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Michael Burry NYT Op-ed


lennie_88
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Burry made one of the great trades in recent memory. I believe that it is possible to spot bubbles with a fair bit of accuracy. However, my view is it is impossible to predict when they will burst (on a consistent basis). I identifed the tech bubble in 1996 and this view was not validated until 2000.

 

I also saw the bubble in the general markets in the late 90's and in 2006-2008.

 

My guess is Vancouver real estate is a bubble. I also think interest rates on government debt looks to be pretty bubblicious.

 

To me the real question is should the government be in the game of deflating bubbles? Very tricky.

 

As a small investor, I continue to agree with Peter Lynch that we have many built in advantages to large institutional investors. If we see a bubble and wish to withdraw and protect our capital we can. That is one very important lesson I learned in 2000 (I owned no teck stocks then). I then re-applied this lesson with a little leverage in 2008 (by being out of the market in general and owning FFH who would benefit if markets imploded). 

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"The former Fed chairman responded that my insights had been a “statistical illusion.” Perhaps, he suggested, I was just a supremely lucky flipper of coins."

 

Unbelievable.  What's the old expression... "those who do not learn from the past...".  I guess it doesn't matter with Greenspan since he'll be dead when the next fed caused bubble comes around...

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I am surprised/confused that Greenspan seems to be claiming no fault for the financial/housing crisis. Didn't he come clean in a congressional hearing and admit that his thinking was wrong? I recall Munger calling him a hero for this admission, but he now seems do be denying that he missed anything….

 

Regardless, I am glad Dr. Burry held him accountable.

 

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His foresight might have been a statistical illusion if he hadn't staked a large part of his fund on his beliefs and then put his CDS positions in a side-car, against the wishes of his investors including Greenblatt by the way, who flew out to San Jose personally to try and get his money back! Of course, the board is very aware of a minimum of a few others who did exactly the same thing.  Watsa being the most notable (who isn't mentioned once in the book, or at least not until 90% of the way through it).

 

I highly recommend 'The Big Short'.  It goes into much more detail about the trade and some other very interesting characters.  It was especially interesting for me having never worked on or even remotely near Wall Street.  I learned much about how things work. 

 

I wonder exactly what he's working on now, Burry that is.  The website says 'private investments'.  I wonder if those are publicly traded stocks or something else. 

 

Glad he spoke up!

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yes, he came clean in congress on the regulation side: he admitted that he never thought that bank CEOs could behave so recklessly... However he never came clean on the printing side of the problem. He and Bernanke have never recognized that the low interest rates of the early 2000s were a key trigger of the real estate bubble.

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I think the low rates were needed after the Tech Wreck and 9/11, but the fact that they left them there so long was the real problem.  And then all of the new mortgage products brought out due to government intervention...whether it was Greenspan, Congress, Committee on Housing, whoever...there was no regulation, no thought about what was happening. 

 

I remember in 2005, I watched a segment on CNBC where there was a panel of mortgage lender CEO's.  Angelo Mozillo, CEO of Countrywide, was discussing how they just brought out a new product that allowed 110% financing with no money down!  I was incredulous...how was this happening?  That should have triggered warning flags with regulators, or even the parasitic ass-kissers at CNBC, but it didn't!  People in the moment lose objectivity...Greenspan was as guilty as anyone else.  Cheers!

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I am surprised/confused that Greenspan seems to be claiming no fault for the financial/housing crisis. Didn't he come clean in a congressional hearing and admit that his thinking was wrong? I recall Munger calling him a hero for this admission, but he now seems do be denying that he missed anything….

 

Regardless, I am glad Dr. Burry held him accountable.

 

 

Greenspan hasn't claimed no fault, to my knowledge, but has claimed that low interest rates did not significantly contribute to the credit bubble. He actually has a decent argument involving correlations between short-term rates, the 10-year treasuries, and overseas savings. However, that is not an argument to absolve the Fed given the regulatory powers that Greenspan squandered in his Fountainhead fantasy.

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Guest dealraker

In 2002 I bought a sailboat identical to my neighbors one- a Marshall Catboat.  He actually had a partner, a real estate broker, who I began to listen to.  This young man was connected to a couple of tract builders and he said (remember this is 2002 not later), "Lenders are going 100% and kicking in a 2nd for $20,000 at closing (on $250,000 homes)."  Shortly afterwards he said, "I just bought a beach house....I overpaid for it but I got a $400,000 ten year baloon interest only loan."  And finally I was told by the faculty where I volunteer that a local bank had made it clear that all beginning public school teachers would be approved for 100% loans on small homes in the community.

 

2002, not 2005 or later.

 

That same local school system just laid off 7% of its workers- the young ones of course.  The are still letting many of the older retired (and well connected) ones slip through the "no double dip" rule by employing the slightly less than full time.

 

And you wonder why we have our current crisis?  Let me tell you something: It isn't the hispanics or the aliens or any other low income bunch that screwed up our country.  It is the largely white middle and upper class "take advantage of anything even it if bankrupts our county" group that of course was led by the biggest idiot of all time- Alan "incredibly popular in-the-moment" Greenspan. 

 

 

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I am surprised/confused that Greenspan seems to be claiming no fault for the financial/housing crisis. Didn't he come clean in a congressional hearing and admit that his thinking was wrong? I recall Munger calling him a hero for this admission, but he now seems do be denying that he missed anything….

 

Regardless, I am glad Dr. Burry held him accountable.

 

 

Greenspan hasn't claimed no fault, to my knowledge, but has claimed that low interest rates did not significantly contribute to the credit bubble. He actually has a decent argument involving correlations between short-term rates, the 10-year treasuries, and overseas savings. However, that is not an argument to absolve the Fed given the regulatory powers that Greenspan squandered in his Fountainhead fantasy.

 

It just does not make sense to me that Greenspan says "I was not wrong on monetary policy" but "I was wrong on regulation". Who cares? Why confuse the situation? The simple thing for him to say is "I had the power to mitigate this housing/credit bubble, but I didn't". Then he can help answer the question: How can the Fed mitigate the next bubble? Maybe they need to hire a few guys like Michael Burry and fire some of there "best-in-the-world" economists.

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I am surprised/confused that Greenspan seems to be claiming no fault for the financial/housing crisis. Didn't he come clean in a congressional hearing and admit that his thinking was wrong? I recall Munger calling him a hero for this admission, but he now seems do be denying that he missed anything….

 

Regardless, I am glad Dr. Burry held him accountable.

 

 

Greenspan hasn't claimed no fault, to my knowledge, but has claimed that low interest rates did not significantly contribute to the credit bubble. He actually has a decent argument involving correlations between short-term rates, the 10-year treasuries, and overseas savings. However, that is not an argument to absolve the Fed given the regulatory powers that Greenspan squandered in his Fountainhead fantasy.

 

http://finance.yahoo.com/news/Greenspan-defends-record-at-apf-712700185.html?x=0&sec=topStories&pos=main&asset=&ccode=

 

"In his opening remarks, Greenspan blamed a litany of other parties and historical events for the meltdown but accepted no responsibility for himself or the Fed, which he led from 1987 until early 2006."

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Greenspan admission in my opinion was worth alot. He basically said the ideology that guided him throughout his life was wrong. He told the person who was trying to regulate derivatives that he didn't even believe in regulating / policing fraud. He thought the market would handle that. He was saying his free market solves all ideology was wrong. That takes alot.

 

In terms of the monetary policy who cares what he has to say. He is just another guy trying to kick the can and save his legacy. There were many ways to prevent aspects of the crisis and many causes for the crisis. His problem is a big chunk of the preventions passed through him and many of the causes were generated by him. No way to really pass the buck.

 

The same can be said for Congress as well.

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I am surprised/confused that Greenspan seems to be claiming no fault for the financial/housing crisis. Didn't he come clean in a congressional hearing and admit that his thinking was wrong? I recall Munger calling him a hero for this admission, but he now seems do be denying that he missed anything….

 

Regardless, I am glad Dr. Burry held him accountable.

 

 

Greenspan hasn't claimed no fault, to my knowledge, but has claimed that low interest rates did not significantly contribute to the credit bubble. He actually has a decent argument involving correlations between short-term rates, the 10-year treasuries, and overseas savings. However, that is not an argument to absolve the Fed given the regulatory powers that Greenspan squandered in his Fountainhead fantasy.

 

http://finance.yahoo.com/news/Greenspan-defends-record-at-apf-712700185.html?x=0&sec=topStories&pos=main&asset=&ccode=

 

"In his opening remarks, Greenspan blamed a litany of other parties and historical events for the meltdown but accepted no responsibility for himself or the Fed, which he led from 1987 until early 2006."

 

Boy, I watched Brooksley Born ask Greenspan about AIG's CDS guarantees, and I almost threw a conniption fit when he said that AIG could just as easily have written bad insurance. Greenspan sounded less like an academic and more like a bureaucrat.

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In my opinion Greenspan takes a lot of the blame, and I think it is good that he is testifing at these hearings. I think we can also agree that Fannie and Freddie were a huge part of the problem as well.

 

However, what is grossly unfair is the complete obfuscation of responsibility on the part of our congressmen. What role did congress play in the debacle?? No one seems to want to discuss this. Well, below is a link to a 2004 congressional hearing where OFHEO, the regulator of Fannie & Freddie, is grilled for raising the issue that the GSEs are cooking the books, and being dishonest in their reporting. You can see and hear what our congressmen thought about the GSEs, at the time, in their own words. In my opinion some of these people should be prosecuted. Be forwarned that this video is biased in favor of a particular Party---but we all know that both sides made big mistakes.

 

http://www.youtube.com/watch?v=_MGT_cSi7Rs

 

 

 

 

 

 

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Greenspan is a tragic hero.

 

I look at Greenspan and wonder, could it happen to me? Could I spend my whole life building an intellectual framework, become famous for it, forgo children for my career and then, in my twilight years, see my whole entire intellectual framework collapse? 

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Bogle commented on Greenspan testimony and called it "disingenuous". I personally think Greenspan deserves more flak than he currently gets. He is trying to rewrite history in his favor. Intellectual honesty would require him to admit his mistakes. It would help others (read Bernanke) not to make the same ones. What a disaster...

 

 

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