The big short is a very interesting story... the main point in the book I think is ~
Break the rule; don’t take any FUCKING authorities seriously.
Very interesting plot:
- Bank lent money to credit worthless homeowners with teasing mortgage rate.
- Wall street banks applied a formula that had been dreamed up to cope with corporate credit risk to consumer credit risk.
- Wall Street banker pack those “BBB” rating loans into “asset back securities”
- Separate the loans into different trenches.
- Hedge fund bet (out right bet; not hedge against their implicit bet) that the BBB Trenches loan with teasing rate like ticking boom. AIG took the bet.
- AIG sensed the risk, stopped offering insurance against the bet. Subprime fund followed the heels.
- Synthetic CDO staged as the swelling the demand from the fund growing. Fund manager actually thanked the hedge fund to bet against to make the virtual loans increase … Increase the subprime fund size.
- Wall Street further pooled the synthetic BBB tranches into synthetic AAA loans y using Markowitz efficiency frontier theory with low correction within. ( a hole in the brain of XXX?) Expanding the demand of subprime fund to pension and general public.
- Ticking bomb times up.
- What's most interesting in the book describing ~ GS was merely the 1st to dash through the exit and then closed the door behind him.
- Winners: hedge funds, DB and GS who run out of the fire and closed the door behind him.
- Losers. Dumbs blinding faith in rating agencies and Wall Street Banks, such as subprime mortgage funds, Taiwan, Japan, German funds, and Wall Street firms as well.
BTW, enjoy the melting cookie dough!