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Danny Moses

lines on the record: 67
first: 2017-04-25
most recent: 2017-04-25
sittings or episodes: 1
sources: podcast

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“It was great. So we first came in to interview us for an article. That's how it kind of started After the book came out in march twenty ten, we did some events together and so all of us did, and then it was kind of done. And then may sixth, twenty ten rolls around, and the flash crash occurs. And the first thing I did, other than not breathe for 90 seconds while it was happening, because we were still trading, but now we're on to the next trade, right? Was call Michael Lewis and say, you have to write something. And he'll tell you this. You have to write something about this because the markets are not sound. I mean, there's too many technologies being implemented in trading. It's just the safeguards aren't there, so forth. So one thing led to another there, and I introduced him to Brad Katsuyama, who now with Ronan Ryan, they run IEX, and they were at RBC at the time. And I had just met Brad maybe six or seven months before that. And Brad was explaining to me why the market structure is imperiled and what needs to happen and what he's seeing that's going on out there. So long story short, Flashboys.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“Did single name bottom up stuff like us. And I think we were very unique in the sense of we use this information in the bond market to help us with our stock portfolio and everything with us was bottom up. And we were picking mortgage-backed securities in various jurisdictions in California by various issuers that we felt had bad or shoddy underwriting standards. So for us, I think we were the ideal candidate for this trade and for Michael Lewis to portray us because of the uniqueness of how we approached it. It wasn't a blanket shorting call at all, but we were aware of the other people, but really it was maybe seven or eight firms that we were aware of that were even involved in this trade to the degree. Again, a lot of firms were involved in the ABX, but they were doing it against some other commercial mortgage-backed portfolio or something. It wasn't of general, the world's going to end. It was like, this is an attractive trade. Ours was more, you know.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“We were aware of some of them because we'd be at dinners or conferences and we would see other equity guys like, hey, equity guy, what's up? You're obviously on the same hunt that we are. And there were firms like Cedar Hill that they did exceptionally well in the trade. Paulson obviously did very well in the trade. But when Michael Lewis came around, he called Meredith Whitney because he had a relationship with her and we all worked with Meredith at Oppenheimer just to backtrack for a second. And he asked Meredith, who do you know out there that is involved in this subprime trade? And she knew Steve well. She worked with him. She was the other associate with Vinnie for Steve. And so he called us first. He called all these players, I believe, but he picked a select group of kind of three or four that he thought were the most interesting, the way they approached it, like the Michael Burry personality. He was a surgeon, a doctor that became this hedge fund guy and so forth. So it was more of, I think, there were a lot of players out there. Some exploited the ABX general just kind of broad sense of what how to play the market.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was about uncovering something, trading it. And I think the movie did a great job in terms of us being detectives in a fixed income world, equity guys in a fixed income world is really what it was. And so it was unnerving. We were able to deal with it, obviously, but it was scary. And I'll tell you, just take the one step further. The bailout stuff that happened, you know, the tarp, the tauf, the P-PIP, and all the things that were occurring, we got very lucky, I think, in the sense that the trade that we were in, while it was legal and there was documents associated with it, at any point in time, the government could have come in and said, no, this is stopping. Cancel it all or whatever. That's why Vinny and I were so emphatic about closing out the trade at 10 cents on the dollar. I mean, let the lawyers deal and let the brokers have the last 10 cents. We're not going to hang on here. I don't even know really what we're dealing with in terms of documentation. So their timing getting in was lucky and our timing getting out was timely, like hanging on for that.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“that time period. And so Benny and Porter picked me up and took me to the steps of St. Patrick's Cathedral. So, of course, as a good Jew, I'll go in and sit on the steps and, you know, pray. But sitting out there, and Steve had been at a Goldman Sachs conference, and he walked down and I remember him coming up on the steps. And we were all just standing there. And so the scene in the book versus seen in the movie is when Vinny's on the phone with Steve somewhere and he closes out the trade. But the real scene is that in the book, we're on St. Patrick's Steps watching people go by. And it's so surreal because we're thinking to ourselves, 95% of these people have no idea what's happening right now and their job and their livelihood's going to be affected. They may not even be investing in the stock market, but they may work for companies that have some association and so forth. So we were scared at that point. So it became not about the money. And it really was never about the money for us. Of course, you make money for your clients and make money.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“That was probably the strangest, craziest thing. The irony that we were at a Morgan Stanley hedge fund. So Morgan Stanley had acquired front point partners in the midst of all of this and paid a nice chunk for it. I can't remember the exact amount, but say four or five hundred million dollars or something in that range. And so while we found ourselves on a more stable platform, if you wanted to say, we realized as this was all ongoing, and it was in the book and it was in the movie that, hold on, we work for the firm that may be the center of all of this. What do we do about it? And so that was the first of all. The second part of that to your point was what's happening to humanity here? What's going to happen here? And there's a scene in the book, which is very accurate. And I actually have a panic attack on the trading desk because there was a day where the markets where all the bank stocks were coming undone. We could have been long and we could have been short, but everything was just dropping. So it wasn't a performance issue for us that day. It was more like, hold on a second. People are really flying out of these names. There's a real crisis going on. This is post Fannie and Freddie. This is kind of pre-Lehman right around.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, the movie portrays stuff on the news and seeing things that were out there, but I would say failed capital raises, companies go into trust preferred to raise capital instead of traditional secondary equity offerings and so forth. There was a lot of signals that were out there”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“And New Century in particular comes to mind that they had really a highly levered balance sheet. And they would go produce loans into the marketplace and they would sell the loans into the marketplace. So they would get funding from the Wall Street banks, produce the loans, keep some on their balance sheet, and then sell the rest, right? And there was a retention rule that they had to keep a certain amount of bonds. Well, what was happening was they were selling the best bonds, say, if PAR is 100 at 103, 104, and keeping the worst, but they were assuming everyone was assuming that 103 or 104 should be the price for their entire portfolio. So we realized there was a mismatch. And that was in the public domain that you could see that they couldn't sell a certain amount. And so as the performance on those mortgages deteriorated, the bonds deteriorated, obviously. And so the stocks were reflecting the balance sheet valuation of these companies at the time. And we knew once that happened that the other side was going to follow suit. So it was a combination of having an antenna up.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, I think the stock started to work at the same time that the CDS was working. So we got confirmation on one side that the other was going to happen. There was a period of time, though, where spreads were widening in the fixed income market and the equities were still holding in. And there was a massive dislocation. So I would be talking to the head fixed income trader at Deutsche Bank and the head financial equity trader at the same time. And the head financial trader had no idea what was happening on the fixed income desk. So here he is bidding for stocks in New Century Ketterhome lenders countrywide. And I said, dude, you got to be very careful because your other side of your desk right now is out trying to short all this paper that these companies are out there creating. So there's a disconnect. So either walk across and find out what's going on. So there was a period of time where there was misinformation in the market. And I would say that when the stock started to drop, it kind of gave us a little bit more confidence in what we were seeing. And then there were some failed deals on the equity side. Companies' inability to go out and raise capital.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“On Wall Street, in the fixed income business, and it was too easy. So we can go into any of those stories in particular, but a lot of it was behavioral finance 101 and really understanding, recognizing that and not trying to trade away from everybody versus with everybody. So that was basically.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“anyone and me who was dealing with the street, trading, trying to understand the nuances at the time, really on the fly, was great. So I would say that from the book to the movie, the only thing that wasn't portrayed correctly was I was a guy that said, how are you going to fuck me? Excuse my French, I can say this on a podcast. And so forth, because I was in the trenches. And Vinny and I, Vinny and I did travel together at various times, Porter. Vinny and I traveled together. Steve Vinny and I traveled together, the Las Vegas scene. Some of it was accurate. There was no alligator chasing us, you know, out of a pool, but we did go to neighborhoods and knock on doors and so forth. So it was just a surreal period of time. And none of us really took it for granted. It was lucky in the sense of timing. Like I said, we made money the day we put the trade on. And our counterparts, as you know, from the story where Deutsche Beck and Goldman Sachs. And so it was just really a continuous discovery process of where the bodies were buried. And it was easy to see that people were making.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“A third of the portfolio was long, a third of the portfolio was short, and a third of the portfolio was in these mortgage-backed securities. So we weren't, it wasn't our entire portfolio. It wasn't really levered up very much. I think at the peak, we probably had five or six hundred million dollars worth of combination of CDOs and ABX and single name CDS. And so we probably could have made more at the time, but it was really going along with our strategy. And so we were able to look at our equities from a credit standpoint, which we have still done at my next firm, Seawolf, which we can talk about. But it was always a bottom-up approach because you cannot commoditize lending. It's one thing that you can't do. You can leverage it. But at the end of the day, if you underwrite poorly, it'll catch up with you. And Steve was a great teacher for all of that. And so having the balance, you know, Steve is the brains and really understanding great instincts. Vinny is the best research analyst of all time, porter who understood the banks better than.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“The cost to short the securities was more than trying to figure out some other way to do it, which was buying credit default swaps on the bonds that are being issued themselves which have been put together in various mortgage-backed portfolios. So coming full circle on that, and as the movie portrayed, Michael Burry, who was played by Christian Bale, was very early to this trade and actually was the pioneer in terms of creating the ability to buy what in effect is a put option on the mortgage business. We did our first trade in august two thousand six. And from the very first statement that we received, we were making money. I can tell you that if we had been in the same position as Michael Burry, I don't think we would have made it through the trade. We were an equity fund that decided to go into the fixed income market. So your investors are going to have a very short lease. Exactly. So it worked right out of the gate. And I would say at the time, roughly.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“They lost a trader and they said, Hey, do you know anyone that can trade for us? So I said, I'll do it. I know your portfolio. I know how you think. This was late 2005, early 2006. Just give me a seat at the table and I'll figure it out. So I jumped over there in 2006. And this was right when things were starting to unravel in housing. So we were tracking housing data. We were tracking delinquent loans and mortgages and so forth. But more importantly, we all understood how these companies were financed, the bonds that they were issuing, the ABX that was being created, and just the leverage that was entering the system. So if you combine our four brains kind of at the time, it really came down to we could no longer short stocks like New Century or Credit Home Lenders. One, there was not much stock that you could short. And if you found it, you were paying 40 to 50 percent interest on it. Secondly, they were paying these large dividends quarterly, even though we knew that they would run out eventually. So it really became.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“They were the ones that brought Saxon public. They brought a credit home lenders public, they brought New Century public, so as a salesman at the time, I was able to see these companies being built from the ground up. About that same time two thousand three, two thousand four, Steve takes Porter and goes to Front Point to be one of the first teams on the platform. I am a salesperson at FBR covering these guys, Vincent joins from KBW, joins Stephen Porter as well. So fast forward a little bit. The subprime business is growing. I'm a salesperson at FBR. I'm the senior salesperson, and I refuse to sell any of these deals. And instead, what I do is I go to these roadshows, I take friends with me that are in fixed income, and I say, what's wrong with this? There's something wrong here. And so while I wouldn't sell the deals, which hurt me in terms of my own pocket and in my stature at the firm, I just didn't believe in these companies. At the same time, Vincent Porter and Steve lost their trader at the time, and they knew these companies well.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“Go into the securitization database and you look at the Moody's and SP flows that are coming in and you can tell X amount of delinquencies, there's only so much capital that these firms have, they're going out of business. There's nothing they can do about it. I go, okay, well, that seems pretty easy. So it went into home equity loans from there and so forth, so in the lead 90s. So fast forward, Steve leaves and goes to Chilton. Vinny leaves and goes to an independent research firm that was basically dealing in Fanny and Freddie at the time. Josh Rosner was his partner who's now all over DC. You see him a lot. And in the midst of that, 9-11 happens and Vincent goes to KBW to be an analyst there to kind of fill many roles. Steve stays at Chilton and hires Porter Collins, who was the fourth person that was mentioned in the big short, as his associate. So I leave Oppenheimer from the cell site and go to a place called Freeman Billings and Ramsey.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I would probably go back to, I worked with Steve Eisman starting in, I would say, 1996 at Oppenheimer. I was an institutional equity broker. He was our research analyst. His associate was Vincent Daniel, who was also in the big short. And so they were a research team and I was a sales guy at the time. So I would take them around to meetings, fun stories like taking Steve to Alabama at the NBC Suites Hotel to see the retirement system of Alabama. It was no hot water and he comes downstairs. You know, great stories like that. But the first go-around with these guys was the first subprime crisis, which actually was around auto, subprime auto, ugly duckling in those names back then. And that was in the late 90s. And so Steve literally got up to the podium on the research platform and said, the following five stocks are going to zero. And he walks off. It's like AIM, ugly duckling. It was a list of them. And I pulled Vinny aside. I go, Vinny, what is this? What is he talking about? And he goes, it's easy.”
2017-04-25 · Invest Like the Best · Danny Moses - The Big Short and Beyond - [Invest Like the Best, EP.34] · IDENTIFIED FROM THE TRANSCRIPT · source