7 ms·

Shorting Home Equity Mezzanine Tranches (2007) [pdf]

94 points by rococode 6y ago

radkapital 6y ago
Can you share the original source / how you found the document? Thanks!
- rococode 6y ago
  I've actually reposted this a couple times since I thought it was interesting and it never gained traction, so at this point I don't remember for sure how I originally came across it. A quick search shows this page has the same link and some more info: http://www.scmessinacapital.com/blog/2015/04/where-can-i-see-a-copy-of-greg-lippmanns-famous-2006-short-subprime-presentation-sent-from-deutsche-bank-to-hedge-funds http://www.scmessinacapital.com/blog/2015/04/where-can-i-see... So I suppose the context was probably that I had just watched The Big Short and was reading up on the topic some more haha.
  - emmelaich 6y ago
    It looks like an addendum to (or part of) "Wall Street & the Financial Crisis-Anatomy of a Financial Collapse" https://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT%20-%20Wall%20Street%20&%20the%20Financial%20Crisis-Anatomy%20of%20a%20Financial%20Collapse%20(FINAL%205-10-11).pdf https://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT%20-%... Yep, there's a reference on page 289. 1119 2/2007 “Shorting Home Equity Mezzanine Tranches,” Deutsche Bank Securities Inc., and there was an earlier version, from 2005. 1314 See, e.g., 2/2007 presentation, “Shorting Home Equity Mezzanine Tranches,” prepared by Mr. Lippmann, DBSI_PSI_EMAIL01988773-845
  - refurb 6y ago
    Thanks for posting, I been looking for one of these pitches, but never found it.
fancyfredbot 6y ago
Would this have convinced you to short home equity mezzanine tranches in 2007? I'd like to think I'd have had the foresight to see what was coming if someone was pitching it to me like this. If I'm being honest however I'm not sure how convinced I'd have been by these slides.
- bryanlarsen 6y ago
  When you're long timing doesn't matter as much, but when you are short it does. The Economist in 2005 had a cover story warning of a crash triggered by real estate. But if you shorted then you probably would have lost a lot of money. As they say, the market can stay irrational longer than you can stay solvent.
  - krrrh 6y ago
    If I remember correctly, the Economist also had cover stories warning of a too hot real estate market in 2004, 2003, and 2002.
    - chrisco255 6y ago
      It probably was. What role did post-dot com, post-9/11 monetary policy play in creating the real estate bubble?
      - KMag 6y ago
        Artificially deflated lending rates, 5 year fixed-rate loans, explicit government pressure to expand the mortgage base, and what happens 5-ish years after the interest rates start coming back to their long-term averages? I remember back in 2004, some of my colleagues were all chatting about flipping McMansions. My housemates and I threw a party, and some poor half-drunk girl I didn't know was telling me that Warren Buffet was warning about a housing bubble and asking me, a stranger, if she and her boyfriend had made a big mistake in recently buying a house. I felt very uncomfortable on several levels trying to give her comfort. Going to a party without her bf and pouring her heart out while half-drunk to a stranger wasn't the biggest sign of looming trouble. There were long warning signs that things were not going to be alright. Hopefully she and her bf were able to ride out the crash.
mifeng 6y ago
I was involved with similar trades at JPMorgan and Citi. Investment bankers gave these presentations to hedge funds to convince them to short the housing market. Then, they created a CDO, called the hedge fund the "manager" and tried to dump the bonds on Asian and Middle Eastern investors.
- bottle2 6y ago
  > tried to dump the bonds How did that go?
  - nickff 6y ago
    Not sure if you are being sarcastic, but some (Goldman Sachs) were more successful than others (Morgan Stanley).
  - icelancer 6y ago
    Pretty good, in actuality. Europe got it way worse than the United States.
    - simonebrunozzi 6y ago
      More details about this, if you can?
      - patrickk 6y ago
        Ctrl+F "Dusseldorf" http://www.peterfrase.com/2011/08/the-big-short-germany-and-toxic-financial-products/ http://www.peterfrase.com/2011/08/the-big-short-germany-and-...
        simonebrunozzi 6y ago
        Thanks!
- deleted 6y ago
  [deleted]
deleted 6y ago
[deleted]
SanchoPanda 6y ago
On your site you have the brk reports back to 1965, but I think all are availalbe from public sources. Here is 57 though 2012. If I'm mistaken and this looks like its from one of the books let me know and I'll take it down. https://send.firefox.com/download/9a64844c1321c00c/#aKJwkyJh6X6IUmva-PzxdQ https://send.firefox.com/download/9a64844c1321c00c/#aKJwkyJh... Thanks for the share that is the subject of the post. Edit for clarity: Early ones are Buffett Partnership, NOT brk.
johnvanommen 6y ago
If you want to see some crazy financials, you should go and look at the oil and energy sector right now.
- adreamingsoul 6y ago
  why is that?
thorwasdfasdf 6y ago
From what I gather, they're basically saying that the 10 year old housing boom is at an end now.

94 points by rococode 6y ago

radkapital 6y ago

Can you share the original source / how you found the document? Thanks!

rococode 6y ago
I've actually reposted this a couple times since I thought it was interesting and it never gained traction, so at this point I don't remember for sure how I originally came across it. A quick search shows this page has the same link and some more info: http://www.scmessinacapital.com/blog/2015/04/where-can-i-see-a-copy-of-greg-lippmanns-famous-2006-short-subprime-presentation-sent-from-deutsche-bank-to-hedge-funds http://www.scmessinacapital.com/blog/2015/04/where-can-i-see... So I suppose the context was probably that I had just watched The Big Short and was reading up on the topic some more haha.
- emmelaich 6y ago
  It looks like an addendum to (or part of) "Wall Street & the Financial Crisis-Anatomy of a Financial Collapse" https://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT%20-%20Wall%20Street%20&%20the%20Financial%20Crisis-Anatomy%20of%20a%20Financial%20Collapse%20(FINAL%205-10-11).pdf https://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT%20-%... Yep, there's a reference on page 289. 1119 2/2007 “Shorting Home Equity Mezzanine Tranches,” Deutsche Bank Securities Inc., and there was an earlier version, from 2005. 1314 See, e.g., 2/2007 presentation, “Shorting Home Equity Mezzanine Tranches,” prepared by Mr. Lippmann, DBSI_PSI_EMAIL01988773-845
- refurb 6y ago
  Thanks for posting, I been looking for one of these pitches, but never found it.

fancyfredbot 6y ago

Would this have convinced you to short home equity mezzanine tranches in 2007? I'd like to think I'd have had the foresight to see what was coming if someone was pitching it to me like this. If I'm being honest however I'm not sure how convinced I'd have been by these slides.

bryanlarsen 6y ago
When you're long timing doesn't matter as much, but when you are short it does. The Economist in 2005 had a cover story warning of a crash triggered by real estate. But if you shorted then you probably would have lost a lot of money. As they say, the market can stay irrational longer than you can stay solvent.
- krrrh 6y ago
  If I remember correctly, the Economist also had cover stories warning of a too hot real estate market in 2004, 2003, and 2002.
  - chrisco255 6y ago
    It probably was. What role did post-dot com, post-9/11 monetary policy play in creating the real estate bubble?
    - KMag 6y ago
      Artificially deflated lending rates, 5 year fixed-rate loans, explicit government pressure to expand the mortgage base, and what happens 5-ish years after the interest rates start coming back to their long-term averages? I remember back in 2004, some of my colleagues were all chatting about flipping McMansions. My housemates and I threw a party, and some poor half-drunk girl I didn't know was telling me that Warren Buffet was warning about a housing bubble and asking me, a stranger, if she and her boyfriend had made a big mistake in recently buying a house. I felt very uncomfortable on several levels trying to give her comfort. Going to a party without her bf and pouring her heart out while half-drunk to a stranger wasn't the biggest sign of looming trouble. There were long warning signs that things were not going to be alright. Hopefully she and her bf were able to ride out the crash.

mifeng 6y ago

I was involved with similar trades at JPMorgan and Citi. Investment bankers gave these presentations to hedge funds to convince them to short the housing market. Then, they created a CDO, called the hedge fund the "manager" and tried to dump the bonds on Asian and Middle Eastern investors.

bottle2 6y ago
> tried to dump the bonds How did that go?
- nickff 6y ago
  Not sure if you are being sarcastic, but some (Goldman Sachs) were more successful than others (Morgan Stanley).
- icelancer 6y ago
  Pretty good, in actuality. Europe got it way worse than the United States.
  - simonebrunozzi 6y ago
    More details about this, if you can?
    - patrickk 6y ago
      Ctrl+F "Dusseldorf" http://www.peterfrase.com/2011/08/the-big-short-germany-and-toxic-financial-products/ http://www.peterfrase.com/2011/08/the-big-short-germany-and-...
      - simonebrunozzi 6y ago
        Thanks!
deleted 6y ago
[deleted]

deleted 6y ago

[deleted]

SanchoPanda 6y ago

On your site you have the brk reports back to 1965, but I think all are availalbe from public sources. Here is 57 though 2012. If I'm mistaken and this looks like its from one of the books let me know and I'll take it down. https://send.firefox.com/download/9a64844c1321c00c/#aKJwkyJh6X6IUmva-PzxdQ https://send.firefox.com/download/9a64844c1321c00c/#aKJwkyJh... Thanks for the share that is the subject of the post. Edit for clarity: Early ones are Buffett Partnership, NOT brk.

johnvanommen 6y ago

If you want to see some crazy financials, you should go and look at the oil and energy sector right now.

adreamingsoul 6y ago
why is that?

thorwasdfasdf 6y ago

From what I gather, they're basically saying that the 10 year old housing boom is at an end now.