The Big Short

The Big Short, Michael Lewis' new book on the subprime mortgage crisis, was already timely.  The recession caused by subprime mortgages and the multiple bets for and against the bonds created from them is only now officially lifting, and the impact is still being felt with high unemployment and struggling markets.

Then the SEC filed fraud charges against Goldman Sachs this week, and the whole book looks a little different.

The Big Short is about some investors, mostly small hedge funds, who made money by going "short" or betting against the success of bonds created from subprime mortgages.  The fraud charges against Goldman Sachs came from transactions similar to those described in the book, although the specific Goldman trade is covered more thoroughly in Gregory Zuckerman's The Greatest Trade Ever, which I haven't read (yet). 

The ins and outs of the trades can be better described by professionals, but the short (no pun intended) version is that banks like Goldman Sachs packaged groups of mortgages into bonds so that they could be sold and traded.  The thought on Wall Street was that the bonds were not terribly risky because they were made of many different mortgages (or pieces of mortgages) from different areas of the country, meaning they were diverse.  A few investors thought, correctly, that the housing market was being fueled by inflated house valuations, and if house prices didn't continue to go up, people with adjustable rate subprime mortgages wouldn't be able to refinance when their rates went up.  Those investors essentially took bets that the mortgages would fail with the Wall Street banks, and the banks either took the "long" side of the bets or passed that risk along to companies like AIG or other investors, often organizations (like pension funds) that were required to make conservative investments.

The fraud charges from the SEC give the stories from Lewis and Zuckerman another dimension.  One way you can read The Big Short is as the story of plucky underdogs who saw that disaster was imminent and unavoidable and figured out ways to make money from it, enduring mockery until their bets paid off.  The other way is to see it as people who made money at the expense of less sophisticated investors, possibly due to criminal activity.  While Wall Street firms lost a lot of money being long on subprime mortgage bonds, the charges from the SEC say that once Goldman Sachs realized that they were on the wrong side of the crisis, they dumped massive amounts of risk onto less sophisticated investors by deceiving them about the origin of those soon-to-be toxic assets.  What's interesting is the "shorts" who made money as a result of these transactions are not under investigation; Goldman Sachs is in trouble for allegedly lying to their investors about how the specific mortgages were chosen and weren't upfront that the asset was being put together solely so John Paulson could bet against it. 

I really enjoyed The Big Short, and I think I'd like to read The Greatest Trade Ever.  I would recommend picking up one or the other if you want to better understand subprime mortgages, collateralized debt obligations, and credit default swaps.  The Amazon ratings are higher on TGTE, but a lot of that seems to be caused by a bunch of low ratings frankly whining that TBS isn't available on Kindle*.  What I do believe from reviews I've read is that TBS less scholarly and more character driven, while TGTE is an in-depth, investigative report on one trade by one man--the one trade being the one that the SEC is now alleging was fraudulent.  I'll agree that TBS is not big on technicalities and skims over some of the negative impact, but it's very readable and I definitely understand more about the crisis that sunk the economy worldwide, resulted in billions in bailouts to banks, and led to the unemployment of friends and family.  I think the recession was personal to everyone, and it's important to learn more about how it happened. 

*I highly recommend reading the 1 star Amazon ratings for entertainment value.  Some are legitimate concerns (not technical enough, too sympathetic to opportunistic investors), some are personal (Lewis is honest that he is not an investment advisor, but some reviews criticize him for contradicting something he said a few years ago about derivatives), but many are about the lack of a Kindle edition.  People complain that the lack of a Kindle edition is tantamount to segregation in the American South, that bookstores should set up garbage cans so people can throw away hard copy Michael Lewis books in protest, and that it might as well be published on post-its, written in crayon.  Which then leads to joke bad reviews that it is not published in Na'vi or serially in a magazine like a Dickens novel.  The interweb is funny.

The Remains of the Day

If you recall, I was not impressed by Ishiguro's When We Were Orphans.  I decided to give him another try and recently read The Remains of the Day.  It's a character study of Stevens, an English butler in the mid-1950s.  His previous employer dead, he now works for an American who bought Darlington Hall, the house Stevens ran for many years. 

Stevens takes an opportunity to visit former co-worker Mrs. Benn née Miss Kenton.  With permission, he borrows Mr. Farraday's car and goes on a road trip through Devon and Cornwall.  As happens in all good road trips, Stevens encounters some interesting people and beautiful scenery, stumbles into some comic misadventures, and has plenty of time to reflect on his life.

Through the stories of the past woven into the experiences of the present, we learn that Miss Kenton served as a foil to Stevens over the years they served Lord Darlington.  Stevens, preoccupied with propriety and duty, accepted his employer's word as law; in doing so, he gave up some of his humanity and supported some questionable decisions.  Miss Kenton was more compassionate beneath her similarly high professional standards.  Because of their differences, there are many misunderstandings between Miss Kenton and Stevens, and she ultimately leaves Lord Darlington's employ to marry.  Stevens' road trip is, in part, a trip to see if Mrs. Benn would like to return as housekeeper to Darlington Hall due to the unhappiness with her marriage she expressed to Stevens in a letter.

It's hard not to include spoilers in these posts.  I will say that I found the ending of the book very poignant and definitely recommend The Remains of the Day.  Stevens isn't always a sympathetic character, but by the end Ishiguro leads the reader to an understanding of Stevens' motivations and Stevens to an understanding of his own mistakes.  The ending is surprisingly hopeful, even if there is an undercurrent of melancholy.  In some ways, it reminds me of the ending to The Sun Also Rises.  While Hemingway's book ends with regret, Ishiguro's takes half a step back from the "Isn't it pretty to think so?" lament and substitutes the truth that the past doesn't have to determine the future.

Instances of the Number Three

I picked up Salley Vickers' book Instances of the Number Three mostly because I thought it was an interesting title.  There are better reasons to read a book, but I think there are also worse ones.

In the book, a woman named Bridget connects with her husband's mistress and mysterious young friend Zahin after his death in a car accident.  We learn about Peter through each of them. For example, we learn that much like the protagonists of every Graham Greene novel I've read, Peter is an adulterous Catholic, although only mistress Frances knows of his faith. (I'm not hatin' on GG - I really liked The End of the Affair even if I was disappointed by The Heart of the Matter, mostly because it was similar but not as good.) 

Despite the dark subject matter, it was actually a fun and fast read.  There's a bit of a mystery element to it as the reader learns more about Peter and the three he left behind.  The book shares some theories on the afterlife that I don't think the Catholic church would bless, even if there are some interesting ties to Hamlet. Not great literature, but definitely a step above your standard chick lit. 

I'm still behind - posts are upcoming on The Remains of the Day and The Big Short. 

Grace (Eventually)

I can't justify getting a Kindle, Nook, iPad, or other e-reader.  It's appealing.  The bookshelves are full.  I wouldn't have to use as much valuable luggage space when I travel.   I could carry around hundreds of books at a time.

But two things stand in the way.  One, I am frugal.  The readers themselves are pretty pricey, and most books tend to run in the $8-$15 range.  I can do better at the used bookstore.  Two, there is something nice about having a book that can be shared with a friend, even if they don't always find their way home.  (I'm talking to you, guy at work who still has my copy of Freakonomics three years after I lent it to you.  Too late to ask for it back now without seeming crazy.) 

Recently, I found a third reason.  When you buy used books, they sometimes tell a (bonus) story.

Take, for example, the copy of Grace (Eventually) I purchased.  Usually I flip through all the pages of a used book and make sure it's not terribly marked up, but I forgot this time.  When I got it home, I discovered something interesting.

It appears that this particular book was either purchased at or brought to a discussion and reading by the author.  First, it's autographed.

Second, there are notes from the talk.  Some of the notes seem to be directly related to one or two essays, but others are more generally about being a writer or artist.  The notes cover virtually every blank or partially blank page at the beginning and end of the book.  My favorite is a bit ironic - Ms. Lamott apparently gave the advice to always have a pen and index cards to take notes about things or people you encounter, which would probably be better than scribbling all over your paperbacks. 

As for the book, I think you either like or don't like Anne Lamott.  She writes about Christian spirituality from a very liberal perspective.  Although I'm more conservative and traditional in my faith, I think she's thought-provoking.  Even if I'm shocked by statements that I find borderline heretical, at least it makes me think about what I believe about the nature of God and the promises of Jesus, as well as what the role of Christians is in the world.  She's also good for the occasional belly-laugh.  Although I think I liked her Plan B better (the essays about teenagers and starting a Sunday School are so priceless I marked those two essays for my mom, currently starting a Sunday School and raising a tween and teen, hoping she would skip over the essays that included more colorful language), I found plenty to think about while reading Grace (Eventually). 

I hope everyone had a fantastic Easter.  He is risen! 

Excuses, Excuses

I've been neglectful of the blog, but I had good reason. Three weeks ago I had an infection.  I dutifully went to the doctor, got antibiotics, and started feeling a little better.  But not completely better.  Two weeks ago I would come home from work each evening and fall into bed.  This is unusual, but not unprecedented.  I rationalized that work was stressful, and I was still recuperating.  I didn't want to be the obnoxious patient running up healthcare costs and strengthening bacteria by demanding more antibiotics if I didn't feel better immediately.  

Then last weekend I really started feeling poorly.  By Sunday I wasn't eating or drinking and was running a 104 fever, so I abandoned my plan to wait until Monday to go to the doctor and ended up at Primacare.  The urgent care nurses and doctors were lifesavers, and I left about an hour after arrival having been pumped full of antibiotics and in possession of a prescription for a much longer and stronger run of antibiotics.  By Sunday night I had my first adult encounter with Pedialyte (disgusting - how can they do that to children!?) and my fever had dropped from severe to merely moderate. 

I'm now feeling much better.  Not quite eating, sleeping, or living normally, but getting much closer.  I was able to go to work three days this week and really feel like I turned a corner today.   Ben has been indispensable, and if he didn't faint every time he sees or even thinks about blood, I'd say he has a gift for nursing. 

My illness did allow for plenty of reading time, so I'm now three books behind.  Stay tuned - I'll be posting again soon.