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The Banker Who Said No

forbes.com

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Re: The Banker Who Said No

#21

Post by anamax »

smanek wrote: post #19
Tangurena wrote: post #18

Earlier quoted context omitted.

To start with, you have to be what is commonly called an "accredited investor." This is a requirement because almost none of the "investments" sold as CDOs are registered with the SEC. The accredited investor loop-hole is the one you'll need to invest in hedge funds and the like: it means something like you're a big boy now, and you don't need the feds protecting you from crooks . Alternatively, your organization wil…

I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.

> I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income).

>That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.

Those rules are set up to protect you from unsafe investments, scams, and the like. After all, you need to have enough money to keep paying taxes....

Re: The Banker Who Said No

#22

Post by gscott »

smanek wrote: post #19
Tangurena wrote: post #18

Earlier quoted context omitted.

To start with, you have to be what is commonly called an "accredited investor." This is a requirement because almost none of the "investments" sold as CDOs are registered with the SEC. The accredited investor loop-hole is the one you'll need to invest in hedge funds and the like: it means something like you're a big boy now, and you don't need the feds protecting you from crooks . Alternatively, your organization wil…

I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.

> That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.

There was one VC here that mentioned how someone emailed him about also investing in 3 of the companies that he had invested in, and how he couldn't let the person do it because the person didn't fit the requirements to be an "accredited investor" then he mentioned what three companies they were. They were all money pits with no path to profitability. I believe the "accredited investor" bit helps people from having there life's savings thrown away on a unregulated bad investment. The ultra rich either inherited money or built a real business from the ground up and sold it. I would suggest one of those paths instead :)

Re: The Banker Who Said No

#23

Post by BobbyH »

jmtame wrote: post #6

To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.

This sounds like a multi-variable linear regression he did in Microsoft Excel?

Re: The Banker Who Said No

#24

Post by jmtame »

BobbyH wrote: post #23
jmtame wrote: post #6

To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.

This sounds like a multi-variable linear regression he did in Microsoft Excel?

That's very possible. Reporters tend to exaggerate certain elements, but he has a pretty strong math background. Either way you look at it, he's hacking the numbers to increase his own odds of investing in the right stuff.

Re: The Banker Who Said No

#25

Post by toffer »

This is a great article.

If anyone is interested in learning more about Andy Beal's million-dollar poker games with the best players in the world in 2001, you should check out this book: "The Professor, the Banker, and the Suicide King: Inside the Richest Poker Game of All Time", by Michael Craig. It's got a pretty complete profile of Beal, and tells all about the games.

Re: The Banker Who Said No

#26

Post by ctkrohn »

smanek wrote: post #9

Does anyone know if it's possible for an individual to buy a CDO? Supposedly everyone wants to get rid of these things and is desperate for cash, which makes it seem like a decent opportunity for buyers. If I had $10,000 I could afford to lose (and was willing to take a long shot with) is there some market where I can buy those sort of assets?

I'd stay away from CDOs, but there are great opportunities in cash subprime and Alt-A mortgage bonds. If you know how to analyze the deal structures, it can be very lucrative. If you run the bonds to extremely draconian default and loss scenarios, you can still end up with 15-20% yields.

$10,000 is too little -- for agency MBS, $15,000 is the minimum purchase size, and I think the rules are similar for non-agency bonds. Most of the high-end brokerage firms can help you, though. I know Merrill Lynch and Bear Stearns Private Client Services (now a division of JPM) deal in mortgage bonds for individual investors.

Re: The Banker Who Said No

#27

Post by MaysonL »

anamax wrote: post #20
byrneseyeview wrote: post #16

Earlier quoted context omitted.

Is it really responsible for a bank to back 30-year loans with demand deposits, at 25-to-1 leverage? I really can't imagine that happening without government intervention, and if it only happens when the government makes it happen, there's a good reason to expect that it's irrational. Banks are hybrid companies in the sense that FDIC insurance means they are basically conduits for lending to the government. If I depo…

>E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. > This gives all banks an incentive to take undue risk Actually, you've just demonstrated that FDIC insurance gives you an incentive to take undue risk. You'll deposit your money at any bank without regard for whether said bank…

The trouble is that the trust a bank or any such institution receives is not, and probably cannot be, well correlated to its trustworthiness. Cf. Bernard Madoff, and the vulnerability of any bank (especially when no insurance exists) to a run.

Re: The Banker Who Said No

#28

Post by MaysonL »

mynameishere wrote: post #8
jhancock wrote: post #3

Earlier quoted context omitted.

It is a good read and he obviously is a "good" banker for not overextending his bank. But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. This is the rub with banks. They want to behave like private entities, but they leverage government backed cu…

Lot of upmods for an extremely confused post. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. ...oh kay. A class that recognized they are hybrid entities, and not the same as a typical private company Umm. You seem to be getting at GSEs, a standard corporate form. http://en.wikipedia.org/wiki/Government-owned_corporation Generally, this doesn't seem to work out too well w…

The truth is, the vast bulk of banks were perfectly healthy and responsible. Almost all the trouble came from a few gigantic ones, and the reasons for their behavior were many.

You're way too optimistic, IMO. 21 US banks have failed so far this year, and many more are going to fail. Many commercial real estate and development loans are going to default in the next couple of years, mostly provided by many small and medium local and regional banks.

Re: The Banker Who Said No

#29

Post by ori_b »

gills wrote: post #10

I think it's pretty telling that this guy was investigated for not consuming the fraudulent crap coming out of Wall Street. Wouldn't that be like a 1999 startup being investigated because they didn't have exponential growth projections in the IPO prospectus?

Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate.

I'm not surprised he was investigated; Massively different investments, raising money without buying anything apparent, and not trying to cash in whenever possible do point to an anomaly -- possibly even a fraud -- happening.

So long as he's not wrongfully convicted, I don't have a problem with investigations.

Re: The Banker Who Said No

#30

Post by endtime »

ori_b wrote: post #29
gills wrote: post #10

I think it's pretty telling that this guy was investigated for not consuming the fraudulent crap coming out of Wall Street. Wouldn't that be like a 1999 startup being investigated because they didn't have exponential growth projections in the IPO prospectus?

Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate. I'm not surprised he was investigated; Massively different investments, raising money without buying anything apparent, and not trying to cash in whenever possible do point to an anomaly -- possibly even a fraud -- happening. So long as he's not wro…

Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate.

Yeah, that's the point...that it was extraordinary to behave sanely (as opposed to "consuming the fraudulent crap coming out of Wall Street").

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