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Michael "Big Short" Burry: After Every Over-Consumption, "A Brutal Hangover Is Inevitable"
On America's day most famous for over-consumption, we thought a few minutes of quiet 'tryptophan-induced' contemplation of the state of our world would be useful. Infamous for his correct predictions of the great recession, Europe's demise, and the collapse of the US financial system (as well as profiting handsomely from being right), Dr. Michael Burry's infamous UCLA commencement speech has much to offer (especially considering Burry is making a come-back - Bill Fleckenstein style - at Scion Asset Management). In this "age of infinite distraction", the painful 'truthiness' of this brief speech stunningly summarizes the ominous truth facing most of the developed (and much of the emerging) world today: "when the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable." A quarter-of-an-hour well spent from a self-described 'chicken-little' who was "just trying to figure it all out".
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It'll be fun watching the suffering of those who overindulged in debt, by those who didn't.
EDIT: Sorry my schadenfreude is acting up.
>> Sorry my schadenfreude
Sorry? I love schadenfreude.
I just hate to show how deep it runs. Watching the suffering of others is painful, less so for the stupid though.
It'll be sad to watch the suffering of those who overinduged in saving, looted by those who went into debt.
There fixed it for you.
have not heard anything from Burry since this speech. I wonder if he sees it differently now.
After the backlash he and others got last time for " betting against America " I can only imagine he has learned to keep his mouth shut. When the vast majority of people will believe he helped cause a financial collapse by shorting, he would be wise to keep it to himself. Look at it from his perspective, fonz- we did not heed his warnings last time, and are now in worse shape than before. If I was him I would deem this population unworthy of my help or advice, and quietly profit from what he sees as inevitable
Great point, and that may very well be the way he sees things. I wonder if he knows what we know...the fed has zero intentions of unwiding their balance sheet and every intention of owning and eliminating the bond market. I wonder if this time around he knows there will be no payoff for shorting this beast.
Yeah no possibility to short wholesale corruption of the market. Burry possibly pulled off the last great short. Which makes it even more legendary.
I think he'd have a grateful audience as well, though. I, for one, would love to hear what's on his mind these days and had a hope when I clicked that there might some recent words from him here. Come out, come out wherever you are, Burry. . . I think ZH would be happy for his "guest post".
Exactly. In the end of the day the savers will suffer. TPTB will inflate away their problems. It's the only way out.
"It'll be fun watching the suffering of those who overindulged in debt, by those who didn't." CK
I wish that is how it worked - what I am seeing though is the biggest bailout of those who overindulged (banks) by those who didnt (us)
K@
@Ob1 - Agree it's sad to see savers currently being looted. When those sheeple in debt don't ultimately pay, it will be the banks who take the loss, unless it's foisted upon the taxpayers once again.
@k@ - Agreed. That is unless you're like me. I stopped working and paying into the system 4 years ago. There's a cost to me but no one ever said freedom or action was without sacrifice. It's my only way to fight a system I disagree with. No borrowing, no contributing, and little economic activity from me, yet I still live a great life.
You and Karl Denninger have the same playbook. Why do 9-5 when 50% goes to the man.
Colonel - "Schadenfraude" is spelled with a capital "S." Being German, you should know that. Of course that may be why you are Col. Klink as opposed to say....Goethe. BTW - how is LeBeau doing? Ooooops. Better clean up your desk, General Berkholder just came through the front gate.
Now - to something important. We all need to be watching our spiritual health as things unwind. Everybody should take in Greg Hunter's interview with Catherine Austin Fitts:
U.S. System Dependent on Crime and Fraud -Catherine Austin Fittshttp://usawatchdog.com/u-s-system-dependent-on-crime-and-fraud-catherine...
She got reamed for blowing the whistle on the mortgage fraud. You know - black helicopters. Losing most of her wealth. She talks about what it did to her spirit. Says that it will be the biggest hindrance in recovering from the inevitable collapse. I am serious. Query: Why is it that all of the people who "get it" are women and speak out? You know, Nomi Prins, Elizabeth Warren (most of the time), Brooksley Born, Janet Tavakoli, etc. Janet Yellen - NOT!
I am from Philadelphia. A recent WSJ blog (per Max Keiser) suggested that Philly was in line behind Detroit. I saw that coming 30 years ago. Didn't know whether to laugh or cry. Hey!!! It's nice to get an "A" on the test - but this was one in which I wish I had no chance not to participate.
Sooooo. Take only a brief moment to savor - if that much. Rather enjoy a little boost of confidence in your analytic skills. We all will all need them going forward, and confidence is an asset not easily developed.
BTW: Did you ever do Helga? I thought not.
Moving from Thinking to ThinkLink.
Road to Serfdom
< Road to serfdom.
< High speed $30 billion California bullet train to serfdom.
Jeez, I wonder what is THE BET he has on, right now?
would be good to know .
Farm land. True story.
Voices: Common Loon
http://www.youtube.com/watch?v=4ENNzjy8QjU
Love the Burry speech for sure, but this is the third time I've seen it on ZH
Slow day.
I'm enjoying reading your blog, Dr.
Not that I think ASIC will do anything. But hopefully you will get to wake a few small investors about the scam.
Thank you Prisoner, much appreciated!
I think you're right, ASIC won't do anything, they just let it all go too far. Maybe one or two small investors will read my blog and avoid the trap, but realistically the fraudsters reach millions through coopted media. Like so much we do in life, my blog is ultimately futile, so your encouragement is welcome.
Great speech..... But its over 1 1/2 years ago......
'Do no harm'... the opposite of that is where we are today. Thank you Ben.
Lovin' the replays. To boot, with newer folk coming aboard, redundancy on the 'basics' is always appreciated to educate the board.
Thanks ZH!
He notes that the grads face withering attacks on quality of life
Also, found it interesting that in the wake of his winning bet, he was attacked by fed.gub. Fed.gub does not work for you - it is your adversary.
@Yes We Can - it wasn't his winning bet that got the Feds after him. It was Burry exercising our 'supposed' right to free speech. He wrote an op-ed in the New York Times where he clearly calls out Greenspan and other top dogs for claiming they couldn't have known the financial meltdown was going to happen.
Two weeks later goons show up to audit his closed investment funds that no one had complained about. And, as you heard, it cost him an assload of time and money to defend himself....and he was charged with nothing. Sheer harrassment!
And he had the true guts to mention that travesty in the video. That guy is a patriot.
It never gets old.
I love watching Dr. Cool on Burry's right. Guilty much?
Dear ZH
not sure WTF is going on but those goofy images that now accompany most ZH articles remind me of business insider - content here is still okay but pandering to whomever with these silly images almost has a CNBSish tint to it
checking out for a while
see ya
Two books I wish the whole world would read: "Liar's Poker" and "The Big Short".
You wonder why you work so hard? The answer is in them pages.
"Boomerang" is also good, but not as much fun to read.
"I wish the whole world would read those books". Unfortunately that statement makes it sound like a chore. It's not. Those books are well written.
And no, I am not in any way associated with Michael Lewis, but I have made him a little bit richer over the last couple of years due to a couple of books and videos I have bought.
Slap Shot (1/10) Movie CLIP - The Finer Points of Hockey (1977) HD
https://www.youtube.com/watch?v=_XbL7lG0Su8
Burry is perhaps the most intelligent & insightful true analyst of macro & micro economic trends that I know of.
It's his opinion of the true state of the economy and its trend, and how these things will interact with "markets," that I'd be most interested in learning.
There's not even a close runner-up.
Love the overuse of the word "Infamous".
http://www.reuters.com/article/2013/11/29/us-economy-global-stagnation-insight-idUSBRE9AS03O20131129
'SELF-INFLICTED DISASTER'
With Beijing repressing domestic consumption and holding down the yuan's exchange rate to give it a competitive edge in world markets, foreign direct investment poured into China to take advantage of cheap labour, land and other inputs.
Exports duly exploded. China's resulting current account surplus, though now declining, contributed to a glut of global savings that depressed U.S. interest rates and helped fuel the fateful boom in sub-prime mortgages.
China's foreign exchange reserves today stand at an unfathomable $3.66 trillion.
Tens of millions of people have been lifted out of poverty by the rise of China and other poor countries plugged into global supply chains.
But outsourcing of production has hollowed out skilled jobs in advanced economies in what British financial analyst Tim Morgan, in his book ‘Life After Growth' calls "a self-inflicted disaster with few parallels in economic history".
Jen added: "If you are a labourer in the West, you have been hurt. It's very clear. If you are a capitalist in the West, you have benefited immensely."
Dominic Rossi, global chief investment officer for equities at Fidelity Worldwide Investment, noted that labour's share of U.S. non-financial output held steady at between 61 percent and 65 percent for half a century.
"Then, something happened. From 2000, it plummeted and currently rests at an all-time low of 57 percent," Rossi wrote in the Financial Times. Over the same period, median U.S. household incomes have fallen in real terms.
"Overall, labour is not participating in economic growth as it has done in the past," he said.
The flip side is that U.S. corporate profit margins stand at 12 percent of gross domestic product, a record high, yet net corporate investment is only 4 percent of GDP, Rossi noted.
The picture of corporations awash with cash but reluctant to invest is mirrored in Europe.
THE ZERO BOUND
So what is to be done?
Against a background of high debt and depressed incomes and investment, former U.S. Treasury secretary Larry Summers posited at a recent IMF conference that real interest rates consistent with full employment could now be minus 2-3 percent.
"We may well need in the years ahead to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity, holding our economies back below their potential," Summers said.
He is not alone in worrying about the limits of monetary policy even as the risks of outright deflation grow.
Alan Blinder, a former Federal Reserve vice-chairman, expects inflation to be lower on average over the next half a century than in the past 50 years. As a result, central banks would keep hitting the zero lower bound (ZLB) on nominal interest rates.
"We have just experienced first-hand how difficult the ZLB can make it for a central bank to stimulate its economy out of a recession and, therefore, how large the potential social costs are," Blinder wrote in a recent essay.
Bill White, a former chief economist of the Bank for International Settlements, blamed central banks for wrongly analysing the strong disinflationary impulse imparted by the reintegration of previously isolated economies such as China into the world trading system.
"Globalisation constituted a significant, long-lasting and positive productivity shock that should have been met with tighter rather than easier monetary policy," White said in a speech to Omfif, a London think tank.
By leaning against what they saw as excessive disinflation, central banks have helped to create the imbalances now dogging the global economy and have postponed the adjustments needed to achieve sustainable, balanced growth, White argued.
"In short, ‘still more of the same' monetary policies since 2007 have left us, in my view, with old problems unresolved and some new ones added as well," he said.