Over the last few months, I’d been avoiding the horrific tales of the U.S. sub-prime mortgage market.  I’d read and heard enough.  It was ‘so last year’. 

But this week a friend alerted me to a treatise by Michael Lewis on Conde Nast’s Portfolio.com.  His story about the development of the sub-prime mess and the rot on Wall Street is a worthwhile read.  It has real people, drama and plenty of insight. 

The world first met Michael Lewis when he wrote Liar’s Poker, which was about his three years at Solomon Brothers.  It was an expose on the inner workings of Wall Street.  The book turned out to be a big seller and served to launch Lewis’ career as a writer.

As I remember, I didn’t much like Liar’s Poker.  I was working on the sell side of Bay Street at the time and I took it personally.  I thought Lewis exaggerated too much.  In a similar vein, I didn’t like Oliver Stone’s Wall Street either. 

As a total aside, I did love Lewis’ Moneyball, which married two of my passions - sports and business.  The book was about how Billy Bean, the General Manager of the Oakland A’s, turned baseball’s conventional thinking on its head.  It resonated with me because my ‘armchair instincts’ told me that the sports establishment’s traditional methods were too often wrong.  In football, the ‘prevent’ defense never prevented anything but unlikely comebacks.  The math behind the sacrifice bunt never made sense to me, as Lori heard too many times when we watched the Blue Jays in the 90’s.  And I always wondered why good running teams in basketball eschewed the fast break at the end of a game when easy baskets are hard to come by.

That is a long-winded introduction to Lewis’ current piece, simply titled “The End.”  Since his days at Solomon, he has been anticipating the demise of Wall Street.  “In the two decades since then, I had been waiting for the end of Wall Street.  The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management.   Over and over again, the big Wall Street investment banks would be in some narrow way, discredited.  Yet they just kept on growing...”

Lewis refers to people like me.  There were many who saw the housing crisis coming, but didn’t nearly appreciate the magnitude of the silliness (it didn’t take much time holidaying in the U.S. in 2004 and 2005 for me to understand how bad the cycle could get and the impact it would have on mortgage default rates).  Lewis’ article provides some background behind the silliness and why the value destruction has been so enormous.

It is not a short read, but I highly recommend it.