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Michael Burry: A Visionary Investor’s Journey and The Scion Capital Hedge Fund


Michael Burry, an accomplished investor and founder of Scion Capital, has garnered widespread recognition for his exceptional foresight and precise prediction of the 2007-2008 housing market collapse. With a contrarian approach and meticulous research, Burry identified the risks embedded in the mortgage market, defying conventional wisdom and paving the way for substantial financial success.

Background and Unconventional Path:

Accurate Prediction of the Housing Market Collapse:

Burry’s groundbreaking achievement came from his deep understanding of the mortgage market and mortgage-backed securities. Back in 2005 and 2006, he passionately argued, through letters to his clients, that the mortgage market would crumble in the latter half of 2007, causing significant damage to the economy. His prediction was rooted in exhaustive research and analysis of regulatory filings related to these securities, coupled with astute observations of the lending practices and trends within the industry.

Investment Strategies and Risk Management:

Burry’s investment approach emphasized value investing and a margin of safety. He sought out undervalued assets, particularly in the form of credit default swaps (CDS), which acted as insurance against the impending housing market collapse. Despite facing skepticism and opposition, Burry’s strong conviction and rigorous risk management techniques, such as carefully selecting counterparties and demanding daily collateral settlements, safeguarded his investments and led to substantial profits. Michael Burry made a personal profit of $100 million and a profit for his remaining investors of more than $700 million on his bet against the subprime mortgage market in 2008. His fund, 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.

Challenges and Legacy:

Despite accurately predicting the crisis and generating significant returns, Burry encountered resistance and dismissal of his insights from both investors and the broader financial community. The closure of Scion Capital in 2008 marked a turning point in his career, yet his impact and legacy remain influential. Burry’s success story serves as an inspiration for independent thinkers and contrarian investors, showcasing the importance of extensive research, long-term perspective, and the courage to stand against prevailing sentiments.