January 2009
Beginner
304 pages
7h 30m
English
Content preview from Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street
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Chapter 10. Bazooka Hank and Dread Reckoning (AIG, Fannie, Freddie, Lehman, Merrill, and Other Fluid Situations)
If they sell five percent of it, they'll get the market price. | ||
| --Warren Buffett to Janet Tavakoli, August 10, 2007 | ||
Before the fall of 2007, few besides Warren Buffett, John Paulson (Paulson & Co.), Bill Ackman (Pershing Square), David Einhorn (Greenlight Capital), Jim Rogers (Rogers Holdings), and I specifically challenged investment banks' prices of complex structured products. On August 9, 2007, I told CNBC that "when you get truthiness in lending you get truthiness in pricing." Even with corporate leveraged loans, there is "too much foam and too little beer."[295] Many AAA rated money market investments were losing money because they were backed by CDOs backed by subprime loans. Becky Quick of CNBC asked who is vulnerable, and I responded just about every investor: hedge funds, REITs, insurance company investment portfolios, mutual funds, and money market funds might lose money.
The next day, I challenged American International Group Inc.'s (AIG) accounting, after it told analysts it did not need to show a loss (reflecting a change in market prices) on its credit derivatives portfolio for its second quarter ending June 30, 2007. Yet, accounting practices required AIG to mark to market its portfolio using market prices or a close approximation to market prices. The rule did not say only if you feel like it. AIG seemed to take the position that (1) nothing like this ...
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.