Dr. Michael "The Big Short" Burry's "Brutal Hangover Is Inevitable" State-Of-The-World UCLA Commencement Speech

Infamous for his prediction of the great recession, Europe's demise, and the collapse of the US financial system (as well as profiting extremely handsomely from said predictions), so well captured in Michael Lewis' book "The Big Short", UCLA's Dr. Michael Burry undertakes UCLA's Economics Department's commencement speech with much aplomb. In this "age of infinite distraction", the astounding truthiness of this 15 minute speech is stunning from single-sentence summation of Europe's convulsions that "when the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable" he reminds us that Californians, and indeed all Americans, should take note. A quarter-of-an-hour well spent from a self-described 'chicken-little' who was "just trying to figure it all out".
Source: Zerohedge

Michael Burry is founder of the Scion Capital LLC hedge fund, which he ran from 2000 until 2008, when he closed the fund to focus on his own personal investments. Author Michael Lewis profiled him in his 2010 book The Big Short: Inside the Doomsday Machine.

More wisdom from Michael Burry

As you remember Michael Burry started his investment career as a poster on a message board about stocks. In the beginning he preferred to run an ultra-concentrated portfolio with only 4 to 6 stocks. Later Burry has changed his mind and targeted a more diversified portfolio of 9-10 stocks. After sometime he has evolved the way he thinks about diversification. He held up to 18 positions and said that “If anything that Buffett’s done can be said to have hurt value investors, IMO it’s his witticisms regarding diversification as a weapon of the ignorant or lazy.” Michael Burry said that because he could not handle the high level of volatility that comes from ultra-concentrated portfolio holdings. Guess what the volatility is when you have 4-6 positions and 2 or 3 goes down big way? He goes to say that he still outperform the market with a portfolio of 15 stocks so it’s better to diversify.

It is interesting to point out that Michael criticizing Buffett’s stance on diversification at a time when he himself is holding 15 positions. I believe that Buffett’s criticisms of over diversification are aimed at the closet indexers that do nothing to separate themselves from the market. While changing his believe that 4-6 stocks is the optimal diversification to believing that ~15 positions is the optimal mix in just about two years is a huge move. Still a portfolio of 15 positions today is considered as conservative. So the advice about do not do over-diversification is still active today.

Michael Burry’s investment approach is really complex and changing. He relies mainly on relative valuation, technical analysis and other rules that help him to sell or buy and make the decisions with no respect toward the tax efficiency and turnover.

Michael Burry is founder of the Scion Capital LLC hedge fund, which he ran from 2000 until 2008, when he closed the fund to focus on his own personal investments. Author Michael Lewis profiled him in his 2010 book The Big Short: Inside the Doomsday Machine.

Michael Burry QUOTES

These are wonderful quotes from Michael Burry comments that are worth-reading for every serious investor. As you know Michael Burry has retired, so it is hard to find more comments by the great investor. That is why it is wise to remind about some of his wonderful comments or quotes that he made during his short but successful investment career.

1. I prefer to look at specific investments within the inefficient parts of the market.

2. The bulk of opportunities remain in undervalued, smaller, more illiquid situations that often represent average or slightly above-average businesses

3. fully aware that wonderful businesses make wonderful investments only at wonderful prices, I will continue to seek out the bargains amid the refuse.

4. It is likely, however, that the investors in the habit of overturning the most stones will find the most success.

5. My firm opinion is that the best hedge is buying an appropriately safe and cheap stock.

6. It is a tenet of my investment style that, on the subject of common stock investment, maximizing the upside means first and foremost minimizing the downside

7. Lost dollars are simply harder to replace than gained dollars are to lose.

8. The Fund maintains a high degree of concentration - typically 15-25 stocks, or even less. Some or all of these stocks may be relatively illiquid.

9. Volatility does not determine risk.

10. I certainly view volatility as my friend volatility is on sale because 99% of the institutions out there are doing their best to avoid it

11. In essence, the stock market represents three separate categories of business. They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value. The preference, always, would be to buy a long-term franchise at a substantial discount from growing intrinsic value.

12. Ick investing means taking a special analytical interest in stocks that inspire a first reaction of “ick.” I tend to become interested in stocks that by their very names or circumstances inspire unwillingness – and an “ick” accompanied by a wrinkle of the nose on the part of most investors to delve any further.

13. One hedges when one is unsure. I do not seek out investments of which I am unsure.

14. I will always choose the dollar bill carrying a wildly fluctuating discount rather than the dollar bill selling for a quite stable premium.

15. With all seriousness, a 2,500-share sell when no one is looking could torpedo the apparent market value of several of the Fund’s holdings.

Michael Burry is founder of the Scion Capital LLC hedge fund, which he ran from 2000 until 2008, when he closed the fund to focus on his own personal investments. Author Michael Lewis profiled him in his 2010 book The Big Short: Inside the Doomsday Machine.