Comments on Distressed Debt Investing: Michael Burry of Scion Capital: The Next Berkshire...

I skimmed the first page of the 1-star reviews on ...

2010-03-23T05:00:56.685-04:00

I skimmed the first page of the 1-star reviews on Amazon, and most of the critiques focused upon Michael Lewis' defense of derivatives market orthodoxy. But I don't read a Michael Lewis book for nuanced, brilliant thoughts; I read him for frequently incisive, and well written, observations.

As a previous commentator noted, Burry probably is not on the short list of Berkshire managers. He put a non-negligible amount of his fund into a derivatives play where a lot of funky things could have happened. What if the market continued to rise for a few more years? Or if the post-default auctions were manipulated by CDS writers? Looking at Berkshire's short-term financing for Burlington Northern, and the desire to retain $20 billion in cash, you can see that Buffett doesn't like to rely on the capital markets. Burry might be a bit too cowboy for Berkshire.

Is not everyday that you can hear/read real time w...

2010-03-21T19:52:07.777-04:00

Is not everyday that you can hear/read real time what a great investor in the making thought and how he reacted.

Myself, and at least one other blogger, was also preparing a series of posts based on these discovery. I was particularly surprissed that he was not a pure value investor and he had his own set of rules to limit losses. Another biggie was his stubbornness to short Amazon and being long Borders in 1999. He had this missionary personality that scared me a little but I for sure learned a lot.

However as you say, his thoughts may have changed.Hope we do not saturate the "series of tubes".

Plan

it's kind of funny everyone is acting like Mic...

2010-03-19T20:09:59.265-04:00

it's kind of funny everyone is acting like Michael Lewis discovered this guy, since he was profiled at length in "the greatest trade ever" (which was a fantastic book). Not saying that's what Hunter claims, just making an observation.
Based on "the greatest trade ever", I can agree with persistentone. Clear style drift, which understandably made his investors nervous.

If you study the history of his hedge fund, he cha...

2010-03-19T18:03:24.804-04:00

If you study the history of his hedge fund, he changed from being a pure value fund to instead running a speculative short on prime mortgage. Regardless of whether he was right or wrong about the bet (he was right in a historic way!), that change of focus really pissed off his investors, who did not sign up to speculate on real estate via what were essentially long dated put options (e.g., CDS contracts on subprime bond trenches).

My impression about Dr Burry is that he is very very smart, but he obsessively pursues what is a) true, b) interesting to him. Truth was a more important objective than maintaining the focus of his fund.

ever thought of Klarman as a possible successor to...

2010-03-19T09:11:51.612-04:00

ever thought of Klarman as a possible successor to Charlie and WEB?

loving this Burry stuff. amazing how many investo...

2010-03-18T18:58:24.162-04:00

loving this Burry stuff. amazing how many investors are out there knocking it out of the park that nobody has ever heard of.

an interesting theory. However, I think WTM and B...

2010-03-18T09:03:33.202-04:00

an interesting theory. However, I think WTM and Burry had a falling out (due to Burry's move away from regular stock picking and into mortgage markets). Additionally, Burry closed his fund very early in order to maximize his performance potential (polar opposite of constraints he would face at BRK). Finally, I saw Michael Lewis on Charlie Rose last night, and Lewis said that Burry had lost all interest in the business of money management b/c of how his relationships with his clients deteriorated.

Buffett said all of his choices lost significant m...

2010-03-18T08:10:28.534-04:00

Buffett said all of his choices lost significant money in the 07-08 period, which would strike Burry off the list. Interesting stuff, though!