Michael Burry

Businessman

1971-06-19

Quotes by Michael Burry

• The major reform legislation, Dodd-Frank, was named after two guys bought and sold by special interests, and one of them should be shouldering a good amount of blame for the crisis.

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• Throughout the universe of public and private funds, managers are measured quarterly against one index or another, defined by statistics, and corralled into this category or that category so that fund of funds, pensions, and other institutions can make comforting - if not necessarily prudent - asset allocation decisions.

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• In essence, the stock market represents three separate categories of business.They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value.

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• 'Ick investing' means taking a special analytical interest in stocks that inspire a first reaction of 'ick.' I tend to become interested in stocks that by their very names or circumstances inspire unwillingness - and an 'ick' accompanied by a wrinkle of the nose on the part of most investors to delve any further.

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• Regardless of what the future holds, intelligent investment in common stocks offer a solid route for a reasonable return on investment going forward.

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• In early 2005, I really studied the prospectuses of these mortgage pools that were tranched out into different-rated slices rated by agencies like S&P and Moody's. They had names like Park Place and People's Choice. It was clear to me that many of the buyers of these repackaged subprime mortgages were doing little analysis.

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• Back in 2005 and 2006, I argued as forcefully as I could, in letters to clients of my investment firm, 'Scion Capital', that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy.

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• Innovation, especially in America, is continuing at a breakneck pace, even in areas facing substantial political or regulatory headwinds. The advances in health care in particular are breathtaking - so many selfless souls are working to advance science, and this is heartening.

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• Americans have so much natural entrepreneurial drive. The caveat is that it is technology that should be a tool making lives better in the real world, and in line with the American spirit of getting better and better at something, whether it's curing cancer or creating a better taxi service.

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• Fresh, clean water cannot be taken for granted. And it is not - water is political, and litigious. Transporting water is impractical for both political and physical reasons, so buying up water rights did not make a lot of sense to me, unless I was pursuing a greater fool theory of investment - which was not my intention.

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• Sadly, in the highest levels of economic thought in government, questions are not tolerated. It is as if we're dealing with the binary thinking of a fundamentalist religion.

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• I started trading stocks, options and futures while I was at UCLA, using my earnings from working summers at the old IBM plant on Cottle Road. I never lost interest in how companies work. It's fundamental to who I am.

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• Common hedging techniques include shorting stocks, buying put options, writing call options, and various types of leverage and paired transactions. While I do reserve the right to use these tools if and when appropriate, my firm opinion is that the best hedge is buying an appropriately safe and cheap stock.

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• I try to buy shares of unpopular companies when they look like road kill and sell them when they've been polished up a bit.

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• Credit-default swaps remedied the problem of open-ended risk for me. If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.

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• It is a tenet of my investment style that, on the subject of common stock investment, maximizing the upside means first and foremost minimizing the downside. The deleterious effect of permanent capital loss on portfolio returns cannot be overstated.

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• 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.

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• At one point, I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham but, rather, set out on his own path and ran money his way, by his own rules... I also immediately internalized the idea that no school could teach someone how to be a great investor.

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• I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers - those with the weakest credit.

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• The post-crisis perception, at least in the media, appears to be one of Americans being held down by Wall Street, by big companies in the private sector, and by the wealthy. Capitalism is on trial. I see it a little differently. If a lender offers me free money, I do not have to take it.

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