Thursday, April 08, 2010

Michael Burry explains subprime CDS trade

Michael Burry explains credit default swaps and his subprime short to Scion Capital investors in this November 2006 document shared by Marketfolly:

"A big hat tip to
Greenbackd for originally bringing this to our attention. Below you will find a very interesting primer on credit default swaps and the subprime mortgage short from Scion Capital's hedge fund manager Michael Burry.

Burry of course was recently featured in Michael Lewis' latest book,
The Big Short (which we highly recommend reading) for his notable early short position in subprime mortgages.

Michael Burry penned his primer back on November 7th, 2006 and it's almost comical now to think about how he was running a value fund focused on equities and then all of a sudden has to explain his short subprime trade and complex derivatives to his certainly surprised and confused investors..."

Head on over there to read the full embedded document. Should make for very interesting reading, as by now I've read and heard several accounts of how difficult it was for Burry to hold on to his famous trade in the face of overwhelming resistance from his investors.

While you're at it, you can also check out Michael Burry's recent op-ed in the NY Times deflating the great Greenspan myth that "no one saw the crisis coming". Essential reading for those who believe the endless barrage of lies coming from the econo-political "elites".

Related articles and posts:

1. FSN interview: Richard Eckert (Lahde Capital) - Finance Trends.

2. Michael Lewis on Charlie Rose: The Big Short - Finance Trends.