Michael Lewis’s fascinating page-turner, The Big Short: Inside the Doomsday Machine takes us through the Subprime mortgage market through the eyes of the cast of characters who not only saw the coming crisis but bet heavily on the catastrophe, and won big.

What’s interesting about the cast of characters is their contrarian view on the financial crisis, events that shaped their worldview, and holding on and increasing their bets while under tremendous pressure, in some cases, from their own investors.

Lewis focuses largely on four groups, and among them mostly on Steve Eisman, Dr. Michael Burry, Greg Lippmann and Charlie Ledley:
• Frontline Partners (Steve Eisman, Vincent Daniel, Danny Moses, Porter Collins), Ivy Zelman and Wing Chau
• Scion Capital (Michael Burry, Steve Druskin), Joel Greenblatt and Kip Oberting
• Formerly of Deutsche Bank (Greg Lippmann & Eugene Xu)
• Cornwall Capital (Charlie Ledley, Ben Hockett, Jamie Mai) and David Burt

The book starts with Eisman, moves on to Burry, Lippmann, Ledley and how they go about learning more about the Subprime market, various interactions with Wall St. Banks, AIG, how the protagonists put together the pieces of the puzzle, and finally culminates with Howie Huber losing billions and the financial crisis of 2008.

My favorite quotes from the book:

“The original cast of subprime financiers had been sunk by the small fraction of the loans they made that they had kept on their books. The market might have learned a simple lesson: Don’t make loans to people who can’t repay them. Instead it learned a complicated one: You can keep on making these loans, just don’t keep them on your books. Make the loans, then sell them off to the fixed income departments of big wall street investment banks, which will in turn package them into bonds and sell them to investors.”

“It was as if you could buy flood insurance on the house in the valley for the same price as flood insurance on the house on the mountaintop.”

Steve Eisman:

“How do you make poor people feel wealthy when wages are stagnant? You give them cheap loans.”

“I now realized there was an entire industry, called consumer finance, that basically existed to rip people off.”

Dr. Michael Burry:

“The more he studied Buffett, the less he thought Buffett could be copied; indeed, the lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual. “If you are going to be a great investor, you have to fit the style to who you are.”"

“Ick investing means taking a special analytical interest in stocks that inspire a first reaction of ‘ick’”

If you liked this post, you might like Daily Links #171 (Michael Burry edition).

Set during the NBA 2005-06 season, ace sportswriter, Jack McCallum spends time with the Phoenix Suns as an “Assistant Coach” and covers the inner-workings of an NBA team. The book stems from an article Jack wrote during the pre-season which turned out to be quite popular.

The name of the book refers to Coach Mike D’Antoni’s philosophy of scoring in the first 7 seconds of the 24 second shot clock. The 2005-06 season was significant for a few reasons:
- Amare Stoudemire was lost to injury for most of the season
- Steve Nash receives his 2nd (back-to-back) MVP after playing point-guard at a level similar to Magic, Cousy & Stockton
- Raja Bell clotheslining Kobe Bryant and getting suspended for an elimination game

The book starts off and devotes a good portion, almost half, to the first round playoff’s with the Lakers, where the Suns comes back from 3-1 down to win the series, segways to training camp and a few regular season games. After which, the book moves on to the series with the Clippers, goes back to the cameo appearance Amare makes for 3 games, and then covers the western conference finals against the Mavs. All along you get insights into the players, coaches, how teams prep for games, how they deal with losing and winning games, the chemistry and the interplay.

While insights into teams might be common today with the advent of twitter, videos and interviews done by the players in the locker room, this books covers the era before all that. Jack McCallum is a fantastic and engaging writer and Seven Seconds or Less: My Season on the Bench with the Runnin’ and Gunnin’ Phoenix Suns is a fast paced page turner which is well worth a read.

My favorite quotes from the book:

“On the first day, Marion nailed me in the face as I held the ball during a shell drill, and I felt I belonged.”

“Just when it appears that Nash had played himself into a state of utter fatigue, he would summon up some uncommon effort and hit a shot down the stretch.”

When SportsCenter came on, that was the signal for Nash to get off his butt, “I felt uncomfortable being comfortable”, says Nash”.

“I just want to let you know,” says the coach, “that I’m never going to get mad at you for shooting. I’m going to get mad at you for not shooting.”

“When you are on the borderline of making it, when you don’t have what everybody thinks you need to make it, it’s important to have someone who believes in you. It’s sometimes the most important thing.”

[Nash]: “I’m more elusive than quick, and people confuse the two.”

“The central dichotomy about the NBA’s fastest offense, then, is that it is quarterbacked by someone who’s not at all that fast.”

If you like this post, here are some videos from the 2009-10 season from the Suns showcasing their chemistry and why they advanced to the western conference finals.
- Nash covering JMZ in the locker room during the playoffs
- Steve Nash & Robin Lopez, balls talk
- Goran Dragic shuts down the Spurs with 26 points (23 in the 4th quarter) in 17 minutes. Check out the end of the video on how the bench, the owner (Sarver) and the GM (Kerr) feel about Goran’s play.