost a forgotten memory now but at that time, the biggest one day drop in stock market history. What did Warren Buffett have to say about it? Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him. Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you. But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game. As they say in poker, "If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy." Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising "Take two aspirins"? The value of market esoterica to the consumer of investment advice is a different story. In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace. In my own efforts to stay insulated, I have found it highly useful to keep Ben's Mr. Market concept firmly in mind. Following Ben's teachings, Charlie and I let our marketable equities tell us by their operating results - not by their daily, or even yearly, price quotations - whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it. As Ben said: "In the short run, the market is a voting machine but in the long run it is a weighing machine." The speed at which a business's success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price. Sometimes, of course, the market may judge a business to be more valuable than the underlying facts would indicate it is. In such a case, we will sell our holdings. Sometimes, also, we will sell a security that is fairly valued or even undervalued because we require funds for a still more undervalued investment or one we believe we understand better. We need to emphasize, however, that we do not sell holdings just because they have appreciated or because we have held them for a long time. (Of Wall Street maxims the most foolish may be "You can't go broke taking a profit.") We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business. During 1987 the stock market was an area of much excitement but little net movement: The Dow advanced 2.3% for the year. You are aware, of course, of the roller coaster ride that produced this minor change. Mr. Market was on a manic rampage until October and then experienced a sudden, massive seizure. We have "professional" investors, those who manage many billions, to thank for most of this turmoil. Instead of focusing on what businesses will do in the years ahead, many prestigious money managers now focus on what they expect other money managers to do in the days ahead. For them, stocks are merely tokens in a game, like the thimble and flatiron in Monopoly. An extreme example of what their attitude leads to is "portfolio insurance," a money-management strategy that many leading investment advisors embraced in 1986-1987. This strategy - which is simply an exotically-labeled version of the small speculator's stop-loss order dictates that ever increasing portions of a stock portfolio, or their index-future equivalents, be sold as prices decline. The strategy says nothing else matters: A downtick of a given magnitude automatically produces a huge sell order. According to the Brady Report, $60 billion to $90 billion of equities were poised on this hair trigger in mid-October of 1987. If you've thought that investment advisors were hired to invest, you may be bewildered by this technique. After buying a farm, would a rational owner next order his real estate agent to start selling off pieces of it whenever a neighboring property was sold at a lower price? Or would you sell your house to whatever bidder was available at 9:31 on some morning merely because at 9:30 a similar house sold for less than it would have brought on the previous day? Moves like that, however, are what portfolio insurance tells a pension fund or university to make when it owns a portion of enterprises such as Ford or General Electric. The less these companies are being valued at, says this approach, the more vigorously they should be sold. As a "logical" corollary, the approach commands the institutions to repurchase these companies - I'm not making this up - once their prices have rebounded significantly. Considering that huge sums are controlled by managers following such Alice-in-Wonderland practices, is it any surprise that markets sometimes behave in aberrational fashion? Many commentators, however, have drawn an incorrect conclusion upon observing recent events: They are fond of saying that the small investor has no chance in a market now dominated by the erratic behavior of the big boys. This conclusion is dead wrong: Such markets are ideal for any investor - small or large - so long as he sticks to his investment knitting. Volatility caused by money managers who speculate irrationally with huge sums will offer the true investor more chances to make intelligent investment moves. He can be hurt by such volatility only if he is forced, by either financial or psychological pressures, to sell at untoward times. http://www.berkshirehathaway.com/lett... Asian Crisis '97-98 - The rise of George Soros and the macro traders Interview with Rob Johnson, portfolio manager at George Soros's Quantum Fund "What is the structure of financing in the country? Do corporations and financial institutions have a lot of off-shore borrowings? You watch for those kinds of structural situations. You then look at the macro-economic fundamentals: Is this an economy which will come into a realm where it has a policy dilemma? ... What election schedules there are, who's strong and who's weak in politics, what potential there is for policy change? You learn to access probabilities, probabilities of change, detecting changes in tax policy, interest rate policy ... Prices are either contradicting or they're confirming hypothesis you have about what's happening in the world. Your entire life is unclear when you're a trader because you're watching and prices sometimes tell you somebody knows something you don't, you'd better jump on the telephone, talk to people, get over there and find out what's going on that's making those prices change. Another thing you become very conscious of, a sense of where everybody's positions are. Have people been long and enthusiastic about [technology] stocks recently? Well you know they have. You know there are a lot of people who've bought a lot of it. If you believe there's no more good news or worse if there's bad news, these stocks could fall very abruptly. So you're trying to sense the psychology of what people will react to, what positions they have, so the capacity for asset prices to change through volume of changing portfolios. It's not just a question of discerning what's going on, on the political grid or the economic business cycles. It's also understanding how that will inspire action by other people. You spend almost all your time, even some of your dreaming time, thinking of things that could help you and how you would react. Contingencies - this is called risk management. How am I going to react if this happens or, alternatively, what can I imagine that could happen that could hurt me that I haven't thought of yet? It's all about trying to stay a couple of steps ahead and anticipate and understand what's coming up." Dot.com Boom & Bust 1998-'01 The Sage of Omaha has this to say, "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities  that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future  will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands. Far more irrational still were the huge valuations that market participants were then putting on businesses almost certain to end up being of modest or no value. Yet investors, mesmerized by soaring stock prices and ignoring all else, piled into these enterprises. It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the values of stocks in certain sectors became decoupled from the values of the businesses that underlay them. Value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get. What actually occurs in these cases is wealth transfer, often on a massive scale. By shamelessly merchandising birdless bushes, promoters have in recent years moved billions of dollars from the pockets of the public to their own purses (and to those of their friends and associates). The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them. Too often, an IPO, not profits, was the primary goal of a company’s promoters. At bottom, the “business model” for these companies has been the old-fashioned chain letter, for which many fee-hungry investment bankers acted as eager postmen. But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street  a community in which quality control is not prized  will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest." Global Financial Crisis 2007-09 "You may recall a 2003 Silicon Valley bumper sticker that implored, “Please, God, Just One More Bubble.” Unfortunately, this wish was promptly granted, as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief. As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight." - Warren Buffett 2007 Annual Report "Much of the industry employed sales practices that were atrocious ... I described it as involving “borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent.” To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was involved. (“That certainly looks like a $2,000 cat to me” says the salesman who will receive a $3,000 commission if the loan goes through.) Moreover, impossible-to-meet monthly payments were being agreed to by borrowers who signed up because they had nothing to lose. The resulting mortgages were usually packaged (“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and it did. The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified. Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition. The type of fallacy involved in projecting loss experience from a universe of non-insured bonds onto a deceptively-similar universe in which many bonds are insured pops up in other areas of finance. “Back-tested” models of many kinds are susceptible to this sort of error. Nevertheless, they are frequently touted in financial markets as guides to future action. (If merely looking up past financial data would tell you what the future holds, the Forbes 400 would consist of librarians.) Indeed, the stupefying losses in mortgage-related securities came in large part because of flawed, history-based models used by salesmen, rating agencies and investors. These parties looked at loss experience over periods when home prices rose only moderately and speculation in houses was negligible. They then made this experience a yardstick for evaluating future losses. They blissfully ignored the fact that house prices had recently skyrocketed, loan practices had deteriorated and many buyers had opted for houses they couldn’t afford. In short, universe “past” and universe “current” had very different characteristics. But lenders, government and media largely failed to recognize this all-important fact. The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like today’s could have been obtained on good-grade municipal or corporate bonds even while risk-free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms. When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary." - Warren Buffett 2008 Annual Report

  27. 4 out of 5

    Susan Visser

    What causes a financial crisis? Michael Lewis (the man who wrote The Big Short, Moneyball, Blideside, and many more) gives us a look at the last 5 financial meltdowns, beginning with Black Monday in 1987. Did you know that there were 5 meltdowns including that one? I didn't. Two were primarily caused overseas (Russia and Asia), one was the internet bubble crash and arguably the biggest, the sub-prime mortgage crisis. Michael pulls up articles that reflect the situation immediately before the What causes a financial crisis? Michael Lewis (the man who wrote The Big Short, Moneyball, Blideside, and many more) gives us a look at the last 5 financial meltdowns, beginning with Black Monday in 1987. Did you know that there were 5 meltdowns including that one? I didn't. Two were primarily caused overseas (Russia and Asia), one was the internet bubble crash and arguably the biggest, the sub-prime mortgage crisis. Michael pulls up articles that reflect the situation immediately before the crisis and immediately after. Some are his own articles that the wrote at the time, others are from writers who did a great job explaining the situation. One of the questions that Michael raises is this: are corruption and greed necessary parts of capitalism? After the sub prime meltdown, Michael wrote a satirical piece about "poor people". Apparently at the time, many did not realize it was satirical and those who hate the poor were asking that Michael run from president. It's worth reading the book just for that story, but overall, I liked seeing the perspective that Michael was able to give on modern finance problems and what we can learn from them. I listened to the audible version. There were two narrators and then Michael did his own commentary at the end. I just heard that Michael will be starting a podcast ... which I think will be worth subscribing to. Aside: when I met Michael (when he and Billy Beane were promoting the movie Moneyball) I asked Michael why he doesn't narrate all his books. He pointed out that it takes so much time to narrate an entire book. He did a afterword in The Big Short in his own voice. I told him that he did a great job and his accent was pleasant to listen to. Looking forward to hearing his regular updates in his podcast.

  28. 4 out of 5

    Wendy (bardsblond)

    This book just makes me think that we learn nothing from the past. Michael Lewis examines past financial panics: the one that launched Lewis career in 1987 (read Liars Poker), the Asian financial crisis of 1997 (and the related collapse of hedge fund Long-Term Capital Management due to being overleveraged in 1998), the Doc Com bust of 2000 and, of course, the global financial crisis that started in 2007. Its essentially just a selection of essays and newspaper articles curated by Michael Lewis This book just makes me think that we learn nothing from the past. Michael Lewis examines past financial panics: the one that launched Lewis’ career in 1987 (read Liars Poker), the Asian financial crisis of 1997 (and the related collapse of hedge fund Long-Term Capital Management due to being overleveraged in 1998), the Doc Com bust of 2000 and, of course, the global financial crisis that started in 2007. It’s essentially just a selection of essays and newspaper articles curated by Michael Lewis (to which he also contributes introductions) about these financial panics. I realize Lewis did very little work to put these essays together but the material itself is very interesting. Depressing, but interesting. Of course, anyone who has read Nassim Taleb is unsurprised by how totally predictable human greed and stupidity is. Financial advisors take huge risks to make short-term profits for their firms because they do not absorb the downside of those risks. Who does? U.S. taxpayers, mostly. Who lets them proceed with this totally amoral behavior? Our elected officials. Do we ever learn anything? Not really. Our financial system is appalling. A worthwhile read.

  29. 4 out of 5

    Bill Shannon

    Really just a collection of contemporaneous news articles about four major financial events: Black Monday in 1987; the Asian crash of 1997; the dot-com boom and bust; and the 2007-08 subprime mortgage crisis and subsequent Great Recession. The articles cover both the booms and the busts, all in their original format, which gives interesting insight into the kinds of pie-in-the-sky expectations that preceded massive financial calamities. I didn't understand most of the jargon, which may have Really just a collection of contemporaneous news articles about four major financial events: Black Monday in 1987; the Asian crash of 1997; the dot-com boom and bust; and the 2007-08 subprime mortgage crisis and subsequent Great Recession. The articles cover both the booms and the busts, all in their original format, which gives interesting insight into the kinds of pie-in-the-sky expectations that preceded massive financial calamities. I didn't understand most of the jargon, which may have affected my enjoyment of the book, but not enough that I wasn't able to enjoy most of it. (Truth be told, the book only really picks up at the dot-com boom section.) It's not as dry as it had a right to be, but it's also just a collection of isolated articles.

  30. 4 out of 5

    Jeffrey

    Panic is a compilation of articles from newspapers, magazines and other sources. Lewis has only merely compiled them - but that's ok: he's done a great job choosing articles from before, during and after to give a great sense of context (also allowing your to re-evaluate statements made in the articles before the respective crisis) and also gives a good diversity of views. A good trip through the crash of '87, Asian crisis, dot-com boom and the '08 crisis. A good read for anyone interested the Panic is a compilation of articles from newspapers, magazines and other sources. Lewis has only merely compiled them - but that's ok: he's done a great job choosing articles from before, during and after to give a great sense of context (also allowing your to re-evaluate statements made in the articles before the respective crisis) and also gives a good diversity of views. A good trip through the crash of '87, Asian crisis, dot-com boom and the '08 crisis. A good read for anyone interested the history of financial crises. My only suggestion is Lewis probably should release a new edition - now that we are 10 years on from '08 episode, Part IV could probably be updated with more articles talking about the aftermath. But that's just me being greedy.

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