Panic!: The Story of Modern Financial Insanity

The book contains 56 different essays and articles on the main financial crises since 1987. Some of those pieces are just a couple of pages long; others are up to nearly 20 pages. They come from numerous well established sources such as Bloomberg, Businessweek, Forbes, Fortune, New York Times, New Yorker, The Economist, Wall Street Journal, and Washington Post among others. Some are extracts of books. Michael Lewis has written only a few of those 56 pieces.The quality of those articles vary somewhat. For the most part they are very good. Very few are terrible. And, some are outstanding.Just to name a couple of the terrible ones, there is one entitled “From the Brady Commission Report” that just narrates nearly hour-by-hour the level of the Dow during the stock market crash of October 1987. However, it provides no analytical insight whatsoever about what happened and why. Luckily, it is only 4 pages long. But, those 4 pages made for really miserable uninformative reading.Another terrible one is the one by Lester Thurow who attempts to demonstrate that “portfolio insurance” had nothing to do with the crash of 1987. Within this same book, other articles provide an abundant body of evidence (both explanatory and quantitative) that portfolio insurance caused a huge automated pipeline of stock sell orders that overwhelmed the markets, and caused a vicious downward spiral in the stock market. Lester Thurow opinion that portfolio insurance trading did not contribute anything to the crash of October 1987 is nearly as absurd as if he advanced the same opinion regarding High Frequency Trading and the more recent flash crashes the markets experienced just a few years back. For more on this subject, I recommend Michael Lewis excellent “Flash Boys.”Fortunately, the book is dominated by excellent articles that give you a contemporary analytical narrative covering the respective financial crises live in real time (at the time). And, it provides some very interesting insights. I’ll mention just a few of them below.The Economist article on the dysfunctional implementation of markets circuit breakers in 1989 is very interesting. Without going into details, those circuit breakers were structured in a very inconsistent way across different markets triggering both liquidity and volatility events (just the type of events that they were supposed to prevent). I trust that since then (nearly two decades later) those known flaws have been fixed.Robert Shiller writes an excellent piece in The Washington Post documenting how portfolio insurance did explicitly contribute to the crash of October 1987 and rebuts Lester Thurow’s position mentioned earlier. Portfolio insurance contributed an addition $6 billion out of $40 billion in sell orders on October 19, 1987. A factor that increases sell orders by 15% overnight is going to put very severe downward pressure on the stock market.One of the longest pieces is a Michael Lewis essay from the NYT on the demise of Long Term Capital Management (LTCM) called “How the Eggheads Cracked.” And, it is a classic… very detailed, and very clearly explained. You have to remember that LTCM was headed by a former famous Salomon Brothers bond trader called John Meriwether. And, the latter was actually one of Michael Lewis boss when Lewis started his career at Salomon. Lewis will soon quit and write a bestseller “Liar’s Poker” where he describes Meriwether in great detail. In any case, Lewis demonstrates an excellent technical grasp of what happened to LTCM. And, this essay is really fascinating to read.Another long and excellent piece by Michael Lewis is an essay about the dot.com bubble also published in the NYT called “In Defense of the Boom.” And, here he takes a positive take on this bubble. He makes a persuasive case that allowing for somewhat unrestrained form of high-tech innovation-capitalism has long term economic benefit for a society. The dot.com bubble generated a lot of new ideas and much new hi-tech infrastructure including a wild excess of fiber optics networks at the time (that will be eventually used up over time). Michael Lewis summarizes his theme as follows: “Failure in the valley was more honestly and bravely understood as the first cousin of success.”John Hechinger writes an excellent article on the abuse of real estate appraisals that contributed to the subprime crisis. But, what were appraisers to do? They were paid by the lenders who needed a specific valuation to fund the subprime mortgage and in turn securitize those pools of mortgages at a great profit by reselling them to Wall Street. If the mortgage lenders and bankers did not get the appraisal values they needed they would stop hiring the appraisers.Roger Lowenstein’s article “Triple-A Failure” in the NYT on the failing of the bond rating agencies in accurately assessing the credit risks of MBS and CDOs is probably the very best article in the book. For one thing, it focuses on the elephant in the room. The rating agencies have been mentioned in passing regarding the subprime crisis. However, if you understand their key role in passing junk debt for AAA rated ones, and their enormous conflict of interest (they were directly paid by the bond issuers), you realize they were truly the engine of the subprime crisis. With accurate ratings there would have been very little investor demand for subprime mortgage backed securities. Those would have been rated as junk bonds associated with a very moderate institutional investor demand. And, you would have had no subprime crisis period. When risk is priced accurately, everything is fine.A really funny and politically incorrect article is the one written by Michael Lewis titled “A Wall Street Trader Draws Some Subprime Lessons.” It is by far the most cynical article within the book. It is also one of the funniest ones (numerous of them have much humor). I won’t repeat what this article says, I might get shot. You just will have to read it in secret yourself.Matthew Lynn’s article titled “Hedge Funds Come Unstuck on Truth-Twisting, Lies” on the real poor performance of hedge funds is also excellent.As you can tell, I have just mentioned a very small minority of the 56 articles included in the book. So, there is a lot more information and insights to be had from reading the whole book. I strongly recommend it.

Lewis is brilliant. If you're,like me, one of the people.who thought our leaders were basically well intended and knew what they were doing, he'll scare you to death.

Please note that Mr. Lewis didn't write this book; he is the Editor, compiling a selection of pieces written by other authors - and their writing style is not up to his level. I didn't realize this when I bought it, and it's been something of a chore to get through.

Michael Lewis is one among the group of journalist writers ( I mean non academic university type writers) who has written extensively on the functioning of the financial markets. I Like the ones that I have read. Due to his own experience in Wall Street his work is insightful. His informal narration makes his work easy to read. It tells you stories about the financial system that you would never get from any formal academic book. I would recommend this book and Liar's paradox to students and faculty of economics and finance.

Michael Lewis does his usual great job of explaining very complex subjects so the layman can understand them.

The book is only partially written by Michael Lewis. It's a collection of articles about various economic bubbles that was edited by Lewis, which includes some of his own writing.

All of the Michael Lewis books are extremely readable. In this anthology, he has assembled lots of works from the Panics, in a well organized fashion. The price is absolutely fantastic and for this small price will help you develop a mind set to "keep your head while others are loosing theirs". This book could save you a lot of money SO..Buy this book"

Like countless others who have reviewed Michael Lewis' "Panic: The Story of Modern Financial Insanity", I didn't realize I was buying a collection of works of other authors in addition to Lewis' previously published pieces. However, it was interesting to get a glimpse into different financial eras to see how things have progressed over the past twenty years. Of the four sections, the Dot.Com was my favorite due to Lewis' defense of the entrepreneurial spirit within the Dot.com firms and criticism of Wall Street's post-crash, hypocritical stance of "don't blame us".What is very interesting and what I came away with from reading about these unique events is the realization that the panic in 1987, as well as the Asian Currency crisis, really didn't affect the average American. However, beginning with the Dot.com stocks and continuing into the current subprime crisis, the markets have evolved into such a far-reaching force that the actions of Wall Street have significantly impacted all income classes. Also, Lewis does a good job in selecting pieces that, as a whole, portrays the evolution of investment banks as firms focused on servicing individual brokerage accounts to fee-driven, relationship banks for corporate clients. This has created significant conflicts of interests with regards to investment banks pushing the sale of stocks of their corporate clients to their individual investors. I perceived an implication from Lewis, through his selection of some of the pieces, that he places a large share of the blame on Wall Street for all of these Panics.All in all, I felt the book was a good read that you can pick up over the course of a couple of weeks and read at your pace. However, there are articles that you will read and wish you had those ten minutes of your life back. I wish there would have been less focus on the Asian Currency crisis and more so on the current sub-prime mess but I suppose more time needs to pass in order to get a proper perspective on its historical significance.

There are plenty of decent articles in this volume but it is pretty lightweight.It is interesting just how inaccurate some of them have proved to be.Certainly Michael Lewis' article on LTCM seems to take them at their own word as to howThe rest of the world was irrational rather than their model being flawed.I think that lots of them are probably available for free.Dave Barry's article about attending a wealth seminar is brilliant. It is just a shame that people still get fooled by these snake oil peddlers.

not as well focused as his other works

OK

As with all Michael Lewis books, it is a great read. Be careful though you could get hooked to finance. Great booked!!

This collection of articles of financial panics in the modern era starting from the stock market crash on black monday in october '87 to the sub - prime mortgage crisis of '08 describes vividly the extent of excesses and callousness of wall street firms in the conduct of financial transactions since thereagan era which has proved to be detrimental to the global economy in general and the american economy in particular.A must read for all those who are interested in finance and economics.