One path to good storytelling when dealing with complex issues is to report from the point of view and actions of someone involved in the events. This doesn't necessarily make the event itself any clearer; instead it trusts that the reader may appreciate the challenges the protagonists face and it conveys a feeling about the events. This look at the financial implications of the housing market collapse in 2008 attempts to explain events by following three hedge funds and a banker as they try to make sense of what appears to them to be an asset bubble and to find a way to take the opposite side of the trade. It takes great self-confidence, or foolhardiness, to take a short position when the world is convinced prices can only move upward.
The uninitiated reader is unlikely to come away from this book with a clear understanding of derivatives trading, credit default swaps, or collateralized debt obligations, but this book is not intended as a CFA textbook on derivatives. In fact, this book should be read alongside Gillian Tett's book Fool's Gold to really understand how such a market developed. The pair of books gives a richer context to the trading.
Michael Lewis is, nonetheless, a talented writer. The traders and bankers he describes are complex personalities. They are not heroic; they see an opportunity to make money and have to develop a way to exploit the situation. They have to keep their financial backers and investors behind them while the action they propose violates accepted wisdom. They have to abandon any faith in the leading names in the financial community. Once events begin to run their way, they have to decide how long to hold the trade before it becomes worthless. Here is Lewis' talent: giving the reader a sense of the inner workings of these people.
We are still living with the results of the crisis. It still plays a role in the political campaigns this year because it has affected how we interpret the work of Wall Street, the government, and the markets in a broad sense. This book is still timely even as it describes events that are a decade ago.
(NB. The movie of the same name is equally enjoyable and should be watched in conjunction with Margin Call to see both sides of the story, but it has fictionalized some parts of the story and simplified other parts.)
This book is recommended although with the suggestion that the experience improves if one takes time to learn more about the derivatives and the securities discussed.
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