This page has been archived and commenting is disabled.
Profiling "The Big Short's" Michael Burry
"Bloomberg Risk Takers" profiles Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge. He forecast that the bubble would burst as early as 2007, and he acted on his conviction by betting against subprime mortgages. The former head of Scion Capital LLC was profiled in Bloomberg columnist and bestselling author Michael Lewis' book "The Big Short"
Some of the key highlights for those strapped on time:
On his personality:
"My natural state is an outsider, and no matter what group I'm in or where I am, I've always felt like I'm outside the group and I've always been analyzing the group."
On his early days blogging about investing:
"I knew I was getting attention when I said something I think in late 1999. I said that Vanguard funds are the worst funds to invest in now. Those index products are going to do horribly over the next decade and I linked to the site and I got a cease and desist from Vanguard. So I realized, oh, people are reading this."
"I started getting paid a dollar a word to write, which was — I didn't have a lot of money, and I was actually in a lot of debt. So that was tremendous validation for what I was doing in that space."
On starting his hedge fund:
"I think it was at $45,000 is what I had and I said, this is the last little bit that I got – this is the nut of what I got from my dad and I don’t want to just pay down my medical school debt with it. "
On his investing style and dealing with investors:
"I think a lot of hedge funds get their trades from Wall Street and get their ideas from Wall Street. And, um —I just like to find my own ideas. I’m reading a lot; I read a lot of news. I’m addicted to it. I basically I follow my nose on news stories. And more often than not it’s a dead end, but sometimes it produces something of value."
"I had been to New York once before but not for business and I just didn’t know how to dress. I didn’t know anything about it."
"I didn’t offer transparency. I provided one quarterly report in a letter form and that was all you got. I basically demanded that if you’re going to invest in my fund, you need to accept my terms — the terms not being super high fees, but just, you know, I’m not going to cater to you."
"In 2003, something curious had happened. The interest-only mortgage was reintroduced. That spurred me to write a section in my letter called Basis for Concern."
"I tried to raise a fund, Milton’s Opus, to uh—Milton’s opus being Paradise Lost—to just do this because I wanted to do it in big size, but I couldn’t get it going. And um, the urgency came from my belief that I can’t be the only one thinking this. Somebody will see it and when they do, spreads will blow out wide. I want to get it on when it’s cheap."
"My positioning with my investors had always been from the beginning…I need three to five years. I saw the time clock. I knew when it was going to happen. We just needed to make it through to that period. And that was something that was a hard sell when it moved against us initially."
"Even when there was the investor rebellion and even when we had these difficulties in ’06, I was 100% confident when it was going to happen and I would tell people: just wait. We’re on the cusp, 2007, it will happen."
"Ironically, I'm in this book, 'The Big Short,' but I'm not a big short. I don't go out looking for good shorts. I'm spending my time looking for good longs. I shorted mortgages because I had to. Every bit of logic I had led me to this trade and I had to do it. And I had to pull back on equities, because I saw what was coming I thought would affect everything."
Jeff Madrick, journalist and author of "The Age of Greed"
"I think Michael Burry’s Asperger’s [Syndrome] on balance helped him. It made him a deeply effective, perspicacious researcher, like very few others."
"I think [Asperger's] had its downside. He didn’t know how to deal with investors. He didn’t really know how to deal with the traders on the other side of his trades. He had problems with that."
Kip Oberting, early investor in Michael Burry's fund:
"In [Michael Burry's] mind, he wasn’t a risk-taker. He was a risk-avoider. And he was paranoid about avoiding risk in his investments."
"A colleague of mine came in to my office one day and said, 'Kip, come and check out this Web site.' This guy who's a doctor is posting these investment ideas, and they're pretty interesting….It was unique because it was deeper than your typical web-posting-market-watch type of person. It was someone that clearly was writing very lucidly, writing very clearly."
"We at White Mountains invested $500,000 to purchase a share of his business, and we gave him $10 million dollars to invest."
On not meeting Michael Burry:
"I was scheduled to meet him once in, in person, and it fell through. And so all of our correspondence to date— you know, we invested a lot of money with him and so forth— was either through the phone or through email or just other writing that he did."
On Michael Burry's relationships with investors:
"In 2006, the equity markets were up five or ten percent and Michael was down 20%. The loss was attributable to this derivative position shorting the housing market….So he did start to feel some pressure from investors. And as the year progressed, I think he got a bleeding ulcer. I think it was a very difficult time for him and his firm, too. Some of his large investors confronted him and said they're going to take their money out. "
"[Michael Burry's] bet against the subprime mortgages, that made him his fortune, they regarded as mission creep. He was supposed to be a value investor in the stock market and there was a lot of suspicion."
"And so this was on the eve of what was going to be [Michael Burry's] marquee moment… the winds had blown against him so much so that it started to get taken out of his control. And so what he did, which was a controversial move, was he locked in certain investors. That move drew the ire of some of his larger investors."
"[Michael Burry] basically turned $750 million dollars into more than a billion and a half dollars. And at the end of the year, because of his relationships with some of his investors, he had to give 750 million dollars of that back to people."
"[Michael Burry] would put out these letters to his investors that were very prescient and very thoughtful. And the letter for 2007 was kind of a recap. It was about the people who doubted him along the way, and he also included in this letter, which was very unlike him, pictures of himself with like swans around him. I think they were like black swans. It was kind of Michael’s little way of saying, See, I was right, and this was his little touchdown dance."
Michel Del Buono, former analyst for Michael Burry's hedge fund Scion Capital:
On Michael Burry's early days juggling medical school and investing:
"[Michael Burry] told me that he had been working so hard both studying for medical school and studying on these financial things that during a complicated surgery he fell asleep standing up, and crashed into the oxygen tent that had been built around the patient and was then thrown out of the operating room by the surgeon, you know, very angrily. So that tells you how hard he was burning the candle at both ends. "
"Michael tends to be very, very intense and focused when he does things, definitely more than the average person. Definitely more than most investors I had ever met. It was really driven by, I think, a passion to learn and to really understand the underlying mechanisms of what’s going on."
On choosing to bet against subprime mortgages:
"So we are seeing all these things happen how do we take advantage of this and it's not easy. The obvious one would be to short these mortgage-backed security, these pools of mortgages, and that is why we went with this derivative thing which was the credit default swap."
"Some of the investors came out to meet with Michael and said that they were very upset by this. We said we had always been upfront about it. It was in our documents. It’s not an unusual clause in people's documents to have the ability to side-pocket. And after they had met with Michael Burry, Michael Burry came out and told us that we probably needed to go look for other jobs just in case."
»
- 39593 reads
- Printer-friendly version
- Send to friend
- advertisements -
He made billions on that short, what about now?
He's buying up farmland, from what I hear.
Other then CRESY, anybody know any practical ways to play farmland?
buy seeds, plant in fertile ground, keep well irrigated
+10 bushels.
ORI
The simplest plans are always the best! :>D
Here's a good link: http://www.youtube.com/watch?v=3ctetiBFxeE - Good Luck
delete
Smart move. I'm buying some land too.
and gold. Lots of. He's on the record as a long.
It's beautiful that his career success boils down to the fact that he's honest. Intellectually honest. Could not have happened to a more wrthy guy. Fuck the Wall Street sycophants who praise naked emperors for money.
That and I believe gold -would love to hear his thoughts on the current market.
Yeah and thats a dumb idea.
Farm land is the "anything but gold" crowds wet dream. You know...Warren Buffet
He liquidated Scion because he got sick of dealing with investors who didn't understand why he would turn an equity fund into a housing bear bet (plus he wouldn't let them withdraw their funds).
The investors made many multiples of their investment and didn't even have the courtesy to say thanks. Understandably, investing your own money is much more fun -- you don't have to answer to your prospectus.
Scion Capital is closed. You will be forwarded to Bo Shan's GobiCap Value Fund. A proper value investing fund in the Momo Age.
The first. All others piggybacked his trade.
Yep, not only the first but practically invented the Sub-Prime short all by himself (which everyone else piggybacked) ...and in hindsight probably should've kept all his investors in the dark which would have stopped piggybacker Paulson et al
Brilliant, insightful, balls and ahead of the curve... my Hero :)
Very much agree Zero Govt.
http://news.vanderbilt.edu/2011/04/video-burry-cls/ - Here is a lecture of his at Vandy
Here is the previous commentary on this:
Michael Burry : The Toxic Twins Of Fiat Currency And An Activist Fed Set The Route To Long-Term Ruin
When can we expect a Bloomberg video on the real people behind Zero Hedge?
Does it really matter?
http://www.youtube.com/watch?v=e9mf3Bypyk8
http://www.youtube.com/watch?v=YWyCCJ6B2WE
Pay no attention to the Tyler Durdens posting on the other side of the screen.
exactly, this> http://www.youtube.com/watch?v=TJdfWdIBfE8
Grass has to start growing in the bomb craters first...
Thank you for linking that +1000.
Everyone here should watch at least from minute 23 onward - it's epic, amazing and a keeper (about QE, Bernanke's REASON for meddling, public unions, debt and the gravity of our situation).
I tried to listen to it, but that guys voice was drilling into my skull, i cant handle it.
STUD
How could he have possibly made any money?
'Subprime is contained'!
Contained is a matter of the transitory nature of tradional money.
Peas are 'contained' in pods & then cans (until someone goes & tells you you have to eat them)...
Fukushima and Chernobyl are both equally contained.
What I want to know is how, with only $45k in capital, was he able to trade derivatives like CDS? It seems that small time, individual investors don't even have access to the types of securities that are the actual drop in the water . . . but, rather, are left to trade in unpredictable ripple effect markets.
the 45k was his start in equities (quit med residency), which in turn attracted 100M from NYC playas...
Think independently indeed. Is there any other kind?
Great Video. I'm just like him except for the investment savvy part. Also I wonder if he owns physical silver???
Not to be critical, but even I had a bunch of WAMU leap puts....wasn't it pretty obvious to anyone that the housing with cash-out-refi's was going to be a train wreck? If it was obvious to me, it must have been so to several hundred thousand others.
Realtors were busing people from the SF Bay Area out to Chowchilla, CA to buy "cheap" homes. And buy they did with no thought to the simple fact that folks out there do not earn enough to pay the mortgages on the homes being driven up by this outside buying.All one needed to do was use some horse sense.....nothing very complicated here, folks.
To me it is like buying silver mining stocks today....all the actual producers are going to be reporting massive earnings. Just read a report from one re-opening a mine in Texas that had a pay back of 1.9 years.....based on $15/oz silver.....bought some more of that one. Pretty obvious stuff...right in front of us.
But the 'professional' money managers were rather buy Lulu betting on a bigger fool to come along...
In retrospect it seems like it should have been obvious, but it clearly wasn't obvious to the majority back then. Hell he created the credit default swap as that vehicle didn't exist until he started asking about it.
Sort of exactly how not a single major media outlet or 'investment' channel of information (major, conventional, "accepted") is NOT speaking of how any debt crisis resolution is possible without a considerable chunk of the existing debt being wiped away - period. end of story. finito.
The U.S. and developed nations of the world (and many would argue China, as well, among the big emerging ones), are currently unfixable given the commentary and statements made by legislators and media pundits.
All of this should seriously beg the question, for even the least 'conspiratorial' of the non-sheeple (who don't think about these things anyways), "why?"
Denile is long, deep and wide, friend. :>D
the trick i suppose is which silver mining stock to buy???
At the time 86% of people in Orange County (CA) couldn't afford a mortgage on the home they lived in if they had to purchase it. Everyone felt rich ... so much so that they went out and bought every thing in sight
I saw an interview of him about 8 months ago. His advice then was to buy gold and farmland
And open a bank account in Canada.
If you haven't taken the time to read this book you are doing yourself a tremendous disservice. Absolutely essential reading.
Not only essential reading, but fun reading too.
I bought the book to take on vacation 3 days before I left. Had it read before I took off, and read it twice more that following week.
Alan Greenspan is a giant fucking idiot
It's likely far worse than that. He's more likely a psychopath than an idiot.
Alan Greenspan, fun at a party. Head of the Fed? Not so much.
It's all a matter of perspective, no? For Joe Six Pack (I include myself) he was horrible... for the continuation of the Ponzi scheme, he did what needed to be done. Credit was beginning to wobble, the fed lit a fire under housing, can kicked with interest. The end is near.
This is a great story and hard not to love if you have any interest in investing. Searching for a way to bet against sub-prime mortgages Michael Burry basically became the catalyst for the creation of the sub-prime CDS market which didn't really exist before he went looking for it.
In the process others ended up drawing the same conclusions, piggybacked on Burry's idea or both. Yet somehow when John Paulson and Goldman Sachs put these same ideas to work it was viewed in retrospect with considerable acrimony by the likes of ZH and Matt Taibbi.
Both Burry and Paulson/GS were transacting with counterparties and not clients ("clients" aren't clients) and were (from what I understand anyway) acting as principals and not agents in relation to those on the other side of the trade.
Burry is the fucking man and I'm certainly not defending everything John Paulson or The Squid has ever done here. And obviously a little guy sticking his neck out and finding a way to elegantly express his contrarian market outlook is much more impressive that Man's Greatest Investment Bank muscling it's way into some position or other but nonetheless...I *still* fail to see how Paulson/GS are evil-doers while at the same time Burry is a hero in this particular regard.
Yeah, you're right.
Burry generally placed a generic bet that subprime was going to implode.
Goldman Sachs and Paulson colluded to go out of their way and identify the most toxic MBS, find a credit rating agency to label them as investment grade, and then sell them to Goldman's clients while betting against them.
Totally the same thing.
/sarc
There was no generic way to bet against sub-prime mortgages when Burry became interested in doing so. He had to poke around and sell the idea. And who took the other side of the CDS he bought?
Also, the party to whom you sell something to is a 'customer' not a 'client' - no matter what the brochure says .
Wow. Another hero! Another Lou Pai! Another "damn smart" aka Jeffrey Skilling. I knew in midd 2006, that US housing market hit the ceiling. That the music stopped! About the fraud nobody seemed to care at that time! So what! Now.... the question is who provided liquidity for so long at artificially low rates! Answer. The great maestro! Master of the universe and clear straight talk! Bernank is no better! "There is no housing bubble... what housing bubble?". But hey, who cares about housing mess and ongoing kabuki theater in Congress about “cuts”, “reform”, debt ceiling, etc! I ask you, who turned on “Evil Algo” on May 6th and who was testing it two days before the event?! The rest is history, unfortunately corrupt one….
It's worse than that, since the Fed intentionally created the housing bubble to replace the imploded dotcom bubble.
+1
You get the gold star, brosef.
Indeed they did do that.
The Fed is a bubble making machine in this Ponzified Economy they've fashioned for all.
It often takes a classic outsider to look into the machine and see past the hype and the group think. Burry has the ability to think openly and honestly about the markets and economy. Too many main stream economists are too invested in the system and can't think from a detached perspective. Burry was not alone in seeing the housing collapse and how much housing drove the economy, but he was one of a very few and unlike most he backed his propostion with big bucks. So he has courage as well.
A good speaker and thinker, I hope he is around a long time.
"Just trying to think independently" -Mike
I have read The Big Short and the thing that struck me most was that a guy with one working eye saw 1000% more than all the highly paid experts on wall street and main. Go figure
--Desiderius Erasmus Roterodamus
LOL...classic
Responding to Mercury. Mike did not pool morgages and sell them to unsuspecting pension funds and European banks while at the same time shorting the exact same products. It eventually paid GS to sell pools that they knew would not be able to perform amid a financial storm.Conflict of interest or what!
A group of us used to walk down the road of the looming US bankruptcy on Silicon Investor circa 1998-2002.
Michael was one of those great bright lights on SI. He was/is a very, very astute thinker. He was very outside the box. Many of us were/are in that naging and insecure situation... those of us who are still around.
However, Michael's trades in shorting CDO's and CDS worked out .... I have never seen this pointed out ... because that trade as good and right as that trade was for Michael it depended solely upon the SOLVENCY of his counterparties, and upon the solvency of the US banking system.
If the system had gone down in a Herstatt moment he'd have gone down.
In this trade which made both both Michael's reputation, and his present wealth he was simply very, very lucky that the financial system had been rendered into a "prisoner's system of capture".
That not withstanding DR. Michael Burry is probably one of the greatest "value" investors of all time. If and when he has to start all over again, like most of you will if fear, very few of you can or will start with the intellectual equipment Micahel has.
Best to all of you. Fasten your seatbelts. You are going to get a chance to triple down on your CDS and your CDO's .... man up!
A group of us used to walk down the road of the looming US bankruptcy on Silicon Investor circa 1998-2002.
Michael was one of those great bright lights on SI. He was/is a very, very astute thinker. He was very outside the box. Many of us were/are in that naging and insecure situation... those of us who are still around.
However, Michael's trades in shorting CDO's and CDS worked out .... I have never seen this pointed out ... because that trade as good and right as that trade was for Michael it depended solely upon the SOLVENCY of his counterparties, and upon the solvency of the US banking system.
If the system had gone down in a Herstatt moment he'd have gone down.
In this trade which made both both Michael's reputation, and his present wealth he was simply very, very lucky that the financial system had been rendered into a "prisoner's system of capture".
That not withstanding DR. Michael Burry is probably one of the greatest "value" investors of all time. If and when he has to start all over again, like most of you will if fear, very few of you can or will start with the intellectual equipment Micahel has.
Best to all of you. Fasten your seatbelts. You are going to get a chance to triple down on your CDS and your CDO's .... man up!
A group of us used to walk down the road of the looming US bankruptcy on Silicon Investor circa 1998-2002.
Michael was one of those great bright lights on SI. He was/is a very, very astute thinker. He was very outside the box. Many of us were/are those of us who are still around.
However, Michael's trades in shorting CDO's and CDS worked out .... I have never seen this pointed out ... none of us took the trade he did in 2005 onwards.
I would not take that trade today as - good and right as that trade was for Michael his trade depended solely.... upon the SOLVENCY of the US banking system.
If the system had gone down he'd have gone down. In this trade which made both both Michael's reputation, and his present wealth he was simply very, very lucky that the financial system had been rendered into a "prisoner's system of capture".
That not withstanding DR. Michael Burry is probably one of the greatest "value" investors of all time. If and when he has to start all over again, like most of you will if fear, very few of you can or will start with the intellectual equipment Micahel has.
Best to all of you. Fasten your seatbelts ....
A group of us used to walk down the road of the looming US bankruptcy on Silicon Investor circa 1998-2002.
Michael was one of those great bright lights on SI. He was/is a very, very astute thinker. He was very outside the box. Many of us were/are those of us who are still around.
However, Michael's trades in shorting CDO's and CDS worked out .... I have never seen this pointed out ... none of us took the trade he did in 2005 onwards.
I would not take that trade today as - good and right as that trade was for Michael his trade depended solely.... upon the SOLVENCY of the US banking system.
If the system had gone down he'd have gone down. In this trade which made both both Michael's reputation, and his present wealth he was simply very, very lucky that the financial system had been rendered into a "prisoner's system of capture".
That not withstanding DR. Michael Burry is probably one of the greatest "value" investors of all time. If and when he has to start all over again, like most of you will if fear, very few of you can or will start with the intellectual equipment Micahel has.
Best to all of you. Fasten your seatbelts ....
Well said, sir, even if it took four attempts to get it out;)
legend
Here is a video of a lecture he gave recently at Vanderbilt Medical School:
http://news.vanderbilt.edu/2011/04/video-burry-cls/
RT Barr MD
This guy is genius. Scariest part is that the last eight minutes he basically says it's all about to come down again (not that we didn't already know, but still). Too bad no one in the general populace is listening.
No one in Troy listened to Cassandra either!