I am reading The Big Short
I've been meaning to read this book for a long time and it's very good so far. Michael Lewis is a great storyteller. In italics are some good quotes from the book on selected topics with my comments directly below.
His first assignment was in Manhattan, as a junior accountant, was to audit Salomon Brothers. He was instantly struck by the opacity of an investment bank's books. None of his fellow accountants was able to explain why the traders were doing what they were doing. " I didn't know what I was doing," said Vinny. "But the scary thing was, my managers didn't know anything either. I asked these basic questions - like, Why do they own this mortgage bond? Are they just betting on it, or is it part of some larger strategy? I thought I needed to know. It's really difficult to audit a company if you can't connect the dots"....He concluded that there was effectively no way for an accountant assigned to audit a giant Wall Street firm to figure out whether it was making money or losing money.
In my experience financial companies are the most difficult to analyize. Look at Apple, how many iPhones did they sell, iPads, Macs, itunes etc. For such a big company you can easily look at how many iWidgets they sold and do some forecasting. Financials are a lot more complex and I very skeptical when somebody tells me what a financial is worth.
A home without equity is just a rental with debt.
When you borrow 100% to buy a house, you have 0% equity in the house, you don't own your home, the bank does.
They measured risk by volatility: how much a stock or bond happened to have jumped around in the past few years. Real risk is not volatility; real risk was stupid investment decisions.
So true. A lot of people measure risk in terms of price, which is fine, until price collapses.
Burry did not think of investing could be reduced to a formula or learned from any one role model. The more he studied Buffett, the less he thought Buffett could be copied; indeed, the lesson of Buffett was: To succeed in spectacular fashion you had to be spectacularly unusual. "If you are going to be a great investor, you have to fit the style to who you are," Burry said. "At one point I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham, but rather set out his own path, and ran money his own way, by his own rules... I also immediately internalized the idea that no school could teach someone how to be a great investor. If it were true, it'd be the most popular school in the world, with an impossibly high tuition. So it must not be true".
Warren Buffett is a really popular guy, especially around MF. I absolutely think you can learn a lot from him but there is such a thing as over kill and there are other great investors. Buffett said THIS, Buffett said THAT. Lots of coverage of his favorite stocks, the Berkshire annual meeting, and his famous quotes. The other day I had to laugh because somebody wrote an article, what would Buffett think about "fill in the blank" stock?