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03/22/2010

Book Review: The Billion Dollar Mistake


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The Billion Dollar MistakeMost accounts of legendary investing focus on the successes of the investor. In The Billion Dollar Mistake (John Wiley & Sons, 2009), Stephen Weiss has taken a different approach by writing about their mistakes, some of which are striking considering the amount of money lost. One example is David Bonderman’s multi billion-dollar loss in Washington Mutual in which “seven billion dollars evaporated in less than six months.”

Another graphic story is Geoff Grant’s Peloton Partner’s hedge in ABS (asset backed securities). Grant correctly forecasted the problems in subprime, shorting the BBB bonds against a long position in AAA bonds. As expected, the BBB bonds collapsed, but Grant held onto the AAA bonds, which eventually also had a severe decline, resulting in a big loss despite the accurate market forecast.

In each account of a market mistake, Weiss gives his conclusions on what mistakes the investors made, which can be instructive for all investors.

–William A. Hayes

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