Wikipedia

Michael Burry

(Redirected from Scion Capital)

Michael James Burry (/ˈbɜːri/; born June 19, 1971)[2] is an American investor and hedge fund manager. He founded the hedge fund Scion Capital, which he ran from 2000 until 2008 before closing it to focus on his personal investments. He is best known for being among the first investors to predict and profit from the subprime mortgage crisis that occurred between 2007 and 2010.

Michael Burry
Born
Michael James Burry

(1971-06-19) June 19, 1971 (age 53)
San Jose, California, U.S.[1]
EducationUniversity of California, Los Angeles (BA)
Vanderbilt University (MD)
Occupations
Known forShorting the 2007 mortgage bond market by swapping collateralized debt obligations (CDOs)
Founding and managing Scion Asset Management

Early life and education

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Burry was born and grew up in San Jose, California. He has Rusyn ancestry. At the age of two he lost his left eye to retinoblastoma[3] and has had a prosthetic eye ever since.[4] As a teenager, he attended Santa Teresa High School.[5][6][7]

He studied economics and pre-med at the University of California, Los Angeles, earned an MD degree from the Vanderbilt University School of Medicine,[6] and started but did not finish his residency[8] in pathology at Stanford University Medical Center.[9] While off duty at night, he worked on his hobby: financial investing.[9]

Despite not practicing, Burry has kept his license as a physician active with the Medical Board of California, including continuing education requirements.[10][11]

Investment career

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After medical school, Burry worked as a Stanford Hospital neurology resident, then a Stanford Hospital pathology resident.

He then left to start his own hedge fund. He had already developed a reputation as an investor by demonstrating success in value investing, which he wrote about on message boards on the stock discussion site Silicon Investor beginning in 1996. He was so successful with his stock picks that he attracted the interest of companies such as Vanguard, White Mountains Insurance Group and prominent investors such as Joel Greenblatt. Burry has a strictly traditional understanding of value. He has said more than once that his investment style is built upon Benjamin Graham and David Dodd’s 1934 book Security Analysis: "All my stock picking is 100% based on the concept of a margin of safety."[12]

After shutting down his website in November 2000, Burry started the hedge fund Scion Capital, funded by an inheritance and loans from his family. He named it after Terry Brooks' The Scions of Shannara (1990), one of his favorite novels. He quickly earned extraordinary profits for his investors. According to author Michael Lewis, "in his first full year, 2001, the S&P 500 fell 11.88%. Scion was up 55%. The next year, the S&P 500 fell again, by 22.1%, and Scion was up again: 16%. The next year, 2003, the stock market finally turned around and rose 28.69%, but Burry beat it again, with returns of 50%. By the end of 2004, he was managing $600 million and turning money away."[6] Burry was able to achieve these returns partly by shorting overvalued tech stocks at the peak of the internet bubble.[13]

In 2005, Burry started to focus on the subprime market. Through his analysis of mortgage lending practices in 2003 and 2004, he correctly predicted that the real estate bubble would collapse as early as 2007. His research on the values of residential real estate convinced him that subprime mortgages, especially those with "teaser" rates, and the bonds based on these mortgages, would begin losing value when the original rates were replaced by much higher rates, often in as little as two years after initiation. This conclusion led him to short the market by persuading Goldman Sachs and other investment firms to sell him credit default swaps against subprime deals he saw as vulnerable.[14][15][16]

During his payments toward the credit default swaps, Burry suffered an investor revolt, where some investors in his fund worried his predictions were inaccurate and demanded to withdraw their capital. Eventually, Burry's analysis proved correct: He made a personal profit of $100 million and a profit for his remaining investors of more than $700 million.[6] Scion Capital ultimately recorded returns of 489.34% (net of fees and expenses) between its November 1, 2000, inception and June 2008. The S&P 500, widely regarded as the benchmark for the US market, returned just under 3%, including dividends over the same period.[6]

According to his website, Burry liquidated his credit default swap short positions by April 2008 and did not benefit from the bailouts of 2008 and 2009.[17] He subsequently liquidated his company to focus on his personal investments.[17]

In an April 3, 2010 op-ed for The New York Times, Burry argued that anyone who studied the financial markets carefully in 2003, 2004 and 2005 could have recognized the growing risk in the subprime markets.[18] He faulted federal regulators for failing to listen to warnings from outside a closed circle of advisors.[18][16]

In 2013, Burry reopened his hedge fund, this time called Scion Asset Management, filing reports as an exempt reporting adviser (ERA) active in the state of California and approved by the SEC.[19] He has focused much of his attention on investing in water, gold, and farmland. He has said, "Fresh, clean water cannot be taken for granted. And it is not—water is political, and litigious."[20]

Glimpses were offered into Scion's portfolio from the 13F quarterly reports filed from the 4th quarter of 2015 through the 3rd quarter of 2016, as required by the SEC when fund holdings top $100 million. After more than two years, on February 14, 2019, Scion Asset Management filed another 13F, showing Burry to hold numerous large-cap stocks and $103,528,000 13F assets under management, just above the threshold for filing.[21] In August 2019, Bloomberg News quoted an email from Burry in which he said there was a bubble in large US company stocks due to the popularity of passive investing, which "has orphaned smaller value-type securities globally".[22] In 2020, the fund's largest investments were Alphabet Inc. ($121 million value) and Facebook ($24.4 million value).[23]

Burry initiated short position(s) on Tesla before or around early December 2020, according to a now-deleted tweet[24][25] and likely added to his short positions[26][27] after the market cap of Tesla surpassed that of Facebook. Burry predicted Tesla stock would collapse like the housing bubble,[27] saying that "my last Big Short got bigger and Bigger and BIGGER" and taunted Tesla bulls to 'enjoy it while it lasts.'[26] In May 2021, it was reported that he held put options on over 800,000 shares of Tesla.[28] In October 2021, after a 100% rise in Tesla's stock value, he revealed he was no longer shorting it.[29] During the second quarter of 2021, he reportedly held put options valued at almost $31 million on the ARKK ETF innovation index managed by Ark Invest.[30]

In August 2023, it was widely reported that Burry's hedge fund, Scion Asset Management, had made a $1.6 billion bet on a US stock market crash. Securities filings reportedly showed that Burry held put options on both the S&P 500 and the Nasdaq-100 at the end of Q2 2023.[31] While the put options have been widely reported as being 93% of Scion's entire portfolio, this is misleading, as the $1.6 billion figure is based on the maximum possible value that the put options could rise to, and not the amount they were actually purchased for. Furthermore, Scion's assets under management is $237,971,170, significantly lower than $1.6 billion.[32]

Personal life

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Burry is married, with children, and was living in Saratoga, California in 2010.[9] His son was diagnosed with Asperger syndrome, and Burry believes he himself has Asperger syndrome after reading about the disorder. When he was younger, he noticed that it took him a lot of energy to look people in the eye, and said, "If I am looking at you, that's the one time I know I won't be listening to you".[9][33][6]

He is a fan of heavy metal music, including bands such as Obituary, Lamb of God, Amon Amarth, Slipknot, King Diamond and Pantera.[34]

Burry was highly critical of the lockdowns during the COVID-19 pandemic in the United States.[35]

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Film

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Literature

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References

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  1. ^ Szramiakje, John (May 22, 2017). "Here's the story of one of the heroes of 'The Big Short'". Business Insider. Retrieved July 22, 2018.
  2. ^ "The True Story Behind The Big Short - Real Michael Burry". History vs Hollywood. Retrieved July 22, 2018.
  3. ^ Gregory Zuckerman (2009). The Greatest Trade Ever: The Behind-the-Scenes Story of how John Paulson Defied Wall Street and Made Financial History. New York: Broadway Books. p. 73. ISBN 978-0385529938.
  4. ^ "The True Story Behind The Big Short - Real Michael Burry". History vs Hollywood. Retrieved April 23, 2019.
  5. ^ Zuckerman, Gregory (2009). The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. Crown Business. ISBN 978-0-38552-994-5.
  6. ^ a b c d e f Lewis, Michael (1 March 2010). "Betting on the Blind Side". Vanity Fair. Retrieved July 22, 2018.
  7. ^ Carey, Pete (April 6, 2008). "Mercury News Interview: Hedge fund manager saw subprime meltdown coming". San Jose Mercury News. San Jose, California. Retrieved February 18, 2016.
  8. ^ Whitney, Kathy (2014). "These Doctors Mean Business". Vanderbilt Medicine. Retrieved August 18, 2023.
  9. ^ a b c d Lewis, Michael (2010). The Big Short. W. W. Norton. ISBN 978-0-393-07223-5.
  10. ^ https://search.dca.ca.gov/results Users need to fill in name of physician
  11. ^ "These Doctors Mean Business," Whitney, Kathy, Medicine (Vanderbilt School of Medicine), Summer 2014
  12. ^ "Learning From Dr. Michael Burry's Investment Philosophy". ValueWalk. December 20, 2016. Retrieved January 24, 2017.
  13. ^ "Michael Burry life story". Business Insider. Retrieved April 23, 2019.
  14. ^ Anderson, Jenny (March 9, 2007). "Winners amid gloom of defaults". The New York Times.
  15. ^ Kakutani, Michiko (March 15, 2010). "Investors Who Foresaw the Meltdown". The New York Times.
  16. ^ a b "Michael Burry Profiled: Bloomberg Risk Takers". Bloomberg Businessweek. July 20, 2012. Archived from the original on 2012-08-04.
  17. ^ a b Scion Capital website, accessed March 30, 2010.
  18. ^ a b Burry, Michael J. (April 3, 2010). "I Saw the Crisis Coming. Why Didn't the Fed?". The New York Times.
  19. ^ "Scion Asset Management, LLC". Investment Adviser Firm Summary. Retrieved July 22, 2018.
  20. ^ "Why Is Michael Burry Investing In Water? | Investormint". Investormint. 2017-11-23. Retrieved 2018-09-20.
  21. ^ "EDGAR Filing Documents for 0001567619-19-004198". Securities and Exchange Commission. Retrieved 2019-02-20.
  22. ^ Heejin Kim and Myungshin Cho (29 August 2019). The Big Short’s Michael Burry Sees a Bubble in Passive Investing Bloomberg News, accessed 29 Aug 2019
  23. ^ "Michael Burry Portfolio / Scion Asset Management, LLC Holdings". cheaperthanguru.com. Retrieved 2020-08-31.
  24. ^ "Michael Burry tweet, Dec. 1, 2020 (Internet Archive)". Archived from the original on 2020-12-02.
  25. ^ Winck, Ben (December 3, 2020). "'Big Short' investor Michael Burry reveals he's short Tesla, tells Elon Musk to issue more stock at its 'ridiculous price'". Business Insider.
  26. ^ a b "Michael Burry tweet, Jan 7, 2021". Archived from the original on 2021-01-07.
  27. ^ a b Mohamed, Theron (January 8, 2020). "'Big Short' investor Michael Burry predicts Tesla stock will collapse like the housing bubble: 'Enjoy it while it lasts'". Business Insider.
  28. ^ Li, Yun; Kolodny, Lora (2021-05-17). "Michael Burry of 'The Big Short' reveals a $530 million bet against Tesla". CNBC. Retrieved 2021-05-20.
  29. ^ GmbH, finanzen net. "'Big Short' investor Michael Burry says he is no longer short Tesla stock". markets.businessinsider.com. Retrieved 2021-11-22.
  30. ^ "Michael Burry of 'Big Short' Bets Against Cathie Wood's ARKK". Bloomberg.com. 16 August 2021. Retrieved 2021-08-17.
  31. ^ "The Big Short investor Michael Burry bets $1.6bn on stock market crash". Sky News. Retrieved 2023-08-16.
  32. ^ Nugent, Justin (16 August 2023). "No, Michael Burry Didn't Risk 93% of His Portfolio on Put Options". Market Rebellion. Market Rebellion, LLC. Retrieved 18 August 2023.
  33. ^ "Author Michael Lewis on Wall Street's Delusion". 60 Minutes. March 14, 2010.
  34. ^ DiVita, Joe (March 6, 2021). "Legendary Investor Leaves Twitter, Lists 8 Metal Bands in Bio". Loudwire.
  35. ^ Stevenson, Reed (April 7, 2020). "'Criminally unjust:' 'Big Short' investor who called subprime mortgage collapse slams coronavirus lockdowns". Fortune. Retrieved 2021-05-20.
  36. ^ Brayson, Johnny (January 5, 2016). "Where 'The Big Short's Michael Burry Is Today". Bustle.com. Retrieved July 22, 2018.
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