Invest Like The Best
Episode 34 The Big Short and Beyond
Invest Like The Best

Episode 34: The Big Short and Beyond

The Big Short and Beyond

Danny Moses has worked on Wall Street for 20 years and was the head trader at FrontPoint during the 2008 crisis. We cover his part in the Big Short story, how the sell-side has evolved over the years, and how he thinks about valuations as part of the bottom-up framework.

This episode is brought to you by:

CFA Institute. CFA Institute is a global association of investment professionals, whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investor's interests come first, financial markets function at their best and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world.

[00:02:57] – (first question) –  The four traits that would give someone the best odds to succeed as an analyst

[00:07:40] – Danny’s take on his role during the financial crises, which was highlighted in ‘The Big Short.’

[00:14:47] – Looking at the first moment that there was something wrong but that there was a way to trade against it during the crisis

[00:17:13] – Exploring the moment when Danny had to reconcile an amazing trade against a dangerous scenario for the US economy

[00:20:17] – What was the relationship with the other people that discovered parts of this unraveling

[00:22:19] – Danny recounts working with Michael Lewis

[00:24:16] – Flash Boys: A Wall Street Revolt

[00:24:40] – Going back to the auto lending crisis in the 1990’s

[00:28:22] – The evolution of the sell-side, what’s good about it today and what was bad about in the early 2000’s.

[00:34:55] – Why the markets appear to be broken right now

[00:37:20] – How markets were much different back in the 1990’s and what made them more interesting.

[00:40:16] – Has the information provided by the sell-side to the buy side gone down since the financial crisis because the quality of research is lower

[00:43:24] – What was about financial services that Danny found attractive for an active strategy 

[00:47:14] – What was the first idea where Danny was applying his filter and realized the market had it wrong.

[00:48:11] – When Genius Failed: The Rise and Fall of Long-Term Capital Management 

[00:49:01]  – How did Danny think about valuation as part of the bottom up framework 

[00:55:30] – Danny tells the story of how his friend Ira had to run and help bail out Dominque Strauss Kahn, the head of the IMF at the time.

[00:58:30] – The Fixer

[00:58:40] – How do you become the bail bondsmen to the stars

[01:01:02] – Open: An Autobiography

[01:01:25] – What is next for Danny Moses?

[01:02:33] –The root of Danny’s interest in doing media.

[01:04:52] – Kindest thing anyone has ever done for Danny

The Big Short and Beyond

Introduction

Patrick
Many of the most fun investing conversations are with traders and portfolio managers, because they live and breathe risk, day in and day out. Of course, they are often risking other people's money, but controlling real money in markets is hard to match. Theories and ideals can fade quickly, well laid plans often don't last. This week's guest is someone who has lived through his fair share of market highs and lows and I think you'll be able to tell quickly why I so enjoy conversations like this one. My guest is Danny Moses who is directly in the middle of one of the biggest trades in market history, chronicled by Michael Lewis in his book, The Big Short. Danny was the head trader on the FrontPoint Team, led by Steve Eisman, who along with a small handful of others, like Michael Burry and John Paulson, made enormous profits during the financial crisis, as they figured out, in real time, the disaster that was brewing in mortgage-backed securities and figured out how to position their portfolios in a way that would benefit from their insight. No easy feat.My conversation with Danny is multi-faceted, we talk about Danny's role in The Big Short, both the trade itself and the making of Michael Lewis's book. We cover the history and current state of sell-side research and how ETFs and other trends have made it difficult for traditional bottom-up fundamental managers. We even talk about Dominique Strauss-Kahn. To start this episode, I've pulled a piece from the middle of the interview, because I want to make sure that all aspiring asset managers out there hear Danny's answer about what he looked for when hiring an analyst. You can find show notes at investorfieldguide.com/Danny, and now, please enjoy this colorful conversation with Danny Moses.

Traits of a Successful Analyst

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