2. Will Introduce you to: a)Real Investors who went against the grain and made a ton of money. Investors who did not like to make money this way and go on to experience health issues as a result. Also Folks who tried to warn everyone that this was going to happen b)Folks who were willing to work extremely hard to analyze, evaluate and ultimately take huge risk and bet against the system c)How Wall Street and the American Financial Markets were broken

3. Meredith Whitney Brown-Honors Little Known Analyst (Oppenheimer) First person to correctly Predict banking issues Oct,31, 2007 Named on of 50 most Powerful women in 2008 By Forbes

4. Steve Eisman Penn-Magna Cum Laude Harvard Law-Honors Hated Law Switches to Investment Banking (Oppenheimer) Straight Shooter / Rude: Leave in middle lunch Japanese CEO’s financial Statements are “toilet paper” Putting on “Sell” Recommendations Becomes expert in Mortgage Bonds

5. So what problems can occur What did Steve/Vinny figure out ? Loans made with little regard to ability to pay back Loans Sold to Investors Created “shitstorm”, Published document about industry

6. Household Finance /Teaser Rates? What is a teaser Rate ? Loans / Comcast ? System design to “XXXX the poor” Bounces around, starts own firm, has loyal following

7. Sub Prime – 2 nd Act 1990’s - $30 Billion a Big year 2000 - $130 Billion 2005 - $625 Billion - $507 Billion into Mortgage bonds Terms Changing: 1996: 65% Sub-prime had fixed rate 2005: 75% Floating –Teaser Rates

8. Sub Prime – 2 nd Act Sub-Prime Financers learned: Make loans, Sell them to Wall Street, Wall Street will sell them to Investors Everyone gets paid huge commissions along the way. Investors could not get enough of this stuff !

9. Michael Burry -Burry saw this happening: Mortgage 1: Pays 4% interest each payment (less risky) Mortgage 2: Pays 10% interest (very risky) Mortgage 3: Pays 10% interest (very risky) Who buys these: 1)Mortgage Companies/Banks make loans (get commission) 2)Sell them off to Investment Banks (get commission) 3)Investment Banks/Others Consolidate into same average risk pool and sell them off (get commission) 4)Buyers left with portfolio (except now with 2 Sub-Prime loans and greater risk of one failing) Michael Burry sees this and is going to try and buy insurance that will pay him if a certain percentage (small) of the loans in these portfolio’s goes bad.

10. What is insurance ? 13-year-old World Yo-Yo champion Harvey Lowe’s hands for $ 150,000! Food critic Egon Ronay’s taste buds for $ 400,000! Bruce Springsteen’s voice for $ 6 million ! There are more than 100,000 policies sold to insure against alien abduction. If you can prove it then compensation of one million dollars may be given by the insurance company! Normal Examples: Life: I buy to payout $$$$ to Wife if I die Medical: I buy to pay medical expenses if I get sick Home: I buy to payout if my house burns down Auto: We all buy in case of accident

11. Insurance – How does it work? Basically a Bet: a)I want something insured. b)Insurance company studies (actuaries) and projects the probability of it happening. c)They decide if they think they can make money. High probability, not likely to provide insurance d)They ask for a Premium to provide that insurance. They bet that what I want insured will be ok. Questions a)Where is flood insurance cheap ? Where Expensive ? b)Which Gender cost more for car insurance ? Why ? UK Study: Men had 92% driving convictions, Women 8% c) Is medical insurance more expensive for a smoker ? d) If you have the option to pay $600/year for home insurance in Case of a fire (on $100,000 home), is it worth it ?

12. Michael Burry -Question of how to bet Sub-Prime Loans would fail: “Credit Default Swaps” - Insurance How does it work for Bonds: 1)Company issues 10 year Bonds (say GE: $100,000,000) 2)Someone (insurance company) puts up insurance on these bonds defaulting (cost $200,000/year) – There is a market for everything 3)If GE can’t pay bonds, insurance company pays $100,000,000. 4)If GE pays bonds, insurance company makes $2,000,000 over 10 years 5)Insurance companies set cost based on probability

13. Michael Burry -Question of how to bet Sub-Prime Loans would fail: “Credit Default Swaps” - Insurance Why Did Burry want to buy insurance on these bonds ?:

14. Michael Burry -Through hard work and research, finds someone to provide insurance, gets involved in the contract, and starts to buy insurance on loans going bad: So he bet the loans would go bad. Who bet the loans would be ok ? Why ?

15. Michael Burry -So confident that these loans going to go bad, he decides to start a fund just for this “Miltons Opus” What happens ? a)Investors not interested b)Not why they put money with him – wanted stock picker c)Afraid existing funds being invested this way Comes clean that this is the case-large bet – What is reaction ? Fortunately they agree to lock in period but this will be challenged

16. Michael Burry Gets call from Goldman about what is he doing ? Turns out: He was able to convey to his investors that he was betting on housing problems, but not able to convey how to make money. His investors go to Investment Banks to have them come up with way to make money!

17. Michael Burry Gets call from all the banks he bought this insurance from ? They all want to buy it back ? Why ?

18. What had happened by 2005/06 ? What are the dangers of prolonged low rates ? 1)Folks Spend More --Don’t Save 2)Folks Buy Homes --Prices Rise / Inflation 3)Banks Lend Money --Lose Control 4)Stock Markets Rally - Stock Prices Inflated

19. Chapter 3

20. Greg Lippmann Bond Market Trader Gordon Gekko ish Loud, brags Peers/Bosses -”A-hole know as GL” -”F-in Whack Job -Great Trader Broke Codes: Talk about Bonus Let folks know he is not paid enough Has no allegiance to Deutshe Bank Unfortunately in life if you are Very good at something, The type of person you are can be overlooked at times !

21. He approaches Steve Eisman to sell him “Credit Default Swaps ? Taking Burry’s idea and selling it Convinced insurance will be worth it. Buy Insurance on $100,000,000 for $2,000,000/year. Loans will go bad when teaser rates change “You can buy the Los Angeles Dodgers with the amount of money you will make on these trades “

22. Who is providing the insurance ? AIG “American Intl Group– Huge, Triple A rated Which means they have high quality. Believe in diversification: If they bet that one Person won’t go bankrupt, a lot of risk, bet on Hundreds of Thousands, not as likely to happen much Unfortunately they did not realize the quality of the loans they were insuring was getting worse and worse ! Goldman Sachs put together product called CDO – Collateralized Debt Offering. AIG ends up insuring $20,000,000,000 in sub-prime loans and receives $24,000,000/year

23. How did Goldman put together CDO? Gather bunch of sub-prime loans-Bad Loans individually Sold diversification: All Sub-prime but unlikely to all go bad together What could cause sub-primes to go bad ? Interest rate changes, job loss, investors Leaving market (prices go down)

24. How did Goldman put together CDO? Convinced Rating Agencies that putting a bunch of risky Assets together deserved a high quality rating Ivy League/Goldman Sachs vs. Government –want to prove their intelligence and be w/ big boys Goldman convinced AIG that these were high Quality and AIG received.12% in premium Had to find someone to buy insurance: Mike Burry who paid 2.5%. What does Goldman make ? $1,000,000,000 * (2.5% -.12%) = $23,800,000 Ratings: Triple AAA – High Quality, Very Safe Triple BBB-Sub-prime- Junk, Risky

25. Lets Review: What is happening? Step 1: Joe Metalworker wants To buy house in 2004, makes $30,000/year, No savings, no credit Should not get loan-no down Payment, no credit Max house should be $100,000 Step 2: Banks says “Sure” give you interest free for a year, roll closing costs into loan. End of year pay market rates

26. What is happening? Step 3: Joe Metalworker buys $200,000 house and bank gives Loan – Sub-Prime. Pays Teaser Rate in 1 st year 1%, end of year Rate will jump to 6% Step 4: Bank makes money (closing costs) and either keeps or sells loan

27. Who is more at Fault ?

28. What is happening? Step 5: Goldman acquires all Of these bad loans and puts Them together Step 6: GS convinces Moodys to give these A high quality rating, Get paid commissions Feel smart dealing w/ Goldman Sachs. Should have been junk BBB, Given High Quality AAA

29. Who is most at Fault?

30. What is happening? Step 5: Goldman approaches AIG, will you insure these high Quality sub-prime loans and I’ll find someone to pay you A premium -.12% Step 6: AIG believes in Ratings, does not look at what they are insuring. Does not think all loans can go bad at once, books a lot of premium, stock does well.

31. Rank 1-5 who is at Fault-Reason for #1. Turn in with name. I will consolidate.

32. What is happening? Step 5: Goldman approaches Investors willing to pay This premium for 2.5% and bet That folks who borrowed money Won’t be able to pay back Step 6: Lippman buys some and sells some

33. Michael Burry -Burry saw this happening: Mortgage 1: Pays 4% interest each payment (less risky) Mortgage 2: Pays 10% interest (very risky) Mortgage 3: Pays 10% interest (very risky) Who buys these: 1)Mortgage Companies/Banks make loans (get commission) 2)Sell them off to Investments (get commission) 3)Investment Banks/Others Consolidate into same average risk pool and sell them off (get commission) 4)Buyers left with portfolio (except now with 2 Sub-Prime loans and greater risk of one failing)

34. Michael Burry -Question of how to bet Sub-Prime Loans would fail: “Credit Default Swaps” - Insurance So He: 1)Gets Insurance Company to take bet on other side (they get paid large commissions) 2)He uses money from what was supposed to be a stock fund. Investors Angry. Not what they hired him for 3)He will pay 2.5% to Goldman/other Banks who will pay.12% to AIG on an annual basis (longer this goes on, more stressful) 4)When enough sub-prime loans go bad, then AIG needs to pay 5)Eventually Banks call, want it back

35. Rank 1-5 who is at Fault-Reason for #1. Turn in with name. I will consolidate. 1 st Place 2nd Place

36. Lets Review how Joe Metal Workers Decision to overextend in buying a house is going to impact this Norweigan Fisherman……

37. Loan Applicant Joe Metalworker The Players: Lets Review Mortgage Broker Banker making loan to Joe Investment Bankers AIG: Insurance against Loans defaulting Ratings Agency Accounting / SEC Norwegian Fisherman “aka” the mark Loan application and fees to Broker Bank receives application, processes Bank approves gives loan less fees to broker and bank Money for loan to buy house Bank sells loans to Investment Banks/Others. They bundle w/ other ones to form CDO which is like one big Bond-Say $100M- pay 6% per year Bank buys insurance against default for 2% or $2,000,000 year Bank Convince Ratings Agency to give high rating SEC/Acct don’t perform job of policing/disclosure Bank sells loans Pension Funds, Investors: Safe, AAA, Insured, low risk 3% Bonds (they keep 1% for efforts). So What Happens when Joe stops making payments ?

38. Chapter 4 How to Harvest a Migrant Worker

39. Who is Joe Cassano ? Head of AIG Financial Products Group – part Of AIG Bully His company, his Money, his water Drove the Credit Default Told traders to back every trade Involving consumer loans For bonds to default, home prices Everywhere had to fall and Moodys Rated this Triple AAA Everytime he provided this Insurance, AIG got premiums And Joe and team got $$$$

40. Joe Cassano- Starts to worry 2006- Meets w/ Goldman, DB, they say Insurance never be needed, “Housing Prices over last 60 years never fallen nationally all at once” Stops providing insurance, however very exposed Still, Sub-prime market roared on

41. Lippman continues to approach Steve Eisman to sell him “Credit Default Swaps ? Eisman/team, no trust in Lippman “F’In Lippman, how is he going to F us” Gets set of news: a)New Regs for Sub-prime b)Median Home price to Income up to 4:1, LA- 10 :1, Miami 8.5: 1 What does this mean for Miami / LA ?

42. Steve Eisman finds deals-common themes-Most like to default ? Sand States: California, Florida, Nevada, Arizona. Prices had risen the fastest during boom Loans made by bad lenders, trying to sell them, make loan, make fees, sell loan, make fees Even if he got an only interest loan at 5% (very good for this size, he would pay $36,200 in interest every year ! Crazy ! Pools of loans with low doc / no doc – Mexican strawberry picker w/ income of $14,000 and no english lent $724,000

43. How does Mexican Picker get $724,000? FICO Scores-Moodys says to be Triple AAA need FICO Score of portfolio to average 615 Thick Doc FICO – A lot of credit History Thin Doc FICO – Very little, nothing bad – Immigrants So you take a person with proven bad credit and score 550 and combine with a Mexican Strawberry picker with 680 = 615 AVG = Which is Triple AAA but both highly likely default !!! FICO Range: 300 – 850, Avg America: 723. But Moody’s said 615 to get Triple AAA ? Why ? What are FICO Scores ? Thick Doc FICO ? Thin Doc FICO ?

44. Eisman’s team meets Moody’s/S&P? Moody’s says she is not allowed to downgrade Loans she thinks are poor. Why ? Sends list 100 to be downgraded, only 25 ok’d Eisman learns why these things are Triple AAA: -Govt wants more home ownership -Wants to increase Sub-prime -Moody’s folks not as bright -Moodys folks not allowed to do job

45. Chapter 5 Accidental Capitalists

46. Who is John Paulson ? Smart, NY Hedge fund Manager, odd, MBA Harvard Able to raise several Billion dollars where Mike Burry Unable to raise his fund Will Receive the Single Biggest 1 year Payout in Wall Street History Worth $300M in 2007, worth $6,000,000,000 in 2009

47. Charlie Ledley / Jamie Mai Charlie: Leaves Amherst after Freshman year Start w/ $110,000 and form Cornwell Capital Jamie: Graduates from Duke, 1 st job to deliver sailboats to rich people on East Coast Make Bets on things beaten up, things unlikely to happen “Event Driven”. Took longshots and hit a couple. Like Buffett the way to make alot of money is go against crowd (after intense study)

48. Charlie Ledley / Jamie Mai Partner w/ Ben Hockett- Wall Street Inside Want to be treated like “Big Boys”, turn $110,000 into $30M Wanted ISDA – “Hunting License” to trade w/ Wall Street. Able to get from Deutsche Bank They bet on the higher end of CDO’s

49. CDO Triple B- Minus Triple AAA Early CDO’s Triple B-Minus and other CDO’s of poor quality Double AA Late CDO’s Somewhere in between Insurance-Credit Default Swaps cost 2%/year for bottom,.5%/year For Top. All Previous Investors looking for bottom, Charlie/Jamie figured They were all bad so top would start to fail, costs less, get more

50. Cornwell Hires David Burt to analyze what they bought Triple B-Minus and other CDO’s of poor quality Double AA Late CDO’s David comes back and says: a) No one ever bought Credit Defaults Swaps On the Double AA tranche b) what was in the tranche was the same Types of bonds that Mike Burry and Steve Eisman bought - Crap Why Do Insurance Companies Continue to insure these bonds When quality keeps getting worse ?

51. Chapter 6 Spider Man at the Venetian

52. January 28, 2007 - VEGAS? SUBPRIME Conference: a)Housing Prices falling, sub-prime defaults increasing, but sub-prime bonds held firm b)Cost insurance same, no sign of bust Was what they bought ever going to be worth something? Even if real estate market collapsed ? No trust in Lippman

53. Eisman meets Wing Chau Wing Chau: CDO Manager $15Billion dollars Pools loans together Bought Sub-Prime Loans Double Agent: Paid by investors to make sure bonds are good But gets paid.01% for each deal Earnings from $140,000 to $26,000,000 Each time Eisman bets against Housing market, Chau needs More loans to match that bet. More loans means more fees But means more bad loans Eisman tells Lippman he’ll short Every CDO Chau puts together SO IF EISMAN ENDS UP WINNING HIS BET, WHO LOSES ? Chau ? Lippman ? Someone else ?

54. Charlie Meets Bear Stearn CDO guy One of the Bear Steans CDO guys, after Charlie asked him what was likely to happen to these CDO’s in seven years said “Seven Years ? I don’t care about seven years, I just need it to last for another two”

55. John Devaney Organizes Conference Big Buyer of Sub-Prime Mortgages Goes on a Rant: a)Rating Agencies Whores b)Securities Worthless c)Complete Silence Will go on to lose yacht, plane And reputation when market crashes Goes Bust: “I was long in 2007 and was wrong” According to TheStreet.com, Devaney put "one of his most prized possessions-a 142-foot Trinity yacht dubbed Positive Carry- up for sale along with his $16.5 million second-home in Aspen, CO. The house, called Sardy House, is the site of the nations' largest living Christmas tree."

56. Rating Agencies Eisman: “There should be no better Job. Major decisions, move markets, Should be the elite !! Sub-Prime Industry floated on the Backs of Ratings Agencies, everyone Assume they understood this. Not being paid: a)Little Incentives b)Minimal Compensation c)Wall Street Wannabees “Expected Home Prices to Rise And losses to run at 5% The least qualified making the most important decisions !

57. LEAVING LAS VEGAS? What Did Charlie and Eisman Learn ? a)Ratings Agencies poorly equipped to be leaders b)CDO managers all about commission, don’t care about Quality of loans, just want more and more to sell c) Investors in loans think agencies whores, stuff bad

58. Chapter 7 The Great Treasure Hunt

59. January 30,2007 Comes back from Vegas: a)Says to mom “ I think we are facing something like the end of Democratic Capitalism” b)Jamie writes more “Are they making a bet on the collapse of society Realize this is not just about making money and shorting The bonds, this could be bigger.. Why do they make Such statements ? Do you think they are at fault ?

60. Feb 16, 2007 Cornwell: a)Buys $10M in Credit Default Swaps for 1.5%. Morgan Stanley thinks less than 1.5% chance these bonds will fail b)First days trading, Feb 21, value of bonds goes down over 50%. Market felt bonds were falling in value c)They buy some more at other places, then unable to buy.

61. What is happening Feb-June 2007 Cornwell: a)Defaults up, Individual Bonds worth less b)Yet, Merrill and Citigroup sell another $50 Billion in CDO’s If the oranges are rotten, the orange juice should be rotten, If the bonds are bad, the bond porfolio (CDO’s) should be bad ! So how does Merrill / Citigroup sell another $50B ? Who is buying ? Who benefits from these sales ?

62. Somebody is going to get the Horns !

63. Back to Eisman: Wants more ! Same issue as many Berry, Investors in his fund don’t understand what he’s doing, want to limit it. Media totally bullish, Investors wonder how he can bet on collapse with all this positive press.

64. June 2007 Eisman is short on everything real estate: a)Credit Default Swaps b)Home Builders c)Banks d)Rating Agencies The market starts declining…. Eisman goes on “The Great Treasure Hunt” What does this mean ?

65. Jim Grant Respected in Wall Street inner circle Really tries to understand CDO’s Concludes if he can’t, how can rating Agencies ? Write Article about how ratings agencies have abandoned post Eisman is pumped, why ?

66. Class Agenda / Hope to Accomplish REVIEW BIG SHORT

67. Chapter 8 The Long Quiet

68. 2007 Had to take extreme steps to stay afloat: a)Fire Half his Staff b)Had to dump billions of dollars of bets he made on this happening c)Lonely/Isolated Not happy to make money on this. “I have a job to do, make money for my clients. Period. But boy it gets morbid when you start making investments that work out extra great if a tragedy occurs” What is investment ? Does someone always have to lose ?

69. His Bet He created the Credit Default Swap market. A way to bet against insurance on bad bonds. Pay premiums. So if Bonds go bad, insurance companies pay him He bet that for some loans made in 2005 they would have 1-2 years of teaser rates. Then in 2006/7, new higher rates come, folks unable to pay. Problem he had: No market. Not publically traded. Why is this a problem?

70. Problem He relied on Wall Street to tell him what they were worth If Wall Street were to say the bonds had decreased in value, they would pay him. Do you think Wall Street wants to say this ? So WS kept saying what he owned had no value, his investors were upset with him, trying to pull out money

71. Solution Has ability to “side pocket” an investment which has no public market Sends Investors note in rather aggressive terms: What is their reaction ? Greenblatt, Gotham, fly out and asks for money back ($100 Million). Burry says no. Investors Hate him even though he had done so well in past (+186% vs. +10% S&P). Why ?

72. 2007 Made out to be Villian, people think he is stealing money Rumors: He left his wife, fled to South America… Then in 1 st half 2007, things start to fall apart in real estate. Bear Stearns fund goes belly up. No one will return his calls. Goldman, Morgan, BOA, all have power outages, sick days, systems problems… Are all these things really happening at once ?

73. Chapter 9 A death in Interest

74. Howie Hubler Morgan Stanley Head of Asset Back Bond Trading Loud, headstrong And bullying Warehoused the loans Between the time they purchased The loans and sold them, Morgan Stanley held the risk Starts to sour on bonds, creates A form of credit default swap And finds Investors willing to Take 2.5% to back these bonds (Germans for example)

75. Howie Hubler Star Trader in 2006, Generating 20% of Companies profits Paid $25 million In 2006 Wants More-Start Hedge fund MS gives them special deal. Own Desk, own team, share of profits Within Morgan: a)Bond guys buying and selling Bonds to customers b) Hubers group taking $2Billion Bet that these bonds will go bad

76. Howie Hubler Major Problem Developing a) Has bought $2,000,000,000 in credit default swaps. Pays $200,000,000 in premiums (10%) b)Decides to provide insurance (and receive higher premiums on the really bad stuff) on $16Billion in Bad Bonds. c)By his math, if some go bad, he makes money

77. Hubler-April 2007 Start to realize risk they have taken a) Somehow finds someone at Bear Stearn to take provide the insurance on $6 Billion of the $16Billion. But would take a loss of a few tens of millions b)Problem is banks don’t like to take or show losses. A major sign of weakness and bad decision making c)Asked by Risk department, what if defaults on loans reach 10% ? Instead of making $1Billion, lose $2.7Billion….defaults by the way reach 40% on …he keeps saying “will never happen….homeless across county”

78. Hubler- July 2007 Lippman Calls Huber: a)Lippman had bought $4 Billion of the insurance Huber sold and that Morgan Stanley owed Deutsche Bank $1.2 Billion b) Huber says no, Morgan Stanley agrees to $600 million c)Bonds keep going bad, Lippman keeps offering to get out, Morgan stays in. Huber leaves. Morgan loses $9 Billion d)Somehow UBS and Mizuho take on $3 Billion of these bad loans and provide insurance (sold the swaps). UBS would lose $37.4 Billion in a couple of months.

79. Howie Huber-His Legacy HOWIE HUBLER – Single handedly lost $9 billion for Morgan Stanley with one trade. He was the ultimate Big Bully as the head of mortgage bond trading who made $25 million the year he lost the $9 billion. CEO John Mack had no clue what his bond traders were doing. Hubler went on vacation and never came back.

80. August,2007 Cornwell tries to figure out what they are worth: a)If US govt says they will back all sub-prime loans, what is the insurance Cornwell/Others have worth ? b)They try to get out. Ben Hockett is in England on a bad internet connection at the Powder Monkey Pub. c)Call everyone, no one wants them. Then who comes calling ?

81. August,2007 UBS, Citigroup, Merrill, Lehman: a)They are trying to save themselves. Willing to buy at significant premium. b)World financial markets are collapsing: French Bank BNP tells investors can’t withdraw savings c)Cornwell makes $80 Million. Ben does trades in 3 days from Powder Monkey. How do you think he felt ?

82. Burry’s turn He starts unloading his Insurance/Credit Default Swaps. Makes more than $720 million Never hear one Thank you. Sends a note to Gotham “You’re welcome” Wealthy but bitter and disliked

83. Chapter 10 Two Men in a Boat

84. Deven Sharma-President S&P October 22, 2008 “Virtually no one – be the homeowners, financial institutions, rating agencies, regulators, or investors- anticipated what is occurring”

85. Steve Eisman -End of 2007 Frontpoint has double size of fund $700M to $1.5 Billion In 2007 it was fun making money because we were short the bad guys, in 2008 the entire financial system was at risk

86. Steve Eisman Considered Expert. Invited to a number gatherings to participate or listen. Continues to insult, call into question the CEO’s / leaders assumptions. Why is he still invited ?

87. March 14, 2008 Eisman invited to attend meeting Of Alan Greenspan, Bill Miller, Other well know Investors… Bill Miller (At end of 2007, description): a)One of today’s most renowned professional money managers. He is Chairman and Chief Investment Officer of Legg Mason Capital Management, Inc. and leads a team that manages $70.9 billion of assets as of 6/30/07. b) He was ranked among the top 30 most influential people in investing when he was named a member of the Power 30 by SmartMoney. He was also named by Money magazine as “The Greatest Money Manager of the 1990’s” and named Morningstar’s 1998 “Domestic Equity Manager of the Year.” In 1999, he was selected as the “Fund Manager of the Decade” by Morningstar.com. Also in 1999, Barron’s named him to its All-Century Investment Team and BusinessWeek called him one of the “Heroes of Value Investing.”

88. March 14, 2008 Eisman invited to attend meeting Of Alan Greenspan, Bill Miller, Other well know Investors… All financial stocks were beaten down, at “great values”. Bill Miller owns $200Million in Bear Stearns, thinks great value, not alone. My broker had me in a ton of financials. So Eisman is a “Bear” at this conference, Miller a “Bull” What does this mean ?

89. March 14, 2008 Bear Sterns-1/2007 worth $20.6 Billion, at 3/14/08 worth $6.4 Billion 9:21 am – Bill Miller discusses why Bear Sterns is a great buy. CEO Bear Sterns mentions liquidity. Why does this cause concern ? 9:21am – 10:02 – Bear falls to 29. Lost 45% value. What happened ?

90. March 14, 2008 While Mr. Miller is speaking about Bear Stearns, stock price plummeting. Analyst says” Mr. Miller, from the time you started talking, Bear Stearns has fallen more than 20 points. Would you buy more now” What does he say ? How does he feel ? By Monday, Stock at $2, JP Morgan buys for $1.2Billion Do you think this was a fair price ? Why do you think others did not offer to buy it ? Who bought it at $20 ? At $10 ? At $5 ? Why ?

91. Still March 14th A Bad Day for Bill Miller and many, many investors ! Who do you think lost out as a result ? Folks who owned Financial Stocks ? US, Europe, Asia…the World ! Any employees of financial firms ? Why ? Other Stocks ? Market Collapsed Seems to this date to be paper money, not real. This made it very real. Retirement accounts devastated, home values crushed.

92. 3/14/2010 – 9/14/2008 Tremendous uncertainty, market declines 9/15/2008 – Lehman Brothers files bankruptcy (after 158 years of existence as a top investment bank), largest in America ! At 2/2007 had a market cap of $60,000,000,000 ($60 Billion). 3 of Top 5 Investment banks gone in 6 months: Bear Stearns, Merrill Lynch, Lehman

93. September 18 th, 2009 Danny who works for Eisman has heart issues, rushes to hospital. Had these feelings/issues before once – 9/11/2001. Why do you think he is having the same issues ? How can you equate being part of 9/11/2001 and what is happening these days ? if Morgan Stanley goes down ?

94. Cornwell a)Had quadrupled their investment – a 4 Bagger b)Suffering anxiety, migraines c)Angry with system, want to get all investors screwed and sue Moody’s / S&P (actually talk to a lawyer) d)Calling professor at late hours e)Losses mounting: Merrill $50Billion, Citigroup $60Billion What was going through Charlie's mind ?

95. The Line between gambling and Investing is artificial and thin: a)Eisman, Burry, Cornwall, Paulson make tons of money with Bet on Real Estate Collapse b)Wing Chau/Devlaney go bankrupt, Wing Chau left with tens of millions c)Huber makes millions to leave, costs JP Morgan close to 10 Billion d)AIG- Bailed out, surives. US Govt pays Goldman $13 Billion AIG Owes-Our taxes e)Other Investment firms bailed out, not Bear Stearns, Merrill Lynch, Lehman f)Buffett invests $3Billion to save Goldman g)Many Pension Funds/Retirement accounts lose a ton, delayed retirements