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More Mortgage Meltdown: 6 Ways to Profit in These Bad Times [Hardcover]

Whitney Tilson , Glenn Tongue
5.0 out of 5 stars  See all reviews (1 customer review)
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Book Description

22 May 2009
A clear look at how to capture investment profits during difficult financial times The U.S. economy has become crippled by the credit and real estate catastrophe. Even though we′ve all been affected by the calamity and have heard no shortage of news about it, it still seems unfathomable and utterly incomprehensible to most people that the actions of certain mortgage brokers, bankers, ratings agencies, and investment banks could break the economic engine of the world. Now, for the first time, and in terms everyone can grasp, noted analysts and value investing experts Whitney Tilson and Glenn Tongue explain not only how it happened, but shows that the tsunami of credit problems isn′t over. The second wave has yet to come. But if you know catastrophe is looming, you can sidestep the train wreck–and even profit. You just need to understand how bad times present opportunity and where to look. More Mortgage Meltdown can help you achieve this goal. The book Breaks down the complex mortgage products and rocket–science securities Wall Street created Addresses how to find investment opportunities within the rubble and position your portfolio to take advantage of the crisis Explains exactly how the combination of aggressive lending, government missteps, and Wall Street trading practices created the perfect economic storm Shows you why the crisis is not yet over and what we can expect going forward More Mortgage Meltdown can help you understand the events that have unfolded, and put you in a better position to profit from the opportunities that arise during these tough financial times.

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Product details

  • Hardcover: 306 pages
  • Publisher: John Wiley & Sons; 1 edition (22 May 2009)
  • Language: English
  • ISBN-10: 0470503408
  • ISBN-13: 978-0470503409
  • Product Dimensions: 23.1 x 15.7 x 3.3 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: 429,559 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Review

"Most original in its opinions on what happens from here and how investors can profit. Tilson and Tongue argue that the mess is far from over in housing. . . That said, Tilson and Tongue argue that there are opportunities for stock pickers to profit. . . The book concludes with an interesting analysis of Wells Fargo, which the authors shorted at $30 a share but then went long on at $10. . . Overall, the book is well worth reading." ( The Free Lance–Star )

From the Inside Flap

The housing market has imploded and the stock market has followed suit, with stock portfolios, retirement accounts, and pension funds cut in half. The U.S. economy is reeling from the real estate meltdown and credit crunch. Not stopping at the border, the storm has broadened to Europe, Asia, and beyond throughout 2008 and into 2009. Is there anyone on the planet who has not been touched by this disaster? Even though we′ve all been affected by the calamity and have heard no shortage of news about it, it still seems unfathomable and utterly incomprehensible to most people that the actions of certain banks, mortgage companies, and Wall Street firms could bring the economic engine of the world to a grinding halt. Now, for the first time, and in terms everyone can grasp, noted analyst and value investing expert Whitney Tilson, along with his partner Glenn Tongue, explains not only how it happened, but shows that the tsunami of credit problems isn′t over. Another even larger wave is yet to come. If you know catastrophe is looming, you can sidestep the train wreck, and even profit, but you need to understand how bad times present opportunity and where to look. Tilson, a columnist for Kiplinger′s Personal Finance , featured on 60 Minutes , and a regular on CNBC, started presenting his findings to everyday people and found them clamoring for more. Now in More Mortgage Meltdown , Tilson explains in a clear and understandable way how misguided assumptions, insatiable greed, reckless risk taking, and government inaction led to the creation of the greatest asset bubble in history, the aftermath of which is the perfect economic storm. Then, he shows you why there′s still much more pain to come and what we can expect from the ongoing crisis over the next few years. Finally, More Mortgage Meltdown teaches you how to find investment opportunities within the rubble and position your portfolio to take advantage of the crisis. The book uses in–depth case studies of individual companies and stocks to show how to evaluate investments in these uncertain times. You will learn how to spot warning flags in the financial statements of companies that can help you avoid losing your hard–earned money. And you will learn how to spot undervalued businesses with competitive advantages or hidden assets that will likely emerge stronger from the crisis. It is important for all of us to understand how the credit and mortgage crisis happened. Equally important is the chance to potentially profit in its aftermath.

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Most Helpful Customer Reviews
0 of 1 people found the following review helpful
5.0 out of 5 stars Beautiful Analysis 15 Nov 2009
Format:Hardcover
This book is a great analysis of how we got ourselves into the mess that tipped the entire world into the recession. The authors have lots of supporting data to prove their points. The reader not only finds out the causes the mortgage meltdown, but also learns how to profit going forward. The authors present a case study of the following companies: American Express, Resource America, Long Beach Mortgage Loan Trust, MBIA Inc, and Wells Fargo. I highly recommend this book.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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Amazon.com: 4.6 out of 5 stars  26 reviews
13 of 17 people found the following review helpful
5.0 out of 5 stars Accurate analysis of morgtgage meltdown! 25 May 2009
By M. Nath - Published on Amazon.com
Format:Hardcover
I as a Value Investor have known Whitney Tilson for couple of years now. I was eagerly waiting for this book, not to read but to store a copy for my best of best collection, reason being Whitney was very generous in sharing this state of art work through his newsletter (weekly emails) way back in Feb 2008. He has shared his views on the mortgage crisis long before anyone I know thought about it. Even if very few talked, no one shared a 60+ page presentation to general public without fees. I was very lucky to steer clearly away from the mortgage meltdown just because of the forewarnings generated by Whitney's email in Feb 2008. In this highly secretive hedge fund industry where manager's left hand doesn't know what his right hand is going to do, Whitney comes out as a selfless person who wants to give back to the society. He organizes a Value Investing Congress which I recommend every Value Investor to attend as it's very rare that so many great minds come together and share lots of good investment opportunities.

There are many books in the market which looks back in time and tell us the story of what has happened. This book is rare in the sense that the authors accurately predicted the crisis and made the presentation of mortgage meltdown (when the crisis was in its second innings) and issued a note that the crisis will need a full fledged Government intervention (when the word bailout was not heard off) to get through it. And later when the crisis was midway, wrote a book out of their original presentation. So not only the authors know about the mortgage crisis but they also knows about the accurate timing, magnitude, financial & emotional damage it has caused and many more things. This book accurately describes the fact that there is lot more to come and provide investors several key ways in which not only they can survive this meltdown but also thrive from it. The book touches every aspect of mortgage industry, cause and effects along with good investment tips. I don't want to be a spoiler to the new readers so will not say more about the book material but to recommend every stock investor to read the book at least once and take advantage of the great tips given by the authors. Book will be a good read for people who are still trying to understand how bundle of mortgages can bring down the entire world economy to its knees. Book is very simple, straightforward and has enough charts, tables and examples to make it easy to understand even for casual readers. All in all, great value for money and time and a must read!
5 of 6 people found the following review helpful
3.0 out of 5 stars Split decision 21 Jun 2009
By K. Peter - Published on Amazon.com
Format:Hardcover
The first half was an excellent analysis of the mess we are in and how it will only get worse. Second 1/2 advice was fair, but not why to buy the book. Should have had more evaluation of what happens as a consequence of this problem, rather than his case studies. Worth the first 1/2 but a bit disappointing after that. Read it, then HS Dent's "The Great Depression Ahead" and you will have a real game plan.
2 of 2 people found the following review helpful
5.0 out of 5 stars Beautiful Analysis 12 Aug 2009
By Mariusz Skonieczny - Published on Amazon.com
Format:Hardcover
This book is a great analysis of how we got ourselves into the mess that tipped the entire world into the recession. The authors have lots of supporting data to prove their points. The reader not only finds out the causes the mortgage meltdown, but also learns how to profit going forward. The authors present a case study of the following companies: American Express, Resource America, Long Beach Mortgage Loan Trust, MBIA Inc, and Wells Fargo. I highly recommend this book.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
4 of 5 people found the following review helpful
5.0 out of 5 stars Melted Mortgages 17 Jun 2009
By Jeffrey Smith - Published on Amazon.com
Format:Hardcover
Whitney Tilson & Glenn Tongue "More Mortgage Mess-6 Ways to Profit in these bad times" (John Wiley & Sons, 2009)

"Why sometimes I've believed as many as 6 impossible things before breakfast." -Alice in Wonderland

This past decade has seen a massive, national collective hallucination take place in real estate and related industries that has infected the world financial systems and which will have lasting, if not permanent effects that are now unwinding slowly and with great pain.

Tilson & Tongue dissect this situation with insight, depth, mathematical skill and many original ideas in their new book. They are not timid and dole out giant scoops of blame to myriad guilty parties: the government (who repealed or loosened many laws and regulations), banks, the Fed (who kept interest rates artificially low, allowing real estate prices to bubble ever upward), the GSEs (Fannie Mae & Freddie Mac, who were allowed to speculate wildly), the ratings agencies (Moody's, S & P,), real estate agents & appraisers, and finally greedy homeowners.

Charles Mackay, in his classic 1840's Extraordinary Popular Delusions & The Madness of Crowds, a study of various scams, bubbles and manias including the South Sea bubble, the Dutch tulip mania, and the crusades, makes the point that the most dangerous phrase is always "it's different this time." Yet hope springs eternal and many folks spend their whole lives searching for the greater fool, very easily found in the USA of late.

Of the two T's, Tilson has been the more public figure, starting his first hedge fund in 1999, writing for various web sites, Kiplinger's, Forbes, and Marketwatch. Tongue has been co-manager of T-2 since 2004, having previously run DLJDirect, an online brokerage.

Split into two sections, "What Happened and Why" on mortgages and the wide variety of still worsening effects and "Profiting from the Meltdown,"which talks about stocks, bonds, and provides in-depth analysis of some major holdings at T-2 Partners, including Warren Buffett's Berkshire Hathaway, Wells Fargo, American Express, and a few smaller, lesser known stocks.

Inspiration and a lot of the information in their book comes from Amherst Securities' Sean Dobson, who taught the T-2 principles from his massive proprietary mortgage and related securities data bases.

"The US housing market had experienced a bubble of enormous proportions, and countless mortgages were defaulting at unprecedented, catastrophic rates," T-2 explains.

Pretty much any boom time in the USA (or the world, for that matter) is at least partly driven by some sort of scam, especially when uninformed people arrive late to a party already drunk.

Alan Greenspan's Fed, instead of "removing the punch bowl," as former Fed Chairman William Mc Chesney Martin described the chairman's job as being, dumped bottle after bottle of Ever clear into the bowl, resulting in a drunk, clueless populace who kept muttering their ever hopeful mantra, "real estate always goes up, if even a little..."

Then, if that wasn't bad enough, Wall Street, got involved: packaging mortgages, many written to sub-prime and no documentation clients that would never have qualified for loans in eras with more conservative lending standards, often driven by congressional and Presidential quotas to "get more people into houses," usually with no regard for the viability of the loans.

These were sold to individuals, mutual funds, institutions, and sovereign wealth funds around the world, rubber-stamped by ratings agencies as AAA, super-safe ratings that bore no relationship to actual risk assessment and cost them their previously sterling reputations.

Regarding options ARM loans, T-2 writes, "If one were to design a loan that would blow up the maximum number of homeowners the moment home prices stopped rising, an option ARM would be it." In their perverse, self-defeating styles, the states of California and Florid had by far the most ARM loans written.

"Florida has always been susceptible to the Wild West mentality. If it's too good to be true, we're going to be involved in it." -Florida state treasurer Alex Sink in George Packer's "The Ponzi State," The New Yorker 2/9/2009

This book is so dense with information, synopsizing is daunting but are two major points:

* After a decade of using their wildly overvalued houses as ATMs, extracting about $3 trillion (about 25% of the aggregate value of residential US housing), Americans, by 2007, had more debt (10.6 trillion) than equity (8.5 trillion) in their houses for the first time ever

* The collapse of lending standards, loaning more and more money to people with ever lower down payments wildly increased the risk of home owners who are underwater on their homes, losing their jobs and or unable to sell their homes, just walking away from their debts.

* As you may recall from the tech/internet/NASDAQ debacle, when bubbles burst, prices often crash well below the trend line and far well below fair value, which indicates real estate prices still have a long ways to fall, even without factoring in the eventual rise of interest rates, further foreclosures, rising unemployment and other negative factors that will contribute to their fall.

Which banks fail may well be a factor of clumping, luck, and randomness more than skill, in that the banks that survive are in a race to outrun their foreclosure and loan losses.

Tilson & Tongue dissect their holdings in Wells Fargo in depth and point out that we are "in the fifth inning" with there are many shoes left to drop (to mix metaphors) including commercial real estate defaults, as commercial is 40% of WFC's loan book. Wells' acquired sub-prime exposure via the acquisition of Wachovia, more lay offs in areas like Michigan, California, and Florida are also big factors. Wells Fargo sounds like both a great bargain, trading at 3 or 4 times normalized earnings and the next Citibank or Bank of America, a prime bankrputcy candidate.

T-2's math is very pro and can be a bit overwhelming in this book for the non-CPA but it is clearly stated and does become clearer on a second or third more careful reading. The reader is walked, hand in hand through the often intentionally muddy fields of accounting and corporate balance sheets. As Tilson & Tongue write, non in the least hyperbolically, "Wells Fargo is currently in a race for its life, trying to earn its way out. If big (loan) losses materialize quickly but profits are weaker than we expect, WFC will be in big trouble."

REITS (real estate investment trusts) are in even worse shape than banks, yet this isn't mentioned much in T-2's book but it brings up the question regarding both banks and REITS: can vital, much needed industrys fail in aggregate? US airlines and auto makers suggest it's quite plausible and what that means for the country is pretty much open for endless discussion but I doubt it can be good.

They also offer an in-depth look at Berkshire Hathaway, which they describe as "an unusual company and possibly the most talked-about yet least understood business in the world." Tilson has long understood Buffett's giant free cash generation machine and its proprietary advantages, penning his classic "The Last Bull on Berkshire" a decade ago when he & Alice Schroeder, then an analyst, were the only people in the mainstream press to get Berkshire. He and Tongue still do, and as they advise the reader, betting against Warren Buffett & Charlie Munger has never been a good idea.

They also advise buying beaten-down, super solid blue chips such as Wal-Mart, Exxon, Mc Donalds and Altria. There's a good section on shorting (T-2 say "most people should avoid it, to which I add an "amen.)

In conclusion, they offer a fine selection of worthwhile web sites and an exhaustive reading list well worth persuing.
4 of 5 people found the following review helpful
5.0 out of 5 stars Important and Timely 28 May 2009
By Stephen Culbertson - Published on Amazon.com
Format:Hardcover
This book is a rare and valuable exception. Most of the books written about historical events are published well after the events have unfolded and the outcome is known. As such, they might offer a great deal of knowledge from which to learn but not on which to act. "More Mortgage Meltdown" on the other hand, comes out in the midst of the housing bust and financial meltdown. As such, it not only does a wonderful job of educating readers on the factors that led to the problems we face, but also allows for the direct and timely application of that knowledge. Furthermore, its authors were able to gather, organize and synthesize massive amounts of data into clearly written and simple to understand thesis. It might very well go down as one of the seminal works on this chapter of American history, while simultaneously serving as a guide for investors of all types in what is surely a very challenging environment.
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