Today we are covering the story of the legendary Michael burry. Burry was the one who saw the
2008 financial crisis coming and made a hefty profit for his investors and himself because
of his foresight. Because of this correct prediction, he is the main character in the
book the big short and was portrayed by Christian Bale in the subsequent film. However the story
of Mcihael burry wasn’t always one of unmitigated success. It had many ups and downs and in
this video I will cover the whole journey of how Michael Burry came to be.
EARLY LIFE AND CHILDHOOD Michael Burry was born in 1971 in NYC but
grew up in San Jose, California. He had a rare disease which in layman terms was a severe
form of eye cancer. As a baby, he had his left eye removed. He grew up with a glass
eye instead, which affected how people treated him. So much that it became part of Burry’s
personal narrative. He always had trouble dealing with people, instead preferring solitude
and his own specific interests which as we all know paid off later in life and will soon
make a lot of sense why. The interest that dominated his early life
was the study of medicine. Burry studied economics and pre-med at the University of California,
Los Angeles. He then went to medical school and earned an M.D. from Vanderbilt University
School of Medicine. This led to a neurology residency at Stanford Hospital and Clinics
which he did not finish. After Burrys long days he would spend the sliver of his remaining
time writing about trading online. He was focussing on value investing during the dot-com
bubble, making him an outlier once more. It didn’t take long before Burry felt that
he had learned everything he could from the forums online.
He started his own blog, though back then it was not what most people would recognize
as a blog. In 2000, he officially quit his medical profession and moved on to serious
investments and started his investment company, Scion Asset Management. Although unaware of
it initially, he was diagnosed with Asperger Syndrome which is why he always had trouble
dealing with people and preferred his own company instead. During the time that Burry
was managing investments for people, he was uncomfortable talking to them. He communicated
with his investors through letters to inform them of their investment progress. Burry has
said that whatever group he joins, he feels like a stranger, never comfortable and he
usually would spend most of the time analyzing that group.
BTW before continuing on, I just wanna say a huge thank you to all you guys for giving
me your time and watching my videos. We just passed 90 thousand subscribers as I am writing
this script and that’s just insane to think about. Hopefully you guys are enjoying the
content I am putting out and yes huge, huge thank you to each and everyone of you who
watches my video. CAREER
EARLY CAREER As we mentioned early Burry started his blog,
where he posted about the market performance, and also shared his opinion about different
types of stocks. It did not take Mr Burry’s blog too long to get recognised by the high-profile
fund leaders. Burry followed Benjamin Graham’s investment strategy, which helped him make
a vast fortune. He recognised meaningless stocks on the internet and started shorting
them within his company, Scion Capital. Initially, Burry started his investment company by taking
loans and by using his property. He derived the name of his company from the fantasy novel
The Scions of Shannara, by Terry Brooks. As he was setting up his office, he got an
interesting phone call. It was from a man by the name of Joel Greenblatt. He was the
founder of the investment fund Gotham Capital. Joel had also written a book called You Can
Be a Stock Market Genius. Joel told him he had been waiting for him to leave medicine
and invited Michael and his wife to come to New York to meet. The meeting caused some
anxiety for Burry, which is typical of him when meeting new people but i think most people
would be extremely anxious in this situation too. Thankfully, this meeting was nearly impossible
to screw up. At Gotham’s office, they offered him a MILLION
dollars to buy into ownership of Michael’s newly created firm, Scion Capital. This stunned
Burry and he accepted. This was the first time that Gotham had ever done such a thing.
They were not the only ones to do this. An insurance holding company named White Mountain
also contacted Burry. Its manager was Jack Byrne, who was close to Warren Buffett. Byrne
had discovered the deal with Gotham, and he wanted a piece as well. By the end of the
discussion, White Mountain had bought into co-ownership for $600,000 and pledged $10
million to let him invest. Just like Gotham, they had not done such a thing before they
met Burry. By 2001, his company had generated a large
profit for the firm’s investors. Again, in 2002 and 2003 the company did very well.
Due to his continuous success, Scion Capital had $600 million AUM at the end of 2004.
This is amazing by industry standards. Burry made Scion for investors, not for profit.
He had a strong sense of the right way to do things he lived and conducted business
by. Michael Burry described his style as “Ick investing.” Burry described this as follows:
“Ick investing means taking a special analytical interest in stocks that inspire a first reaction
of ‘ick.” Basically, Burry would find investments that
would turn people off on their current reputation but were actually good value in the long run.
Investments like this would often first go down as the market sold off the stock, then
go up strongly soon after as the trouble settled and the value was noticed by the market. This
idea of Ick investing would take Scion to a whole new level and into fame and the public's
eye. That next level came in the form of credit
default swaps (CDSs). A CDS is essentially insurance on a loan. If the loan goes bad,
the holder of the CDSs gets a payout. They are mainly used by loan holders to hedge risk
or by an investor who thinks the loans will go bad. Their creation dates back to the mid-1990s
and they were not common investments at the time. Of course, Burry did not stop buying
CDSs at this amount. Which led to him having $750 million worth of CDS sitting in the fund
by July. This was unlike any other hedge fund. However this is not Michael Burrys claim to
fame. Mr Burry gained most of his fame because he had predicted the housing boom in the early
2000s. Peak of career and Big Short
Mike Burry was soon onto a new idea as he began to analyze the subprime financing market
and bank balance sheets. He noticed great irregularities and unsustainability in this
market. Michael Burry saw the riskiness of the subprime market as millions of borrowers
with low income and few assets bought homes and cars with tremendous leverage. Some borrowers
made very low or in many cases no down payments for mortgages that they couldn’t possibly
pay back if interest rates rose. However, the banking system was valued as if these
mortgages would all be paid. Burry realized that this could not possibly continue over
the long-term and made a plan to capitalise on this.
At the same time, Burry began to tell his investors of the enormous risks to the system.
His investors were mostly institutions that did not want to hear his theory. Their other
investments were all built upon the concept of a sound system with no subprime mortgage
risk. Investors began to get nervous and demand their money back.
Unfortunately, it was too late as Burry had already gotten into several long-term, illiquid
bets against the market using derivatives to bet the price of mortgages would fall.
If he got out of the trades, he would suffer a huge loss – so Burry simply refused the
investors’ requests By early 2007 the predictions were becoming
facts. The subprime mortgages were coming out of their “teaser rates.” Teaser rates
were low payments early in the mortgage that later skyrocketed, causing many defaults.
At the same time, Burry was struggling. To maintain his position, he let go of some of
his staff and a fraction of his positions. This is significant because these CDSs are
becoming sure-fire wins, so having to sell them in the market eats up the gains that
would have come when they paid off. By mid-2007, Bear Stearns and Goldman Sachs
were falling apart in front of everyone. When Burry contacted firms he was trading with,
suddenly people were out sick or came up with other excuses, such as power failures. By
late June, they conferred with Burry to correctly mark these CDS’ value since their reports
had been underestimating them more and more each month. By July’s end, reports were
popular about those who saw the subprime crash coming. This included Greg Lippmann, a trader
from Deutsche Bank. He was the trader who had re-initiated contact with Burry. He had
copied Burry’s plan and gotten money and fame from doing so. Burry’s name was not
heard. Ultimately, Mr Burry turned out to be right. His investors earned US$700 million
overall from his predictions, while he made a personal profit of US$100 million.
Scion Capital, Mr Burry’s hedge fund, generated 489.33 per cent in returns and managed nearly
US$1 billion at its peak. Mr Burry once said no one had thought he would become one of
the wealthiest investors in the world, leaving Wall Street in a surprised mode.Despite not
getting fame for his visionary trading, Burry still did very well. By the end of this long
journey, Burry had made about $100 million for himself. Even more impressive is what
he made for his clients, $725 million. Removing fees and expenses, a client who stayed with
Scion the whole time made around a 500% return on their money.
The one sour note that came with this was the lack of anyone thanking Burry or apologizing
for all the doubt they had shown him. No wonder Mr. Burry didn’t like people.
PERSONAL LIFE Місhаеl іѕ а hіtсhеd individual,
yet he dоеѕ not uncоvеr thе ѕubtlеtіеѕ оf hіѕ ѕіgnіfісаnt оthеr like most
in the public eye do so there is not known about his personal life.Burry is married,
with children, and currently lives in Saratoga, California His son was diagnosed with Asperger
syndrome, and Burry believes he himself has Asperger syndrome after reading about the
disorder. Не gеnеrаllу аttеmрtѕ tо аvоіd dеbаtеѕ, аnd ѕсаrсеlу
соmеѕ fоr mеdіа соmmunісаtіоn. Місhаеl hаѕ аn іnfluеntіаl рrоfеѕѕіоn
аѕ а fіnаnсіаl ѕресіаlіѕt аnd аѕ а dосtоr. Ніѕ ехресtаtіоnѕ
аrе ехасt wіthоut fаіl. Не іѕ рrоbаblу thе mоѕt ехtrаvаgаnt
іndіvіduаl іn thе nаtіоn. LEGACY
He did end up gaining his fame after all, though. Michael Lewis wrote a book about the
subprime bubble in 2013 called The Big Short. The movie version came out in 2015, and Michael
Burry was portrayed by Christian Bale. The moral of the story? Stick to your principles,
and you too can be Batman. Or at least you can have a slice of Bruce Wayne’s money.
So what is Dr. Michael J. Burry investing in now? The answer is simple. Burry’s putting
all of his money into just one commodity: water. Burry has focused much of his attention
on investing in water, gold, and farm land. Burry has been quoted saying "Fresh, clean
water cannot be taken for granted. And it is not—water is political, and litigious."
At the end of the 2015 biographical dramedy film The Big Short, a statement regarding
Burry's current interest reads, "The small investing he still does is all focused on
one commodity: water." Burry also initiated short position(s) on
Tesla before or around early December 2020, according to a now-deleted tweet and likely
added to his short positions after the market cap of Tesla surpassed that of Facebook. Burry
predicts Tesla stock will collapse like the housing bubble; he boasted that "my last Big
Short got bigger and Bigger and BIGGER" and taunted Tesla bulls to 'enjoy it while it
lasts. Burry currently holds long puts on 800,100 shares of Tesla. Mr Burry is no more
an active hedge fund investor. His wealth is, of course, still vast, and he has set
an example for many generations to come. His current net worth is estimated between
US$200–300 million, with no official source. Wіth thіѕ, hе іѕ bеlіеvеd tо hаvе
ѕаvеd mаnу реорlе frоm undеrgоіng а tоtаl lоѕѕ іn thе іnvеѕtmеnt
іnduѕtrу.