the other calling

Money man

"the interest-only negative-amortizing adjustable-rate subprime mortgage. You, the homebuyer, actually were given the option of paying nothing at all, and rolling whatever interest you owed the bank into a higher principal balance. It wasn’t hard to see what sort of person might like to have such a loan: one with no income. What Burry couldn’t understand was why a person who lent money would want to extend such a loan."

- From what I understand, banks were making a killing rolling these over by securitizing them. The fees involved were sufficient to cover the fact that the mortgage itself went into default almost immediately. At least until they started issuing these NINJ loans with a negative amortizing schedule. Then they didn't start hitting bottom until the housing market finally realized it had no clothes anymore. (all this is explained in the next couple paragraphs of the article itself too).

Financial innovation is not a bad thing. In this case, it allowed someone to discover real asset prices by essentially shorting a market which was bloated and overexposed. Short selling also isn't much of a problem because if enough people (and their money) still think something is valuable, the market corrects for it. But when people realize that they're buying things that are supposedly valuable but really are worthless loans to people who will never pay them back, it is appropriate to have a product where people bet that those people will never pay them back. The shorts get paid and everyone else loses (in the long run). This was supposedly a bad thing that people lost millions on these dumb bets. But I'd rather know something sucks sooner and faster and most people will ultimately lose less money when this happens. Note also that he didn't short sell stocks. That's typically a losing game because it's much like playing roulette. You can't always tell which stocks will die. You're usually better off buying up the ones that are undervalued and letting them go up than betting they will fail. But credit default swaps, essentially shorts on the housing market in this case, are a bit different hunting ground.

Amusing personal bits and pieces.
"He’d become a doctor not because he enjoyed medicine but because he didn’t find medical school terribly difficult." - Ahh. I suspect this is my conundrum with law or economics.
"“I wanted to help people—but not really.” - Ahh again. Indirect is the way to go here.
"In writing, he presented himself formally, even a bit stuffily, but he dressed for the beach." - Tie? Who needs a ridiculous piece of scarf strung tightly about the neck?
"...to learn how to interact more profitably with his fellow human beings" - Hmph. Who wants to do that? Learn how to act?

"...By this time the craze for Internet stocks was completely out of control and had infected the Stanford University medical community. “The residents in particular, and some of the faculty, were captivated by the dot-com bubble,” - The usual routine is that very smart people are some of the first people to be taken in by insane financial patterns. This is partly why Goldman Sachs and others were buying up those worthless loans and figuring out ways to make money off of them, and why they always had willing investors for them, thinking they had figured out a new way to game the market and make a fortune. But for the most part, if all you are is a part-time investor making your income off of internal medicine or engineering and throwing money where everyone else seems to be in the latest craze, trying to stay ahead of it, there isn't a way to game the market. That's the way to lose the game. When everybody else runs for something, you walk away. You walk toward it when other people are running away. That's typically the way investing works best (analogously speaking, the "ick investing" part is much like this philosophy). It isn't surprising that this guy made a fortune (for his clients) doing this as a result. All it took was the fine print and the pattern of trillions of dollars doing...really nothing at all except to call itself busy.

"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." - Uh, yes, asset prices were this distorted because of the enormous faith in ratings agencies. Who were essentially being paid to produce "favorable" ratings.
"Bad behavior was no longer on the fringes of an otherwise sound economy; it was its central feature." - Good times.

And that last point. Something of a humility to it.
"It was very quiet" - Nobody cares when you're right anyway.