Thursday, September 09, 2010

Oh yeah, this is funny money...

Marcia Taylor offers her review of one of the latest post-mortem reports on the financial crash, The Big Short by Michael Lewis.  It was apparently a learning experience.
This month marks the second anniversary of the Wall Street meltdown that very nearly bankrupted the global financial system and triggered untolled human and economic carnage in its wake. I don't need to recount the misery wrought by the Great Recession, but I will admit that I didn't truly grasp the sheer depravity of the subprime mortgage crisis until reading author Michael Lewis's latest book, "The Big Short."
In it, Lewis decodes the financial double-speak that was meant to keep billion-dollar derivatives trades so opaque that even ratings agencies like Moody's didn't know how to properly rate them and instead magically turned Bbb- bonds into Aaa.. We learn exactly how a trader at Morgan Stanley could lose $9 billion on a single trade, apparently without adult supervision at his parent company. And--most amazing to me--that the icons of Wall Street magnified the crisis out of proportion by making their own house bets on borrowed money. [More]
This book seems to match many others flooding the market. But more interesting to me was to see the name of of one of the major actors in that drama pop up in my part of the economy.

Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said he is investing in farmable land, small technology companies and gold as he hunts original ideas and braces for a weaker dollar.
“I believe that agriculture land -- productive agricultural land with water on site -- will be very valuable in the future,” Burry, 39, said in a Bloomberg Television interview scheduled for broadcast this morning in New York. “I’ve put a good amount of money into that.”
Burry, as head of Scion Capital LLC, prodded Wall Street banks in early 2005 to create credit-default swaps to bet against bonds backed by the riskiest home loans. The strategy paid off as borrowers defaulted, letting his investors more than quintuple their money from 2000 to 2008, according to Michael Lewis’s book “The Big Short” (Norton/Allen Lane).
Burry, who now manages his own money after shuttering the fund in 2008, said finding original investments is difficult because many trades are crowded and asset classes often move together. [More]
I'm not sure what "water on site" means, but if I were in irrigation country I'd be curious. Judging by the latest FRB Chicago report on farmland price increases the boom is hot enough in north central IA (14% y-o-y).

One more exhibit in support of my bullishness on farmland.

Howdja like to farm for one of these guys?  Think they'll be interested in a fair, risk sharing flex rent?


Anonymous said...

Water on site?
I think he means well watered whether it be by rainfall or irrigation. He just doesn't want a section of Nevada desert or Wyoming for that matter unless there are mineral rights.

Anonymous said...

I would assume water on sight means iether surface irrigation under a well managed irrigation district with high priority, well water that is accessible and not in a rapidly declining aquifer, water from a river basin that is not in danger of being "taken" away from irrigation for environmental or endangered species concerns. Low risk irrigation water.