Tuesday, September 14, 2010
Michael Burry is best known for his successful subprime CDS short trade during the great housing bubble of the mid-2000s (recently detailed by Greg Zuckerman in The Greatest Trade Ever, and in Michael Lewis' The Big Short).
What you may not know about Burry (if you haven't perused the ex post facto celebratory literature) is that he began his career as a value investing med student sharing ideas & research with fellow stock pickers on popular message boards like Silicon Investor, as well as on his blog, the now defunct valuestocks.net.
He then founded Scion Capital, a hedge fund devoted to his own unique brand of value investing and short speculating. As a witness to the relentless rise in real estate prices and the simultaneous plunge in borrowing standards for home mortgages, Burry decided to become a self-taught expert in subprime mortgage lending and the market for asset-backed securities based on these loans. His fund soon shifted its focus to shorting subprime bonds via the CDS market, and the rest, as they say, is history.
Now beyond these facts that anyone can find through an article search, I think there is another aspect of Burry's investing career that is coming to the fore: Michael Burry as global macro investor.
Last week we highlighted Bloomberg TV's interview with Burry, in which the California investor said he was investing in agricultural land, gold, smaller tech companies, and small cap companies in Asia.
While Burry is no longer managing funds for clients, he is definitely looking farther afield in his own investment portfolio. As he noted to Bloomberg, increased correlation in the price movements of asset classes has made it more difficult to find unique trades and investment opportunities.
So Michael Burry has moved well beyond his original focus of value investing and value-focused short selling of US shares, to an approach that embraces a variety of asset classes (land, gold, stocks) at home and abroad. In this sense, he is building on the global macro approach of his earlier subprime trade: combining a top down view of economic trends with intensive research in an effort to find the proper investment vehicle to express (and hopefully profit from) his view.
In this, he is joined by other successful investors, like John Paulson, whose own subprime short trade helped Paulson & Co. expand from its original mandate as a merger arbitrage & event-driven fund, into one of the largest hedge funds in the world with sub-funds devoted to gold, real estate, and macro bets on a US economic recovery.
While media attention surrounding Michael Lewis' book, The Big Short, tended to cast a disparaging light on Burry and his fellow subprime shorts (CBS' "60 Minutes" patronisingly dubbed him a "Wall Street Misfit"), it's nice to see him getting a chance to share his views on investing and the US economy through recent editorials in the NY Times and on Bloomberg TV.
Burry's most recent appearance on Bloomberg TV was edited down to a series of 3 minute clips for the web, but you can read the full transcript of his interview here (thanks to Bloomberg TV and Heidi Tan). If you're interested to find out more about his macro view, including his take on the post-housing bubble stimuli and the US and global economy, be sure to check this out.
Even though Michael Burry is now a private investor, we'll be keeping an eye out for more of his macro views and investing ideas. I hope he'll continue to share his thoughts in the future, because he seems like a very sharp guy, motivated to self-learning and investing on the basis of his own findings and views.
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