Michael Burry (Lessons for Economics)

  • Jul 26, 2021
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For many the name Michael Burry says nothing, for those who move in the world of business, finance and entrepreneurship, Burry is what it should be for everyone, "The best example of perseverance." Well, despite its limitations, he has never stopped, and despite the fact that his profile on social networks described him as clumsy, in debt, he has achieved large investments and profits where no one else saw them.

In this article you will find:

Who is Michael Burry?

He is an American investor, was born in California on June 19, 1971, is a neurologist (a profession that he does not practice) and American hedge fund manager, the first investor to recognize subprime mortgages, where he invested through insurance non-payment.

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He studied medicine at UCLA and earned a doctorate from the medical school of Vanderbilt, and he did residency at Stanford while in his spare time he spent time at finance.

Michael Burry is considered a peculiar character, he achieved recognition when the subprime pomp exploded in the United States.

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Did he bet heavily against the market and win big?

His unsociable personality is due to the fact that he feels comfortable being alone, it has been difficult for him to relate to others, his sincerity filter is quite high, so some people do not feel very comfortable either with the.

After his son was diagnosed with Asperger Burry syndrome after noticing his social behaviors, for the first time he realized that he was also Asperger.

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Burry has come to believe that despite the burden that this disorder has placed on him in his day to day life, he has also brought important advantages to his life as an investor. It has endowed him with an obsessive personality towards specific issues and an ability to remain rational and cold in the face of the investments he makes.

Michael Burry sees himself as a value investor, he admires characters like Charlie Munger, Warren Buffett and Benjamin Graham, however, he acknowledges that he has quite a different style than they.

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Regarding his character, the book The Big Short has been written, which deals with the real estate crisis, which has also been released in the film called The Big Short.

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What is a Value Investor?

They are investors considered different, who act very differently from others, they do not carry by the herd, it is an investment philosophy that has borne fruit where very few investors saw future.

Well, precisely where the key "future" is, his investments are intelligent, designed to long termInvestors with the strong conviction of the margin of safety offered by a purchase at a bargain price. Most investment fund managers are desperate to make money profitable and ignore the possibility of what is cheap, since this by definition does not give cost effectiveness. The value investor sees beyond the current profitability, investigates, thinks and acts based on the future.

Burry's investing career

Burry's career in the markets, he started as an investment blogger, becoming more and more influential.

His first fund, Scion Capital, turned out to be a great business, became famous, and made large amounts of money. money by bursting the subprime crisis, within a few years Scion Capital beat the S & P500 with a large difference.

Michael Burry He conceived of how to bet against what was seen to come with junk mortgages, in financial jargon he went short. So he thought about non-payment insurance limited to subprime credits, which did not exist, however, he convinced investment banks issued said insurance and sold it to them, by March 2005 it earned its first 60 millions. But even so the bubble did not burst and other investors gave up.

When the crisis finally broke out, investment was replicated and the fund made about $ 1 billion.

Burry was the founding manager of the hedge fund Scion Capital LLC, which operated until 2008, after which he is dedicated and focused on his own investments. In 2010 I bet on gold, small technology and agricultural land. In 2013 he again opened a fund, called Scion Management.

Philosophy of Michael Burry

The history of this character in the financial field demonstrates the value provided by the proper management of capital and the implicit need to win by assuming risks.

Research is a fundamental weapon to understand the value of an investment, company or project. Before investing a penny, you must know the state and situation of the environment where you are going to invest.

Burry makes it clear that he is a value investor, yet develops his own approach, and differs from regular investors and other value investors.

Provide clear ideas such as:

  • Treat the shares as partial property of the real business.
  • Research as an element for understanding any business.
  • Stock selection should be based on the concept of margin of safety.
  • The high value of the asset is not enough, the best protection is in buying an appropriate, safe and cheap action.
  • In the area of ​​investment in common shares, the aim is to maximize resources upward, firstly, minimizing the decline and maintaining the base value of investing with a margin of safety.

For Burry the lost money is more difficult to replace than the earned money, in investing with Margin of Safety most of the alternatives are good. A good margin of safety is achieved when securities are bought at a price sufficiently below the underlying security, as to allow the possibility of bad luck, human error, or the extreme variation of a complex world and unpredictable.

It would be easy to think that everyone is a value investor, because observing the main principles of this philosophy which are: buy cheap, look for undervalued goods and get opportunities, because it is obvious that we are looking for that, of course, that the detail of patience is forgotten because in reality the operation of this philosophy is not so easy and simple.

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