Buying at the Point of Maximum Pessimism: Six Value Investing Trends from China to Oil to Agriculture

Chapter 2. The Biggest Gamblers Go “All In” on the Housing Bet

By now, we have reasonably illustrated the deterioration in the mortgage market from responsible borrowers refinancing their homes in early 2001 to 2003 to the runaway speculators betting on higher home prices in 2006. We have described many of the key actors in this comedy of errors, from the spendthrift consumer looking to monetize his house’s appreciating value, to the house price speculator buying up second and third properties, as well as the mortgage brokers, policy makers, and hedge funds that all helped make it happen. Conspicuously absent from our roll call have been the real players in the mortgage securitization charade, the big fishes in the pond, the real borrowers, ...