He also describes how Burry initially sought out credit default swaps against the worst tranches of sub-prime loans, only to discover that the major investment banks did not offer a CDS product that would serve that very purpose.

Really interesting.

Here’s a brief excerpt:

Once again they shocked and delighted him: Goldman Sachs e-mailed him a great long list of crappy mortgage bonds to choose from. “This was shocking to me, actually,” he says. “They were all priced according to the lowest rating from one of the big-three ratings agencies.” He could pick from the list without alerting them to the depth of his knowledge. It was as if you could buy flood insurance on the house in the valley for the same price as flood insurance on the house on the mountaintop.

The market made no sense, but that didn’t stop other Wall Street firms from jumping into it, in part because Mike Burry was pestering them. For weeks he hounded Bank of America until they agreed to sell him $5 million in credit-default swaps. Twenty minutes after they sent their e-mail confirming the trade, they received another back from Burry: “So can we do another?” In a few weeks Mike Burry bought several hundred million dollars in credit-default swaps from half a dozen banks, in chunks of $5 million. None of the sellers appeared to care very much which bonds they were insuring. He found one mortgage pool that was 100 percent floating-rate negative-amortizing mortgages—where the borrowers could choose the option of not paying any interest at all and simply accumulate a bigger and bigger debt until, presumably, they defaulted on it. Goldman Sachs not only sold him insurance on the pool but sent him a little note congratulating him on being the first person, on Wall Street or off, ever to buy insurance on that particular item. “I’m educating the experts here,” Burry crowed in an e-mail.

He wasn’t wasting a lot of time worrying about why these supposedly shrewd investment bankers were willing to sell him insurance so cheaply. He was worried that others would catch on and the opportunity would vanish. “I would play dumb quite a bit,” he said, “making it seem to them like I don’t really know what I’m doing. ‘How do you do this again?’ ‘Oh, where can I find that information?’ or ‘Really?’—when they tell me something really obvious.” It was one of the fringe benefits of living for so many years essentially alienated from the world around him: he could easily believe that he was right and the world was wrong.

China’s Cyberposse (NYT)

US may be headed for long decline. You don’t have to follow (Christian Science Monitor)

Obama ramps up push for energy-efficiency program (CNN)

Obama’s new adversary (Fortune)

Happy Stuff…

50 Depressing Facts About The Healthcare System That Will Make You Beg For Reform (Business Insider)

Treasury Reiterates Commitment on Fannie, Freddie (WSJ)

Comparative Unemployment Graph during recessions courtesy of Clusterstock:

Asia’s Boom Conceals Some Darker Prospects (NYT)

China becomes a net coal importer in 2009 (China Daily)

Cyber Evil Will Thrive Without Global Rules — Good Luck With That (Epicenter @ Wired)

E.P.A. Plans to Phase in Regulation of Emissions (NYT)

Majoring in Debt: Average College Grad Now Owes $23,000 (Huffington Post)

Yuan hits new high against US dollar (China Daily)

The Top Ten States for Wind Power:

via Fast Company:

Good news on the wind energy front: new statistics from the National Renewable Energy Laboratory (NREL) show that previous estimates of U.S. wind power resources actually underestimated the amount of energy available. The new statistics estimate that onshore wind power could generate 37,000,000 gigawatt-hours (GWh) each year–nine times the amount of energy required to power the country. NREL also ranked the top 10 states with the highest wind potential as follows:
Top 10 wind potential states State MW of wind turbines GWh each year of wind power Texas 1,901,530 6,527,850 Kansas 952,371 3,646,590 Montana 944,004 3,228,620 Nebraska 917,999 3,540,370 South Dakota 882,412 3,411,690 North Dakota 770,196 2,983,750 Iowa 570,714 2,026,340 Wyoming 552,073 1,944,340 Oklahoma 516,822 1,788,910 New Mexico 492,083 1,644,970

We still have a long way to go before the U.S. meets its full wind power potential. The country currently has an installed capacity of 35 GW, but its total potential is over 10,000 GW. In other words, it’s time to start building.

Wall Street’s Bailout Hustle (Matthew Taibbi @ Rollingstone)

Energy efficiency to shine in 2010 (San Jose Mercury News)

Apple Secures Nifty Near-Field Wireless Patent for iPhones (Fast Company)

Why I’m Not at CPAC (Mickey Edwards @ The Atlantic)

Got Spare Juice in Your Electric Car? Sell it Back to the Grid, Earn Cash (Fast Company)

Think Your Start-up Is Venture Worthy? Think Again. (Sarah Lacy @ TechCrunch)

Severin Borenstein on Cap-and-Trade: “There is a ticking time bomb under these cap-and-trade models.” (Greentech Media)

The Yuan Is About To Surge Beyond Your Wildest Dreams (Business Insider)

Gore Wants Carbon-Free Electricity in 10 Years (Greentech Media)

TED 2010: Google Optimistic It Can Remain in China (Wired)

Wall St. Helped to Mask Debt Fueling Europe’s Crisis (NYT)

At the time, I thought that Murdoch was making a wise move. Remember though, this was in mid 2006, before the ascent of Facebook, and before the leadership of MySpace and their News Corp. overlords ran the company into the ground.

Fast forward: It may have seemed like a good deal at the time. But now it’s early 2010 and I don’t think I have logged into my MySpace account for well over a year, perhaps even two years. I can’t even remember, it has been so long. Facebook now permeates the public consciousness, often being one of the first websites people visit at the start of their day. Indeed, many people simply leave it open in their browser window, refreshing it constantly, so that they can see and respond to the live updates posted by their friends. With its gorgeous, clean, well-designed user interface, and less emphasis on banner advertising, I don’t think MySpace ever stood a chance. The rush to Facebook was breathtaking and unstoppable. The execs at Fox Interactive Media must have been fighting back panic, but did not choose to recognize the incredible value Facebook offered people and the obvious flaws evident at MySpace.

Where MySpace failed and Facebook succeeded, is the reconciliation of differing views on the purpose of their respective online products. It is obvious that managers at MySpace viewed effective monetization of their surging web traffic as a core business strategy. They must have thought to themselves, “With the ad revenue we will realize from this new web property, we can add x to the bottom line of News Corp.” Not long after the acquisition by News Corp. and the subsequent ad deal with Google, the increase in advertising on the site was evident. It contributed to a tolerable, but unpleasant user experience defined by ubiquitous ads, ugly design and lots of unwanted prostitutes attempting to friend you, which was never very nice.

Facebook on the other hand, turned down astronomical buyout offers and made profitability a secondary concern, as it focused of providing users with a pleasant forum to interact with individuals whom they wanted to. All business decisions were secondary to user experience and providing enjoyable, easy-to-use features for users. The stratospheric increase in new accounts and users over the past few years validates this strategy. And only now, after becoming one of the most trafficked websites in the world, has Facebook become profitable. Mark Zuckerberg and other senior leaders at FB should be commended for their long-term vision and commitment to providing a quality product above all else.

We recently learned that Owen Van Natta, a former senior Facebook executive brought in to save MySpace, has been dismissed after just nine months on the job. In January 2009, ComScore reported that Facebook drew twice the global internet traffic that MySpace was. The MySpace fall back strategy of becoming an online hub for music, (given MySpace’s popularity as a forum for upcoming musicians) resulted in the purchase of online music networks iLike.com and Imeem under Van Natta’s tenure. Infighting among management and incoherent strategy have resulted in the company falling short in their ad deal with Google, with a $100m loss.

Its a tough lesson in not being too greedy and focusing on what your customers want. Facebook, the social network that burned through investor cash and endured widespread criticism for not taking buyout offers, is triumphant.

Links:

MySpace chief executive resigns (LA Times)

UPDATE: News Corp Sees 2010 Oper Earnings Rising In Low 20% (WSJ)

Google Crashes Facebook IPO Party (The Street)