.com Review Morgan Stanley's David M. Darst on Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street In 14 Chapters, 265 pages, and 443 footnotes drawing upon 119 sources, structured finance and derivatives consultant and expert witness Janet M. Tavakoli writes about her “meeting with Warren Buffett on the eve of the greatest market meltdown in history” and how meeting him subtly changed the way she looks at global financial markets. But Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street is much more than a personal investing bildungsroman. The book is so loaded with lessons, warnings, admonishments, and recommendations that readers will find themselves copiously underlining the text and filling the margins with stars, checkmarks, and exclamation points. Dear Mr. Buffett is wide ranging and hard hitting, written with humility, great specificity, honesty, humanity, and historical awareness. Captious (or offended) readers may criticize the book as: too harsh in parts; overly broad-brush in its treatment of micro and macro events; and possibly bordering on solipsism when Tavakoli frequently cites her own articles, letters, e-mail exchanges, telephone conversations, and television appearances. Serious financial debacles in the post-Millennium years have left plenty of blame to be apportioned among firms, regulators, the financial system, and let’s face it, human nature, and though polite and deferential, Tavakoli (called by Business Week “the Cassandra of credit derivatives”) is not reticent. At times, her tone can be Biblically prophetic. That said, Dear Mr. Buffett is worth its weight in gold for two main reasons. First, the timeless investment lessons laced throughout the book. To cite a few: Warren does not rely on a price because that is what you pay. He relies on value because that is what you get (page 23). The five most dangerous words in business may be “Everybody else is doing it” (page 38). Janet Tavakoli’s Theory of Everything in Finance: The value of any financial transaction is based on the timing of cash flows, the frequency of cash flows, the magnitude of cash flows, and the probability of receipt of those cash flows (page 69). One of Warren Buffet’s core principles: Don’t lend money to people who can’t pay you back. If you do not understand something, do not invest (page 105). The fraud triangle: need, opportunity, and the ability to rationalize one’s behavior (page 199). Second, the book contains lucid, lapidary descriptions of options backdating (Chapter 3); mortgages (Chapter 5); complex structured products, securitizations, and off-balance sheet vehicles (Chapter 7); and the perils of leverage and the developments leading to the difficulties at Bear Stearns, Lehman Brothers, and other financial enterprises (Chapters 8 and 9). Parts of the book read like replaying a YouTube video of a hurricane. Whether or not you agree with Tavakoli in all cases on the details and/or her approach, what comes through in every sentence is her conviction and courage in recounting what happened and her creativity and concretization in proposing safeguards and solutions. In the Preface, she says she is “still learning,” and the financial realm stands the richer from her energy, discernment, persistence, erudition, curiosity, insight, and human empathy. Read this book as soon as you can. As Warren Edward Buffett has said, “Janet Tavakoli should have been listened to much more carefully in the past… and will be in the future.” David M. Darst is a Managing Director at Morgan Stanley. He serves as Chief Investment Strategist of the firm's Global Wealth Management Group and is the Chairman of the Asset Allocation Committee. Darst is also the founding president of the Morgan Stanley Investment Group. Prior to joining Morgan Stanley in 1996, he was with Goldman Sachs for over twenty years, where he served as a senior executive in the Equities Division. Darst is often quoted in the New York Times, Wall Street Journal, and Financial Times, among others. He is also a frequent guest on CNBC, Bloomberg, and FOX News. He earned his MBA from Harvard Business School and received a BA in economics from Yale University. Darst is a CFA charterholder. Read more Review "Dear Mr Buffett is, like its author, strongly, often harshly, and, more than rarely, tartly, opinionated. The attitude is, however, well-supported by the facts; should anyone ever display the slightest interest in criminalizing the criminals who led us down this path, a prosecutor could do worse than ordering up copies for the grand jury. One thing the world is not going to run out any time soon is books on subprime credit-turned-global financial meltdown. But it's doubtful that many, or any, will so closely match the ripping yarn of financial upset with concepts that any - and perhaps every - investor can apply to their own financial security. This book was already at the printer when the Madoff Maelstrom broke, but it's highly doubtful that anybody who absorbs the message of Dear Mr Buffett will ever need confront that kind of mayhem." -- Seeking Alpha's Greg Newton Read more See all Editorial Reviews
M**Y
Tart, witty, and brilliant: by one who saw disaster coming
The great market crash should not have been such a big surprise: some people saw it coming, including Janet Tavakoli. It is easy to be wise after the event, but she had published many warnings about the exiguous clothing of the financial emperors long beforehand. This book is only partly about Warren Buffett; mostly it's about how his homespun wisdom combined with her technical expertise to improve her understanding of market fundamentals.I myself can hardly claim to be any kind of expert in high finance, my own training is in scientific research; I began to worry about the housing market in late 2006 when I noticed half the books in the personal-finance section at local bookstores were "make money fast by flipping houses" and actually exclaimed out loud, "it's the Dutch Tulip Bubble all over again!"But although I saw a crash coming, I had no idea just how much worse it would become due to games being played on Wall Street. After reading with JT and some others have to say about the meltdown I have gone from being saddened to being enraged. And relieved that my wife and I went into this crisis with little debt.Anyway, Tavakoli's book is highly recommended.For a sample of her warnings before the collapse, see:[...]
J**S
Enjoyed it immensely.
Warren Buffett has identified permanent values in the most important areas of life. By scouring the world he has identified "deep value" in more than simply financial markets. But he has also discovered values in terms of his teachers, colleagues, friends and family as well as his outlook on life in general. This book is the story of Janet Tavakoli who dedicated many years of her professional life to acquire a deep understanding of the credit derivatives market down to the smallest details. So then it is no wonder that since Warren Buffett understood in his gut that these instruments could be extremely risky and could be the cause of the next major financial crisis, that he wanted to engage with Janet because she had a front row seat to the action and understood what was about to take place. This book is the story of those exchanges and it is very enlightening. I am always delighted to hear Ms. Tavakoli's thoughts when they are available to the public.
T**E
Recipe for stability and prosperity
Great exposé of what caused the financial crisis. It is clear that little has been done to correct the causes. The role of the Fed in appeasing the fraudsters culpable of plunging the taxpayer, ordinary consumer, guy on the sidewalk into debt, difficulties and depression is shocking. Janet Tavakoli is a courageous writer and her opinions matter. I follow her on the Huffington Post - especially her relentless pursuit of truth concerning the Facebook IPO - and align myself with hers and Buffett's way of thinking. The only reason I didn't give her five stars is that my electronic version of this book contained quite a lot of grammatical errors and it finishes a bit too suddenly. It needs updating at the next edition and requires a better conclusion (she has the ammunition and a perceptive brain to be more authoritative in making coherent recommendations in the sum-up). As for Warren Buffet, thank God his like still exist..
J**D
Yapps a lot
I think that this lady says the truth. Even though she says the truth, she is very persnickety and goes on ad nauseum with her diatribes and personal soliloquies. The relevant information relating to the industry of finance & structured products could be condensed into one third of the actual book size.She also sounds like she's continuously complaining throughout the entire book. It kind of makes it a drag to read.
J**N
You Must Read This Book.
If you are an investor, either directly or through mutual funds or managed accounts or if you are a trustee allocating to alternative investments, you must read this book. You will understand how name-brand institutions like UBS, Wachovia, Citigroup and Merrill Lynch collectively lost hundreds of billons of dollars in ill-conceived products they invented and sold to invstors who lost much more. Ms Tavakoli saw this coming and explains what happened clearly, logically and persuasively. The juxtaposition of Buffett's investment philosophies provide sharp contrast with those of the major institutional participants who are responsible for the current debacle. Knowing how this disastrous phenomenon evolved will forever changed the way you evaluate your investments and/or those intermediaries who make them on your behalf. In this book you will find answers to questions such as : (1). How does Buffett find the rare opportunities for true arbitrage?; (2). What is the Golden Fleece Award, and why does Buffett call it "gem"?; (3). How can Nobel laureates get investing so wrong in practice? and (4). How does Buffett's concept of value carry over to life beyond investing? Digest this book and you will know all there is to know about complex instruments of structured finance.
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