I have no idea how Whitney Tilson found the time to write More Mortgage Meltdown, but he did a good job. The book is really two books in one.
The first part of the book describes the mess we are on and how we got there. Tilson published the book in early 2009; however he was bearish on real estate far before the book was published. Tilson provides extensive data on the housing bubble and demonstrates how the trend was clearly unsustainable. The author also does a good job explaining the differences between Subprime, Alt-A, Prime, option ARM loans. Tilson is very bearish in March 2009 he estimated $3.8 trillion in total losses to the worldwide financial system. This is even more than Dr Doom Nouriel Roubini who estimated $3.5 trillion in early 2009.
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
The second part of the book starts with a short introduction to value investing. Tilson then provides an in depth analysis of six different investments of his. The six investments are three stocks the author was long, two stocks short and a pool of distressed mortgages. The three stocks the author was long are Berkshire Hathaway, American Express (Tilson seems to be a fan of Buffett), and Resource America ( a small cap stock). The two stocks he was short are MBIA and Wells Fargo.
Tilson writes that several weeks before the book was published he reversed his short on Wells Fargo, and went long. This tells me something very important about the author. When someone is bearish on the economy as Tilson clearly is, many times they will not buy stocks regardless of price. Tilson was bearish on Wells Fargo but realized at a certain price even a distressed company can be a good buy. This is one of Benjamin Graham’s most important “although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.” When I realized Tilson was following in the footsteps of Graham, I knew I could trust his advice.
To purchase the book on amazon.com click on the following link More Mortgage Meltdown: 6 Ways to Profit in These Bad Times
Disclosure: New FTC guidelines require me to disclose I have a material connection because I received a free copy of the book to review.
To anyone following my series of book reviews on the financial crisis my next book reviews will be Too Big to Succeed by Robert Pozen, and This Time is Different by Kenneth Rogoff and Carmen Reinhart.