Thursday, April 14, 2011
HE'S SUBJECT OF MICHAEL LEWIS BOOK THE BIG SHORT
DR. MICHAEL BURRY, a graduate of Vanderbilt Medical School, decided after the fact, he wasn't cut out for his chosen profession. While doing a residency later at Stanford University, he began focusing on his passionate hobby of investing in his spare time.
Ultimately he became more and more enthralled with investing, quit medicine and started a hedge fund. From Wikipedia:
Michael Burry (born ca. 1972) is founder of the Scion Capital LLC hedge fund, which he ran from 2000 until 2008, when he closed the fund to focus on his own personal investments. Burry was one of the first investors in the world to recognize and invest in the impending sub prime 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
Burry was back at Vanderbilt recently speaking at the Chancellor's Lecture Series about his phenomenal and prescient success of the past decade and also about his views on the economy. While he's not the smoothest speaker I've ever heard, he's certainly one of the wisest. With an inside view of Wall Street and a 10,000' view of the economy, this half-hour talk at Vanderbilt is well-worth listening to and heeding.
There are several take-homes from Burry's life and recent talk, but three stand out more than any others to me:
First, you don't always end up working in the field you were trained for, even when you have an advanced degree. To wit: A medical doctor who put on one of the most brilliant (short) trades in the history of civilization?
Second, we can't fix our financial problems---or any problems---until and unless we admit to having them. He's talking about toxic money printing and out-of-control spending in the federal government. As long as there's nothing but finger pointing, like this (which accomplishes nothing since we're all to blame), we will continue to draw nearer and nearer to the abyss, until one day, we will go over into it. I pray it's not too late and our leaders will come to their senses in all branches of government. But Burry says it's not going to happen. I happen to agree.
Third,there's no free lunch (2nd law of thermo). Teaser rates caused unnatural growth. What this means is that unnaturally low rates---as in anything in life that's too easy---caused lots of takers. Then, the tide turned to reality and, guess what?, all these people who took the bait were trapped with the very high consequences of their actions. And they're paying, and we will pay, the price for decades to come. So will taxpayers. Remember: teases are only that: A device to get you in, trap you by the illusion before the true bill is present. It's a suckers game for people who want to believe there's a free lunch.
Posted by Webutante at 9:11:00 PM