Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street

by Janet M. Tavakoli

“Buffett, Tavakoli Flag Scheme Bigger Than Madoff’s” – Bloomberg News

"Full of anecdotes, details and character sketches that add depth...she knows her stuff, has strong opinions and turns a colourful quote." - Financial Times

“An excellent read, loaded with information about the goings-on in the financial sector in the US…racy, laced with wit.” – Business Standard

"Tavakoli tugs vigorously at the seemingly disparate threads of the current financial crisis, naming names, citing cases and leaving no schmuck — whether investment bank, credit rating agency, monoline insurer, mortgage brokers, regulators and their ilk — unspared. Based on more than 20 years in the derivatives arena, and having served time at Salomon Bros, Bear Stearns and Goldman Sachs, she knows that of what and who she speaks. 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." – Seeking Alpha

From the publisher (John Wiley & Sons): Janet Tavakoli takes you into the world of Warren Buffett by way of the recent mortgage meltdown. In correspondence and discussion with him over 2 years, they both saw the writing on the wall, made clear by the implosion of Bear Stearns. Tavakoli, in clear and engaging prose, explains how the credit mess happened beginning with the mortgage lending Ponzi schemes funded by investment banks, the Fed bailout and its impact on the dollar. Through her narrative, we hear from Warren Buffett and learn how his enduring principles caused him to see the mess that was coming well in advance and kept him and his investors well out of the way.

Genres: Finance, Business, Economics, Nonfiction, Biography, Management, Autobiography

304 pages, Hardcover

First published December 1, 2008

About the author

Finance Expert & Author

Janet Tavakoli is the founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm established in 2003. Internationally recognized as a finance expert, Business Week called her the "Cassandra of Credit Derivatives" for predicting the financial crisis. This profile features her acclaimed nonfiction finance books and business expertise.

Ms. Tavakoli posts topical finance updates at her business site: Tavakoli Structured Finance.

Fiction Writing: Author Janet Tavakoli has written the well-received financial murder mystery Archangels: Rise of the Jesuits. She also writes science fiction using the pseudonym Michael K. Clancy, creating the acclaimed Zombie Apocalypse series. She posts fiction updates at: Janet Tavakoli, Science Fiction and Mystery Author.

Media Recognition: She is frequently published and quoted in financial journals including The Wall Street Journal, The Financial Times, New York Times, The Economist, Business Week, Forbes and Fortune. Television appearances include CBS's 60 Minutes, CNN, C-Span, CNBC, Fox, CBS Evening News, Bloomberg TV, and BBC.

Education: Ms. Tavakoli earned a Bachelor's degree in Chemical Engineering from the Illinois Institute of Technology and an MBA in Finance from the University of Chicago's Booth School of Business, where she served as adjunct associate professor of finance.

Books by Janet Tavakoli

Finance & Business: Credit Derivatives (John Wiley & Sons, 1998, 2001, 2022)

Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, 2003, 2008): an exposé of grave flaws in the structure, sales practices, and methodology for rating structured financial products.

Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (John Wiley & Sons, 2009): the causes of the greatest credit bubble in the history of the world, how we could have avoided it and how we can prevent it from happening again.

The New Robber Barons (2012): Janet Tavakoli's ongoing chronicle of the global financial crisis captured in her articles from the September 2008 meltdown through February 2012.

Nonfiction: Decisions: Life and Death on Wall Street: Janet Tavakoli's nonfiction account of Wall Street skullduggery.

Unveiled Threat: A Personal Experience of Fundamentalist Islam and the Roots of Terrorism: Janet Tavakoli's autobiographical account.

Fiction: Archangels: Rise of the Jesuits: Janet Tavakoli's financial fiction thriller debut.

Reviews

[Sam Reaves · Rating 4 out of 5]

Janet Tavakoli is one of the world's foremost authorities on credit derivatives. She corresponded with Warren Buffet and then had lunch with him one day, and this book is the result of their ongoing conversation. Sharp analysis of the financial world and how the current crisis came about.

[Owen Holtz · Rating 4 out of 5]

Janet Tavakoli - founded Tavakoli Structured Finance® (TSF) in 2003: leading independent risk consulting and expert witness services firm for derivatives, credit derivatives, mortgage-backed securities, mortgage-related derivatives, synthetic collateralized debt obligations, total return swaps, special purpose entities, foreign exchange derivatives, and structured finance. TSF does risk management and expert witness consulting.

Commentary on lead up to the mortgage meltdown and relationship with Warren Buffet after meeting (sent a copy of ‘Credit Derivatives’) in early 2000’s.

“Many corporate executives resist expensing the value of employee stock options, complaining there is ambiguity in how one values them. But accounting practices are rife with ambiguities. As long as the rules are understood, accounting helps paint a picture of corporate value with a semblance of consistency…. Stock options, which are call options, are a moral hazard inviting unnecessary risk taking because corporate officers get leveraged rewards for any success - and suffer no consequences if they fail. Officers of corporations can leverage up corporate balance sheets, make poor acquisitions to pump up revenues, and be rewarded for stock price pumping mischief. Out-of-control - albeit legal - management behavior has no penalty, and often brings rich rewards.”

[Dani · Rating 2 out of 5]

2.5 stars. Don't waste your time with this one.

[Daniel Bratell · Rating 2 out of 5]

This book has a very intriguing title, but that is about it. Tavakoli is an expert on credit derivatives and early notices how debt speculation was leading into a big black hole. This book, written shortly after the stabilizing after the 2007-2008 crash, is mostly a long "I told you so". And she may be right, and she may be very smart, but you don't need 350 pages to say "I told you so".

I was hoping to read a bit more about Warren Buffet but though his involvement is frequent it's also frequently repeated and in the form of "Warren thinks this" with very little explanation and background. Tavakoli clearly gives the impression of the greatest respect for Warren Buffet but it's not very interesting without background. I almost get the feeling Tavakoli wants the world to know that she's in contact with him more than actually convey any information from him.

There is also a theme of "let them have it" when banks are starting to collapse. In reality the American (and other) government intervened, and the only major player that died, Lehman Brothers, caused huge problems for innocents and guilty both, so her standpoint is understandable from a morale perspective, but dangerous too. Nobody (I hope) is happy that many of the speculators that caused the problems came out mostly unscathed while millions of poor people in the US went bust. I think everyone can agree that there is no fairness in that, but again, repeating something enough times doesn't make it a more interesting read.

The book has one redeeming feature, it bashes speculative fund managers and bankers hard. They can take it and they deserve everything they get, so I hope the one thing people reading this book remember is that if someone wants to sell you a financial product really badly, it's because they are to gain from it, not you. And bankers and fund managers live on money churn, not gains. Avoid fees like plague since in our low interest, low growth world, any fees will completely wipe out your possible gain. Also, stay away from "financial products" that you don't understand. If the water has been muddied it's because what's hidden is scary.

Finally I think the book could have used a proper editorial overview. There are sentences and paragraphs repeated in different chapters in a way that makes it look very rushed. I do wonder if it was more important to publish "the first" book on the crash, rather than publishing a good book.

[Charles · Rating 5 out of 5]

What would Warren Buffett do? Read and find out

Despite his long-term record of success, there are many members of the financial services industry that pay little attention to the investment advice given by the greatest of them all, Warren Buffett. Tavakoli is herself a very astute investor and analyst of the financial markets and she carried on a conversation with Buffett in the last half of the first decade of the 21st century. This was when the speculative bubble started to unwind and then collapse, with the American taxpayers paying the bill with the double cost of a major recession with the loss of jobs as well as the public money that went to the financial institutions.
Tavakoli has some unkind words for the members of the American government regarding the massive debt being piled up, she spares no political party although her harshest words are used to refer to the American invasion of Iraq that toppled the government of Saddam Hussein. Tavakoli was married to an Iranian man and living in Iran when the revolution against the Shah was reaching the high level that drove him from power. Therefore, her comments about that region of the world are based on more than theory from a distance, she witnessed the ugly transformation of Iran into a brutal theocracy led by a religious autocrat.
The bulk of the book is a back-and-forth description of the financial meltdown, describing the comments and investment principles of Warren Buffett and then contrasting them with what the “leaders” of the Wall Street financial firms did. Tavakoli is almost totally opposed to the bailouts that were executed by the American Federal Reserve and the Treasury Department. She describes much of the malfeasance that was perpetrated and how nearly all were de facto cleared of wrong-doing.
Warren Buffett’s investing acumen as well as his humble nature are made very clear in this book, and his principles are so simple. Only buy value, both present and future, stay calm during financial turbulence and avoid the constant monitoring of the stock market. After hearing of all the negative actions and consequences of the actions of the traders in financial death, it was refreshing to read about someone that truly wants to create wealth for all, not acquire it for themselves and a few like-minded cronies.

This book was made available for free for review purposes and this review also appears on Amazon.

[m · Rating 2 out of 5]

Two-and-a-half-stars.

Janet Tavakoli reports that she was a member of the same freshman training class at Salomon Brothers as Michael Lewis, but says that unlike him she sat in the front-row & paid attention. Both she & Lewis write strongly opinionated criticism of Wall Street sprinkled with lots of gossip and firsthand accounts of significant events. The quality of their reporting is roughly equal, but Lewis is by far the more winsome writer.

By my rough count (I have a digital copy of this book) Warren Buffett's name appears in these pages around 470 times. This book is, indeed, a weird (stalking?) love letter to the 'Sage of Omaha.' But Tavakoli has long been quite capable of fending for herself, so I couldn't see the need of repeated reference to Buffett's writing/thinking for authorization of her own views, like when she writes "Warren’s subtle encouragement helped me find my voice. Now I specifically challenged the Federal Reserve Bank and major investment banks on national television" (p. 85).

Her love for Mr. Buffett leads her to write this howler:

"The national tragedy is that the Bush administration apparently neither read Berkshire Hathaway’s shareholder letters nor sought Warren Buffett’s advice."

That kind of sentiment, which pervades the entire book, makes the reader doubt the credibility of her many other (entirely justifiable) pronouncements.

I also worked at Bear Stearns in the late '80s & was distantly familiar with J.T. herself and some of the people & events she recounts. I continue to care about her opinions but can't quite recommend this book to lay readers, though former Bear Stearns employees will prolly regard chapter 9 of this book as highly as I did.

[Eric_W]

Quote from a review by Dynamic Duo on Amazon: "For example, the chapter about the backdating of stock options scandal, although not strictly related to the credit crisis, makes you wonder about the character of the people running corporate America: in the 2006-2007 timeframe more than 120 U.S. companies were under investigation for accounting irregularities; 85 ended up amending their earning statements. She is very critical of the role played by the Office of the Comptroller of the Currency (OCC), which invoked an obscure 1862 provision to undermine the states' ability to police predatory lending. This decision, she believes, had a very negative effect on mortgage origination standards and their subsequent re-packaging by investment bankers. Additionally, she castigates the Securities and Exchange Commission (SEC) for failing to oversee the investment banks. And when it comes to the rating agencies, which blessed some of these securitizations with AAA ("very safe") ratings, she employs the term "financial astrology". Enough said! Ironically, Mr. Buffett, who through its investment company (Berkshire Hathaway) owns almost 20% of Moody's stock, has admitted to her that this is one investment he is not proud of."

Brian Lamb's interview with the author is excellent and can be found at: http://www.youtube.com/watch?v=WA20Am... Tavakoli has an interesting background. She was trained as a chemical engineer and is now an expert in credit derivatives, etc. Her comments in the interview about crony capitalism made me sad and depressed, not to mention that basically we have a congress on the take.

[Khoa · Rating 1 out of 5]

The title of the book is: " What an Investor Learns 1,269 Miles from Wall Street"... she's a consultant. Check her company's website.

You can see that the author reviewed her own book on Goodreads and attacked other reviewers. If you didn't do anything wrong, you don't need to hide. Let your reader judge your work. This behavior alone qualifies the book for zero star.

Anyone who read closely knows that the author makes commentaries on talk shows. Now, does she get paid for it? Of course, yes! You know how these shows are structured: one supports Wall Street and one attacks Wall Street. An avid reader should realize that the structure of these talk shows gives her 50% chance of being right. That's very high. Since she happened to be right, she can go ahead and criticize Wall Street. This leads to the structure of this book:

Here's what happened. Here's what Warren criticized. Janet Tavakoli criticized the same thing. Look how great she it! How did she know about it? Because Warren Buffett is great, so she's great!

The author has serious name dropping of Warren Buffet and other Wall Street execs, yet I don't see any praise for this book from Warren. Overly focused on the name dropping and petty details. Very little analysis. Of course there is also a praise from Seeking Alpha, the pump and dump stock research agency.

I learned very little from this book. Many ideas are copied directly from Benjamin Graham and Buffet's quote.

[Tony Canas · Rating 3 out of 5]

This book is a weird hodgepodge of ideas some very interesting, some not so much. It's written by Janet Tavakoli who generally writes finance textbooks and who developed a friendship with the Oracle of Omaha. The book talks about her friendship with Buffett and reads more like her diary than like a well organized book meant to be published. It's essentially a giant love letter to Warren and a giant diss to Wall Street. With that said many parts of the book are interesting and enjoyable, it just seems that they are not organized very well to make it an easy read. I picked it up and put it down many times in the 3 months it took me to get through it. Finally, this book is not a beginners book and doesn't take the time to explain a lot of the financial issues it talks about in the way that other books bring them down to the layman's level, you need to have a decent background in finance or at least have read a few other books on the financial crisis to understand it. I recommend this book, but only for big fans of Warren who have a lot of patience to get through it.

[Christina · Rating 3 out of 5]

I wish I'd had the time to absorb the details in this book, I ended up skimming some of the more meaty details to be able to return it to the library. I found Janet Tavakoli to be credible and knowledgeable about the past few years events in the financial markets which have brought us into the current recession. I loved the re-cap of her meeting and subsequent interactions with Warren B., since that is about as close as I will ever come to meeting him myself. This book is a little heavy on the details for novice investors, plus it has a little bit of an "I told you so" tone. Otherwise, an interesting read.

[Julian Bu · Rating 2 out of 5]

learned little. the author has the most stretched reason to mention the buffett name to sell the book.

[Bob Segers]

Economy