Ch2 - Introducing Michael Burry (Jun 19)
* Michael Burry is without any doubts self-made man. He was funded by $20K from his mother, $10*3 from his relatives by blood, and his own $40K , totally $90K against his $145K student loan.
* On his way to his meeting with Greenblatt, Burry was wracked with the anxiety that always plagued him before face-to-face encounters with people. He took some comfort in the fact that the Gotham people seemed to have read so much of what he had written. “If you read what I wrote first, and then meet me, the meeting goes fine,” he said. … He was a walking blind taste test: You had to decide if you approved of him before you laid eyes on him. (p.41)
* Warren Buffett had an acerbic partner, Charlie Munger, who evidently cared a lot less than Buffett did about whether people liked him. Back in 1995, Munger had given a talk at Harvard Business School called “The Psychology of Human Misjudgment.“ If you wanted to predict how people would behave, Munger said, you only had to look at their incentives. (p.43)
* Munger’s remarks articulated a great deal of what Mike Burry, too, believed about markets and the people who comprised them. “I read that speech and I said, I agree with every single word of that,” Burry said, adding, “Munger also has a fake eye.” (p.43)
* As Burry lived his life by e-mail, he inadvertently kept a record of the birth of a new market from the point of view of its first retail customer. (p.46)
* He also didn’t like the idea of taking the risk of selling a stock short, as the risk was, theoretically, unlimited. It could only fall to zero, but it could rise to infinity. (p.46)
* International Swaps and Derivatives Association (ISDA) (p.47)
* “He’d read dozens of prospectuses and scoured hundreds more, looking for the doggiest pools of mortgages, and was still pretty certain even then (and dead certain later) that he was the only human being on earth who read them, apart from the lawyers who drafted them.” (p.48)
* “The credit default swap was a zero-sum game.” (p.50)
Ch4 - Moody's
* The big Wall Street firms - “had the same goal as any manufacturing business: to pay as little as possible for raw material (home loans) and charge as much as possible for their end product (mortgage bonds).” (p.81)
* The narrow industry: “They really thought that they had a secret.” (p.84)
* FICO scores: “thin-file” vs. “thick-file” “Immigrants who had never failed to repay a debt, because they had never been given a loan, often had surprisingly high thin-file FICO scores.” (p.82) “The highest possible FICO score was 850; the lowest was 300; the U.S. median was 723.” (p.81) “A person with a FICO score of 550 was virtually certain to default and should never have been lent money in the first place.” (p.82)
* Rating agency - “Moody’s and S&P asked the loan packagers not for a list of the FICO scores of all the borrowers but for the average FICO score of the pool.” (p.82) “Guys who can’t get a job on Wall Street get a job at Moody’s.” (p.81)
* Case -
* “Next, the baby nurse he’d hired back in 2003 to take care of his new twin daughters phoned him. ‘She was this lovely woman from Jamaica,’ he says. ‘She says she and her sister own six townhouses in Queens. I said ‘Corinne, how did that happen?’ ‘It happened because after they bought the first one, and its value rose, the lenders came and suggested they refinance and take out $250,000 - which they used to buy another. Then the price of that one rose, too, and they repeated the experiment..’ By the time they were done they owned five of them, the market was falling, and they couldn’t make any of the payments.” (p.81)
Ch 7 - Rain man, Asperger’s syndrome, & Me against the world. (06.09)
This chapter is frantically worth binge reading.
It was like going line by line with an eccentric genius, sitting in his lonely office, reading the prospectuses of every mortgage bond.
This one, the one and only who is capable of doing this job, need to be a rain man. This job needs an insanely long attention span and the unbent determination to go against the whole world.
Solitary, idiosyncrasy, or even social intelligence-retard together hone his mathematical and legal savvy.
Even he is sort of the HERO. He can never earn people's gratitude back. Investors pay you the money, you show off and get the work done. They scold you, mistrust you, or even betrayed you. You get things done. They took money off. That's what's money for.
If Buffet's obsession with money is based on his obsession with self-independency, then Michael Burry's obsession with money retrived from his obsession with fairness. Eventually, this howdy man got his fairness in 2008, like he got his revenge against the world.