The Big Short: Inside the Doomsday Machine

As you know there are some select people that just find a drive in certain activities that supersedes EVERYTHING else.

Investing well was all about being paid the right price for risk.

The subprime mortgage machine roared on. The loans that were being made to actual human beings only grew crappier, but, bizarrely, the price of insuring them--the price of buying credit default swaps--fell.

Eisman's parents, old-fashioned value investors at heart, had always told him that the best way to learn about Wall Street was to work as an equity analyst. He started in equity analysis, working for the people who shaped public opinion about public companies

ut then I read the news that a little-known New York hedge fund manager named John Paulson had made $20 billion or so for his investors and nearly $4 billion for himself. This was more money than anyone had ever made so quickly on Wall Street. Moreover, he had done it by betting against the very subprime mortgage bonds now sinking Citigroup and every other big Wall Street investment bank

This woman wasn't saying that Wall Street bankers were corrupt. She was saying that they were stupid. These people whose job it was to allocate capital apparently didn't even know how to manage their own.

mere scandal could have destroyed the big Wall Street investment banks, they would have vanished long ago

The beauty of the credit default swap, or CDS, was that it solved the timing problem. Eisman no longer needed to guess exactly when the subprime mortgage market would crash. It also allowed him to make the bet without laying down cash up front, and put him in a position to win many times the sums he could possibly lose. Worst case: Insolvent Americans somehow paid off their subprime mortgage loans, and you were stuck paying an insurance premium of roughly 2 percent a year for as long as six years--the longest expected life span of the putatively thirty-year loans

If Wall Street bond departments were increasingly the source of Wall Street profits, it was in part because of this: In the bond market it was still possible to make huge sums of money from the fear, and the ignorance, of customers

It was one of the fringe benefits of living for so many years essentially alienated from the world around him: He could easily believe that he was right and the world was wrong