The (Next) Big Short: Current Investments of Michael Burry and Steve Eisman

I’ve read parts of The Big Short by Michael Lewis before, but finally re-read the entire thing over the weekend. If you are unfamiliar with this bestseller, it tells the story of the housing bubble through the viewpoint of investors who saw the crisis coming and bet big money on the collapse of subprime mortgages. Lewis portrays these guys as almost heroes, courageous individuals from smaller hedge funds that went against the commonly-held beliefs of the big firms on Wall Street.

Instead of writing the 8,449th review of this book, my question was – what are these characters betting against now? Now, this doesn’t necessarily mean I think they’ll be right, but I’m still curious.

Michael Burry, Scion Capital
Burry no longer accepts money from outside investors (he doesn’t need to), but still invests at Scion Capital using his own money. He doesn’t write a blog or release his recent letters to shareholders to the public, except for a few old ones. He did make a April 2011 lecture at his alma mater Vanderbilt University entitled Missteps to Mayhem where he sees continued problems with the government printing too much money and not tackling our current fiscal problems.

The government’s borrowing of money for the purpose of injecting cash into society, bailing out banks, brokers, and consumers, is a short-sighted, easy decision for a population that has not yet learned that short-sighted and easy strategies are the route to long-term ruin.

He ends his speech with the ominous advice “All that said, I might suggest opening a retail banking account in Canada.” I’m not even sure that’s possible to do as a U.S. citizen… is it?

From this complete transcript of a September 2010 interview with Bloomberg, he states that he believes that “productive agricultural land with water on site is — will be very valuable in the future”, he is bullish on gold due to currency debasement, but he doesn’t have a good feel for the timing of things as it could take a while to play out.

Steve Eisman, FrontPoint Partners
Eisman left FrontPoint in June 2011 and is reported to start his own hedge fund Emrys Partners in 2012. He has gotten the most publicity in recent years for shorting the stocks of certain for-profit colleges taking advantage of easy credit from government student loans. Basically, people who can’t get into traditional colleges are pitched a great future and convinced to take out large amounts of debt that they can’t pay back, all so these pseudo-accredited colleges can profit. Sound familiar? From a 2010 conference speech:

Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task. […] This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper.

I also looked for information on Charles Ledley and James Mai of Cornwall Capital, but really didn’t come up with much. They have a website, but there is nothing to see for the public.

Comments

  1. Not only can you open a retail bank account in Canada but you can buy GICs and have a brokerage account as well. Both RBC and HSBC have cross border platforms that make moving money back and forth easy and quick. The latest tax treaties mean you no longer pay a non-residents tax in Canada on interest income though they still take out witholding on dividends.
    Like the US, you need to do it in person with proper ID.

    It’s that simple….

  2. You can look at what a hedge fund holds by looking at their most recent 13F-HR filing with the SEC. That information is held in the EDGAR database, which can be searched here: http://www.sec.gov/edgar/searchedgar/webusers.htm

    Scion hasn’t filed for a few years (since it’s not public any more). I couldn’t find much on Cornwall Capital.

    FrontPoint’s most recent 13F-HR is here: http://www.sec.gov/Archives/edgar/data/1217389/000090266411001599/p11-1827form13fhr.txt

  3. For those without a passport, consider the CurrencyShares etf…FXC.

  4. I emigrated from Canada, and am a US citizen now. Yes, you can have accounts in Canada, but they are savings accounts. You cannot buy Canadian mutual funds, due to SEC restrictions, nor trade on Canadian exchanges via brokerage firms. This goes not only for US citizens, but even for Canadian citizens resident in the U.S.

    Given the recent IRS crackdown on people with accounts outside the US, I can’t recommend this, though. The bookkeeping is a pain, once you exceed 10K in assets, and even worse at 100K (Google FBAR and FATCA). They’re trying to catch the millionaires hiding assets, but are instead creating a nightmare for anyone with foreign accounts.

  5. wondering how do we profit on for-profit college education bubble?

  6. The Art of Fake Leadership
    Why do I bring this up? It is not because of where I see this world is going, but merely to encourage those of you to consider what is real leadership. The person who does action and not speak of it. In the case of Finance there are many experts, or so called pundits, but none are more foolhardy to the public than the likes of Warren Buffet, who behind his complexion, is really just a wolf in sheep’s skin. I gander if you look at any of his videos, you will see him from time and again always in devilish eyes look down to his associate (Mr. Munger) or whoever, when broached with a difficult question. The reason is he is no average investor. He buys companies, not stocks, and owns real assets, touting himself to be a leader in finance. The truth is he piles on to control the country’s disposables (rail, consumer goods, and finance). Only the most evil of investors require their principal to pay warrants—anyone remembers the Goldman real deal, “I’ll give you 5 billion but you’ll pay me back in multiples…” A real hysteric if you don’t mind me saying so. And alas, this type has existed throughout history. The old hedge fund saying, never sell good assets to cover/protect bad assets could not be more truthful in this sense. Watch for predators such as him. Indeed, it amazes me the way in which fake leadership is used. I challenge any real truth seekers to figure this out. Trust no one.
    This brings up my last point, which is a cue to readers who should be paying attention now. I see the greatest and fake leader of them all stepping stage. Rand Paul, a man from no real background taking form and shape in an unknown arena. His comments are mere trifles of quotes from various reports to back his claims, his own agenda. There is a reason history repeats, for those of us who pay real attention to this sort of sheepishness. “I will cut down the tax rates at a rate this country has never seen before.” I myself only urge caution, to truth seekers.
    As history has shown…a severe recession has hit us for any marked period of significant reduction in tax income. Any leader sees our true direction…

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