In July of 2007 two Bear Stearns Hedge funds collapsed. The funds specialized in CDOs they used and insane amount of leverage (borrowed money) and the credit default swamps they bought to protect didn't pay off at the same time the subrpime CDOs tanked. That was the canary in the coal mine or microcosm of the 2008 crisis.

The 10 year anniversary got me nostalgic.

So the Big Short. I didn't read it back when came out in 2010 because I felt like I read through it all between the Financial Times, WSJ, NYT, etc. And of course of the vampire squid piece in the Rolling Stone.

Lewis' book saves you from reading all of that. He very clearly explains the subprime structured debt (CDO) and the insurance on the - credit default swaps. How people could short these "assets" by taking the other side of the insurance. You can understand how the CDS might not pay off as soon as the CDOs drop in value because they are set by two different market makers and have different conditions. Lewis explains how Goldman and others manipulated the rubes at Standard & Poor into calling a bunch awful mortgages Triple A (the highest rating - by the end of 2009 there was hardly a firm in all of America rated Triple A, yet these mortgages made to low income bad credit people were passing in 2007 as Triple A. These were the intrest only loans, the liar loans, the NIJNA loans, etc.). This is easier to understand then CDOs and CDS and synthetic CDOs. The rating agency incompetence is the second biggest outrage.

Lewis is a master story teller and gives you some interesting characters and exciting narrative along the way.

He starts with the Meredith Whitney research piece in October of 2007 - this is the biggest outrage - it stated the the bankers weren't greedy they were incompetent. Somewhere along the way they believed their own baloney or the left hand didn't know what the right hand was doing and they bought these terrible CDOs themselves because they were rated Triple A. They forgot they were really junk that was manipulated to Triple A or they made too much inventory and couldn't unload fast enough and had it on their books. In any case that's the whole meltdown.

Fantastic book. We are due for another crisis, so this a great way to prepare.