Michael Burry

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Michael Burry
Born 1971 (age 44–45)
Alma mater University of California, Los Angeles
Vanderbilt University School of Medicine
Occupation Hedge fund manager

Michael Burry (born 1971) is an American hedge fund manager. He is the founder of the Scion Capital LLC hedge fund that he ran from 2000 until 2008, which he then closed to focus on his own personal investments. Burry was one of the first investors in the world to recognize and invest in the impending subprime mortgage crisis. Author Michael Lewis profiled him in his 2010 book The Big Short: Inside the Doomsday Machine, and he was featured in Gregory Zuckerman's 2009 book The Greatest Trade Ever: How John Paulson Bet Against The Markets and Made $20 Billion. Kip Oberting, of KVO Capital Management, has described Burry as "a risk-avoider".[1]

Early life

Burry was born in 1971.[2] He attended the University of California, Los Angeles (UCLA) for his undergraduate education in economics and pre-med studies. He graduated from Vanderbilt University School of Medicine[3] and did his residency in neurology at Stanford Hospital and Clinics.[4] While off duty at night, he worked on his lifelong hobby, financial investing.[4] On one occasion, Burry had been working so hard studying both for medical school and his personal financial interests, that he fell asleep standing up during a complicated surgery, and crashed into the oxygen tent that had been built around the patient and was thrown out of the operating room by the lead surgeon.[1]

Investment career

Burry left work as a Stanford Hospital neurology resident to become a full-time investor and start his own hedge fund. He had already developed a reputation as an investor by demonstrating astounding success in "value investing," which he wrote about on message boards on the stock discussion site Silicon Investor beginning in 1996. He was so successful with his stock picks that he attracted the interest of such companies as Vanguard, White Mountains Insurance Group and such prominent investors as Joel Greenblatt.

After shutting down his website in November 2000, Burry started Scion Capital, funded by a small inheritance and loans from his family. The company was named after The Scions of Shannara, a favorite childhood book. Burry quickly earned extraordinary profits for his investors. According to Lewis, "in his first full year, 2001, the S&P 500 fell 11.88 percent. Scion was up 55 percent. The next year, the S&P 500 fell again, by 22.1 percent, and yet Scion was up again: 16 percent. The next year, 2003, the stock market finally turned around and rose 28.69 percent, but Mike Burry beat it again—his investments rose by 50 percent. By the end of 2004, Mike Burry was managing $600 million and turning money away."[3]

In 2005, Burry started to focus on the subprime market. Through his analysis of mortgage lending practices in 2003 and 2004, he correctly forecast a bubble would collapse as early as 2007. Burry's research on the runaway values of residential real estate convinced him that subprime mortgages, especially those with "teaser" rates, and the bonds based on these mortgages would begin losing value when the original rates reset, often in as little as two years after initiation. This conclusion led Burry to short the market by persuading Goldman Sachs to sell him credit default swaps against subprime deals he saw as vulnerable. This analysis proved correct, and Burry profited accordingly.[5][6][7] Ironically Burry's since said, "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".[1]

Though he suffered an investor revolt before his predictions came true, Burry earned a personal profit of $100 million and a profit for his remaining investors of more than $700 million.[3] Scion Capital ultimately recorded returns of 489.34 percent (net of fees and expenses) between its November 1, 2000 inception and June 2008. The S&P 500 returned just over two percent over the same period.[3]

According to his website, Burry liquidated his credit default swap short positions by April 2008 and did not benefit from the taxpayer-funded bailouts of 2008 and 2009.[8] He subsequently liquidated his company to focus on his personal investment portfolio.[8]

In an April 3, 2010, op-ed for the The New York Times, Burry argued that anyone who studied the financial markets carefully in 2003, 2004, and 2005 could have recognized the growing risk in the subprime markets.[9] He faulted federal regulators for failing to listen to warnings from outside a closed circle of advisors.[9][7]

Burry was portrayed by Academy Award-winning British actor Christian Bale in the biographical comedy-drama film The Big Short.

Personal life

Burry is married with children and lives in California.[4] His son was diagnosed with Asperger syndrome, and Burry believes he himself has Asperger after reading about the disorder.[4][10][3]

References

  1. 1.0 1.1 1.2 Profiling "The Big Short's" Michael Burry Zero Hedge, Tyler Durden, 07/20/2011. Retrieved 07/20/2011
  2. Zuckerman, G: 'The Greatest Trade Ever: How John Paulson Bet Against The Markets and Made $20 Billion'
  3. 3.0 3.1 3.2 3.3 3.4 Michael Lewis, "Betting on the Blind Side,", Vanity Fair, April 2010.
  4. 4.0 4.1 4.2 4.3 Michael Lewis. The Big Short, W. W. Norton, 2010. ISBN 978-0-393-07223-5
  5. Anderson, Jenny (March 9, 2007). "Winners amid gloom of defaults". The New York Times.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  6. Kakutani, Michiko (March 15, 2010). "Investors Who Foresaw the Meltdown". The New York Times.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  7. 7.0 7.1 "Michael Burry Profiled: Bloomberg Risk Takers". Bloomberg Businessweek. July 20, 2012.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  8. 8.0 8.1 Scion Capital website, accessed March 30, 2010.
  9. 9.0 9.1 Burry, Michael J. (April 3, 2010). "I Saw the Crisis Coming. Why Didn't the Fed?". The New York Times.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  10. "Author Michael Lewis on Wall Street's Delusion," 60 Minutes, March 14, 2010.

External links