Michael Burry

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Michael Burry
Born (1971-06-19) June 19, 1971 (age 47)[1]
San Jose, California, U.S.[2]
Residence Saratoga, California, U.S.
Alma mater University of California, Los Angeles (BA)
Vanderbilt University (MD)
Occupation Physician, investor, and hedge fund manager
Known for Shorting the 2007 mortgage bond market by swapping collateralized debt obligations (CDOs)
Founding and managing Scion Asset Management
Net worth $300 million[3]

Michael J. Burry (/ˈbɜːri/; born June 19, 1971) is an American physician, investor, and hedge fund manager. He was the founder of the hedge fund Scion Capital, which he ran from 2000 until 2008, and then closed to focus on his own personal investments. Burry was one of the first investors to recognize and profit from the impending subprime mortgage crisis.

Early life and education[edit]

Burry was born in 1971 and attended Santa Teresa High School in San Jose, California.[4][5][6] He studied economics and pre-med at the University of California, Los Angeles, went on to earn an M.D. from the Vanderbilt University School of Medicine,[5] and started but did not finish his residency[7] in neurology at Stanford Hospital and Clinics.[8] While off duty at night, he worked on his hobby, financial investing.[8] 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. As a result, he was thrown out of the operating room by the lead surgeon.[9]

Investment career[edit]

After medical school, Burry worked as a Stanford Hospital neurology resident, and then a Stanford pathology resident. He then left to start his own hedge fund. He had already developed a reputation as an investor by demonstrating 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 companies such as Vanguard, White Mountains Insurance Group and prominent investors such as Joel Greenblatt.

After shutting down his website in November 2000, Burry started the (now defunct) hedge fund Scion Capital, funded by a small inheritance and loans from his family. The company was named after Terry Brooks' The Scions of Shannara, a favorite book, which was published in March 1990, when Burry was 19 years old. Burry quickly earned extraordinary profits for his investors. According to the author Michael 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."[5]

In 2005, Burry started to focus on the subprime market. Through his analysis of mortgage lending practices in 2003 and 2004, he correctly forecast that the real estate bubble would collapse as early as 2007. Burry's research on the 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 were replaced by much higher rates, often in as little as two years after initiation. This conclusion led Burry to short the market by persuading Goldman Sachs and other investment firms to sell him credit default swaps against subprime deals he saw as vulnerable. This analysis proved correct, and Burry profited accordingly.[10][11][12] Burry has 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."[9]

Burry has a strictly traditional understanding of value. He has said more than once that his investment style is built upon Benjamin Graham and David Dodd’s 1934 book Security Analysis: "All my stock picking is 100% based on the concept of a margin of safety." [13]

Though he suffered an investor revolt (where some investors worried the logic was wrong and demanded to be allowed to withdraw their investment in Scion Capital's hedge fund) 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.[5] Scion Capital ultimately recorded returns of 489.34% (net of fees and expenses) between its November 1, 2000 inception and June 2008. The S&P 500, widely regarded as the benchmark for the US market, returned just under three percent including dividends over the same period.[5]

According to his website, Burry liquidated his credit default swap short positions by April 2008 and did not benefit from the bailouts of 2008 and 2009.[14] He subsequently liquidated his company to focus on his personal investment portfolio.[14]

In an April 3, 2010, op-ed for 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.[15] He faulted federal regulators for failing to listen to warnings from outside a closed circle of advisors.[15][12]

As of November 2016, Scion Asset Management was terminated but files reports as EXEMPT REPORTING ADVISERS which is Active in the state and SEC.[16]

After shutting down Scion Asset Managemen, Dr. Michael Burry has focused much of his attention on investing in water, gold, and farmland. Mr. Burry has been quoted saying “Fresh, clean water cannot be taken for granted. And it is not — water is political, and litigious."[17] After the end of the film, The Big Short, a statement regarding Michael Burry's current interest reads, “Michael Burry is focusing all of his trading on one commodity: Water” – The Big Short.[18]

Personal life[edit]

Burry is married, with children, and currently lives in Saratoga, California.[8] His son was diagnosed with Asperger syndrome, and Burry believes he himself has Asperger Syndrome after reading about the disorder.[8][19][5]

In popular culture[edit]

Film[edit]

Literature[edit]

References[edit]

  1. ^ "The True Story Behind The Big Short - Real Michael Burry". History vs Hollywood. Retrieved July 22, 2018. 
  2. ^ Szramiakje, John (May 22, 2017). "Here's the story of one of the heroes of 'The Big Short'". Business Insider. Retrieved July 22, 2018. 
  3. ^ Brayson, Johnny (January 7, 2016). "What Is Michael Burry's Net Worth? The Real Life Star Of 'The Big Short' Is A Walking Hollywood Blockbuster". Bustle.com. Retrieved July 22, 2018. 
  4. ^ Zuckerman, Gregory (2009). The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. Crown Business. ISBN 978-0-38552-994-5. 
  5. ^ a b c d e f Lewis, Michael (1 March 2010). "Betting on the Blind Side". Vanity Fair. Retrieved July 22, 2018. 
  6. ^ Carey, Pete (April 6, 2008). "Mercury News Interview: Hedge fund manager saw subprime meltdown coming". San Jose Mercury News. San Jose, California. Retrieved February 18, 2016. 
  7. ^ Whitney, Kathy (2014). "These Doctors Mean Business". Vanderbilt Medicine. Retrieved July 22, 2018. 
  8. ^ a b c d Lewis, Michael (2010). The Big Short. W. W. Norton. ISBN 978-0-393-07223-5. 
  9. ^ a b Durden, Tyler (July 20, 2011). "Profiling 'The Big Short's' Michael Burry". Zero Hedge. Retrieved July 20, 2011. 
  10. ^ Anderson, Jenny (March 9, 2007). "Winners amid gloom of defaults". The New York Times. 
  11. ^ Kakutani, Michiko (March 15, 2010). "Investors Who Foresaw the Meltdown". The New York Times. 
  12. ^ a b "Michael Burry Profiled: Bloomberg Risk Takers". Bloomberg Businessweek. July 20, 2012. 
  13. ^ "Learning From Dr. Michael Burry's Investment Philosophy". ValueWalk. December 20, 2016. Retrieved January 24, 2017. 
  14. ^ a b Scion Capital website, accessed March 30, 2010.
  15. ^ a b Burry, Michael J. (April 3, 2010). "I Saw the Crisis Coming. Why Didn't the Fed?". The New York Times. 
  16. ^ "Scion Asset Management, LLC". Investment Adviser Firm Summary. Retrieved July 22, 2018. 
  17. ^ "Why Is Michael Burry Investing In Water? | Investormint". Investormint. 2017-11-23. Retrieved 2018-09-20. 
  18. ^ "Why Is Michael Burry Investing In Water? | Investormint". Investormint. 2017-11-23. Retrieved 2018-09-20. 
  19. ^ "Author Michael Lewis on Wall Street's Delusion". 60 Minutes. March 14, 2010. 
  20. ^ Brayson, Johnny (January 5, 2016). "Where 'The Big Short's Michael Burry Is Today". Bustle.com. Retrieved July 22, 2018. 

External links[edit]