I see the Broken clock right twice a day. sentiment expressed in a couple places in this thread.
I think it warrants mentioning that Michael Burry had a very successful career before nailing the credit swaps trade. I think the sentiment that he's a perma-bear that just happened to get lucky is very unlikely. First, Michael Burry manufactured the credit swap trade that he is known for. What I mean by that is that Burry didn't trade options regularly. Rather, somewhat like Elon Musk, he reasoned from first principles. Burry started from the fact that certain housing markets were deteriorating and loan standards had been massively relaxed. Then figured out exactly what loans were in which CDO's and which tranches would be impacted by bad loans. Then he went out and bought credit default swaps against those specific tranches. There was very little luck involved.
In addition to that, prior to the credit default swaps trade, Burry had been running Scion very successfully using a value strategy (wikipedia quotes Michael Lewis as follows 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. That is amazing performance.
Burry really is worth listening to. I went back and read his Scion Capital letters and IMO he actually is a genius wrt investing. I don't know quite how to express it other than its got the same feel as Warren Buffett's letters. He doesn't get swayed by fear or greed, he's just incredibly logical.
I think it warrants mentioning that Michael Burry had a very successful career before nailing the credit swaps trade. I think the sentiment that he's a perma-bear that just happened to get lucky is very unlikely. First, Michael Burry manufactured the credit swap trade that he is known for. What I mean by that is that Burry didn't trade options regularly. Rather, somewhat like Elon Musk, he reasoned from first principles. Burry started from the fact that certain housing markets were deteriorating and loan standards had been massively relaxed. Then figured out exactly what loans were in which CDO's and which tranches would be impacted by bad loans. Then he went out and bought credit default swaps against those specific tranches. There was very little luck involved.
In addition to that, prior to the credit default swaps trade, Burry had been running Scion very successfully using a value strategy (wikipedia quotes Michael Lewis as follows 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. That is amazing performance.
Burry really is worth listening to. I went back and read his Scion Capital letters and IMO he actually is a genius wrt investing. I don't know quite how to express it other than its got the same feel as Warren Buffett's letters. He doesn't get swayed by fear or greed, he's just incredibly logical.