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Dobrynya Krasilnikov
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How to Read The Big Short Book PDF Free Online: A Guide for Finance Enthusiasts

The Big Short Book PDF Free: What Is It and Why You Should Read It

If you are interested in learning more about one of the most significant events in modern history, namely the global financial crisis of 2008, then you should definitely read or watch The Big Short. The Big Short is a non-fiction book by Michael Lewis that tells the story of how a few outsiders predicted and profited from the collapse of the U.S. housing market and the subsequent economic meltdown. The book was published in 2010 and became a bestseller, earning praise from critics and readers alike for its insightful, entertaining, and shocking account of what really happened behind the scenes of Wall Street and Washington. The book was also adapted into a movie in 2015, starring Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt, which received five Academy Award nominations and won one for Best Adapted Screenplay.

the big short book pdf free


In this article, we will give you an overview of what The Big Short is about, who wrote it, who are its main characters, what are its main themes, how it was received by critics and readers, how it was turned into a movie, and why you should read or watch it. We will also provide you with a link to download a free PDF version of the book at the end of this article.

The Author: Michael Lewis and His Background

Michael Lewis is an American author and journalist who is known for his best-selling books on various topics related to business, finance, sports, politics, and culture. Some of his most famous books include Moneyball (2003), which explores how statistical analysis can be used to improve baseball performance; The Blind Side (2006), which tells the story of how an African-American football player overcame poverty and homelessness with the help of a wealthy white family; Flash Boys (2014), which exposes how high-frequency trading rigs the stock market; and The Undoing Project (2016), which chronicles the friendship and collaboration between two psychologists who revolutionized behavioral economics.

Lewis has a background in finance himself, having worked as a bond salesman for Salomon Brothers in London in the 1980s. He quit his job after writing his first book, Liar's Poker (1989), which exposed the greed and corruption of Wall Street during that era. He then became a freelance writer and a contributing editor for various publications, such as The New York Times Magazine, Vanity Fair, and The New Republic.

Lewis became interested in the financial crisis of 2008 after reading an article by a hedge fund manager named Steve Eisman, who was one of the few people who foresaw and bet against the subprime mortgage bubble. Lewis decided to interview Eisman and other similar characters who had made a fortune by betting against the market, and to write a book about their stories. He spent more than a year researching and writing The Big Short, which he described as "a story of epic proportions" and "the most amazing story I've ever found."

The Characters: The Misfits, Renegades and Visionaries Who Bet Against the Market

The Big Short follows the lives and actions of four groups of people who were among the first and the few to recognize the impending doom of the U.S. housing market and the global economy, and who took advantage of it by creating and buying credit default swaps, which are essentially insurance policies that pay off if a certain financial instrument defaults. These people were not typical Wall Street insiders, but rather outsiders, misfits, renegades, and visionaries who had different backgrounds, motivations, and personalities, but who shared a common trait: they were willing to challenge the conventional wisdom and to go against the herd.

The main characters of The Big Short are:

  • Michael Burry, a former neurologist who became the founder and manager of Scion Capital, a hedge fund based in California. Burry was a self-taught investor who had a knack for spotting undervalued or overvalued assets. He was also diagnosed with Asperger's syndrome, which made him socially awkward but also extremely focused and analytical. Burry was one of the first to discover the flaws and risks of the subprime mortgage market, and he started buying credit default swaps on mortgage-backed securities (MBS) in 2005, betting that they would collapse. He faced a lot of opposition and criticism from his investors, who thought he was crazy and wanted him to stop his bets. Burry eventually proved them wrong and made more than $700 million for his fund and $100 million for himself.

  • Steve Eisman, a former lawyer who became a portfolio manager at FrontPoint Partners, a hedge fund affiliated with Morgan Stanley. Eisman was a cynical and outspoken critic of the financial system, who had a personal vendetta against Wall Street after witnessing how his former employer, Oppenheimer & Co., had engaged in unethical practices. Eisman was introduced to the subprime mortgage market by Greg Lippmann, a bond trader at Deutsche Bank who was also betting against it. Eisman realized that the market was a fraud and a bubble, and he decided to join Lippmann in buying credit default swaps on MBS. He also visited various mortgage lenders and securitizers to see how they operated, and he was appalled by their lack of standards and oversight. Eisman made more than $1 billion for his fund and $200 million for himself.

  • Greg Lippmann, a bond trader at Deutsche Bank who specialized in asset-backed securities. Lippmann was a smart and ambitious salesman who had a flair for numbers and marketing. He was also a contrarian who liked to take the opposite side of any trade. Lippmann became aware of the problems and opportunities in the subprime mortgage market in 2006, when he saw that the default rates were rising while the ratings agencies were still giving them high ratings. He decided to create and sell synthetic collateralized debt obligations (CDOs), which were complex financial instruments that allowed investors to bet for or against MBS. Lippmann then used his own money to buy credit default swaps on the CDOs he sold, effectively betting against his own clients. He also contacted various hedge funds and persuaded them to buy credit default swaps from him, including Steve Eisman's FrontPoint Partners. Lippmann made more than $50 million for himself.

The Plot: How the Doomsday Machine Was Built and Crashed

The Big Short is not a linear narrative, but rather a collection of interrelated stories that span from the late 1990s to the late 2000s. The book traces the origins and evolution of the subprime mortgage market, which was a segment of the housing market that catered to borrowers with low credit scores or income, who were offered loans with high interest rates and fees. These loans were then packaged into MBS, which were securities that paid investors based on the cash flows from the underlying mortgages. The MBS were then sliced into different tranches, or levels of risk and return, and sold to various investors, such as banks, pension funds, insurance companies, and hedge funds. The MBS were also used as collateral to create CDOs, which were similar securities that paid investors based on the cash flows from the underlying MBS. The CDOs were also sliced into different tranches and sold to investors. Some CDOs were even composed of other CDOs, creating CDO-squared or CDO-cubed.

The subprime mortgage market grew rapidly in the early 2000s, fueled by low interest rates, lax lending standards, aggressive marketing, fraudulent underwriting, predatory lending, and a housing boom that created a false sense of security and wealth. The ratings agencies, such as Moody's and Standard & Poor's, gave high ratings to most MBS and CDOs, despite their poor quality and high risk. The regulators, such as the Securities and Exchange Commission (SEC) and the Federal Reserve, failed to monitor or curb the activities of the financial institutions that created and traded these securities. The Wall Street banks, such as Goldman Sachs, Morgan Stanley, Lehman Brothers, and Bear Stearns, made huge profits from originating, securitizing, distributing, and trading these securities. The investors who bought these securities believed that they were safe and diversified investments that offered high returns with low risk.

However, the subprime mortgage market was a house of cards that collapsed in 2007-2008, when the housing bubble burst and the default rates on the mortgages soared. The MBS and CDOs lost most of their value, as the cash flows from the mortgages dried up. The investors who held these securities suffered massive losses or went bankrupt. The Wall Street banks that had exposure to these securities also faced huge losses or insolvency. The credit markets froze, as no one wanted to lend or borrow money. The global financial system was on the verge of collapse.

The Big Short tells the story of how this collapse happened from the perspective of the characters who saw it coming and bet against it. The book shows how they discovered the flaws and frauds in the subprime mortgage market, how they analyzed and quantified the risks and rewards of their bets, how they executed their trades and faced various challenges and obstacles along the way, how they reacted to the unfolding crisis and its consequences, and how they ultimately made billions of dollars from their bets.

The Themes: The Lessons and Implications of the Book

The Big Short is not just a thrilling and entertaining story of financial intrigue and adventure, but also a profound and insightful commentary on the nature and implications of the financial crisis and its aftermath. The book explores various themes and issues that are relevant to our understanding of what went wrong and what can be done to prevent it from happening again. Some of these themes are:

  • Greed: The book shows how greed was one of the main driving forces behind the creation and expansion of the subprime mortgage market. Many actors in the financial system were motivated by their own self-interest and desire for profit, without regard for the consequences or risks for others. They exploited loopholes in the regulations, manipulated information and incentives, engaged in unethical or illegal practices, and ignored or dismissed warnings or evidence that contradicted their views.

The Themes: The Lessons and Implications of the Book (continued)

  • Corruption: The book exposes how corruption was rampant in the financial system, especially among the ratings agencies, who were paid by the issuers of the securities they rated, and who gave high ratings to MBS and CDOs that they knew were risky or worthless. The book also reveals how some Wall Street banks, such as Goldman Sachs, knowingly sold toxic securities to their clients, while secretly betting against them. The book also questions the role and responsibility of the regulators, who failed to oversee or intervene in the activities of the financial institutions they were supposed to supervise.

  • Ignorance: The book illustrates how ignorance was widespread in the financial system, as many actors did not understand or care about the nature and implications of the securities they created, sold, or bought. They relied on faulty models, assumptions, or heuristics that did not capture the complexity or uncertainty of the real world. They also suffered from cognitive biases, such as overconfidence, confirmation bias, hindsight bias, or groupthink, that prevented them from seeing or accepting the reality of the situation.

  • Risk: The book analyzes how risk was mismanaged and underestimated in the financial system, as many actors took on excessive or inappropriate levels of risk, without adequate compensation or protection. They assumed that the housing market would always go up, that the securities they traded were diversified and liquid, that the ratings agencies were reliable and independent, that the markets were efficient and rational, and that they could hedge or exit their positions at any time. They also ignored or dismissed the possibility of rare or extreme events, such as a nationwide decline in housing prices or a systemic failure of the financial system.

  • Accountability: The book evaluates how accountability was lacking or distorted in the financial system, as many actors did not face any consequences or incentives for their actions or outcomes. They enjoyed asymmetric rewards and punishments, as they reaped huge profits and bonuses when things went well, but faced little or no losses or penalties when things went wrong. They also shifted or externalized the costs and risks of their activities to others, such as their clients, investors, taxpayers, or society at large.

The book also raises some broader questions and challenges for our society and economy, such as:

  • How can we reform and regulate the financial system to make it more transparent, fair, efficient, and resilient?

  • How can we restore trust and confidence in the financial institutions and markets that are essential for our prosperity and stability?

  • How can we balance innovation and regulation in finance to foster growth and development without creating instability and inequality?