Danny Moses - The Big Short and Beyond

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
Many of the most fun investing conversations are with traders and portfolio managers because they live and breathe risk day in and day out. Of course, they are often risking other people's money, but controlling real money in markets is hard to match. Theories and ideals can fade quickly, well-laid plans often don't last.
This week's guest is someone who has lived through his fair share of market highs and lows, and I think you'll be able to tell quickly why I so enjoy conversations like this one. My guest is Danny Moses, who is directly in the middle of one of the biggest trades in market history, chronicled by Michael Lewis in his book, The Big Short. Danny was the head trader on the Frontpoint team, led by Steve Eisman, who along with a small handful of others, like Michael Burry and John Paulson, made enormous profits during the financial crisis as they figured out in real time the disaster that was brewing in mortgage-backed securities and figured out how to position their portfolios in a way that would benefit from their insight. No easy feat. My conversation with Danny is multifaceted. We talk about Danny's role in The Big Short, both the trade itself and the making of Michael Lewis' book. We cover the history and current state of sell-side research and how ETFs and other trends have made it difficult for traditional bottom-up fundamental managers. We even talk about Dominic Strauss-Kahn. To start this episode, I've pulled a piece from the middle of the interview because I want to make sure that all aspiring asset managers out there hear Danny's answer about what he looked for when hiring an analyst.
You can find show notes at investorfieldguide.com forward slash Danny, and now please enjoy this colorful conversation with Danny Moses.
If you were designing a new analyst or you could somehow bestow upon a person three or four traits that you think would make them successful, and this question's really aimed at younger people that are interested in asset management, what things or people know a certain strength about themselves do you think make for the best odds of someone succeeding, given all these challenges, right? Given the fact that the fundamentals don't matter right now, they will at some point. So obviously I think a love for it is maybe one of them, because you're not gonna last if you're in it just to make money. But what are the kind of most common traits that you think, you seem to have this kind of arbitrage mind, right, and numbers mind. What would you name as the most important things if you were hiring a 23 year old?

**Danny Moses** (3:37)
You gotta be an out of the box thinker. You have to question everything that you see.
It's not so much being cynical as it is being skeptical.
Don't take anything at face value that a CEO is telling you. He may be telling the truth and most of them do, but don't take anything, don't just rely upon that or other people in the investment world to tell you that you're right. You want people that are gonna tell you that you're wrong. So the first thing I do is when I meet somebody is how they approach things in life in general. Like how do you just accept everything at face value, question it. Second is that, and this goes back to what I actually, when I hired a trader at Frontpoint, when we were really growing, I get all these resumes would come in. And I'm not gonna single out any university, but let's just take some of the Ivy Leagues. They come in and I see the resume and I meet with them. Brilliant people, very smart. But when I said, so where do you see yourself in two years? So well, I'd be the portfolio manager. And I said, oh, that's okay. So what exactly, how are you gonna get to that level?