If Michael Lewis’ “The Big Short” is a story from an outsider journalist taking a look inside Wall Street, then Janet Tavakoli’s “Dear Mr. Buffet: What an Investor Learns 1,269 Miles from Wall Street” is a very well-respected practitioner’s honest criticism of what truly happened on Wall Street. Ms. Tavakoli has worked at numerous investment banks through her career and is now the founder of her own firm, Tavakoli Structured Finance out of Chicago. She also has written two very good books on structured finance and CDO’s: “Credit Derivatives & Synthetic Structures: A Guide to Instruments and Applications” & “Structured Finance and Collateralized Debt Obligations: New Developments in Cash and Synthetic Securitization”.
Credentials aside, Ms. Tavakoli knows what she is talking about. Not only does she serve as an expert witness for litigation surrounding complex structured securities, but she is able to grasp and relay the intricacies and faults of the financial markets, banks and politicians. At times, the book seems to act as a self-righteous pat on the back for being right when so many others were wrong, but the details, often glossed over by others, more than make up for the occasional gloating. Besides, she was vocal (and right) about many of the problems brewing when it was very difficult to take that stance on Wall Street.
In addition to being a place for Ms. Tavakoli to praise Warren Buffet, the book can serve as a very detailed account of the issues that derailed the financial markets. Chapter 5 – “MAD Mortgages – The “Great” Against the Powerless” serves as the best and most concise account of the underlying factors that set the housing market up for the greatest collapse in US history. That chapter alone has over 50 cited references.
As a professional, I have to say that I agree with Ms. Tavakoli more often than not. I also respect her courage to stand up to the financial bullies with deep pockets at every chance she gets. And if you are thinking about reading “The Big Short” first, see why Ms. Tavakoli calls him a “Junior Salesgirlieman“.
And if you do not want to read the book, then you can watch the “Q&A” session with her that highlights that key aspects of the crisis in less than an hour: