Higgenbotham wrote:Clearly, he lost 100% of the funds he put toward CDS exposure in 2005 and the first part of 2006, which was unnecessary. Those are quarterly payments, though the contract periods can be longer. Not to say I didn't make the same timing mistake, as I also thought the bubble would top in 2005 and sold out early, losing a lot of potential profits. Point being, in 2005 I would have also thought he was doing the right thing, but the fact is he pissed away a lot of money on quarterly CDS payments when he didn't need to. But based on reading this account and one other one, it would have been necessary to take at least some losses, as the big banks were not willing to sell CDS when it became clear the unravelling was close at hand. When the latest time was to buy CDS I don't know, probably mid 2006 as home prices were turning down then. The fact that he warned investors about the potential time frame was good, but it doesn't seem like he understood the psychology of losing trades because he'd never really had any before this one. Lucky for him that a few more investors didn't withdraw or he'd have hit the wall and we never would have heard of him. But I'd say to figure out as much as he did at his age and with his limited real estate background was a big accomplishment. Let's see if he gets his gold and farmland bets right eventually.
I will just have to take your word for the specific contracts he was investing in. I did not see that level of detail in the quote you posted and I did not dig any deeper. My comments were simply based on the information you posted in your quote.