NYC April 20, 2011 visit
12:50am: Arrival
1:00pm: Steve Eismann to speak about the 2008 Financial Crisis, his experiences, lessons learned (or not)
1:30pm: Q&A session with the group
* Preparation *
* Read Michael Lewis' The Big Short. *
Two short videos explaining the causes and consequences of the 2008 Global Financial Crisis
Other resources, information
The 2008 Global Financial Crisis
* Topic Agenda *
I. Issues Related to the Financial Crisis of 2008: What happened?
What we’ve been told by Politicians/media:
1. Just one of those things that occurs every 80 years or so. A big thing, for which statesmen stood up in a bipartisan fashion and did what had to be done – saving the system from collapse, not for the banks, but for us. … And look, they’ve been paying back the money!
2. Inadequate regulatory oversight.
3. Some poor judgment, management, malfeasance.
4. Largely fixed as a result of Obama’s historic legislation.
Big Short
A harsher assessment, but still not quite clear on what caused it. Or whether it will happen again. Indeed, rather bizarrely if you think about it, he ends with an attribution/accusation of his boss at Solomon Bros, for going public with the firm.
Your perspective on the crisis, how it’s understood and perceived?
II. Issues Related to the Actual Events (Micro/personal)
Reading the market pricing and responding
Self- assurance to Bet against the Market
1. What were you and your traders thinking when market pricing did not correspond to underlying fundamentals?
2. Was there any self-doubt that you may have been reading the market fundamentals wrong?
3. Given the high stakes of your bets, did you discuss contingencies if the timing or outcomes of your bets did not occur as planned?
4. What was your biggest fear, if any, during the time that you were executing trades?
Real time contingency planning
5. What were your thoughts on some of the other traders profiled in "The Big Short" and their various strategies that capitalized on this situation?
6. What inaccuracies were in "The Big Short", or which parts of the book would you suggest re-writing if the author were amenable?
Your perspective on the book?
III. Systemic Issues?
1. Can anything be done reform-wise to avoid the occurrence of these bubbles in the future? Do you expect any effective reform to occur?
2. Why did some of the investment banks that created these worthless securities incur losses by holding their own junk?
3. How do you perceive investment banking and the hedge fund industry changing and evolving in the future?
4. Has anyone (regulators, industry, investors) learned anything from this financial era?
IV Upcoming (potential) macro-economic crises
Do you anticipate future bubbles and their scope going forward?
US Financial practices and predictions about consequences
1. Do you think that the zero % interest rate policy by the Federal Reserve is creating another asset bubble in the stock market?
2. -We know that there is a lot of excess inventory in the housing market, additionally the banks are holding a lot of foreclosures because they do not want to put them out into the market to increase supply and further bring prices downward – my question is, what happens when interest rates inevitably go up, aren’t all of these homes going to decline in value and the banks will be hit with further loses?
3. - There has been talk of inflation for a long time, but over the last two months there have been significant increases in the PPI as well as rising commodity prices, the dollar is continually making new lows. What do you think is going to happen to the US dollar and will the dollar ever lose its reserve currency status? … One more thing, do you own gold?
Higher education bubble
• How can we contain the higher education bubble? The crisis is predicted to be worse than the housing bubble since students cannot forfeit loans.
• Is there a way to securitize it and insure student loans or profit from the bubble?
• There's controversy over UnCollege movement where education is being emphasized outside the classroom with student directed learning. How do you feel about formalized education institutions?
http://techcrunch.com/2011/04/10/peter-thiel-were-in-a-bubble-and-its-not-the-internet-its-higher-education/
http://techcrunch.com/2011/04/13/living-the-knowledge-life-a-thiel-fellowship-finalists-response/
http://techcrunch.com/2011/04/12/friends-don%E2%80%99t-let-friends-take-education-advice-from-peter-thiel/
V. benefiting from macro-economic crises
V. I. Trading Strategies
--Alternate ways to benefit from the same market conditions
--How to rate and rank alternate strategies
--Managing stress and discord within your team
--Risk management (Both system wide and within a hedge fund)
V. II. Systemic Issues
--Reform initiatives
--Building a "better hedge fund"
How do you manage risk and growth for a large-scale speculative enterprise like a hedge fund?
VI. Critical thinking, big lies, mass mis-perceptions
Critical thinking
Absence of critical thinking in high-finance, the professions in general, or maybe we could simply say absence of thinking generally in America. Just as you experienced with the housing boom, I’ve worked in several areas in which fraud and big lies are staring at anyone willing to think, but which go unchallenged because, well, why exactly?
Big lies
What other mass mis-perceptions are out there?
• Is there intentionality?
• Was there intentionality in the housing bubble burst?
Confidence in the face of Mass Perceptions
• What would you have done differently, either personally or professionally, f you could re-live this era of your professional life?
VII. Candor and its Consequences
The Big Short does not always paint each character in a favorable context…some come off as villains, others as fools.
• What was your motivation for being so honest about your feelings and perceptions of the characters (Wing Chau, for example)?
• Did you assume that you would not need to have favorable relationships with those characters in the future?
• At what point does a person in a networking/relationship industry stop politicking, if ever? What happened with your relationships on Wall Street after the book was released?
• How did you choose the characters that you were willing to talk about…were there any that were left out on purpose?
• Why did you agree to work with Michael Lewis on the book?