Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and his quest to short the mortgage market. Very long and very much worth the time to read if you're interested in such matters
On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > his quest to short the mortgage market. Very long and very much worth > the time to read if you're interested in such matters
On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He bought $60 million of credit-default swaps from Deutsche Bank—$10 million each on six different bonds. “The reference securities,” these were called. You didn’t buy insurance on the entire subprime-mortgage- bond market but on a particular bond, and Burry had devoted himself to finding exactly the right ones to bet against. He likely became the only investor to do the sort of old-fashioned bank credit analysis on the home loans that should have been done before they were made. He was the opposite of an old-fashioned banker, however. He was looking not for the best loans to make but the worst loans—so that he could bet against them. He analyzed the relative importance of the loan-to- value ratios of the home loans, of second liens on the homes, of the location of the homes, of the absence of loan documentation and proof of income of the borrower, and a dozen or so other factors to determine the likelihood that a home loan made in America circa 2005 would go bad. Then he went looking for the bonds backed by the worst of the loans.
None of the sellers appeared to care very much which bonds they were insuring. He found one mortgage pool that was 100 percent floating- rate negative-amortizing mortgages—where the borrowers could choose the option of not paying any interest at all and simply accumulate a bigger and bigger debt until, presumably, they defaulted on it. Goldman Sachs not only sold him insurance on the pool but sent him a little note congratulating him on being the first person, on Wall Street or off, ever to buy insurance on that particular item. “I’m educating the experts here,” Burry crowed in an e-mail.
> On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote: >> Fantastic article by Mike Lewis about Scion Captial's Mike Burry - >> and his quest to short the mortgage market. Very long and very >> much worth the time to read if you're interested in such matters
> On May 19, 2005, Mike Burry did his first subprime-mortgage deals. > He bought $60 million of credit-default swaps from Deutsche Bank—$10 > million each on six different bonds. “The reference securities,” > these were called. You didn’t buy insurance on the entire > subprime-mortgage- bond market but on a particular bond, and Burry > had devoted himself to finding exactly the right ones to bet > against. He likely became the only investor to do the sort of > old-fashioned bank credit analysis on the home loans that should > have been done before they were made. He was the opposite of an > old-fashioned banker, however. He was looking not for the best loans > to make but the worst loans—so that he could bet against them. He > analyzed the relative importance of the loan-to- value ratios of the > home loans, of second liens on the homes, of the location of the > homes, of the absence of loan documentation and proof of income of > the borrower, and a dozen or so other factors to determine the > likelihood that a home loan made in America circa 2005 would go bad. > Then he went looking for the bonds backed by the worst of the loans.
What the hell? Are the weird-ass sucker bets in the middle of the craps table not complicated enough?
I should've invited *you* to play fantasy baseball.
> On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > his quest to short the mortgage market. Very long and very much worth > > the time to read if you're interested in such matters
> On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > bought $60 million of credit-default swaps from Deutsche Bank—$10 > million each on six different bonds. “The reference securities,” these > were called. You didn’t buy insurance on the entire subprime-mortgage- > bond market but on a particular bond, and Burry had devoted himself to > finding exactly the right ones to bet against. He likely became the > only investor to do the sort of old-fashioned bank credit analysis on > the home loans that should have been done before they were made. He > was the opposite of an old-fashioned banker, however. He was looking > not for the best loans to make but the worst loans—so that he could > bet against them. He analyzed the relative importance of the loan-to- > value ratios of the home loans, of second liens on the homes, of the > location of the homes, of the absence of loan documentation and proof > of income of the borrower, and a dozen or so other factors to > determine the likelihood that a home loan made in America circa 2005 > would go bad. Then he went looking for the bonds backed by the worst > of the loans.
> None of the sellers appeared to care very much which bonds they were > insuring. He found one mortgage pool that was 100 percent floating- > rate negative-amortizing mortgages—where the borrowers could choose > the option of not paying any interest at all and simply accumulate a > bigger and bigger debt until, presumably, they defaulted on it. > Goldman Sachs not only sold him insurance on the pool but sent him a > little note congratulating him on being the first person, on Wall > Street or off, ever to buy insurance on that particular item. “I’m > educating the experts here,” Burry crowed in an e-mail.
Interesting read. Took me a couple of breaks to get through it, but interesting. I may have to subscribe to Vanity Fair (like I have time to read what I already subscribe to, heh).
> On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > his quest to short the mortgage market. Very long and very much worth > > > the time to read if you're interested in such matters
> > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > million each on six different bonds. “The reference securities,” these > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > bond market but on a particular bond, and Burry had devoted himself to > > finding exactly the right ones to bet against. He likely became the > > only investor to do the sort of old-fashioned bank credit analysis on > > the home loans that should have been done before they were made. He > > was the opposite of an old-fashioned banker, however. He was looking > > not for the best loans to make but the worst loans—so that he could > > bet against them. He analyzed the relative importance of the loan-to- > > value ratios of the home loans, of second liens on the homes, of the > > location of the homes, of the absence of loan documentation and proof > > of income of the borrower, and a dozen or so other factors to > > determine the likelihood that a home loan made in America circa 2005 > > would go bad. Then he went looking for the bonds backed by the worst > > of the loans.
> > None of the sellers appeared to care very much which bonds they were > > insuring. He found one mortgage pool that was 100 percent floating- > > rate negative-amortizing mortgages—where the borrowers could choose > > the option of not paying any interest at all and simply accumulate a > > bigger and bigger debt until, presumably, they defaulted on it. > > Goldman Sachs not only sold him insurance on the pool but sent him a > > little note congratulating him on being the first person, on Wall > > Street or off, ever to buy insurance on that particular item. “I’m > > educating the experts here,” Burry crowed in an e-mail.
> Interesting read. Took me a couple of breaks to get through it, but > interesting. I may have to subscribe to Vanity Fair (like I have time > to read what I already subscribe to, heh).- Hide quoted text -
> - Show quoted text -
Know the problem - waaaay behind on mags as it is.
FWIW, VF has been putting out some sterling financial stories lately - usually, but not always, by Lewis.
And if you haven't read it, Lewis' first book, "Liar's Poker" is an excellent read.
> > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote: > >> Fantastic article by Mike Lewis about Scion Captial's Mike Burry - > >> and his quest to short the mortgage market. Very long and very > >> much worth the time to read if you're interested in such matters
> > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. > > He bought $60 million of credit-default swaps from Deutsche Bank—$10 > > million each on six different bonds. “The reference securities,” > > these were called. You didn’t buy insurance on the entire > > subprime-mortgage- bond market but on a particular bond, and Burry > > had devoted himself to finding exactly the right ones to bet > > against. He likely became the only investor to do the sort of > > old-fashioned bank credit analysis on the home loans that should > > have been done before they were made. He was the opposite of an > > old-fashioned banker, however. He was looking not for the best loans > > to make but the worst loans—so that he could bet against them. He > > analyzed the relative importance of the loan-to- value ratios of the > > home loans, of second liens on the homes, of the location of the > > homes, of the absence of loan documentation and proof of income of > > the borrower, and a dozen or so other factors to determine the > > likelihood that a home loan made in America circa 2005 would go bad. > > Then he went looking for the bonds backed by the worst of the loans.
> What the hell? Are the weird-ass sucker bets in the middle of the > craps table not complicated enough?
> I should've invited *you* to play fantasy baseball.
> -- > Daniel Edwards > Memphis, TN- Hide quoted text -
> On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > his quest to short the mortgage market. Very long and very much worth > > > > the time to read if you're interested in such matters
> > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > million each on six different bonds. “The reference securities,” these > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > bond market but on a particular bond, and Burry had devoted himself to > > > finding exactly the right ones to bet against. He likely became the > > > only investor to do the sort of old-fashioned bank credit analysis on > > > the home loans that should have been done before they were made. He > > > was the opposite of an old-fashioned banker, however. He was looking > > > not for the best loans to make but the worst loans—so that he could > > > bet against them. He analyzed the relative importance of the loan-to- > > > value ratios of the home loans, of second liens on the homes, of the > > > location of the homes, of the absence of loan documentation and proof > > > of income of the borrower, and a dozen or so other factors to > > > determine the likelihood that a home loan made in America circa 2005 > > > would go bad. Then he went looking for the bonds backed by the worst > > > of the loans.
> > > None of the sellers appeared to care very much which bonds they were > > > insuring. He found one mortgage pool that was 100 percent floating- > > > rate negative-amortizing mortgages—where the borrowers could choose > > > the option of not paying any interest at all and simply accumulate a > > > bigger and bigger debt until, presumably, they defaulted on it. > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > little note congratulating him on being the first person, on Wall > > > Street or off, ever to buy insurance on that particular item. “I’m > > > educating the experts here,” Burry crowed in an e-mail.
> > Interesting read. Took me a couple of breaks to get through it, but > > interesting. I may have to subscribe to Vanity Fair (like I have time > > to read what I already subscribe to, heh).- Hide quoted text -
> > - Show quoted text -
> Know the problem - waaaay behind on mags as it is.
> FWIW, VF has been putting out some sterling financial stories lately - > usually, but not always, by Lewis.
> And if you haven't read it, Lewis' first book, "Liar's Poker" is an > excellent read.
"He found one mortgage pool that was 100 percent floating- rate negative-amortizing mortgages—where the borrowers could choose the option of not paying any interest at all and simply accumulate a bigger and bigger debt until, presumably, they defaulted on it."
<the_andrew_sm...@yahoo.com> wrote: > "He found one mortgage pool that was 100 percent floating- > rate negative-amortizing mortgages—where the borrowers could choose > the option of not paying any interest at all and simply accumulate a > bigger and bigger debt until, presumably, they defaulted on it."
the_andrew_sm...@yahoo.com wrote: > "He found one mortgage pool that was 100 percent floating- > rate negative-amortizing mortgages—where the borrowers could choose > the option of not paying any interest at all and simply accumulate a > bigger and bigger debt until, presumably, they defaulted on it."
> On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > his quest to short the mortgage market. Very long and very much worth > > > > the time to read if you're interested in such matters
> > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > million each on six different bonds. “The reference securities,” these > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > bond market but on a particular bond, and Burry had devoted himself to > > > finding exactly the right ones to bet against. He likely became the > > > only investor to do the sort of old-fashioned bank credit analysis on > > > the home loans that should have been done before they were made. He > > > was the opposite of an old-fashioned banker, however. He was looking > > > not for the best loans to make but the worst loans—so that he could > > > bet against them. He analyzed the relative importance of the loan-to- > > > value ratios of the home loans, of second liens on the homes, of the > > > location of the homes, of the absence of loan documentation and proof > > > of income of the borrower, and a dozen or so other factors to > > > determine the likelihood that a home loan made in America circa 2005 > > > would go bad. Then he went looking for the bonds backed by the worst > > > of the loans.
> > > None of the sellers appeared to care very much which bonds they were > > > insuring. He found one mortgage pool that was 100 percent floating- > > > rate negative-amortizing mortgages—where the borrowers could choose > > > the option of not paying any interest at all and simply accumulate a > > > bigger and bigger debt until, presumably, they defaulted on it. > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > little note congratulating him on being the first person, on Wall > > > Street or off, ever to buy insurance on that particular item. “I’m > > > educating the experts here,” Burry crowed in an e-mail.
> > Interesting read. Took me a couple of breaks to get through it, but > > interesting. I may have to subscribe to Vanity Fair (like I have time > > to read what I already subscribe to, heh).- Hide quoted text -
> > - Show quoted text -
> Know the problem - waaaay behind on mags as it is.
> FWIW, VF has been putting out some sterling financial stories lately - > usually, but not always, by Lewis.
> And if you haven't read it, Lewis' first book, "Liar's Poker" is an > excellent read.
<jeffersonWE...@PENNSTATEglapski.com> wrote: > the_andrew_sm...@yahoo.com wrote: > > "He found one mortgage pool that was 100 percent floating- > > rate negative-amortizing mortgages—where the borrowers could choose > > the option of not paying any interest at all and simply accumulate a > > bigger and bigger debt until, presumably, they defaulted on it."
> On Mar 11, 4:15 pm, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > > his quest to short the mortgage market. Very long and very much worth > > > > > the time to read if you're interested in such matters
> > > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > > million each on six different bonds. “The reference securities,” these > > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > > bond market but on a particular bond, and Burry had devoted himself to > > > > finding exactly the right ones to bet against. He likely became the > > > > only investor to do the sort of old-fashioned bank credit analysis on > > > > the home loans that should have been done before they were made. He > > > > was the opposite of an old-fashioned banker, however. He was looking > > > > not for the best loans to make but the worst loans—so that he could > > > > bet against them. He analyzed the relative importance of the loan-to- > > > > value ratios of the home loans, of second liens on the homes, of the > > > > location of the homes, of the absence of loan documentation and proof > > > > of income of the borrower, and a dozen or so other factors to > > > > determine the likelihood that a home loan made in America circa 2005 > > > > would go bad. Then he went looking for the bonds backed by the worst > > > > of the loans.
> > > > None of the sellers appeared to care very much which bonds they were > > > > insuring. He found one mortgage pool that was 100 percent floating- > > > > rate negative-amortizing mortgages—where the borrowers could choose > > > > the option of not paying any interest at all and simply accumulate a > > > > bigger and bigger debt until, presumably, they defaulted on it. > > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > > little note congratulating him on being the first person, on Wall > > > > Street or off, ever to buy insurance on that particular item. “I’m > > > > educating the experts here,” Burry crowed in an e-mail.
> > > Interesting read. Took me a couple of breaks to get through it, but > > > interesting. I may have to subscribe to Vanity Fair (like I have time > > > to read what I already subscribe to, heh).- Hide quoted text -
> > > - Show quoted text -
> > Know the problem - waaaay behind on mags as it is.
> > FWIW, VF has been putting out some sterling financial stories lately - > > usually, but not always, by Lewis.
> > And if you haven't read it, Lewis' first book, "Liar's Poker" is an > > excellent read.
> I did read it, probably what? 20 years ago?- Hide quoted text -
> - Show quoted text -
When I got home last night and dragged out my copy, since it'd been a while since I last read it myself.
Was immediately struck by the eerie similarities between then and now (As well as the dot com boom). The cast of characters was different (Altho some are the same) and the instrument of choice is different - but otherwise, the book could easily have been dated from now.
Well worth picking up a copy and skim reading again....
> On Mar 11, 3:21 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > On Mar 11, 4:15 pm, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > > > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > > > his quest to short the mortgage market. Very long and very much worth > > > > > > the time to read if you're interested in such matters
> > > > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > > > million each on six different bonds. “The reference securities,” these > > > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > > > bond market but on a particular bond, and Burry had devoted himself to > > > > > finding exactly the right ones to bet against. He likely became the > > > > > only investor to do the sort of old-fashioned bank credit analysis on > > > > > the home loans that should have been done before they were made. He > > > > > was the opposite of an old-fashioned banker, however. He was looking > > > > > not for the best loans to make but the worst loans—so that he could > > > > > bet against them. He analyzed the relative importance of the loan-to- > > > > > value ratios of the home loans, of second liens on the homes, of the > > > > > location of the homes, of the absence of loan documentation and proof > > > > > of income of the borrower, and a dozen or so other factors to > > > > > determine the likelihood that a home loan made in America circa 2005 > > > > > would go bad. Then he went looking for the bonds backed by the worst > > > > > of the loans.
> > > > > None of the sellers appeared to care very much which bonds they were > > > > > insuring. He found one mortgage pool that was 100 percent floating- > > > > > rate negative-amortizing mortgages—where the borrowers could choose > > > > > the option of not paying any interest at all and simply accumulate a > > > > > bigger and bigger debt until, presumably, they defaulted on it. > > > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > > > little note congratulating him on being the first person, on Wall > > > > > Street or off, ever to buy insurance on that particular item. “I’m > > > > > educating the experts here,” Burry crowed in an e-mail.
> > > > Interesting read. Took me a couple of breaks to get through it, but > > > > interesting. I may have to subscribe to Vanity Fair (like I have time > > > > to read what I already subscribe to, heh).- Hide quoted text -
> > > > - Show quoted text -
> > > Know the problem - waaaay behind on mags as it is.
> > > FWIW, VF has been putting out some sterling financial stories lately - > > > usually, but not always, by Lewis.
> > > And if you haven't read it, Lewis' first book, "Liar's Poker" is an > > > excellent read.
> > I did read it, probably what? 20 years ago?- Hide quoted text -
> > - Show quoted text -
> When I got home last night and dragged out my copy, since it'd been a > while since I last read it myself.
> Was immediately struck by the eerie similarities between then and now > (As well as the dot com boom). The cast of characters was different > (Altho some are the same) and the instrument of choice is different - > but otherwise, the book could easily have been dated from now.
> Well worth picking up a copy and skim reading again....
I think it was the first book to talk about mortgage backed securities, and explained them very well. I remember admiring how clever an idea it was. Of course back then they were more straightforward with less potential for toxicity.
> On Mar 12, 8:14 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > On Mar 11, 3:21 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > > On Mar 11, 4:15 pm, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > > > > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > > > > his quest to short the mortgage market. Very long and very much worth > > > > > > > the time to read if you're interested in such matters
> > > > > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > > > > million each on six different bonds. “The reference securities,” these > > > > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > > > > bond market but on a particular bond, and Burry had devoted himself to > > > > > > finding exactly the right ones to bet against. He likely became the > > > > > > only investor to do the sort of old-fashioned bank credit analysis on > > > > > > the home loans that should have been done before they were made. He > > > > > > was the opposite of an old-fashioned banker, however. He was looking > > > > > > not for the best loans to make but the worst loans—so that he could > > > > > > bet against them. He analyzed the relative importance of the loan-to- > > > > > > value ratios of the home loans, of second liens on the homes, of the > > > > > > location of the homes, of the absence of loan documentation and proof > > > > > > of income of the borrower, and a dozen or so other factors to > > > > > > determine the likelihood that a home loan made in America circa 2005 > > > > > > would go bad. Then he went looking for the bonds backed by the worst > > > > > > of the loans.
> > > > > > None of the sellers appeared to care very much which bonds they were > > > > > > insuring. He found one mortgage pool that was 100 percent floating- > > > > > > rate negative-amortizing mortgages—where the borrowers could choose > > > > > > the option of not paying any interest at all and simply accumulate a > > > > > > bigger and bigger debt until, presumably, they defaulted on it. > > > > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > > > > little note congratulating him on being the first person, on Wall > > > > > > Street or off, ever to buy insurance on that particular item. “I’m > > > > > > educating the experts here,” Burry crowed in an e-mail.
> > > > > Interesting read. Took me a couple of breaks to get through it, but > > > > > interesting. I may have to subscribe to Vanity Fair (like I have time > > > > > to read what I already subscribe to, heh).- Hide quoted text -
> > > > > - Show quoted text -
> > > > Know the problem - waaaay behind on mags as it is.
> > > > FWIW, VF has been putting out some sterling financial stories lately - > > > > usually, but not always, by Lewis.
> > > > And if you haven't read it, Lewis' first book, "Liar's Poker" is an > > > > excellent read.
> > > I did read it, probably what? 20 years ago?- Hide quoted text -
> > > - Show quoted text -
> > When I got home last night and dragged out my copy, since it'd been a > > while since I last read it myself.
> > Was immediately struck by the eerie similarities between then and now > > (As well as the dot com boom). The cast of characters was different > > (Altho some are the same) and the instrument of choice is different - > > but otherwise, the book could easily have been dated from now.
> > Well worth picking up a copy and skim reading again....
> I think it was the first book to talk about mortgage backed > securities, and explained them very well. I remember admiring how > clever an idea it was. Of course back then they were more > straightforward with less potential for toxicity.- Hide quoted text -
> - Show quoted text -
That's correct - the mortgage bond was a Solly invention as a way of appeasing the thrift monetary dislocations.
> On Mar 11, 4:15 pm, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > On Mar 11, 3:10 pm, xyzzy <xyzzy.d...@gmail.com> wrote:
> > > On Mar 11, 11:34 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > On Mar 11, 10:30 am, CheeseHusker dos <jonrus...@yahoo.com> wrote:
> > > > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > > > > his quest to short the mortgage market. Very long and very much worth > > > > > the time to read if you're interested in such matters
> > > > On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He > > > > bought $60 million of credit-default swaps from Deutsche Bank—$10 > > > > million each on six different bonds. “The reference securities,” these > > > > were called. You didn’t buy insurance on the entire subprime-mortgage- > > > > bond market but on a particular bond, and Burry had devoted himself to > > > > finding exactly the right ones to bet against. He likely became the > > > > only investor to do the sort of old-fashioned bank credit analysis on > > > > the home loans that should have been done before they were made. He > > > > was the opposite of an old-fashioned banker, however. He was looking > > > > not for the best loans to make but the worst loans—so that he could > > > > bet against them. He analyzed the relative importance of the loan-to- > > > > value ratios of the home loans, of second liens on the homes, of the > > > > location of the homes, of the absence of loan documentation and proof > > > > of income of the borrower, and a dozen or so other factors to > > > > determine the likelihood that a home loan made in America circa 2005 > > > > would go bad. Then he went looking for the bonds backed by the worst > > > > of the loans.
> > > > None of the sellers appeared to care very much which bonds they were > > > > insuring. He found one mortgage pool that was 100 percent floating- > > > > rate negative-amortizing mortgages—where the borrowers could choose > > > > the option of not paying any interest at all and simply accumulate a > > > > bigger and bigger debt until, presumably, they defaulted on it. > > > > Goldman Sachs not only sold him insurance on the pool but sent him a > > > > little note congratulating him on being the first person, on Wall > > > > Street or off, ever to buy insurance on that particular item. “I’m > > > > educating the experts here,” Burry crowed in an e-mail.
> > > Interesting read. Took me a couple of breaks to get through it, but > > > interesting. I may have to subscribe to Vanity Fair (like I have time > > > to read what I already subscribe to, heh).- Hide quoted text -
> > > - Show quoted text -
> > Know the problem - waaaay behind on mags as it is.
> > FWIW, VF has been putting out some sterling financial stories lately - > > usually, but not always, by Lewis.
> > And if you haven't read it, Lewis' first book, "Liar's Poker" is an > > excellent read.
> eh...I could never get into it.
That's okay - you don't have to be too ashamed about it.
CheeseHusker dos wrote: > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > his quest to short the mortgage market. Very long and very much worth > the time to read if you're interested in such matters
Can I ask you a basic question about "shorting" (and simultaneously reveal my ignorance on the subject) - the key idea is that you're reversing the buy/sell order, right (so you sell first, buy later)? To do this, you have to find someone willing to "lend" you their shares of the stock, on the contingency that you'll purchase the same number of shares at a later time and return them.
(1) Is there generally this much dissent between various trading entities? Obviously, if party A is going to agree to do this for party B, party A has to believe the stock isn't going to drop, but rise..
Wait a second, maybe I worked this out on my own - is it generally that party B (the "shorter") is more interested in short-term trends, and party A (the "lender of shares") is interested in long-term trends? - so party A, whether the stock is going to bounce around a bit in the short-term, doesn't really care, because they've invested in the stock long-term?
Or, something like that? I'm just trying to wrap my mind around what party A could possibly be getting out of this - I realize they aren't really losing anything in the deal, because the assumption is that they had no plans to sell the stock on their own... but are they gaining anything?
Is the above, regarding short-term VS long-term strategies, in the context of stock-borrower VS stock-lender relevant? Does the borrower "sweeten" the pot at all for the lender?
Feel free to blast me about my obvious ignorance - I have a thick skin - just remember that I'm likely one of the youngest regular posters here, and I just haven't ever been that interested in this stuff until recently. Now, of course, (and fairly recently) I've gotten married, bought a house, had a kid - so I'm thinking more about my family's long-term financial well-being. What I'm saying is - I don't think any of this stuff is over my head, I just haven't ever looked into it seriously.
A few short years ago, my main concern was which bar stocked Bell's Oberon. You know, I wouldn't want to go back, love the family life, having money (compared to when I was a student, I mean) is great, but there are certainly times when I miss the relatively carefree student/grad student lifestyle I took for granted.
> CheeseHusker dos wrote: > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > his quest to short the mortgage market. Very long and very much worth > > the time to read if you're interested in such matters
> Can I ask you a basic question about "shorting" (and simultaneously > reveal my ignorance on the subject) - the key idea is that you're > reversing the buy/sell order, right (so you sell first, buy later)? To > do this, you have to find someone willing to "lend" you their shares of > the stock, on the contingency that you'll purchase the same number of > shares at a later time and return them.
> (1) Is there generally this much dissent between various trading > entities? Obviously, if party A is going to agree to do this for party > B, party A has to believe the stock isn't going to drop, but rise..
> Wait a second, maybe I worked this out on my own - is it generally that > party B (the "shorter") is more interested in short-term trends, and > party A (the "lender of shares") is interested in long-term trends? - so > party A, whether the stock is going to bounce around a bit in the > short-term, doesn't really care, because they've invested in the stock > long-term?
> Or, something like that? I'm just trying to wrap my mind around what > party A could possibly be getting out of this - I realize they aren't > really losing anything in the deal, because the assumption is that they > had no plans to sell the stock on their own... but are they gaining > anything?
> Is the above, regarding short-term VS long-term strategies, in the > context of stock-borrower VS stock-lender relevant? Does the borrower > "sweeten" the pot at all for the lender?
> Feel free to blast me about my obvious ignorance - I have a thick skin - > just remember that I'm likely one of the youngest regular posters here, > and I just haven't ever been that interested in this stuff until > recently. Now, of course, (and fairly recently) I've gotten married, > bought a house, had a kid - so I'm thinking more about my family's > long-term financial well-being. What I'm saying is - I don't think any > of this stuff is over my head, I just haven't ever looked into it seriously.
> A few short years ago, my main concern was which bar stocked Bell's > Oberon. You know, I wouldn't want to go back, love the family life, > having money (compared to when I was a student, I mean) is great, but > there are certainly times when I miss the relatively carefree > student/grad student lifestyle I took for granted.
> Cheers.
I'm sure others can explain it better, but when you short you borrow shares and sell them. what does the lender get out of it? Well, you don't get to borrow the shares for free.
On Mar 12, 10:25 am, "Kyle T. Jones" <KBf...@realdomain.net> wrote:
> CheeseHusker dos wrote: > > Fantastic article by Mike Lewis about Scion Captial's Mike Burry - and > > his quest to short the mortgage market. Very long and very much worth > > the time to read if you're interested in such matters
> Can I ask you a basic question about "shorting" (and simultaneously > reveal my ignorance on the subject) - the key idea is that you're > reversing the buy/sell order, right (so you sell first, buy later)?
That is correct.
To
> do this, you have to find someone willing to "lend" you their shares of > the stock, on the contingency that you'll purchase the same number of > shares at a later time and return them.
Depends on the marketplace - this is how it works with stocks - but with futures, you don't "borrow" at all - you just sell. This is why futures have a much truer price reading, IMO - it is easier to sell, therefore more sell and there's better price discovery.
> (1) Is there generally this much dissent between various trading > entities? Obviously, if party A is going to agree to do this for party > B, party A has to believe the stock isn't going to drop, but rise..
Yep. Even with just ONE side, there's this much dissent. Most of the sales of stocks, for example, are from former buyers.
> Wait a second, maybe I worked this out on my own - is it generally that > party B (the "shorter") is more interested in short-term trends, and > party A (the "lender of shares") is interested in long-term trends? - so > party A, whether the stock is going to bounce around a bit in the > short-term, doesn't really care, because they've invested in the stock > long-term?
No, not really. But yes in terms of different time perspectives. One buyer who is selling might be looking short term - and thus selling to a buyer who's looking longer term and seeing something else.
> Is the above, regarding short-term VS long-term strategies, in the > context of stock-borrower VS stock-lender relevant? Does the borrower > "sweeten" the pot at all for the lender?
Nope - no sweetening.
Here's the easiest way to think of shorting - supply and demand. A price goes up when there's demand for it. What short sellers do, is increase the supply for sale - not unlike a new factory producing a widget.
> Feel free to blast me about my obvious ignorance
no way - you ask good questions on a subject I really enjoy.
- I have a thick skin -
> just remember that I'm likely one of the youngest regular posters here, > and I just haven't ever been that interested in this stuff until > recently. Now, of course, (and fairly recently) I've gotten married, > bought a house, had a kid - so I'm thinking more about my family's > long-term financial well-being. What I'm saying is - I don't think any > of this stuff is over my head, I just haven't ever looked into it seriously.
THAT is a great attitude - and one which will take you as far as you want.
> A few short years ago, my main concern was which bar stocked Bell's > Oberon. You know, I wouldn't want to go back, love the family life, > having money (compared to when I was a student, I mean) is great, but > there are certainly times when I miss the relatively carefree > student/grad student lifestyle I took for granted.
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