Whitney Tilson’s name spread like wildfire on the web after his firm T2 Partners released what was then a controversial bearish outlook on the economic impact of a rapidly deteriorating mortgage market. He was so spot on, I have no problem giving him an unsolicited gratuitous plug. Whitney Tilson is the founder and Managing Partner of T2 Partners LLC and the Tilson Mutual Funds.
This is the excerpt from a post he wrote on Seeking Alpha in March:
We’ve been working on nonstop for the past two weeks on a presentation entitled: “Why We Are Still in the Early Innings of the Bursting of the Housing and Credit Bubbles – And the Implications for MBIA and Ambac.”
Amherst Securities provided us with some incredible – and very sobering – data that leads us to the following conclusion (see page 19):
‘In summary, today we are only seeing the tip of the iceberg: an enormous wave of defaults, foreclosures and auctions is just beginning to hit the United States. We believe it will get so bad that large-scale federal government intervention is likely.’
Another implication, covered starting on page 57, is that MBIA and Ambac (which remain among our biggest short positions) are in big trouble.
Well that presentation is no longer available, but in its place is a new one. In an October 8th, 2008 presentation titled “An Overview of the Housing/Credit Crisis, Why There is More Pain to Come, and Three Investment Ideas” Tilson outlines that we are not out of the woods yet.
Defaulting Subprime and Alt-A Loans Are Responsible for the Current Mortgage Crisis and Credit Crunch. The Next Leg Down Will Be Driven By Defaulting Prime Loans, Primarily Option ARMs, Home Equity Lines of Credit (HELOCs) and Second Liens (Closed-End Seconds)
This presentation is really worth a read. When you are through, you will understand why Steve Schwartzman told his traders to go home until next year. Although Tilson has recently been quoted as saying that he is buying stocks like Warren Buffett, hand over fist. Nonetheless, his overview offers a sobering perspective on why it might be wise to sit on the sidelines, at least for a little while longer, particularly if you don’t have the stomach for the current roller-coaster.
He does make three very strong conviction calls, also worth reading it for. I don’t get paid for this, nor any form of remuneration, but you do have to sign up for the Value Investing Congress’ website to gain access to the pdf. To access the presentation, click here. If you don’t like where that link takes you, go to the prior page here, and look for the presentation on the lower right hand side.
If you have trouble accessing the presentation or would like a copy of the old one, please just email me at email@example.com, or post a comment with your email address.
An Overview of the Housing/Credit Crisis, Why There is More Pain to Come, and Three Investment Ideas
Whitney Tilson, T2 Partners LLC, October 8, 2008
Why We Are Still in the Early Innings of the Bursting of the Housing and Credit Bubbles – And the Implications for MBIA and Ambac
Whitney Tilson, T2 Partners LLC, March 10, 2008
Why We’re Still in the Early Innings of the Bursting of the Housing and Credit Bubbles – And Implications for MBIA and Ambac
Whitney Tilson, Seeking Alpha, March 8, 2008