February 26th, 2009


The End of Wall Street's Boom

[Happy (now belated) birthday to osewalrus!]

Thanks to mindways for the pointer to this fascinating article about the mortgage meltdown and how it happened. It's pretty long, but well worth reading, being both interesting and informative.

It's kind of based on the classic Wall Street question, "If you're so smart, why aren't you rich?" -- it tells the story of a few traders who saw the disaster coming long in advance, and *did* get pretty rich off of it. Along the way, it describes their gradually wakening horror as they figured out how horrifyingly broken the market was, and the step-by-step description of them discovering the structure of the house of cards is actually one of the clearer outlines of that structure that I've read.

And tying back to the birthday greeting up top, it's kind of an interesting variation of cassandrafreude. These guys reportedly tried fairly hard to wake everybody up to the looming disaster. And while they made a pile off of it (by short-selling the firms that they could tell were doomed), one gets the impression that they were pretty horrified by being proven so terribly correct: even as they were vindicated and made their money, they could see the burning towers of their own city around them...