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Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street's Bluff Paperback – March 29, 2011


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Editorial Reviews

Review

"This a riveting account of a tenacious investor, incompetent/apathetic regulators & analysts and a company that hid information, deceived investors and used every connection it had in its attempts to silence him. At points this reads like a John Grisham novel … except it actually happened. For me, this is the best of the ‘melt down’ books to date … hands down."
— Todd Sullivan, valueplays.net, April 2010

" ... Ackman’s pursuit of MBIA spanned the two major crises of capitalism of the last decade, from the earlier era of corporate fraud prosecutions epitomized by Enron and its off-balance-sheet special purpose vehicles (SPVs), to the late credit debacle stemming from the collapse of the CDO house of cards."
—The Hedge Fund Law Report, May 2010

--This text refers to the Hardcover edition.

From the Inside Flap

The Warning and the Winnings

Confidence Game is a real-world "Emperor's New Clothes," a tale of widespread delusion and one dissenting voice in the era leading up to the worst financial disaster since the Great Depression. Wall Street appeared to have found the secret for turning everything from risky mortgages to credit card bills into super-safe, triple-A-rated securities. Behind the facade of safety, the financial system had become dangerously fragile. Few had anything to gain from pointing out the risk.

Bill Ackman did. In 2002, the hedge fund manager issued a critical research report on MBIA Inc., the owner of a triple-A-rated bond insurer that played a central role in the financial alchemy on Wall Street. "This company will spiral downward," Ackman warned, and he placed a bet against MBIA that would earn his investors billions of dollars if it did.

The backlash was swift. Ackman was branded a fraud in the press and investigated by Eliot Spitzer and the SEC. Despite the scrutiny, he spent years telling anyone who would listen why MBIA was a catastrophe waiting to happen. With the onset of the credit crisis, the problems exposed turned out to be bigger than MBIA. An unquestioning acceptance of credit ratings, a blind eye to leverage, a dangerous reliance on financial models, and the abandonment of common sense had become part of a deeply flawed financial system. The collapse humbled nearly every large financial institution and plunged the country into recession.

Ackman's story captures an era of delusional confidence, when debt exploded yet risk appeared to vanish. Told by award-winning bond market reporter Christine Richard, Confidence Game is a behind-the-scenes look at how warnings went unheeded as Wall Street careened toward disaster.

--This text refers to the Hardcover edition.
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Product Details

  • Paperback: 335 pages
  • Publisher: Bloomberg Press; 1 edition (March 29, 2011)
  • Language: English
  • ISBN-10: 1118010418
  • ISBN-13: 978-1118010419
  • Product Dimensions: 5.7 x 1 x 8.8 inches
  • Shipping Weight: 15.2 ounces (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (43 customer reviews)
  • Amazon Best Sellers Rank: #173,476 in Books (See Top 100 in Books)

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Customer Reviews

4.5 out of 5 stars

Most Helpful Customer Reviews

83 of 85 people found the following review helpful By Janet M. Tavakoli on May 5, 2010
Format: Hardcover
In 2002, hedge fund manager Bill Ackman used credit derivatives to place a "short" bet against MBIA, the largest of municipal bond insurers. (Ackman later bet against other bond insurers.) Ackman raised serious accounting issues with MBIA executives, rating agencies, regulators, industry analysts. Among other things, Ackman questioned MBIA's foray into credit derivatives and synthetic CDOs.

Joseph "Jay" Brown, then MBIA's Chairman and CEO, met with Ackman in 2002 about a negative report Ackman was about to release. Ackman recalls this power-play (P. 6):

"You're a young guy, early in your career. You should think long and hard before issuing the report. We are the largest guarantor of New York state and New York City bonds. In fact, we're the largest guarantor of municipal debt in the country. Let's put it this way: We have friends in high places."

Ackman published the report on his fund's web site: "Is MBIA Triple-A?"

Here's some ironic background you won't find in Confidence Game. In 2003, Jack Caouette, then Vice Chairman of MBIA (he left in early 2005), wrote a blurb, still visible on Amazon, for my book on the dangers of credit derivatives and synthetic CDOs, Collateralized Debt Obligations and Structured Finance : New Developments in Cash and Synthetic Securitization. He began: "Caveat Emptor! Never in the history of finance has this warning been more appropriate."

Ackman's concerns were reasonable. Structured finance is easily gamed, and fraud was common. Moreover, Ackman was correct about several other accounting issues unrelated to synthetic CDOs.
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40 of 44 people found the following review helpful By John Bogle on April 20, 2010
Format: Hardcover Verified Purchase
this is a fascinating account of outlandish corporate greed and hubris and the author's and a fund manager's multi-year attempts to shed sunlight on the manifold fraudulent machinations one large company's management employed to keep its debt rating and "earnings" intact. it also contains insights into the then forthcoming credit crisis, the almost-fraudulent conflicts facing the sell side and bond rating agencies, and the ineptitude and politicization of the sec- sort of michael lewis meets harry markopolous. for me it's a five-star book; however, some of the more technical finance and accounting, while very clear, might make it a slightly less rich experience for those less interested in these details. i was surprised that this book hadn't been more broadly publicized or reviewed, then found out it's only on kindle; hard copy is released 4/26. really great read.
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10 of 10 people found the following review helpful By a Chelsea reader on May 11, 2010
Format: Hardcover
CONFIDENCE GAME is a thoughtful, sharply observed piece of reporting on an historic moment in U.S. history--both financial and sociological--that brought the intricacies of the financial world into sharp focus for me. With a brisk pace, telling details, and the ability to explain the financial industry and its people with wasting a word, Richards has crafted an extraordinary book.
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7 of 7 people found the following review helpful By Ira E. Stoll VINE VOICE on August 9, 2010
Format: Hardcover Verified Purchase
This book came out in late April, and the Wall Street Journal, the New York Times, and the Financial Times have all ignored it.

The lack of attention is a shame, because it's an amazing, amazing book.

Hedge fund manager William Ackman gave author Christine Richard impressive access. She writes, "Ackman gave me a CD-ROM containing every e-mail he had written or received that mentioned MBIA as well as years of appointment calendars and access to an office filled with more than 40 boxes of documents he'd collected in researching MBIA. He encouraged colleagues, advisers, and friends to talk with me and spent hours answering my questions."

The result is a fast-paced, behind-the-scenes look at how a "short" investor uses the press, stock analysts, and the government to beat down the price of a stock he has bet against.

Mr. Ackman's campaign that is at the heart of this book is his war against Municipal Bond Insurance Association, or MBIA.

Here the key journalist seems not to have been anyone at the New York Times, or even Ms. Richard, who worked for Dow Jones and Bloomberg. No, it was "Marty Peretz, the editor-in-chief of the New Republic magazine, who had been Ackman's thesis adviser when he was an undergraduate at Harvard."

Mr. Peretz, reports Ms. Richard became the first investor in Mr. Ackman's hedge fund after Mr. Ackman "drove from Boston to Peretz's summer house on Cape Cod to pitch him the idea." (Mr. Peretz tells me the investment was $500,000, made at the time and not subsequently increased.)

By Ms. Richard's account, Mr. Peretz wasn't exactly what you'd call a passive investor. After the SEC didn't really follow up on a meeting in which Mr. Ackman aired his allegations about MBIA to SEC staff, Mr.
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7 of 7 people found the following review helpful By A. Youn on May 7, 2010
Format: Hardcover Verified Purchase
This book is an incredibly engaging story about a hedge fund's quest to expose an over-leveraged and unstable company - a company that would later play a major destabilizing role in our nation's financial crisis. Given the subject-matter, the book is surprisingly *fun* - it is a page-turner populated by entertaining personalities, and they really come to life. And the story is fantastic - the audacity of the companies involved will make you gasp out loud, if you are not too busy smacking your head. On a more serious note, I also believe this is an important story to tell. Our financial markets and regulators are very poor at highlighting bad and risky businesses - they need the help of the private sector to identify and expose these businesses. This book is about an incredibly courageous effort to bring market information to the light of day. This is one of my favorite books of the year.
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