Before the movie is released, I will present a book review for readers who have seen or have not seen the documentary novel of the same name.
I thought that with the heartbreak of the June stock market crash, the China Securities Regulatory Commission put forward a perfect new word in July-malicious shorting, which can draw a satisfactory turning point for the current round of the A-share market plunge. The majority of investors are full of enthusiasm once again. Was hit hard by the trend in August. As of November, the Shanghai Stock Exchange Index took two months to slowly withdraw from the bottom of the policy. When we looked back at this year's market, we discovered that the huge decline in the past six months was full of murderous opportunities, but more importantly, it was also vitality.
In this era when "investment" has been completely interpreted as catching the skyrocketing ride and earning multiple profits, we can find more profound enlightenment by turning our perspective to a completely different side in the financial market-the empty side. This is the meaning of Michael Lewis writing "The Big Short", and it is also the purpose of my choice to read "The Big Short".
Michael Lewis graduated from Princeton University and the London School of Economics. At the age of 24, he entered the top investment bank on Wall Street, Salomon Brothers, and became its bond trader. Twenty years ago, his famous work "The Liar's Playing Cards" was recognized as a "textbook" describing Wall Street in the 1980s, and was named "the 20 most influential business books of the 20th century" by Forbes. Twenty years later, amidst the earth-shaking farce on Wall Street, Lewis still had his insights and reproduced the market legends and creepy moral dramas on Wall Street in the corner of "Big Short".
The background of "Big Short" is set in the whole process of fermentation, outbreak, and ending of the subprime mortgage crisis that swept the world violently from 2005 to 2008. The protagonist is not a group of glamorous guys, but a few grassroots standing on the ruins. . Among them are the one-eyed Barry suffering from Asperger's syndrome, Charlie, a very small hedge fund manager, Eisman, who has turned from a lawyer to the securities industry, and the nagging Deutsche Bank who is in charge of the subordinated bond business. The leader of Greg Lippman.
They are all small people with very different personalities and life experiences, but their common characteristics are paranoid enthusiasm for knowing the truth of things, independent thinking, refusal to follow the trend, and the courage to persist against the trend. When the subprime mortgage market is prosperous, and everyone is intoxicated and refuses or does not know to face the truth, the herd effect drives unconscious people to sing and dance before the early morning bell rings. Almost everyone chose to follow a path that seemed to have always been bright, including the elites on Wall Street. Human greed drives everything, but it ignores the most basic common sense and principles: too many borrowers who are unable to repay have gotten loans; Wall Street financial institutions have taken on dozens of times of leverage; virtual finance The scale is more than ten times the global GìDP; financial derivatives are so complex that no one can understand; the specific content contained in almost all subprime loan pools is unknown; the real estate market and securities market are overvalued.
In the first five chapters of the book, four little people have been preparing for the collapse of the subprime loan and its derivatives market since 2005; in the second five chapters, four little people are anxiously waiting for the expected results to arrive. Always remain calm in a human-controlled market, and ultimately profit. The cover of "Big Short" illustrates this point vividly: a roll of green banknotes is placed on a fish hook, and a thin and tough fishing line is firmly tied to the hook. Someone makes money, and others lose money. The bait is everyone who participates in the irrational illusion of prosperity. The representative in the book is Morgan Stanley's star bond trader Howie Hubler. Due to the pressure to pay “insurance premiums” for the customized credit default swap products he purchased, Huebler took the risk of holding a $16 billion Class III A (actually composed of Class III B subprime bond products, but Huebler Don’t know) The secured debt warrant product, that is, became the seller of transactions with people like Charlie, and eventually caused the largest single transaction loss in Wall Street history, with a loss of up to 9 billion U.S. dollars.
There are not many books about this crisis history on the market, and there is no shortage of popular products among them. Andrew Ross Sorkin’s "Big But Not Falling" has more than 500 hours of real interviews with more than 200 people who have experienced the financial crisis. It restores the first scene of the financial crisis from the perspective of the managers of the institutions involved in the crisis. , A complete reproduction of the US government's rescue operation. U.S. Secretary of the Treasury Paulson’s "Edge of the Cliff" faithfully records how Paulson made major decisions during the financial turmoil. The talks between current President Barack Obama, Fed Chairman Bernanke and current Secretary of the Treasury Geithner have truly reproduced the unremitting efforts made by the U.S. government to rescue institutions from crisis. Only Michael Lewis takes as the protagonist the small person who has become the target of the victims and counterattacked in the disaster, which clearly reflects the absurdity and madness of the market.
In fact, it is not very meaningful for us to investigate how the subprime mortgage crisis occurred and how to prevent it today. We cannot predict where the next financial storm similar to the subprime mortgage crisis will come from. The only thing we can be sure of is: the nature of human greed is caused This kind of unstoppable situation. The line between investment and gambling is artificial and very thin. The most stable investment has a certain gambling nature, and the most bold speculation also has obvious investment characteristics. Perhaps the best definition of "investment" is "gambling with odds in your favor". The gambling is always there, and avoiding the gambling is never the content of revelation. How to stand firmly on the winning side is the whole point.
Lewis said in the preface of "The Big Short" that when writing his first book "The Liar's Playing Cards", he didn't have much ambition, he just wanted to tell an unusual story. His original intention was to reveal the true status quo of intrigues and predators on Wall Street to everyone. What he hopes is that the bright children of Ohio State University who really want to become oceanographers can read his book, throw the job invitation letter from Goldman Sachs into the trash, and set sail. However, six months after the book was published, he received numerous letters from Ohio State University students. They all wanted to know if Lewis could share other secrets about Wall Street with them. They treat the book as a "how to" manual. Twenty years after leaving Wall Street, Lewis is waiting for the finale of Wall Street, an ending he had already anticipated. Finally the final judgment day has arrived.
Books are written about people, but what we have to think about is systems and rules.
The first point worth thinking about is the short-selling system. What if the Chinese market allows shorting? China's listed companies have too many problems. Short selling can make a lot of money. That is not necessarily true, because administrative measures are higher than the market, and the stock price is not only determined by the quality of the company and the market. Maybe I have spotted an abusive company and I am obviously right, but it is very likely that the short seller will go bankrupt before the company really rots.
A mature and effective market should allow shorting. Because "long" and "short" are two forms of the market, the buyer is long and the seller is short, which expresses the comprehensive judgment of market participants on value. Where there is "long", there is "short", and only when there is a balance can there be a market. Of course, in a market where there is no short-selling mechanism, an investor cannot profit from the decline in stock prices even for a thousand reasons-he can at best choose not to intervene in a short position. But this in itself limits the function of market price discovery. The introduction of a short-selling mechanism allows investors to express their judgments on value in both directions, which is beneficial to the discovery of real prices. In fact, short selling is often more under pressure than long selling-his greatest possible profit is the return of the stock price to zero, and once the judgment is wrong, the possible loss is not capped.
In connection with the "malicious short selling" mentioned at the beginning of this article, I have been thinking about how to define "malicious". Capital is profit-seeking and also keen. When it perceives profit opportunities, its animality is completely aroused. This may be an internal mechanism of the invisible hand. For the purpose of chasing profit, playing according to market rules, you can hardly call it malicious. Although the result can be quite tragic, because the law of the jungle is the weak and the strong. From this point of view, "malicious" seems to be defined as not pursuing profit but only aiming at destroying the system. We may find that the vast majority of short sellers are veterans who are immersed in this market. It is hard to imagine that they will deliberately destroy an ecosystem on which they live.
Another choice of definition is to ignore market rules and resort to illegal means for profit, such as insider trading, spreading false information, etc. These are indeed ills in our market. But these tactics are quite popular in the long-short market, and there is no reason to only start short and condone long. In fact, cracking down on such behavior should be the basic homework of market supervision.
In this stock market crash, we should realize that even if there are deliberate spoilers, the flaws in our market ecology give them opportunities. Therefore, we should think more about whether our trading system arrangements need to be improved, such as the asynchrony of the spot and futures markets; whether our investor education and screening are in place, such as which investors can carry out financing, our rescue Are the eighteen gold medals effective? and many more.
In fact, through the monitoring of market transaction information, even in the face of powerful "evil forces", the regulatory authorities can still use market-oriented means to maintain market liquidity and orderly transactions. The market operation of the Hong Kong Monetary Authority in 1998 is an example. At the same time, we should also see that administrative measures may be effective in the short term, but the long-term side effects should not be underestimated. From this, when you think of your childhood friends playing, you will inevitably bump into each other. If you move out of your brother to support you every time, your friends will avoid you in the future. The market is the same. If you are worried that the rules will change at any time, potential participants must think twice.
The second point to think about is the reward and punishment mechanism. An intellectual born in Princeton's art history major, Lewis has always been critical of Wall Street's culture of money supremacy. From the liar's playing cards played by Salomon Brothers traders with dollar bills, to the big hedge fund tycoons throwing $20 million to buy killer whale specimens to celebrate their victory, the power that drives Wall Street is always money. Regarding this matter, the explanation may have a psychological basis. In a book I read before, it was said that psychologists used a group of college students to do experiments and engage in different types of labor, such as building housing models and proofreading numbers. The lower the sense of responsibility and satisfaction, the higher the salary required in the experiment. Compared with building a house, granting a housing loan is a more abstract labor, and it is less likely to have a sense of accomplishment, so people will want higher wages to compensate. Of course, not all such requirements can be met. After all, there is still a problem of negotiating with capitalists. But if the company’s capitalists are absent, it is the executives themselves who control the company. Will they give themselves a lot of money? So there is a second problem, which is also a common problem of insider control caused by the absence of actual controllers in China. People working in state-owned enterprises should be familiar with this. A similar phenomenon occurs on Wall Street.
The whole story of "Big Short" is quite dramatic: Barry, Eisman, Charlie, and Lipman, these little-known little characters, when everyone is crazy, through insight into the risks of the market, with short I made a lot of money for my identity; their opponents: Huebler, Zhao Wen, and many CEOs of Wall Street companies, all acted as "fools" in this gambling game, handing investors over to the funds they manage. It's a mess, but everyone's personal wealth is still unaffected. Even if they lose their job, they can get millions of dollars in "compensation." As a result, the real losses in this subprime mortgage crisis are the majority of investors. The source of funds managed by Zhao Wen reflects that investors from all over the world are participating in the subprime mortgage, and the U.S. government uses taxpayer money to give these points. Not stupid "fools" clean up the mess-here it even makes people feel that the U.S. government has been held hostage by the big Wall Street banks. In the end, taxpayers not only lose money, but also save the "fools" who caused them to lose money- It seems more appropriate to be called a "liar". The income is for one's own family, and the risk is for the whole society. Something happened to the financial company, and the public money was consumed to rescue, and then the executives of the financial company landed safely with golden parachutes. For so many years in the subprime mortgage crisis, none of the people who created the risk has been punished. The perpetrators have either made enough money to withdraw from the rivers and lakes, or continue to do evil in another place.
Therefore, I have to ask the question: whether those "fools" make smart or stupid decisions, they can get a lot of wealth. This is obviously illogical-it is consistent to let them pay for their stupid decisions. Of economic law. Therefore, under this wrong reward and punishment system, the occurrence of crises is not unexpected. Later, we can see that Obama imposed restrictions on the income of Wall Street executives, but how many loopholes in the system have not been discovered?
The third thing worth thinking about is the market system. The modern financial system tends to solve some chronic diseases by avoiding problems and creating bigger problems. This thing is not only related to the inefficiency of the bureaucracy and democratic system, but also related to human nature.
On the front page of the book, it reads Leo Tolstoy’s words, “If a person does not form any prejudices, no matter how stupid he is, he can understand the most difficult problems. However, if a person believes that those He already knew the problem before him, without any doubts, then, no matter how smart he was, he would not be able to understand the simplest things."
Those Wall Street investment banks, rating agencies, and other financial institutions that are considered to be the smartest and most cautious are just like the emperor’s new clothes. They are intoxicated to the point of absurdity, and for profit and greed, the subprime mortgage bubble Get bigger and bigger. Coupled with the two major regulatory loopholes in the subprime mortgage crisis-rating agencies and fund managers who buy CDOs. The rating agencies were worried that their "rating business" would be taken away by competitors, and they were still unclear about the structure and composition of junk bonds, so they gave them an "AAA" rating; fund managers only charge investors' trading commissions. If junk bonds are shut out, income will be greatly reduced. Why not do something risk-free and profitable?
In this market where Keynes believes that investment is like a beauty pageant, it seems that how to choose the right one is not important at all. The important thing is to choose what most people think is right. Investment does not consider the need for a bubble, no matter how big the bubble is, as long as there is a stupid successor. So under the herd effect, everyone is forced to get involved in the trap of irrationality.
The cruelty of the financial market has long been seen in various film and television works. But after reading this book, I still can't help but sigh. In such a world, how to persist in understanding the truth of things, think independently, refuse to follow the trend, and uphold the courage to go against the trend, will always be the people of the world will continue to learn and understand in the future. The road is long and long, and I will search up and down.
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