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clifhostetler

Clif's Book World

Adventures from reading books captured within short reviews.

Panic!: The Story of Modern Financial Insanity

Panic!: The Story of Modern Financial Insanity - Michael Lewis,  Read by Jesse Boggs,  Read by Blair Hardman I was hoping that by reading about the folly of others I could be a bit wiser for the current financial crisis. But I still don't feel wise. This book does provide some relief for today's remorseful investor by telling stories of others who lost more.

"Everything, in retrospect, is obvious. But if everything were obvious, authors of histories of financial folly would be rich . . ." It is incredible how naive and stupid some of the pre-panic articles are. But on the other hand, many of the post-panic articles are equally over the top in finding conspiracies where in reality only simple capitalistic greed is present. Is being greedy (or stupid) against the law? An example of pre-panic swagger is this quote by Dave Barry; "You don’t have to take any risk, or work hard, or even have a central nervous system. That’s how profitable real estate is!"

This book was published November 17, 2008, and the current financial crisis has continued to play out since then. So the comments about the current sub-prime mortgage crisis probably will become quickly dated. Nevertheless, I found his predictions related to the current financial situation of interest. He says the coming recession will be longer and more persistent than any in recent memory. In absolute terms it won't be as bad as the 1930's depression because we're beginning from a higher starting point. However, in relative terms we may feel worse than those who lived through the 1930's. The reason is that our expectations are so high and our tolerance for discomfort so low that we'll cry like spoiled children. Perhaps this time it really is the end of the world as we know it.

Of the five financial crises examined, the differences are so large that there are few morsels of wisdom that can be carried forward to avoid the next crisis. However, I will make this prediction; If you had the job in the past of flipping derivatives based on sub-prime mortgages, you'd better start looking for a new job flipping hamburgers because your old job isn't coming back.