My guest this week is Danny Moses, who was directly in the middle of the biggest trades in market history, chronicled by Michael Lewis in his book the Big Short.
Danny was the head trader on the Frontpoint team led by Steve Eisman, which was one of a small group of firms that figured out, in real time, the dire situation with mortgage-backed securities during the financial crisis, and how to build a portfolio to bet against the U.S. housing market.
We cover his part in the Big Short story, but also lots of other interesting ground, including the state of sell-side research and financial markets. I love conversations with traders because they live and breathe market risk. You’ll be able to see why quickly in this great conversation with Danny Moses.
2:57 – (first question) – The four traits that would give someone the best odds to succeed as an analyst
7:40 – Danny’s take on his role during the financial crises, which was highlighted in ‘The Big Short.’
14:47 – Looking at the first moment that there was something wrong but that there was a way to trade against it during the crisis
17:13 – Exploring the moment when Danny had to reconcile an amazing trade against a dangerous scenario for the US economy
20:17 – What was the relationship with the other people that discovered parts of this unraveling
22:19 – Danny recounts working with Michael Lewis
24:16 – Flash Boys: A Wall Street Revolt
24:40 – Going back to the auto lending crisis in the 1990’s
28:22 – The evolution of the sell side, what’s good about it today and what was bad about in the early 2000’s.
34:55 – Why the markets appear to be broken right now
“It’s all about how you get paid… this is the worst, in aggregate, that Wall Street research has ever been, because I believe it is compromised… fundamental investing has gone by the wayside, you’re better off knowing which ETFs hold this stock than what this company even does.. that’s scary to me.”
“In order for us to get back to fundamentals mattering, the market needs to have a major crash or unwind.”
37:20 – How markets were much different back in the 1990’s and what made them more interesting.
40:16 – Has the information provided by the sell-side to the buy side gone down since the financial crisis because the quality of research is lower
43:24 – What was about financial services that Danny found attractive for an active strategy?
47:14 – What was the first idea where Danny was applying his filter and realized the market had it wrong.
49:01 – How did Danny think about valuation as part of the bottom up framework?
55:30 – Danny tells the story of how his friend Ira had to run and help bail out Dominque Strauss Kahn, the head of the IMF at the time.
58:30 – The Fixer
58:40 – How do you become the bail bondsmen to the stars
1:01:02 – Open: An Autobiography
1:01:25 – What is next for Danny Moses?
1:02:33 –The root of Danny’s interest in doing media.
1:04:52 – Kindest thing anyone has ever done for Danny