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in the September/December natural gas spreads depending on which time period you use for your data. In September, Amaranth lost more than half of its value, skidding from $9 billion to only $3 billion in assets (according to the Wall Street Journal) having put on the classic “Dead Man’s Curve” trade. These trades don’t follow a normal curve or even a historical spread pattern, and even if historical patterns eventually return, in the meantime, one is merely “dead” right.

22 Warren Buffett to Janet Tavakoli, e-mail correspondence, 27 September 2006.

23 Ianthe Jeanne Dugan, “Failed Hedge Fund Haunts Celebrities,” Wall Street Journal, 22 August 2006.

24 Richard Esposito, “Police Investigating Possible Suicide by Hedge Fund Cheat,” ABC News, 9 June 2008.

25 Ibid.

26 Greg Newton,“Surfacing Scammy,” Naked Shorts, 10 June 2008.

27 Ianthe Jeanne Dugan, “Manhunt is Launched for Trader in Big Fraud,” Wall Street Journal, 11 June, 2008.

28 Ibid.

29 Greg Newton,“Show Me the Corpse!” Naked Shorts, 9 June 2008.

30 Carlyn Kolker and David Glovin, “Bayou’s Samuel Israel to Forfeit Bail, Begins 20-Year Sentence, Bloomberg News, 3 July 2008.

31 Christian Boone and Bill Rankin, “Marietta Man in Hedge Fund Fraud Commits Suicide,” Atlanta Journal-Constitution, 25 May 2008.

32 D. H. Lawrence, “The Rocking Horse Winner,” in The Woman who Rode Away and Other Stories (1928), edited by Dieter Mehl and Christa Jansohn (Cambridge, U.K.: Cambridge University Press, 1995) 230-243.

33 Benjamin Graham, The Intelligent Investor New York: Harper & Row, 1973), 98.

34 Richard Heckinger to Janet Tavakoli, e-mail correspondence, 22 August 2006. Heckinger is now the senior policy advisor in the Financial Markets Group of the Federal Reserve Bank of Chicago.

35 Gregory Zuckerman, “Shakeout Roils Hedge-Fund World,” Wall Street Journal, 17 June 2008. The calculations on the number of hedge funds controlling assets is from Tavakoli Structured Finance Inc. based on market share data from Hedge Fund Research, Inc. sourced in this article.

36 Tom Cahill, “HFR Hedge Fund Index Rebounds in April after Decline in March,” Bloomberg News, 30 April 2008.

37 Matthew Lynn, “Hedge Funds Come Unstuck on Truth-Twisting, Lies,” Bloomberg News, 9 April 2008.

38 Tom Cahill, “Hedge Fund Outlook Is ‘Much Worse’ Than 1998, LTCM Veteran Says,” Bloomberg News, 8 August 2008. Hans Hufschmid became the chief executive officer of GlobeOp Financial Services LP.

39 Neil Weinberg and Bernard Condon, “The Sleaziest Show on Earth,” Forbes, 24 May 2004.

40 Ibid.

41 Ralph Cioffi (former managing director of Bear Stearns Asset Management) in a conversation with author, 30 March 2006. (This is not proprietary information).

42 Berkshire Hathaway Inc. 2007 Annual Report, 17.

43 Carol J. Loomis,“Buffett’s Big Bet,” Fortune/CNNMoney.com, 9 June 2008.

Chapter 5: MAD Mortgages—The “Great” Against the Powerless

1 Berkshire Hathaway 2003Annual Report, 5.

2 OHC Liquidation Trust, et al v. Credit Suisse First Boston et al., U.S. Bankruptcy Court, Delaware. Civil Action No. 07-799 JJF (Chapter 11 Case No. 02-13396) Memorandum Opinion June 9, 2008. (Partial Summary Judgment) Oakwood provided both mortgage loans and retail installment sales contracts (RICs) to buyers of its homes. Credit Suisse First Boston and subsidiaries (CSFB) provided Oakwood with a warehouse facility. CSFB received a warrant to purchase just under 20 percent of Oakwood’s common stock and earned fees for the warehouse facility and for structuring real estate mortgage investment trusts (REMICs) backed by Oakwood’s loans. CSFB was also the underwriter and marketer. CSFB bought the REMIC Certificates and sold them to investors. On November 15, 2002, Oakwood filed for protection under Chapter 11 of the Bankruptcy Code. From 1994 to 2002, CSFB underwrote $7.5 billion of Oakwood’s securitizations, of which $1.3 billion were done in 2001-2002. In 2001-2002 alone CSFB earned around $21 million in fees. Oakwood’s liquidator wanted $50 million for the decline in its value while it was sinking and to get back $21 million