• Jim Costa

Jim’s Rant For The Day. Movie: The Big Short; Dr. Michael Burry and his Economic Outlook.

If you have seen the movie, The Big Short (Trailer #1, Trailer #2) then you will remember that Dr. Burry was the hedge fund manager who, in 2005, spotted the coming 2007/2008 financial collapse that wiped out the mortgage industry, some big banks, 50% of the pension savings and caused the Bank Bailouts. If you haven’t seen the movie you need to.

He was managing a hedge fund (Schion) of $200 Million. Some of his investors began suing him because they no longer trusted his investment strategy after he refused to return their investments as the play was currently in motion. During that period, most hedge funds showed no more than a 3% return on investment. Scion, cashed out $1.2 Billion to its investors, for a Return On Investment of 489%. Of course, this stopped the law suits as the investors were now most happy.

Two years ago in May of 2017, he was interviewed and asked what he predicted for the Economic Future. He foresaw only two scenarios: A total financial collapse, or worse yet, global WWIII to mask the total financial collapse.

In 2008 Burry closed his hedge fund in disgust with the investors as well as the fraud in the markets. But then again, maybe the $200 Million he earned in the deal had something to do with his quitting the business, who can say? What is interesting however, is that in the past 18 months several hedge funds have suddenly closed, refunding all clients money to them with the explanation that the market is too corrupt, if they won by using Credit Default Swaps (as Burry did) the banks might not be able to pay them off and that now was the time to get out.

If you watch(ed) the movie, you may notice that at the end they never said what happened to all of those garbage mortgage backed security bonds that caused the collapse. Well wonder no more. They were mainly parked in pension funds where they wait to explode again anytime now.

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