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PRESS RELEASE
THE BILLION DOLLAR MISTAKE
Learning the Art of Investing Through
the Missteps of Legendary Investors
By Stephen L. Weiss
Publisher: Wiley
Publication Date: January 2010
Price: $29.95/hardcover
ISBN: 978-0-470-48106-6
"If you want to read only one book on investing this year, make sure it's
The Billion Dollar Mistake. It reads like a novel, but the
stories are all true. As an active investor, I will leave this book on my
desk and use it as a reference. It's simply the best investment book in years.
Stephen Weiss's insights blew me away."
- Roger Reinlieb, Private Investor
Retired Partner, Warburg Pincus Asset Management
"The Billion Dollar Mistake does a superb job of combining thoughtful
advice and entertainment in a unique style that grabs the readers' interest and
educates. This book should be required reading for every business school educating
students in the art of successful investing."
- Carlton Martin, Vice-Chairman, Blaylock, Robert Van, LLC
LEARN FROM THE MISTAKES OF LEGENDARY INVESTORS
Financial Expert Stephen L. Weiss Offers Cautionary Tales
And Clear-Cut Lessons In THE BILLION DOLLAR MISTAKE
Insufficient due diligence. Lack of diversification. Assuming that a low stock price equals opportunity. Investment mistakes such as these can devastate a portfolio -- and even the best investors can fall prey to them, often with crippling consequences. In his new book, THE BILLION DOLLAR MISTAKE: Learning the Art of Investing Through the Missteps of Legendary Investors (Wiley, January 2010), Stephen L. Weiss draws on his nearly twenty-five years of Wall Street experience to offer an in-depth look at large scale errors made by some of the world's most brilliant investors, along with guidelines to help readers improve their own investment strategies. For as Weiss points out, the only real difference between these billion dollar mistakes and the mistakes the average investor might make is the number of zeros that define the loss.
Based on Weiss's original research and interviews, THE BILLION DOLLAR MISTAKE profiles ten legendary investors including Kirk Kerkorian, Bill Ackman, Aubrey McClendon, Leon Cooperman, David Bonderman, Nick Maounis, Richard Pzena, Geoff Grant, Chris Davis, and Adolf Merckle, as well as some of the people who invested with Bernie Madoff. "Though these mistakes were committed by extremely successful and well known pros, they are common, garden-variety investment mistakes," writes Weiss. "Understand what these guys did wrong, and you improve your chances of not falling into the same trap."
Some of the billion-dollar lessons that readers will learn are:
- Passion is not an investment strategy -- Kirk Kerkorian's passion for the American auto industry drove him to attempt to buy into the Big Three automakers no fewer than four times. That passion, combined with early investment successes in the industry, ultimately led to a loss of nearly $800 million when he finally took a large position in Ford. In the world of investing, emotion is the antithesis of discipline. Passion cannot override objectivity.
- ALWAYS do your due diligence -- David Bonderman, a very careful, accomplished investor, had a personal history with Washington Mutual and its CEO when, with only a week or so in which to perform due diligence, he and his firm invested $2 billion in the troubled company. Only five months later, the FDIC seized the bank's assets, making it the biggest bank failure ever. Substituting familiarity for due diligence is a dangerous mistake, cautions Weiss. No matter how well an investor believes he or she knows a company, fresh examination and detailed analysis are required before every new investment.
- Leverage is a double-edged sword -- Aubrey McClendon leveraged himself to the hilt to buy millions of shares of his own company, Chesapeake Energy. When gas prices slid, margin calls forced him to sell nearly all of his holdings at a loss of some $2 billion off the stock's peak value. Buying on margin -- that is, with borrowed money -- allows investors to increase the size of their investments, but the penalty for being wrong can be the loss of the entire principal, plus the loan. Bottom line: don't buy what you can't afford to own and can't afford to lose.
- Don't be blinded by outsized returns -- Geoff Grant's Peloton Partners found extraordinary success -- to the tune of 87 percent returns -- with the trading of asset-backed securities (ABS). But, with the onset of the global credit crunch other ABS investors ran for the exits while Peloton stayed put -- ultimately costing the firm $2 billion. Weiss counsels investors to be wary of hyper-returns. "Remember that high return means higher risk, and higher risk can wipe out your principal," he writes.
- Declining stock prices may not equal opportunity -- Richard Pzena saw the collapse in residential mortgages and the tanking of financial stocks in late 2007 and early 2008 as a once-in-a-generation opportunity to get bargain basement prices for Citigroup, Fannie Mae, and Freddie Mac. Less than a year later, and with financial stocks comprising forty percent of Pzena's portfolio, Fannie and Freddie were nationalized -- essentially wiping out their equity value. Stocks are only rarely inefficiently priced, Weiss warns. Because price moves are usually symptoms of an underlying issue, investors must understand that issue before deciding to buy.
A fast-paced read with plenty of detail about each billionaire's road to success as well as the circumstances that led to their out-sized losses, THE BILLION DOLLAR MISTAKE brings to life lessons that average investors can use. As Stephen Weiss explains, "All investment involves risk. The mistakes I've described have been made by some of the smartest, savviest, sharpest, investors around. Be sure you don't do what they did."
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ABOUT THE AUTHOR
STEPHEN L. WEISS has spent nearly twenty-five years on Wall Street working for some of the industry's most prestigious firms including Salomon Brothers, SAC Capital, and Lehman Brothers (he played no role in its demise). He is currently a Senior Managing Director and Partner at Leerink Swann, LLC, an investment bank. He lives in Short Hills, New Jersey with his wife, two daughters, and two dogs.
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