Dear Mr. Buffett: What an Investor Learns 1,269 Miles From Wall Street

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Dear Mr. Buffett: What an Investor Learns 1,269 Miles From Wall Street Page 32

by Janet M. Tavakoli


  U.S. Senate Committee on Banking, Housing, and Urban Affairs. “Testimony of Jamie Dimon Before the Senate Committee on Banking, Housing, and Urban Affairs,” April 3, 2008.

  United States of America against Ralph Cioffi and Matthew Tannin, CR 08 415, f.#2007R01328, filed June 18, 2008.

  Vulliamy, Ed, “Dark Heart of the American Dream,” The Observer, 16 June 2002.

  Walker, David M. Saving Our Future Requires Tough Choices Today. Presentation for the Fiscal Wake-Up Tour at Haas School of Business, University of California-Berkeley, Berkeley, California, March 5, 2008. U.S. Government Accountability Office document GAO-08-583CG.

  Wall Street Journal Research. “Subpar Earnings: Companies Blame Housing, Credit Problems for Weakness,” Wall Street Journal, 5 October 2007.

  Weinberg, Neil, and Condon, Bernard. “The Sleaziest Show on Earth,” Forbes, 24 May 2004.

  Williams, John Burr. The Theory of Investment Value. 1938. Reprint, New York: Fraser, 1997.

  Index

  A

  ABX index

  exposure

  prices, decline

  securities, overpricing

  Accredited investor, Securities Act definition

  Ackman,William

  publicly available information

  Active investment, zero-sum game

  Adams Square Funding I, conflicts of interest

  Adjustable rate mortgages (ARMs), offering

  Ahmadinejad, Mahmoud Allison, Herb

  Alpha, making

  Al Qaeda, terrorist attack

  Alt-A backed bonds, collateral

  Alt-A loans, default rate

  Amaranth hedge fund, implosion

  Ambac, securities

  American International Group (AIG)

  accounting, challenge

  credit default protection, writing

  credit derivatives exposure, value

  overstatement (SEC/DOJ

  investigation)

  Fed loan/bailout

  Goldman Sachs exposure, immateriality

  losses

  problems, worsening

  Ameriquest, predatory lending offender

  Amsterdam Stock Exchange, Carlyle trading

  Analysis, value

  Andrukonis, David A.

  Arbitrage

  funds

  genuineness, occurrence (rarity)

  money pump, function

  Archimedes, leverage

  Argush, Lee

  Aristotle (memory training)

  Arnall, Roland E. (ambassador confirmation)

  Askin, David

  Asset-backed CDO, RMBS investment

  Asset-backed commercial paper (ABCP)

  Countrywide bailout

  Countrywide issuance

  Asset-backed securitization CDO prospectuses, problems

  Asset correlations,Wall Street estimates

  Assets

  levels

  overrating, consequences

  Assuras,Thalia

  Astoria Financial

  Auction-rate bonds, purchase/sale

  Auction-rate securities (ARS)

  buyback, level

  sale

  Auditors, reserve reporting incompetence

  Average depth, mischaracterization

  B

  Backdating

  advantage

  scandal

  theft

  Bailey, Jr., Daniel

  Bailout, cost (increase)

  Baker, James

  Bale, Christian

  Balestra Capital

  Bank for International Settlements (BIS), rating agencies (relationship)

  Bank of America, shares (decrease)

  Bank problems, increase

  Bank protection, Fed responsibility

  Barnes, Michael

  Bayou Group LLC, estate manager (aggressiveness)

  Beales, Richard

  Bear Stearns Asset Management (BSAM)

  assets, value (markdown)

  derivative collateral, return (request)

  funds, problems

  high grade/junk conversion

  management fees

  margin calls, moratorium (request)

  mortgage-backed securities hedge funds management, collapse

  problems

  redemptions, freeze

  subprime exposure

  tactical error

  turnkey program

  Bear Stearns Co.

  arrogance

  asset lists, circulation

  borrowing inability

  CDO activities, SEC investigation

  corporate ratings, Moody clarification

  derivatives transactions, intermediating (cessation)

  failure

  Fed action, Buffett viewpoint

  ISDA request

  withdrawal

  JPMorgan Chase purchase

  leverage

  liquidity

  inadequacy

  pressure, absence (claim)

  problems

  mortgage-backed products, losses

  securitization underwriting, life insurance policies (backing)

  stock, zero value

  stop-gap loan, Fed announcement

  subpoena

  Subprime IPO title

  survival, question

  tactical error

  take-no-hedge-fund-prisoners philosophy

  trading floor telephone tapes, recordation (mistake)

  Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage Fund

  bailout

  launch

  Beller, Ron

  assets strategy

  loss

  Berkshire Hathaway

  annual report (2003)

  annual report, An Owner’s Manual (inclusion)

  Assurance, Jain setup

  Clayton Homes

  acquisition

  contagion, avoidance

  company purchases, preference

  credit risk

  derivatives, market price fluctuations (report)

  dollar investment

  ISCAR Metalworking investment

  nonreported (undistributed) earnings

  performance

  premium income, investment

  reinsurance companies, excess risk underwriting

  shareholder letter (1985)

  stock shares purchases

  success, meaning

  value company definition

  Berkshire Hathaway, Buffett letter

  Bernanke, Ben

  U.S. Senate Committee testimony

  Bies, Susan (resignation)

  Bingham, Richard

  Bin Laden, Osama (noncapture)

  bin Laden, Shafig

  Black Bart, safety margin protection (necessity)

  Blackjack card counting, hedge fund manager genius evidence

  Black October crash (1987)

  Blackrock, losses

  Blackstone, FGIC share

  Blog of War,The (Burden)

  Blum, Mike

  Blumkin, Rosa

  Bond insurers

  AAA rating

  Ackman/Einhorn concerns

  credit enhancement, providing

  downgrading

  guarantees

  trouble

  Borden, Alfred (magician)

  Borrowers, fraud

  Black swan

  Bove, Richard (Dick)

  Boyle, Phelim

  Bradlee, Benjamin C.

  Bremer, Paul (budget disappearance)

  Broad, Eli

  Brokers, rate increase

  Buffett, Astrid

  Buffett, Howard

  Buffett, Susie

  Buffett,Warren

  advantage

  All Stars memo

  appearance

  bridge, playing

  business investments

  cash investment

  civility

  conditional probabilities

  earnings

  economist
knowledge, contrast

  Buffett,Warren (continued)

  financial institutions, position sale

  Five Percent Solution

  fortune, donation

  Goldman Sachs, preferred stock investment

  Gutfreund rescue

  interests

  intrinsic value, increase

  investments, multiplication

  Kill Bill article

  lending rule

  letter

  response

  leverage, avoidance

  logic, preference

  market opportunities

  mistakes, examination

  news business, change

  newspapers, attraction

  nostalgia, impact (absence)

  polymath

  purchase, preference

  reputation

  risk, perspective

  safety margin

  shareholder letter (2007)

  skill

  stock options, absence

  tax efficient average annual return

  unexercised stock options, holding

  value/growth companies, opinion

  Washington Post editorial

  Burden, Matthew Currier

  Bush, George H.W.

  Bush, George W.

  Bush subprime lending crisis, Spitzer screed

  Business Wire (Berkshire subsidiary)

  C

  Calamos, Sr., John P.

  Canadian money market funds investments, risky leveraged subprime products (impact)

  Capital Cities/ABC, Inc., Berkshire Hathaway ownership

  Carlucci, Frank

  Carlyle Capital Corporation Ltd. (CCC // Carlyle Capital)

  assets, usage

  Bear Stearns exposure

  creditors, Fed bailout

  fund trouble

  investments, value

  investor loss

  Carlyle Group

  credit line, increase

  creditors

  Federal Reserve Bank bailout

  funds

  private equity firm

  Carriage crowd

  Carter, Jimmy

  Caviar crowd, investor search

  Cayne, James E.

  resignation

  Churchill,Winston

  Cialdini, Robert

  Cifuentes, Arturo

  Cioffi, Ralph

  Bear Stearns exit

  indictment

  Citigroup

  dividend, profit relationship

  losses

  Coca-Cola

  Cohen, Steven (earnings)

  Cohen Brothers

  Coleman,Timothy

  Collateralized debt obligation (CDO)

  backing, debt combination (usage)

  CDO-squared deals

  CDO-squared positions

  equity, Cioffi examination

  hawala

  investment

  market, growth

  Moody model

  problems

  Collateralized Debt Obligations & Structured Finance (Tavakoli)

  Collateralized mortgage obligation (CMO), price

  Collins & Aikman, default/bankruptcy

  Commercial Financial Services, charged-off credit card receivables management

  Commodity money

  Compounded returns, calculation

  Conditional probabilities

  Constant proportion debt obligations (CPDOs)

  downgrading

  Constellation deals, problems

  Consumer Deception Award

  Consumer value, Buffett search

  Conway,William E.

  Corporate malfeasance, Buffett perspective

  Corporations, investigation

  Coren, Scott R.

  Counterphobic competitiveness

  Countrywide

  asset-backed commercial paper, bailout

  bailout

  Bank of America Corp. purchase

  Federal Reserve Bank authority

  Interest-Only program, expansion

  lawsuits

  loans, trouble

  problems

  Cox, Christopher

  capital adequacy, statement

  testimony

  Creation bias

  Credit, money type

  Credit derivatives

  feature

  leverage impact

  liquidity destruction

  mispricing

  opacity

  usage

  Credit Derivatives & Synthetic Structures (Tavakoli)

  Credit loan accounts, servicer collection/recordation

  Credit models, inputs

  Credit Suisse Alternative Capital (CSAC), conflicts of interest

  Credit Suisse First Boston (Oakwood Homes Credit line)

  Cruise,Tom

  Crystal, Billy

  Cusack, John

  Credit Suisse First Boston, loss projections

  D

  D’Anicllo, Dan

  Daily Show with Jon Stewart,The

  Davis, Shelby

  Dead Man’s Curve

  rounding

  scenario

  trade

  Deal sponsors, due diligence (responsibility)

  Death by one thousand cuts (Tavakoli)

  Debt assets, leveraging

  Decision-making ability, quality (decrease)

  Default probability, variation (absence)

  De-Laurey, Joyti

  Derivatives

  contracts, imagination

  financial bets

  naming (B uffett)

  opportunities, Buffett identification

  stock options, similarity

  Diba, (Pahlavi) Farah

  Diller, Stanley

  Dimon, Jamie

  bid, assistance

  Congressional testimony

  purchase

  Dinallo, Eric

  Discretionary investments, hedge fund nomenclature

  Diversified portfolios, Buffett refusal

  Dodd, David

  Dollar, weakening

  Washington/Wall Street policies, impact

  Drexel Burnham Lambert, bankruptcy

  Dulles, Allen

  Dulles, John Foster

  Dunn, Patricia

  E

  Earnings announcements, JPMorgan Chase balancing

  Earnings to price ratio, satisfactory level

  Edwards, Jeff

  Efficient markets, theory (Buffett disapproval)

  Einhorn, David

  Eisenhower, Dwight D.

  Elghanian, Habib

  Employee stock options

  backdating perversion

  cost advocacy

  value expensing, corporate executive resistance

  Enhanced Leverage Fund. See Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage Fund

  Enron, scandal

  Equity, investment leverage

  Erdman, Paul

  Everquest Financial Ltd.

  assets

  break-up fee, payment

  first loss risk

  IPO

  registration statement, change

  management

  subprime exposure, market value basis

  Ex Etiquette (Grant)

  Exotic CMO collateral, Bear Stearns seizing/liquidation

  F

  Fabian, Matt

  Fair Isaac Corporation (FICO) scoring system

  Fakahny, Ahmass

  Federal agency debt, acceptance

  Federal Bureau of Investigation (FBI), mortgage fraud cases

  Federal Deposit Insurance Corporation (FDIC), deposit insurance fund (drawdown)

  Federal Home Loan Banks, low-cost loans

  Federal Home Loan Mortgage Corporation (FHLMC)

  Berkshire Hathaway shareholding

  debt

  support

  HUD regulation

  Federal Housing Finance Agency (FHFA), control

  Federal National Mortgage Association (FNMA)

/>   debt

  support

  HUD regulation

  Federal Open Market Committee (FOMC), economic outlook statement

  Federal Reserve

  actions,Tavakoli disapproval

  Open Market Trading Desk, money (pumping)

  power, conservation

  rating agencies, relationship

  reverse moral suasion, usage

  Federal Reserve Bank

  bailout

  liquidity provider

  Federmann, Michael

  Feynman, Richard

  Fiat money

  Fimalac, finances

  Finance, credibility (importance)

  Finance Roundtable, funds (contribution)

  Financial Accounting Standards Board (FASB)

  accounting rules, SEC interpretation

  employee stock options value proposal

  praise

  Financial markets

  overleveraging

  risk

  Financial products, problem

  Financial Services Authority (FSA), hedge fund survey

  First Business Morning News (FBMN)

  Fitch (rating agency)

  Flaw of Averages

  Foerster, Bruce

  Fog of War, The

  Forbes, B.C.

  Forbes, Malcolm

  Forbes, Steve

  Frank, Barney

  Foreclosures, number

  Franklin, Benjamin

  Fraud triangle

  Friedman, Milton

  Fuld, Richard

  asset management unit sale, attempt

  Funds supplier (distance increase), securitization (impact)

  G

  Gardner, Martin

  Gasparino, Charlie

  Gates, Bill

  Gates Foundation, Buffett donation

  GEICO, Buffett investment

  Gender-biased finance world, women management (difficulty)

  Generally accepted accounting principle (GAAP)

  General Reinsurance (Gen Re), Berkshire Hathaway acquisition

  Gen Re, derivatives position

  Gerstner, Louis V.

  Gidwitz, Ralph

  Giuliano, Louis

  Global bank balance sheet losses, Bloomberg estimates

  Global credit meltdown, avoidance

  Global financial markets

  Buffett benchmark

  investment banker tracking

  Golden Fleece Award, creation

  Goldman Sachs Asset management, sophistication

  Goldman Sach Group Inc.

  Goldstein, Matthew

  Business Week story posting

  Gordian Knot

  Gossip, quality/interest

  Government, faith and credit

  Government Accountability Office (GAO), worries

  Government sponsored entities, problems

  Graham, Benjamin

  Buffett mentor

  crowd following, avoidance (will power)

  earnings quality/growth, search

  market formula/program trading, avoidance

  market instruction

  market timing, dislike

  Mr. Market character

  safety margin, achievement

  sponsorship/ownership position

  stock market pundits, perspective

 

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