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The Billion Dollar Mistake: Learning the Art of Investing Through the…
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Important investment lessons gleaned from the mistakes of accomplished professional investors and billionaire businessmen
The Billion Dollar Mistake is an up-close account of the career-defining mistakes that some of the world's most brilliant billionaire investors have made, and a revealing look at what we can learn from them. Drawing on author Stephen Weiss' twenty-two years experience at some of Wall Street's most prestigious firms, the core of this book is based upon original research and interviews with these legendary investors, who discuss the most significant trade or investment that went against them, the magnitude of the loss, its effect on their businesses-and on their personal lives. To some, these fascinating accounts will read like a novel; to others, it will be a treasured and unique investment guide.
This intriguing book skillfully examines the causal relationship between the quirks of each investor's personality and the mistakes they have committed. Along the way, Weiss provides a series of compelling narrative accounts of the individuals' road to success, the particular mistakes they made, the character flaws that led to them, and the lessons learned. While some investors made errors of judgment, others made errors of perception. The Billion Dollar Mistake
Learning from the missteps of the best in the investment business can help you succeed. With The Billion Dollar Mistake, you'll discover how.
Get to Know the Billionaires
Always do your due diligence- David Bonderman, a very careful, accomplished investor, had a long personal and professional history with the CEO of Washington Mutual, and saw opportunity in the popular banking institution. With only a week or so in which to perform due diligence, Bonderman and his firm invested $2 billion in the troubled company. Only five months later, the FDIC seized the bank's assets, making it the biggest bank failure ever. Leon Cooperman
The absence of regulatory safeguards is a sign of danger ahead- Leon Cooperman was the top investment strategist on Wall Street and a senior partner at Goldman Sachs before forming Omega Advisors, a hedge fund. Presented with the opportunity to invest in the privatization of Azerbaijan's state oil company, Cooperman took the chance but would soon regret it, a victim of fraud by a well-paid employee and an unregulated emerging market. Chris Davis
Don't own what you don't know- In 2005, Chris Davis significantly increased the Davis Financial Fund's investment in AIG, a company the $60 billion Davis portfolio had owned for more than thirty years. Between the initial investment and the time he added to the position, the AIG in which Chris Davis chose to go "all in" had become a fundamentally different entity - much more complex and murky than a traditional insurance company. When AIG stock plummeted, the loss took a significant toll on the fund's total value. Geoff Grant
Don't be blinded by outsized returns- Geoff Grant's Peloton Partners found extraordinary success - rising 87 percent in 2007 - with the trading of asset-backed securities (ABS). But with the onset of the global credit crunch, other ABS investors ran for the exits while Peloton stayed put - ultimately wiping out the firm and $2 billion. Weiss counsels caution in chasing hyper-returns, particularly when your style has to drift to get there. Kirk Kerkorian
Passion is not an investment strategy- Kirk Kerkorian's passion for the American auto industry drove four attempts, three realized, to buy into the Big Three automakers. That passion, combined with early investment successes in the industry, ultimately led to a loss of nearly $800 million when Kerkorian took a large position in Ford. In the world of investing, emotion is the antithesis of discipline. Passion cannot override objectivity. Bernie Madoff's investors
Be skeptical- Investors who lost billions to Bernie Madoff seemed to have found a deal that was too good to be true - consistent returns at a discount (no fees!). But if something appears too good to be true, it probably is. Investing demands a healthy dose of skepticism. Weiss details the lessons to be learned and followed when temptation presents itself. Nick Maounis
Understand risk- Nick Maounis and his Amaranth hedge fund found phenomenal success in energy trading before losing more than $6 billion in less time than it takes a half-moon to complete its cycle. Although Amaranth had a highly developed risk management function designed to avert such disasters, the reality is that risk management offers no guarantees. If risk can be the downfall of brilliant and experienced traders, where does that leave the individual investor? Weiss provides the answer to this important question and the lessons for navigating individual risk. Aubrey McClendon
Leverage is a double-edged sword- Aubrey McClendon leveraged himself to the hilt to buy millions of shares of his own company, Chesapeake Energy. It was a strategy that created a $4 billion fortune. But when gas prices slid, margin calls wiped out nearly all his holdings in the company he had started with just $50,000. Buying on margin - that is, with borrowed money - allows investors to increase the size of their investments, but the penalty for being wrong can be severe. Adolf Merckle
Short selling: Proceed with caution- Adolf Merckle was one of the wealthiest people in Germany when he risked a fortune "shorting" Volkswagen stock. His multi-hundred-million-dollar bet that the stock price would decline proved a risk he couldn't afford to take, particularly with the rest of his business empire crumbling. With more than a little help from Porsche, VW stock skyrocketed and Merckle - after being forced to sell off assets and beg for loans - hurled himself in front of an oncoming train. Short selling requires a very cautious approach including the observance of specific rules that Weiss details in this chapter. Richard Pzena
Declining stock prices may not equal opportunity- Richard Pzena saw the collapse in residential mortgages and the tanking of financial stocks in late 2007 and early 2008 as a once-in-a-generation opportunity to pay bargain basement prices for Citigroup, Fannie Mae, and Freddie Mac. Less than a year later, and with financial stocks comprising 40 percent of Pzena's portfolio, Fannie and Freddie were nationalized - essentially wiping out their equity value. Stocks are rarely inefficiently priced, Weiss warns, offering insights on finding opportunity in potential calamity - and avoiding the reverse.
(retrieved from Amazon Thu, 12 Mar 2015 18:21:21 -0400)
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