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Book Goes Inside and In-Depth on the Nuclear Meltdown of Wall Street

Many experts like to point to August 2007 as the beginning of Wall Street’s most colossal meltdown since The Great Depression, but reality is that the death spiral began much earlier. In the new book, Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (John Wiley & Sons; January 2009; $24.95; Hardcover) author Janet Tavakoli, president of Tavakoli Structured Finance, takes us on a real-time trip inside the events leading up to the worst global financial crisis in the history of the world, outlining in startling detail how the complex and often corrupt web of interaction of collateralized debt obligations (CDOs), credit derivatives, mortgage loans, consumer loans, corporate debt, hedge funds, investment banks, rating agencies, and bond insurers led to the credit bubble bursting. There were voices shouting about the impending doom, long before disaster struck, and Tavakoli was a vocal one who could see that an investment in a country prone to terrorist attacks had a lower risk than an investment in the U.S. housing market.

Woven throughout the book are insights gleaned by Tavakoli from the “Oracle of Omaha” Warren Buffett. After reading her previous writings that got her dubbed “the Cassandra of Credit Derivatives” by Business Week, Buffett invited Tavakoli to Omaha for lunch; the beginning of a 3-year email and letter correspondence during which they discussed the looming crisis, Tavakoli’s experiences living in the Mideast, geopolitics, and much more. “Meeting Warren changed the way I look at global financial markets,” said Tavakoli.  Expert at decoding Wall Street’s often convoluted deals, Tavakoli found that Buffett’s approach to the markets and life encouraged her to speak out more forcefully and become an even better investor along the way.

 In Dear Mr. Buffett Tavakoli shines a bright spotlight on the dark corners of Wall Street and finance-land to expose the characters who inflicted such “malicious mischief” on the global economy, unmask the “Black Barts” who more resemble the famed Wells Fargo stage coach robber than black swans, and identifies the finance “meth labs” where Wall Street’s crack was manufactured.  Outliers are shown for what they really are: outright liars.

Through sprightly writing we learn how funny accounting led to make believe profits and see just how that ride on the leverage roller coaster works (straight down to a warm, uncomfortable place, taking us all with).  Dear Mr. Buffett makes clear that the bail out isn’t for you and me – it’s for investment banks – the financial “meth dealers”.  We get the skinny on regulation – the regs are there but the finance police were napping in the stagecoach. The rating agencies? – busy crafting astrological charts with old data to predict new risks. Washington? – writing blank checks instead of protecting our money.

Tavakoli foresaw the crisis, and discussed the worsening conditions with Buffett as early as 2006.  The more she saw, the more she also saw that Buffett’s investment and life philosophy avoids catastrophe by holding fast to core values.  Not simply a look back, Dear Mr. Buffett also takes the long view, peeking around the corner to see what the future offers – more real estate declines, a deepening recession, and impending inflation.

But all is not lost. There is hope for those who adopt Buffett’s approach to their investments and their life. Dear Mr. Buffett is a witty well-told account of what happened that would be funny, except as Tavakoli explains: “We invented money to enhance our probability of survival.” Most importantly, Tavakoli tells the story of how principle triumphs over greed and panic, and that wisdom will always beat the market – even when the bubble bursts.

Dear Mr. Buffett is a witty well-told account of how principle triumphs over greed and panic, and is a must-read for all those seeking the timeless wisdom that has beaten, and continues to beat, the market.