The Big Short_ Inside the Doomsday Machine - Michael Lewis [89]
He resisted the news. He had a gift for finding and analyzing information on the subjects that interested him intensely. He always had been intensely interested in himself. Now, at the age of thirty-five, he'd been handed this new piece of information about himself--and his first reaction to it was to wish he hadn't been given it. "My first thought was that a lot of people must have this and don't know it," he said. "And I wondered, Is this really a good thing for me to know at this point? Why is it good for me to know this about myself?"
He went and found his own psychologist to help him sort out the effect of his syndrome on his wife and children. His work life, however, remained uninformed by the new information. He didn't alter the way he made investment decisions, for instance, or the way he communicated with his investors. He didn't let his investors know of his disorder. "I didn't feel it was a material fact that had to be disclosed," he said. "It wasn't a change. I wasn't diagnosed with something new. It's something I'd always had." On the other hand, it explained an awful lot about what he did for a living, and how he did it: his obsessive acquisition of hard facts, his insistence on logic, his ability to plow quickly through reams of tedious financial statements. People with Asperger's couldn't control what they were interested in. It was a stroke of luck that his special interest was financial markets and not, say, collecting lawn mower catalogues. When he thought of it that way, he realized that complex modern financial markets were as good as designed to reward a person with Asperger's who took an interest in them. "Only someone who has Asperger's would read a subprime mortgage bond prospectus," he said.
By early 2007 Michael Burry found himself in a characteristically bizarre situation. He'd bought insurance on a lot of truly crappy subprime mortgage bonds, created from loans made in 2005, but they were his credit default swaps. They weren't traded often by others; a lot of people took the view that the loans made in 2005 were somehow sounder than the loans made in 2006; in bond market parlance, they were "off the run." That was their biggest claim: The pools of loans he had bet against were "relatively clean." To counter the assertion, he commissioned a private study, and found that the pools of loans he had shorted were nearly twice as likely to be in bankruptcy and a third more likely to have been foreclosed upon than the general run of 2005 subprime deals. The loans made in 2006 were indeed worse than those made in 2005, but the loans made in 2005 remained atrocious, and closer to the dates when their interest rates would reset. He had picked exactly the right homeowners to bet against.
All through 2006, and the first few months of 2007, Burry sent his list of credit default swaps to Goldman and Bank of America and Morgan Stanley with the idea they would show it to possible buyers, so he might get some idea of the market price. That, after all, was the dealers' stated function: middlemen. Market-makers. That is not the function they served, however. "It seemed the dealers were just sitting on my lists and bidding extremely opportunistically themselves," said Burry. The data from the mortgage servicers was worse every month--the loans underlying the bonds were going bad at faster rates--and yet the price of insuring those loans, they said, was falling. "Logic had failed me," he said. "I couldn't explain the