I want to ask you about your experience as a financial writer. I will start with your most recent book, Boomerang, and then move to some more general questions.
Did your interview in Boomerang of Kyle Bass, the founder of Hayman Capital Management in Dallas and one of the first investors to develop a bearish view on European sovereign debt, come from the cutting-room floor of your work on The Big Short?
Kind of. I went back to him. So a lot of the interview in Boomerang came after I finished The Big Short, but he was, in fact, on the cutting-room floor of The Big Short. I talked to him about the subprime trade mainly, not the European debt trade.
Is there any leftover material from your discussion with Kyle Bass that you wanted to use in Boomerang, but that you just couldn't or didn't?
It's funny you ask that, because the world would benefit from Kyle Bass getting up on a podium and presenting the research that he did at his firm, showing the inevitability of sovereign default. They were trying to see if there was a quantitative tipping point with sovereigns. Bass looked at sovereign debt differently than the markets, because he was counting not just the sovereign debt itself, but also debt in the banking sector that he thought the government would be responsible for.
But when you look at, for example, France, you can't ignore the government assuming bank debts. If Credit Agricole or BNP goes down, the liabilities of those banks will become a French government liability.
What I didn't do in the introduction to Boomerang, because I didn't want to lose the general reader, is to report on a conversation with Bass in which he walked me through the numbers, and he explained the argument.
Bass’ firm, Hayman Capital – and there must be other firms with this position – is holding long-dated put options on this sovereign debt, so they can afford to wait, but they are still trying to figure out when default happens. Bass thought the endgame would be the end of last year or the beginning of this year, and he may be right; he was talking about Greece. But his argument applies to other countries, and I didn't have the time or energy to lay out his argument in great detail. I was interested in conveying his general argument to the reader, because it was so breathtaking.