Michael Lewis is the preeminent financial journalist of our age. In many ways, Michael Lewis is the only financial journalist of our age. No other author on finance is so widely read. His articles are widely taken as something like the conventional wisdom. This is a great tragedy, as, despite the fact that Michael Lewis is unarguably a great writer, he’s a terrible journalist. Reading a Michael Lewis article on finance is much like watching the evening news. It gives you the impression that you’re well informed, but in reality, you’ve been deceived by noise.
The entire piece is a good read, and reveals that:
The Sarbanes-Oxley Act sticks a wrench in the American market for initial public offerings, and the capital-raising business simply removes itself to London and Hong Kong. Thailand installs capital controls and the markets force it to reverse its policy, virtually overnight — again with nary a ripple. The Brazilian real is now less volatile than the Swiss franc; Botswana’s debt is now more highly rated than Italy’s. Oil prices double, the U.S. housing market tanks — no matter what happens, financial markets adjust quickly and without hysteria. …
There are obviously a few things to worry about just now in the world, but the inability of traders to find a sensible price for the spread between European junk and European Treasuries isn’t one of them.
I’ve felt for a while since that Vanity Fair article that Lewis held something back. There were obviously enough juicy tidbits to work with – with Deutsche Bank being one of the major players in the worldwide crisis, with German banks levered more than 50 to 1 (which implies that a 2% drop in asset values will wipe them out) and consequently, with their banking system allowing them to lie and borrow against collateral that, in other less blind countries, would classify as toilet paper. No, they have indeed not had a financial crisis, but they are like a pig that keeps getting fatter and looks healthier until…that day.
The drama of Europe will have to be written. I will look forward to books by Roger Lowenstein, Niall Ferguson, Frank Partnoy and yes, even Michael Lewis. Because to piece the story together, you have to read more than one book, and read more than one web site. Of the lot, I would (now) give Lewis the least importance. He is entertaining, but indeed has dropped in my mind after the above articles. I’ll read his books, but won’t expect to get the full story.
(Note: I have recommended his book “Panic” on the right sidebar of this blog. It consists of writing from a number of authors, not just Lewis. I still think his other books are good reads.)