Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street


If legendary investor Warren Buffett invited you to lunch, whatwould you talk about? That was the question faced by structuredfinance expert Janet Tavakoli after she sent the Oracle of Omahaher book on credit derivatives, and he replied with an invitation.Now, in Dear Mr. Buffett, she gives you a seat at the table for theextraordinary conversation that began at that lunch and hascontinued through some of recent financial history's most turbulentmoments.

Dear Mr. Buffett reveals ...

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If legendary investor Warren Buffett invited you to lunch, whatwould you talk about? That was the question faced by structuredfinance expert Janet Tavakoli after she sent the Oracle of Omahaher book on credit derivatives, and he replied with an invitation.Now, in Dear Mr. Buffett, she gives you a seat at the table for theextraordinary conversation that began at that lunch and hascontinued through some of recent financial history's most turbulentmoments.

Dear Mr. Buffett reveals how Buffett's wisdom shinesthrough in today's financial world, including how he usesderivatives in classic Buffett style—with prudence,transparency, and an aversion to Wall Street's herd mentality.Sampling their wide-ranging conversations and correspondence,Tavakoli offers both Buffett's and her own sharp insights into themortgage crisis, hedge funds, shoddy accounting practices, andoverall devolution of the markets.

Along the way, Tavakoli sheds light on an aspect of Buffett'ssuccess often overlooked by those focusing on his consistentreturns and distinctive value investing approach. In addition tomaking the right picks for steady, long-lasting gains, Buffett hasalso avoided many major financial meltdowns and crashes, seeming tosee them coming before they arrive. Whatever your level as aninvestor, you'll fine-tune your own analytical skills as youdiscover how both Buffett and Tavakoli were able to spot danger onthe financial horizon.

In Dear Mr. Buffett, you'll also find answers toquestions such as:

  • How does Buffett find the rare opportunities for truearbitrage?
  • What is the Golden Fleece Award, and why does Buffett call it "agem"?
  • How can Nobel laureates get investing so wrong in practice?
  • How does Buffett's concept of value carry over to life beyondinvesting?

Dear Mr. Buffett is a witty, well-told account of howprinciple triumphs over greed and panic, and is a must-read for allthose seeking the timeless wisdom that has beaten, and continues tobeat, the market.

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Editorial Reviews

From the Publisher
Altogether this book is an excellent read, loaded with information about the goings-on in the financial sector in the US till as recently as September 2008. The is informal, almost like a conversation in a lounge bar, racy, laced with wit and when it comments on leading actors in the drama, dipped in vitriol. Tavakoli is a name we will be hearing about frequently in the near future. (Business Standard)

"Dear Buffett is must reading . . . in a way that only Tavakoli could provide. . . Tavakoli knows her stuff. She knows where the bodies are buried in the complex formulas. . . And, almost as a bonus, we get Buffett's views and insights into his derivatives trading. There's nothing more you could ask for in a financial book in this day and age of financial derivatives meltdown." (Economic Policy Journal)

"...full of anecdotes, details and character sketches that add depth...she knows her stuff, has strong opinions and turns a colourful quote." (Financial Times, February 21st 2009)

"A clear and pacy run through the multitude of sins and sinners in the modern financial world. . . full of anecdotes, details and character sketches that add depth and colour to even the best known episodes of the past two years. [Tavakoli] also covers events only a few years before the current crisis that should have been big warning signs. The correspondence between Buffett and Tavakoli over the past three years reinforced her existing views on the dangers of complex finance. And with Buffett's blessing, this book will find a ready-made fan base with little marketing effort. . . Tavakoli makes for an attractive pundit - she knows her stuff, has strong opinions and turns a colourful quote. . . There is a healthy dose of "I told you so" about this volume - but, to be fair, Tavakoli is one of the few who did." (Financial Times)

"[Tavakoli has] been railing against emperors wearing no clothes in the credit derivatives markets forever. If only people had listened." (

"Why is this not an ordinary Buffett book? Because it concerns how an expert on derivatives came to know Mr. Buffett, and how the current crises were seen in advance by both of them. This book’s greatest strength comes from its ability to explain the messes we are currently in. No solutions, mind you, and Mr. Buffett ain’t handing out any of those either, but understanding how we got to where we are is of value, and Janet Tavakoli is nothing if not a good writer on those points.
There is a second theme — how a derivatives expert came to appreciate value investing. After all, when short term investing is focused on a variety of arbitrage situations, why not think long, and look for long term capital appreciation?
I heartily recommend this book. One reading this will understand our current crisis very well, and will gain in his understanding of how our markets work. That said, the virtues of the book do not come from Mr. Buffett, but from one who intelligently admires his views on derivatives and other matters." (The Aleph Blog)

‘Dear Mr Buffett’ is, like its author, strongly, often harshly, and, more than rarely, tartly, opinionated. The attitude is, however, well-supported by the facts; should anyone ever display the slightest interest in criminalizing the criminals who led us down this path, a prosecutor could do worse than ordering up copies for the grand jury.
One thing the world is not going to run out any time soon is books on subprime credit-turned-global financial meltdown. But it’s doubtful that many, or any, will so closely match the ripping yarn of financial upset with concepts that any — and perhaps every — investor can apply to their own financial security. This book was already at the printer when the Madoff Maelstrom broke, but it’s highly doubtful that anybody who absorbs the message of ‘Dear Mr Buffett’ will ever need confront that kind of mayhem. (Seeking Alpha, Greg Newton)

Janet Tavakoli’s Dear Mr. Buffett is an unusual amalgam of a simple, personal story and a complex, public one…The promise of this tantalizing morsel will draw buyers in. But readers will find much more than another book on Warren Buffett…Tavakoli’s book chronicles the words and deeds of people who dealt in derivatives without knowing – and often without caring – what that relationship was. Some will call her book a morality tale. I call it a rationality tale. (Seeking Alpha, Geoff Gannon)

Ms. Tavakoli uses her letters and relationship with Warren Buffett as an homage to Buffett's ability to distill the basic essence of complex matters into simple facts of money and value…For Dear Mr. Buffett, she has opted for a simple approach to tell the tale of actors gone bad and trust abused at many levels. This book is an accessible popularization of the issues, and as such no heavy securitization math etc. to deal with. I agree with this approach as the story needs to get out to as many as possible. (Seeking Alpha, Nick Gogerty)

". . . isn't yet another book about Buffett's career. Rather it's Tavakoli's withering critique of just about anyone who had anything to do with inflating the housing bubble. . . Tavakoli contrasts that behavior with the way Buffett runs Berkshire Hathaway. . . an excellent summary of the factors that led to the historic boom and bust. . . easy to read at 224 pages. . . overall a good book that offers excellent insight into the recent fiasco." (The Free Lance-Star)

"If you want a primer into just how out of control the markets were...then this is an ideal starting point." (, May 29th 2009)

"An intelligent analyst whose command of the arcane world of securitization mixed with a brutally honest analytical framework makes it a pleasure to hear and read her work." (Asia Times Online)

"[This] book is so good, I’m on my second reading of it. That’s how good it is." (Max Keiser, "On the Edge with Max Keiser)

"Zero Hedge joins in endorsing Mr. Keiser's glowing recommendation of . . . " "Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street " a must read for anyone who wishes to get a deep understanding of the real severity of America's economic debacle. . . “(Zero Hedge)

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Product Details

  • ISBN-13: 9780470406786
  • Publisher: Wiley
  • Publication date: 1/9/2009
  • Edition number: 1
  • Pages: 304
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.20 (d)

Meet the Author

Janet M. Tavakoli is the President of Tavakoli Structured Finance, a Chicago-based consulting firm to financial institutions, institut-ional investors, and hedge funds. She gave advance warning of major collapses including Long-Term Capital Management, First Alliance Mortgage, the thrift industry, and the current credit bubble. BusinessWeek called her "The Cassandra of Credit Derivatives." Tavakoli is a former adjunct associate professor in the Finance Department of the University of Chicago's Graduate School of Business, where she taught derivatives. She is also the author of several professional finance books, and is frequently quoted in the business press, including the Wall Street Journal, the Financial Times, BusinessWeek, the New York Times, and many others. She also appears on CNN, CNBC, CBS Evening News, Bloomberg TV, First Business Morning News, Fox News, Fox Business News, ABC, and BBC.

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Table of Contents

Preface ix

Acknowledgments xv

Chapter 1: An Unanswered Invitation 1

Chapter 2: Lunch with Warren 9

Chapter 3: The Prairie Princes versus the Princes of Darkness31

Chapter 4: The Insatiable Curiosity to Know Nothing WorthKnowing (Oscar Wilde Was Right) 41

Chapter 5: MAD Mortgages—The “Great” Againstthe Powerless 67

Chapter 6: Shell Games (Beware of Geeks Bearing Grifts) 97

Chapter 7: Financial Astrology—AAA Falling Stars 107

Chapter 8: Bear Market (I’d Like a Review of the Bidding)123

Chapter 9: Dead Man’s Curve 143

Chapter 10: Bazooka Hank and Dread Reckoning (AIG, Fannie,Freddie, Lehman, Merrill, and Other Fluid Situations) 163

Chapter 11: Bond Insurance Burns Main Street 179

Chapter 12: Money, Money, Money (Warren and Washington) 191

Chapter 13: The Fogs of War, Religion, and Politics 209

Chapter 14: Finding Value 219

Notes 225

Bibliography 259

Index 267

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Sort by: Showing all of 2 Customer Reviews
  • Posted January 16, 2009

    Informed, spicy critique of Wall Street, Main Street and Washington!

    ¿Dear Mr. Buffett¿ is an acid-tongued critique and summary of the players and financial instruments that have precipitated the current turmoil in the financial markets. The author writes with an attitude, high level of self-righteousness, and moral outrage which makes for a spicy read for those of us in the business and know some of the lead characters. I enjoyed the book even though I bought it with other expectations. I selected the book while traveling (I hate flight delays) with the hook being Warren Buffett, investment insight from the Oracle of Omaha. To be fair the first chapter or two was a cute story of Ms. Tavakoli getting an invitation to lunch with Mr. Buffett and her firsthand, personal description of the encounter with the great man; he does sound like a gem of a guy! Beyond this introduction Warren Buffett and Buffett references are used as a clever vehicle to tell the tale of the Wall Street, Main Street (mortgage brokers-- the bastards) and Washington miscreants that are responsible for today¿s turmoil. At times in the book the ¿Warren¿ name dropping and pandering is a distraction. This is more of a Liars Poker book than a Warren Buffett book; quasi insider views, personalization of key players, etc. The author clearly demonstrates her grasp of the complicated (perhaps intentionally so) financial instruments (Weapons of Mass Destruction, aka credit derivatives) in sufficient technical detail to help the reader but not lose them. As such, I recommend this book to any reader with an interest in truly understanding the causality of the current financial market conditions and the principal players involved. I liked the book for reasons other than why I bought it! Go figure? <BR/><BR/>Two other book thoughts: 1. I can only surmise that the author must now be fabulously wealthy assuming she acted her own well documented prescient assessment of the world financial market over the past several years. 2. What is the significance of the erroneous mileage measurement of ¿1,269 miles from Wall Street¿ to Omaha? The mileage is actually about 1,150 miles, about 10 percent less.

    1 out of 1 people found this review helpful.

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  • Posted January 10, 2009

    I Also Recommend:

    Many books have been written about Mr Buffett, yet "1269 miles from Wall Street" was intriguing. Expecting "a how to invest" to my surprise I also got a full account of the events that have led us into this financial crisis.

    At last! A clear explanation of how our Economy and Financial system have reached this bitter place. Best of all, it's written in plain English.<BR/>Yes it is disturbing because it gives an account of the biggest swindle in our history. <BR/>To me it seemed like a recipe for financial disaster, and Tavakoli excelled at identifying each ingredient and its role in the disaster. Her comments gave it enough spice to keep me turning pages and I found myself chuckling. <BR/>By the time you finish reading the book, you¿ll be asking ¿where is the loot¿ and Tavakoli has provided many clues throughout the book and its notes.

    1 out of 1 people found this review helpful.

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