I have received an advanced partial transcript of the story of Michael Burry, which will be appearing on Bloomberg TV at 9PM EST tomorrow night (7/19/11). Burry returned 427% in his bets against the subprime market, as detailed in Michael Lewis’s thriller-The Big Short: Inside the Doomsday Machine
Tomorrow night at 9 PM/ET and PT, Bloomberg Television’s “Risk Takers” explores the extraordinary story behind Michael Burry, who successfully predicted the U.S. real estate crash and generated nearly a billion dollars in profit.
Warren Buffett had the following to say about Burry-“Who’s going to listen to John Paulson in 2005, 2006 or to Mike Burry? It didn’t mean anything. Look at me, I was wrong on it too.”
Below is a special, advanced transcript, which I believe has only been posted on Value Walk (courtesy of Bloomberg TV).
Quotes from Michael Burry
Michael Burry on his personality:
“My natural state is an outsider, and no matter what group I’m in or where I am, I’ve always felt like I’m outside the group and I’ve always been analyzing the group.”
On his early days blogging about investing:
“I knew I was getting attention when I said something, I think in late 1999. I said that Vanguard Funds are the worst funds to invest in now. Those index products are going to do horribly over the next decade and I linked to the site and I got a cease and desist from Vanguard. So I realized, oh, people are reading this.”
“I started getting paid a dollar a word to write, which was — I didn’t have a lot of money, and I was actually in a lot of debt. So that was tremendous validation for what I was doing in that space.”
On starting his hedge fund:
“I think it was at $45,000 is what I had and I said, this is the last little bit that I got – this is the nut of what I got from my dad and I don’t want to just pay down my medical school debt with it. ”
On his investing style and dealing with investors:
“I think a lot of hedge funds get their trades from Wall Street and get their ideas from Wall Street. And I just like to find my own ideas. I’m reading a lot; I read a lot of news. I’m addicted to it. I basically I follow my nose on news stories. And more often than not it’s a dead end, but sometimes it produces something of value.”
On dealing with investors:
“I had been to New York once before but not for business and I just didn’t know how to dress. I didn’t know anything about it.”
“I didn’t offer transparency. I provided one quarterly report in a letter form and that was all you got. I basically demanded that if you’re going to invest in my fund, you need to accept my terms — the terms not being super high fees, but just, you know, I’m not going to cater to you.”
Michael Burry on his market predictions:
“In 2003, something curious had happened. The interest-only mortgage was reintroduced. That spurred me to write a section in my letter called Basis for Concern.”
“I tried to raise a fund, Milton’s Opus, to uh—Milton’s opus being Paradise Lost—to just do this because I wanted to do it in big size, but I couldn’t get it going. And the urgency came from my belief that I can’t be the only one thinking this. Somebody will see it and when they do, spreads will blow out wide. I want to get it on when it’s cheap.”
“My positioning with my investors had always been from the beginning…I need three to five years. I saw the time clock. I knew when it was going to happen. We just needed to make it through to that period. And that was something that was a hard sell when it moved against us initially.”
“Even when there was the investor rebellion and even when we had these difficulties in ’06, I was 100% confident when it was going to happen and I would tell people: just wait. We’re on the cusp, 2007, it will happen.”
“Ironically, I’m in this book, ‘The Big Short,’ but I’m not a big short. 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. And I had to pull back on equities, because I saw what was coming I thought would affect everything.”
Quotes from Jeff Madrick, journalist and author of “The Age of Greed”:
“I think Michael Burry’s Asperger’s [Syndrome] on balance helped him. It made him a deeply effective, perspicacious researcher, like very few others.”
“I think [Asperger’s] had its downside. He didn’t know how to deal with investors. He didn’t really know how to deal with the traders on the other side of his trades. He had problems with that.”
Quotes from Kip Oberting, early investor in Michael Burry’s fund:
“In [Michael Burry’s] mind, he wasn’t a risk-taker. He was a risk-avoider. And he was paranoid about avoiding risk in his investments.”
Kip Oberting on learning about Michael Burry:
“A colleague of mine came in to my office one day and said, ‘Kip, come and check out this Web site.’ This guy who’s a doctor is posting these investment ideas, and they’re pretty interesting…It was unique because it was deeper than your typical web-posting-market-watch type of person. It was someone that clearly was writing very lucidly, writing very clearly.”
“We at White Mountains invested $500,000 to purchase a share of his business, and we gave him $10 million dollars to invest.”
Kip on not meeting Michael Burry:
“I was scheduled to meet him once in, in person, and it fell through. And so all of our correspondence to date— you know, we invested a lot of money with him and so forth— was either through the phone or through email or just other writing that he did.”
Kip on Michael Burry’s relationships with investors:
“In 2006, the equity markets were up five or ten percent and Michael was down 20%. The loss was attributable to this derivative position shorting the housing market….So he did start to feel some pressure from investors. And as the year progressed, I think he got a bleeding ulcer. I think it was a very difficult time for him and his firm, too. Some of his large investors confronted him and said they’re going to take their money out. ”
“[Michael Burry’s] bet against the subprime mortgages, that made him his fortune, they regarded as mission creep. He was supposed to be a value investor in the stock market and there was a lot of suspicion.”
“And so this was on the eve of what was going to be [Michael Burry’s] marquee moment…the winds had blown against him so much so that it started to get taken out of his control. And so what he did, which was a controversial move, was he locked in certain investors. That move drew the ire of some of his larger investors.”
“[Michael Burry] basically turned $750 million dollars into more than a billion and a half dollars. And at the end of the year, because of his relationships with some of his investors, he had to give 750 million dollars of that back to people.”
“[Michael Burry] would put out these letters to his investors that were very prescient and very thoughtful. And the letter for 2007 was kind of a recap. It was about the people who doubted him along the way, and he also included in this letter, which was very unlike him, pictures of himself with like swans around him. I think they were like black swans. It was kind of Michael’s little way of saying, See, I was right, and this was his little touchdown dance.”
Quotes from Michel Del Buono, former analyst for Michael Burry’s hedge fund Scion Capital:
On Michael Burry’s early days juggling medical school and investing:
“[Michael Burry] told me that he had been working so hard both studying for medical school and studying on these financial things that during a complicated surgery he fell asleep standing up, and crashed into the oxygen tent that had been built around the patient and was then thrown out of the operating room by the surgeon, you know, very angrily. So that tells you how hard he was burning the candle at both ends. ”
“Michael tends to be very, very intense and focused when he does things, definitely more than the average person. Definitely more than most investors I had ever met. It was really driven by, I think, a passion to learn and to really understand the underlying mechanisms of what’s going on.”
On choosing to bet against subprime mortgages:
“So we are seeing all these things happen how do we take advantage of this and it’s not easy. The obvious one would be to short these mortgage-backed security, these pools of mortgages, and that is why we went with this derivative thing which was the credit default swap.”
“Some of the investors came out to meet with Michael and said that they were very upset by this. We said we had always been upfront about it. It was in our documents. It’s not an unusual clause in people’s documents to have the ability to side-pocket. And after they had met with Michael Burry, Michael Burry came out and told us that we probably needed to go look for other jobs just in case.”
Below are further details:
BLOOMBERG TV PRESENTS: ‘Bloomberg Risk Takers’ with the
Predictor of the Mortgage Collapse – Michael Burry
Airing Tuesday, July 19th at 9pm ET/PT
“I said, home prices can’t go up anymore. Income wasn’t doing enough to support it and home prices would start to fall. And that’s why I just essentially made it the big, largest investment of my life.” – Michael Burry
“Who’s going to listen to John Paulson in 2005, 2006 or to Mike Burry? It didn’t mean anything. Look at me, I was wrong on it too.” – Warren Buffett
Tomorrow night at 9 PM/ET and PT, Bloomberg Television’s “Risk Takers” explores the extraordinary story behind Michael Burry, who successfully predicted the U.S. real estate crash and generated nearly a billion dollars in profit.
In a rare sit-down with Bloomberg Television, Michael Burry describes how his artificial eye, and diagnosis with Asperger’s Syndrome, helped contribute to his “natural state as an outsider” and an almost obsessive commitment to research.
Bloomberg Television explores whether Burry was a risk taker who got lucky or one of the smartest investors of our time, able to predict the failure of the housing bubble at a time when most Americans thought home prices would rise forever.
Learn from industry experts and analysts about how Burry’s unorthodox business style and failure to communicate with investors nearly cost him his fortune, before the 2007 market crash proved all his housing predictions correct and generated 427% returns on his massive bet against subprime mortgages.
Featuring interviews with: Michael Lewis, author of the bestseller The Big Short: Inside the Doomsday Machine; Michel De Buono, former analyst at Burry’s hedge fund Scion Capital; Jeff Madrick, author of Age of Greed and senior fellow at the Roosevelt institute; Bloomberg News reporter Bob Ivry and hedge fund founder Kip Oberting.
Watch preview here: http://www.bloomberg.com/tv/shows/risk-takers/
About Bloomberg Risk Takers:
Bloomberg Risk Takers is a new series that looks at a new generation of entrepreneurs who have taken a gamble, faced down failure, and revolutionized the way the world does business. How did they do it? Featuring JetBlue founder David Neeleman, investor Michael Burry, sports agent Scott Boras, public policy maker Michelle Rhee and entrepreneur and Tesla Motors Inc. CEO Elon Musk. Airing Tuesdays at 9P ET/PT.
