Monday, March 1, 2010

Michael Burry: The Man Who Shorted Subprime

Sure, very few people were prepared for the rolling disaster of the subprime mortgage crisis and its huge financial repercussions, but some investors saw it coming, and in an excerpt from Michael Lewis’s new book, The Big Short: Inside the Doomsday Machine, one hedge fund manager shows he was way ahead of his time.

Michael Burry was 32 in 2004, Mr. Lewis writes in an upcoming article for Vanity Fair, when he started thinking about the real estate bubble and how to bet against subprime loans, which the market had no way to short at the time. And it was Mr. Burry that first talked some of Wall Street’s biggest banks into letting him bet against subprime mortgage bonds through credit default swaps.

That wasn’t the first time Mr. Burry surprised people. He started writing about stocks on Wall Street while he was still doing his residency as a medical student — between midnight and three a.m. — until he had learned enough, and built such a following of people making money off his ideas, that he struck out with his own fund.

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