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Michael Lewis on 60 minutes (Re: The Big Short)


farnamstreet
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Good video.  It will be interesting to see who they have in the book. 

 

At the same time, I have a bit of a problem with this analysis.  According to the other article written on Burry that was posted here two weeks ago, Burry had put a fair amount of his main fund into credit default swaps.  He also started a separate fund that focused solely on swaps.  What if the mortgage insanity went on for another five-six years.  He would have investors pulling out as the fund is losing money on the swap premiums and required collateral. 

 

I think the media always focuses on investment success, but never focuses on the risk also accepted by the investor.  Kudos to Burry for benefitting from all this, but he had a considerable amount riding on it.  In Fairfax's case, they had a total of about $500M invested in swaps, relative to an investment portfolio of about $15B at the time.  Cheers!

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At the same time, I have a bit of a problem with this analysis.  According to the other article written on Burry that was posted here two weeks ago, Burry had put a fair amount of his main fund into credit default swaps.  He also started a separate fund that focused solely on swaps.  What if the mortgage insanity went on for another five-six years.  He would have investors pulling out as the fund is losing money on the swap premiums and required collateral.

 

Sanj,

 

I think there is some confusion.  He did market a fund for a while that was CDS focused... however, he also sidecar'd his main fund to insure the swaps wouldn't be liquidated (much to the anger of some investors).

 

He specifically locked up his investors because he knew they were trying to pull out.  He saved them from themselves.

 

 

Specifically, I think he certainly could have been wrong, but he called the catalyst ahead of time and he turned out to be very right.

 

I don't think he ever set up a dedicated fund for this though, the reference to the CDS portfolio that you sometimes see was just the sidecar.

 

Ben

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I dont want to give too much away, I found the book really interesting.

 

He tried to raise a dedicated fund for the CDS, was not successful doing it..(Paulson certainly was)

 

and the book talks about most of the points Sanjeev mentions: concentration of the fund in CDS, catalyst for the trade, angry investors (strating with founder and main backer Gotham Capital (Joel Greenblatt),..very interesting read.

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I too thought the 60 Minutes segment was good. Apparently 60 Minutes thought it important enough to devote 2 segments of their show to the topic.

Initially I thought it was a cheap shot at Dr. Burry to point out his loss of one eye. What does that have to do with anything? The more I thought of it I think the subtle point they were making was that the investment company execs were blind to the risks they were taking but here was a one eyed man who could see what few others saw. Maybe I'm reading too much into it. Anyway....

 

I've just finished reading Zuckerman's book "The Greatest Trade Ever" (loved it) and wonder if there's any point in reading Lewis' book on the same topic.

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  • 5 years later...

Lewis surprised the movie was even made, apparently:

 

http://www.vanityfair.com/hollywood/2015/11/the-big-short-movie-michael-lewis

 

Then, the following year, as I was handing the manuscript of The Big Short to my publisher, Billy Beane called and said, “You bastard, Brad Pitt is on his way to my house. The babysitter showed up wearing a dress, and my wife is putting on makeup.”

 

:D

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