Confidence Game: How Hedge Fund Manager Bill Ackman Cal… (2024)

Not an educational book, yet not a novel. Somewhere in between: well-researched, factual storytelling, not dull but also, thank God, without cheesy cliffhangers. Just really good journalism, basically.

The book tells the story of Bill Ackman and his hedge funds, with the main focus being on the research he made on bond insurance company MBIA, starting in 2002 and going all the way to the end of 2008, after the bursting of the subprime bubble. You will get to know about all the tedious research that was done by Ackman and his colleagues to prove his view that MBIA was not worthy of its AAA rating, and was in fact insolvent. Ackman reads arcane documents, questions the company management, reports to investigators and even gets investigated himself. All through this we get to know a little bit about Ackman's personality which in many ways causes some trouble for himself and his organization and embarrasses his lawyers, but also might be the reason that he was the person to see what others didn't.

I think there are many things to learn from this book, since the author goes very deep in portraying the research work done by Ackman and his colleagues, not simply stopping at telling about their findings. If you're an active investor, journalist, or perhaps a regulator, and finds in-depth investment analysis intriguing, I'm sure you will enjoy this book all the way through.

A word of caution is that you might get a bit lost if you have no previous understanding for short-selling, derivatives or mortgages, but if you're very interested and ambitious I think you could enjoy it anyway.

"Confidence Game", written by financial journalist Richards, tells the story of hedge fund manager Bill Ackman, one of those incredible Cassandras who saw gross instability in the financial system years before its collapse. Ackman's crusade was against the bond insurers, and in particular the municipal bond insurer MBIA, whom he could see was hiding losses and smoothing results to maintain the appearance of absolute stability. Because he chose to approach the matter as a short-seller, he was widely disbelieved - and even accused of causing the crisis himself (though one does wonder how things would have turned out had he had no financial stake in MBIA's fate).

The writing's mostly expository, and a background in finance helps - at times my own head was swimming trying to follow the trail of CDO and CDS contracts. However, it's recommended if you want some insight into the financial crisis, how regulation works (or fails to work), and how we can stop it from reoccurring.

Similar to David Einhorn's Fooling Some of the People All of the Time, this recollects Bill's short position and investment in CDS's of MBIA.

Legend has it that Bill read tens of thousands of pages of filings and documents regarding MBIA over the course of this multi-year position.

I read this after reading about Mr. Ackman and Valeant, as well as having known Mr. Ackman from the time he spends at Columbia and involvement in the Graham & Dodd community.

Perhaps this is only for those fascinated by the financial meltdown of 2007-2008, its origins and consequences, but for me -- this was terrific. I lived thru the details of this at work and even sat at a conference table with Bill Ackman. Very dense with details and somewhat arcane terms but sets out the mechanics of the process of failure in a chronology that hands out lots of blame. I certainly don't think Bill Ackman was then or is now a disinterested observer but he obviously did his homework when nobody else could be bothered. Listened to this late into several nights and gained a much deeper understanding of events still affecting the US economy. Wow

Pretty fast paced and entertaining. I could draw parallels with a similar book titled fooling some of the people all of the time.

This is an almost epic tale of a clash between a blunt, stubborn-as-a-mule hedge fund manager with a fierce sense of justice called Bill Ackman and MBIA, the largest municipal bond insurer in the United States with a tough CEO named Jay Brown. It’s also a story of lazy regulators, analysts and journalists with a wish for keeping a profitable status quo and a deep suspicion of short sellers. It is further a tale of the interconnectedness of the financial system where companies most people have never heard of can put entire economies on the brink of collapse. The author, Christine Richard, is a financial reporter previously at Down Jones and now at Bloomberg Press.

Municipalities and other public entities at times need to borrow money by issuing bonds. Apparently there has been a “dual scale” applied by credit rating agencies since the 1920s (!) where public entities despite having lower probabilities for defaults, still received lower ratings. However, if the bonds could be insured against credit losses and the insurer was a triple-A institution the bonds would be as well.

MBIA was the leading insurer in this space getting a slice of the spread between the municipalities’ too unfavourable credit rating and their own too favourable one. This was a high-risk insurer insuring low-risk municipalities. MBIA was in the business of getting paid for stamping AAA on anything that moved. The excellent credit quality of public lenders meant that the losses historically were close to non-existent – MBIA even bragged about their no-loss track record. If there is no perceived risk of loss then there is no real need to set aside reserves to tackle losses and the company hence had absurdly small reserves. Profiting from this bogus spread without having to deploy almost any capital to do it wasn’t enough though. The company ventured into taking risks further and further away from its historical home turf and started to invest in CDOs, CDO-squared and even bought and securitized bad tax receipt portfolios that they then insured themselves!

Gotham Partners founded by Ackman and David Berkowitz saw this house of cards as the shorting opportunity of a lifetime. They issued a report called “Is MBIA Triple-A?” on the Internet. Ackman also communicated his view to credit agencies, regulators, analysts and journalists. As MBIA was a reseller of triple-A ratings this was an attack on its very existence. Without the rating there was no business model. What follows is a full counter attack. Few would have withstood the slander campaigns launched by media spin doctors and investigations by both SEC and Elliot Spritzer without giving in. MBIA also bought their own shares in days of bad news and sold CDS’ on their own company to influence market prices and create the appearance of stability. In a case of possible corruption one of Gotham’s funds was forced to shut down, parting Berkowitz and Ackman who now started Pershing Square. Ironically this freed Ackman from other chores and he could fully dig in to the MBIA case. After 5 years of struggles and MBIA desperately fighting to uphold the no-loss illusion, in June 2008 after the entire market had crashed both S&P and Moody’s finally downgraded the company.

Richard’s story is to a large extent written from Ackman’s point of view. Still I have no doubts that it gives a more or less correct account of events and all legal investigations of Gotham also ended with no finding of wrongdoing. She is a skilled writer and even though the reader knows that the company will have to crash in the subprime crisis the text is still tense and exiting. However, at times the text is relatively dense and could have benefited from the author now and then taking a step back and repainting the full picture to remind the reader. Instead of casting suspicion on short sellers we should all be happy when they use the resources they have to dig into the shady areas that no one else has the energy or will to look at. When complying to the subpoena of the NY attorney general Pershing Square supplied approximately 140.000 pages of material on MBIA.

I mainly bought this book, as I was interested in knowning more about Mr. Ackmann.
Not only did my knowledge of him, and his company, Pershing Square, improve a lot and I found it very interesting, the book also shed a great deal of light on the events leading up to the financial crisis in 2008.

Mrs. Richard have done an excellent job with this book. With the various CEOs, committee members, attorneys which all played a role, she does a good job of explaining numerous times who the persons where. The same holds for the various financial instruments which all lead up to the crisis.

I'd highly recommend this book to anyone who is either interested in how Mr. Ackmann conducts, some of his business in the hedge fund, or to people who would like to have a better understanding of the financial crisis.

Wonderful post-mortem on crisis 2008. Just to underline, this story is about quite complex financial structures and mechanics that made trillion of dollars moved. I really love how all of these complex things turned into a quite clear description of what had been happening for about decade til 2008.

Also, it would be a sin to not admit the author way to write. She included different cute side stories or some etymology details, that under certain angle look like a reflection of the main topic. I especially like the part in epilogue about frieze on the old Moody's building. The bronze frieze, that described credit as a man's confidence in man, turned out to not be solid bronze, and at some moment just disappeared as it has never existed.

Definitely recommend to any one interested in the topic.

Man, the Financial Crisis never ceases to provide interesting stories about human misjudgment. The management of and investors in MBIA were either unaware or unwilling to admit that the company was totally impaired. Bill Ackman saw the problem and took out a short position. Much like with us current bet against Herbalife (which I believe he's spot on for doing, but "the market can remain irrational longer than you can remain solvent"), he had to endure years of mispricing, despite his efforts to publicize the problem. Worse, he was the target of an investigation AND not exactly considered a saintly investor because he took out a short.

An inspiring story for any contrarian or long-term short sellers.

A well told story of Bill Ackman’s bet against MBIA, the bond insurer with AAA ratings which he didn’t believe in. Ultimately an interesting read of how the GFC came told through the eyes of one man and how he made over $1bn, and how his persistence and obsession to be proven right saw him win (and be vindicated) at the end. Bill went through a lot through the years campaigning for regulators to look into the company but it was only till the spring of 2008 (after 6 years) he was taken seriously. It felt more like a novel than a educational book but there’s lots to learn on securitization/financial products such as CDOs, CDS etc. The story got a bit draggy at the end but nevertheless kept me on tenterhooks throughout.

The book is fine, I think I enjoyed Einhorn's story of Allied Capital more which is very similar in structure. It's a fascinating enough read but hard to give a hearty endorsem*nt when based on the sources she could gather, it is like a long press release for Ackman and his research/thesis. Yes he was right 6+ years later thanks to a global financial collapse helping move things along but without some interplay of opposing vantage points the book just isn't very satisfying as you weave through the years of back and forth which gets presented as though the entire world is full of crazy people except Bill.

The bad: Nothing in particular.

The good: Just like Barbarians at the Gate, it's a long, well-written report of a war in financial services, in this case a war over a specific asset category's worth. It's very comprehensive (even more to those who have watched the documentary about Ackman trying to replicate this exactstrategy against Herbalife), clarifies facts and timeline for a fairly complex issue, and very interesting to read. Excellent book.

Excellent book with Bill Ackman the central player in the narrative. A great reminder how the best analysts work incredibly hard and are often not ‘normal’ individuals. The level of analysis and relentlessness was great to see. Fund management is not an easy game and everyone in the industry should read this book.

I think the most interesting idea in this book is the fact that when a market needs a lie to be true, the lie can go on for a very long time.

This was an incredibly visceral account of one such market, and one such lie.

(Also, Bill Ackman is insane. The psychological makeup of someone who could pursue this case, over so many years, against so many set backs — what a man.)

Great. The story is similarly structured to David Einhorn's book but Christine seems more organized.

Outlines Ackman's battle MBIA, the zero loss illusion of CDS, CDO, and CMOs

I was really impressed with just how ironclad Bill's conviction must have been when placing the bet. The degree of competency is blew me away. It's really a business where seeing reality before others due pays off which requires zero margin for informational error.

I liked how the book gave a glimmer of his personality and insight in just how other people think he is– someone who's right isn't always likeable and Bill probably knows this. This makes his defiance to stand on a mountaintop and shout the truth even more admirable.

A great dual-purpose book for me: it gives another account of Bill Ackman, and it's another connector book to the Global Financial Crisis, this time through the bond insurers (or monolines, as I am more familiar with). CDS and insurance are in the spotlight. Great context, good cast of characters, nice storytelling.

Excellent read

Great book. The writer did a great job of explaining a very complicated situation. Would highly recommend this book to anyone wanting to learn more about the capital markets.

Who knew a non-fiction book on bond insurance could be so riveting? This book details Ackman’s meticulous diligence, outspoken demeanour and unrelenting optimism in his nearly decade long crusade against MBIA. I couldn’t put it down.

It makes you stop and wonder how much of our economy is real, and how much is just speculation. And if our economic foundation isn't as solid as we like to believe, how much trouble are we really in?

Not succinct enough, but still a good story on Bill Ackman's investment style.

A fantastic journey back to the 90s and 2000s when one could be a money maker and somebody caring about SEC guidelines and business ethics.

2.5 stars

A rare in-depth look into the life of a hedge fund manager.

Much the same story as the big short film.

Wanted to listen this to learn more about Bill Ackmann. Somehow left really cold and didn’t capture my attention enough, although topic (subprime crisis) itself really interesting.

A great case illustrating how the market rewards those who do their homework.

Loved this given the in-depth coverage

This is my review on Amazon dated March 20, 2012:

This book is about the late 2000s financial crisis, revolving around the battle between MBIA, the largest and highly leveraged BOND INSURER, and Bill Ackman, a hedge fund manager, who in the course of several years has accumulated a huge SHORT position on MBIA.

Other players involved include RATING AGENCIES (using different credit-rating scales for municipal and corporate bonds - not making any sense, and earning fees from those companies whose securities they rate - not seeming right), INVESTORS (blindly believing in AAA rating and not doing due diligence - of course, the question is whether due diligence on ever more complex financial instruments is at all technically possible), MUNICIPALITIES (purchasing insurance from AAA bond insurers to lower their financing costs, which should be at this (lower) level in the first place), SHADOW BANKS (financial institutions lending outside the banking system with its capital requirements and regulatory oversight and taking exsessive risks knowing they can transfer them through securitization to less-informed counterparties), REGULATORS (did they do too little or too much?), and PRESS (that's where the author comes from - she has been covering the bond market for almost a decade).

Two factors make me "feel close" to the story. FIRSTLY, I used to live in New York during the Bush administration, the period of "credit bonanza" in which the MBIA vs. Ackman battle took place. Moreover, I used to have a student in Armonk, NY, the MBIA's headquarters, in the 2006/2007 school year as a math tutor. Little did I know what was happening there at the time. SECONDLY, to me as an actuary, the one-word "big picture" answer to the "what was the cause of the financial crisis" question would be reserves. It's very simple, although the particulars are not. The companies set aside absolutely insufficient reserves (in an ACTUARIAL sense!). Instead, the resulting high earnings and profits were channeled into the pockets of the few privileged in the form of bonuses.

Who won (and who lost) the great game of risk transfer engineered on Wall Street should be clear to everyone. The question I find more interesting (and tricky) is who (exactly) is to blame.

Returning to the book itself, I found it an educational page-turner about the guy who had seen IT coming well ahead of time, the guy who for several years had in vain tried to alert all the involved parties of an enormous risk in the bond insurer's AAA rating (being not really AAA), their "no-loss" business model (which they only nourished via "masking" all their deals that went south, such as AHERF case - equivalent to buying insurance after your house burns down, or the Caulis Negris deal - MBIA unwiling to recognize loss on the tax liens, writing them down gradually instead), and other dubious accounting practices (indirect partcipation in CDS market via a shell company, selling protection against its own bankruptcy filing to drive down the price of its CDS contracts and create an impression of stability, etc.)

And what do I think of Bill Ackman himself?

First time when I felt he needn't have done anything - in fact, I even felt he shouldn't have done it, was when he wrote to the Citigroup claiming they may have been making a mistake by considering an ivestment in (bailout of) Ambac, the second-largest bond insurer (p.262) - it is definitely not my style. But other than that, I did not have a problem with the guy. On the contrary, I admired his critical thinking skill as well as passionate perseverance in proving his case. I don't see why someone might have a problem with him/this. What's wrong with one criticizing a company publicly as long as it is based on facts? After all, if it is not, not only the guy risks going in jail (which can be viewed as an "unimportant by-product"), but more importantly, the company can always disprove the person's claims (and make him look incredible, even stupid), can't they?

This is yet another book on investment and finance that I read twice: first as a "novel," then as a "textbook."

This is an amazing story about a short seller who identified one of the major holes in the credit bubble - at least 5 years before the bubble finally burst! Bill Ackman ultimately earned over $1.1 billion for his hedge fund with his prophetic realization that the bond insurers' business model was faulty in the extreme. What was different about Mr. Ackman was that he was an activist short seller! There are many activist investors who try to pressure management to make better business decisions. Most short sellers keep quite. But Mr. Ackman attacked the establishment head-on and paid the price. He was investigated by the SEC and NY AG's office, which was determined to put him behind bars for stock price manipulation.

The author is a financial markets reporter who had to quit her WSJ job to be able to write the book - it was that anti-establishment an issue. Her own investigative work helped round out the book superbly with stories on failed investments in a prison in OK and property taxes in Pittsburgh.

However, at times I found the book hard to follow - difficult to understand all of the implications of certain situations. Keeping CDOs, CDSs, etc. straight. So to me the book was written for those already familiar with financial markets - not really written for a general audience.

Another lesson I learned was to never assume that the gov't (SEC) or the ratings agencies will protect you from making bad investments. Mr. Ackman spent years telling both of them, in excruciating detail, how the bond insurers were going to fail. They only caught on when the bottom fell out. In fact, I expect you could make a lot of money taking advantage of people who lazily assume that the SEC and ratings agencies will protect them.