I am autistic and have one eye. I am only glad I neither was given the opportunity to use either as an excuse, nor held anyone else accountable for their two eyes, or their neurotypical phenotype. https://t.co/73elLPlGgt
— Cassandra (@michaeljburry) April 4, 2022
For those of you who didn't watch The Big Short or follow stonks at all, Michael J Burry is one of the first people to predict the 2008 sub prime mortgage crisis, and took massive advantage
TLDR: guy is an neurodivergent rich af chad similar to notch but minus the incel shit and doesn't have to care what anyone thinks anymore and just tweets inane shit with grunge rock clips at the end for a week until it all gets deleted
So the guy started out as most neurodivergent do, never fitting in. He lost his right eye to cancer as a kid which made him even more avoidant. He didn't know he had autism but he focuses on his studies, got an MD at Vandy, and eventually started a residency at Standford. The insane hours and medical learning wasn't enough and didn't interest him however, so he used the hospital computer to post on a early stock trading advice forum that emphasizing calculated efficient investing. He made such a name for himself that prominent investment firms reached out to him to fund his own hedge fund Scion Capital (named after a fantasy novel of course). He continued to beat average rates of return year after year.
Eventually he got interested in the subprime market. This is how I understand it: Smaller banks were enticed by the giant ones to give out loans with shitty terms which started out from the US government push for Americans for Homes or whatever the frick they called it. They ranged from deceiving starting teaser rates to straight up pay nothing for a year until they frick you in the butt rates loans that could never possibly be paid back. These shitty loans were then bundled together with other loans and reevaluated by ratings agencies who were also incentivized to push them through, and given better score due to "diversity" and called them Mortgage Backed Securities (MBS) or their derivatives Collateralized Debt Obligations (CDO). People then were allowed to invest in these just like a bond. He meticulously went through these records and realized it was 90% garbage unpayable shit and that if a certain percentage of these loans failed, the whole bundle would as well. This was in like 2006
So what do you do, the backbone of the US economy is based on nothing mortgages, no one was listening to you, and there was no direct way to make money off them failing. He then invoked the "Credit Default Swap". This was usually used between two giant banks giving eachother a loan and a third party would insure just in case anything happened which everyone knew wouldn't happen. Well Michael amended the documents himself to apply to MBSs and went to the giant banks to basically buy insurance on their shitty bundles. If the bundle failed, he would get paid out the full value of it. Most of them laughed him out of the room, but a few took him up on the offer thinking they just scored an easy couple hundred mil
A few years went by and nothing happened. His investors were furious and wanted to pull out and tried to sue him. He locked the accounts saying something will happen just give it 2 weeks. This went on and on until he was paying so much in interest he basically had to fire his entire staff. But others eventually caught on and it did indeed happen. He personally made 100 million dollars and 700 million for his fund, recording a profit margin of almost 500%. However he pissed off a lot of people and was basically blacklisted by big investment firms for calling them out and investors for playing hardball. He's doing well however as what every wall street bets losers wishes they could be. Has an asian wife too
In reference to my link, he now just tweets rightoid nonsense with a grunge youtube link for a week then wipes his account every 6 months. Hope he's doing okay
more contemporary note: He invested heavily in Gamestop around 2019 using his tried and trued "value" investing strategy that made him big in the first place. The company was undervalued as people obviously thought brick and mortar video game stores would go the way of blockbuster. He used his massive investment to push for being not r-slurred and get a change of management. The stock grew but hedge funds doubled down. Reddit caught wind and the rest is history. How much was actually a short squeeze, idk. More technical analysis from bronance: gme was heavily shorted at the beginning but shorts got btfo at around $50 and covered, most of the action afterwards are retail buying, institutions momentum chasing, and market makers delta hedging their short call options.
lets see if we can get him interested
https://x.com/bigbooba8/status/1511218567529865219
inb4 it gets deleted
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@Aevann I think this deserves a retroactive effortpost if you do that
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sry
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that's okay ty for trying
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The only problem is that you don't know if he's still right about current events or whether the fame went to his head after they made a movie about him.
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lmao that's exactly why I made this. He ITS HAPPENING posts constantly so I watch his twitter to see all the desperate stock bros try to get advice
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One correction - the diversity loan shit is highly over-rated and seems to be pushed by bad actors looking to score "but the wokies" points.
A buddy of mine at goldman has told me a bunch of war stories and said the crash was primarily r slurs over-reacting and the default rate was completely normal.
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oh shit I never heard that side of it. So you're saying it was a human overreaction to the scale of the bad loans?
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Worse than that, there is evidence that the housing bubble wasn't actually a bubble, which means that when the Fed tried to pop the nonexistent bubble, it popped the entire economy instead. Whoops!
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I need to know what Zerohedge thinks of this before I decide if it's legit
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Jews did it
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Well do it again, itβs the only way half these r-slurs will ever afford a home.
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Basically yes, the risk assessment was way off.
I never even looked into this but he told me the default rate never went beyond normal levels.
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Interesting. I could definitely see the overreaction not being as bad as the cause. That's normal stock market panic
But from multiple sources I heard they weren't "normal". I guess it depends how you define normal
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I'll try to find the convo with him but from what I remember (this was years ago) the mortgage default rate was basically normal right up until the full crash.
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yea interesting I'd love to see that side of it. You don't hear it much for obvious emotion bait reasons
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He might have been talking about federally backed loans.
https://www.americanprogress.org/article/2008-housing-crisis/
This sounds similar to what he was saying (not identical) and I don't really wanna misquote him.
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That's the current academic opinion too. There just weren't enough subprime loans to topple the whole thing.
What appears to have happened was everyone got high on a price rally. Then people took r-slurred but prime rate loans. Eventually when some people decided they didn't want in, people who over levered couldn't sell, prices stopped going up, and middle class households that couldnt afford mortgage payments either got out at massive losses or defaulted.
The paper below is probably the best explainer I've seen. https://mfm.uchicago.edu/wp-content/uploads/2020/06/Adelino_Schoar_Severino_Loan-Originations-and-Defaults-in-the-Mortgage-Crisis-The-Role-of-the-Middle-Class-1.pdf
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yea so everyone assumed the housing market would go up so they made these shitty loan deals thinking worst case they'd get their money back, and when the average r-slur eventually wized up the thing fell back on itself
correct?
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pretty much
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Thatβs called a bubble
Make bets that only pay off if the price continues to rise, and if it goes down even a little everyone wants to pull out. Thus overvalued
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absolutely false
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My dad is a bond trader and says the opposite. Blames the rating agencies mostly though. It doesnβt matter if thereβs a bunch of shit on the market if people know itβs shit but if they think itβs AAA then you get fricked
I think your friend at Goldman is and/or
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The problem with defaults is how highly they were correlated. This really fricks up the math they used to value CDS
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Every crash starts with an overreaction to an asset perceived as "toxic". Also, the default rate was over 10%, and there was no way to know which mortgage backed securities we're "safe" because subprime mortgages were packed in with normal mortgages. If you weren't panicking about your potentially garbage assets, then you'd be a complete r-slur
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Tbh I read that as βdiversity of loansβ as in some mortgages, some car loans, some commercial. Diverse loan packages track with market growth better.
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The main issue is that they had too much stuff that would have been quickly sold on their books at once, so banks that didnβt hold such assets were actually holding them in between times to at they would buy it and then sell it to someone else
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Iβm confused as to what people you say are over exaggerating the influence of diversity loans?
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That's one dilemma, the other is that with the number of people making bets on predictions some of them are going to be right some of the time, for no other reason than the law of large numbers, and then all it takes is a well-written movie to make them seem like Nostradamus.
In other words, he may have been right about 2008, but there is no way to tell the difference between skill and sufficient luck.
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Thatβs what I always wondered. movie aside his track record was pretty good so far. Until recently that is, he keeps itβs happening posting. Which I think will be right eventually
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This reminds me there was a recent Michael Reves video where be builds a bot to buy/sell stocks based on the habbits of a goldfish and pits it against a bot that learned from the top users at /r/wallstreetbets and long story short wallstreetbets is dumber than a goldfish. By a lot.
Found the video, please excuse the cringe.
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WSB as a whole is terrible. Pre-pre-pre-GME they had solid users that posted coherent DD. Now all the DD is just inane conspiracy theories detached from any rational analysis.
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I miss under 1 mil WSB
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Yeah, I was on the GME wagon before it exploded and turned 3k into 60k. I miss the actually good advice.
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How to spot a sub going to complete shit.
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There was a brief period after Trump was elected where less people were posting loss porn and more people were posting actual advice. Shkreli used to spend time on there telling everyone that they were r-slurred for allocating so much of their portfolio on options, and of course he was spot on.
Iβd say there was a solid year and a half of really good, aggressive trading advice. Stuff that could help an average person take full advantage of the bull market under Trump. It dwindled off a little bit, but the GME stuff killed the sub completely.
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What an absolutely r-slurred way of describing a problem you learn literally your first week of business school.
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My man needs to get on accutane
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His acne is waaay better than it used to be.
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Now get naked in a bathtub and explain subprime mortgages
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one day ill get trappy to do a recreation of that scene for us
@tappy
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The degree to which anyone was actually malicious and planned anything is a point of debate, personally I think they're all just idiots, but basically correct
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CMV: Subprime crisis mostly derived () from the complete opacity of the various "innovative" collateralized securitization units that arose like MBSs. When nobody has any idea wtf they are investing in, accurate risk assessment is impossible. It's irrelevant whether there was malice involved in issuing the shit loans because the market incentivized that exact thing so it would have happened eventually even if everyone acted in good faith.
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I don't know anything about finance, but I've learned to be extremely skeptical of "innovations". If you haven't recently had some massive scientific breakthrough in a field, innovation usually means reinventing the wheel at best and a scam at worst. "Innovative" defense procurement got us the JSF, Zumwalt, and LCS disasters. Innovators in IT have given us a billion more acronyms for stuff that hasn't changed that much in decades. So when it comes to something like lending money that people have been doing since prehistory, I'm a bit skeptical that anything new has been invented. It's like claiming that there's a new kind of prostitution that hasn't been invented yet.
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fricking PREACH. still using 1990 active directory at work
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My current company is investing heavily in researching alternative database strategies and I am (currently) the only one to hedge my bets on tried-and-true relational databases. Like, y'know, the shit from the 80's. I am going to feel very smug when we end up using AWS Aurora databases as """innovation""" in a few months.
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Waterfallcels keep seething at Agilechads.
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The F 35 came out as pretty good itβs just that the development was heck.
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F 35 is good actually
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It is now, but only after vast cost overruns and delays during development.
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that's exactly how I feel but I'm too drunk to put into words and worried people who aren't obsessed with stupid shit like this wouldn't get that
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Theyβre like 90% Ivycels so it stands to reason theyβre all
All the smart ones are MIT grads with PhDβs working at Renaissance
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Yea that seemed to be one of the more unclear points in my reading about this but it's easier and probably more correct to just blame greed and incompetency. The people making the decisions at the top level or crafting the insane securities were completely detached from what was happening in the room of mom and pop loans with joanne and billy
I'm glad it's somewhat coherent/correct
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No, they just needed to make their retirement number and punch out. A thin veil of ignorance is all they needed to have no legal exposure whatsoever.
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People always like to assign an evil actor to anything bad so they can make sense of why it happened. I always get skeptical when people start talking about big groups like 'wall street' as if they're all colluding to do something 'bad'.
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Living by hanlonβs razor is the only way to prevent becoming an agendaposting twink
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sidenote: he also got into $gme way earlier than wsb normies (around when $gme was <$10) but sold way too early as well, before the short squeeze
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FRICK I should have mentioned that. If someone does a quick paragraph on it I'll edit it in, I'm not too verse in the gme stuff
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https://markets.businessinsider.com/news/stocks/big-short-michael-burry-sold-gamestop-stock-q4-missed-rally-2021-2-1030088508
bought at 2019, sold q4 2020
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cool added an ending note, hopefully it's accurate
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yup looks like a good summary of what happened iirc.
gme was heavily shorted at the beginning but shorts got btfo at around $50 and covered, most of the action afterwards are retail buying, institutions momentum chasing, and market makers delta hedging their short call options.
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Probably made the most sense at the time. No one could have predicted the sheer autism the internet would proud into that stock
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cool i'm just gonna paste that in there
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Yeah him and the other players in The Big Short become a lot less impressive when you realize tons of people tried to short the housing market. But plenty got the timing wrong and it's The Big Short's protagonists who managed to get payouts despite not being anywhere near the first people to notice the housing bubble.
I cashed out when GME hit 100. Made some good money, Man do I miss the old WSB not the idiots who joined after.
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This is what neurodivergents can achieve if they don't get addicted to videogames, internet shit, and coming
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Fukuyama argues that we live in relatively peaceful times because people who would have been warlords and marauders now become CEOs. Maybe the same applies to neurodivergents and the Internet
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big true
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The government's role in all this is worth mentioning as well, from what I hear they kindly suggested that the big banks should give out as many mortgages as possible - every administration likes bigly home ownership numbers they can take credit for
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Yea I'll add that in, definitely a big push for home ownership during that time
just don't talk bad about my boy bush
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I think it started under Clinton anyway, shit was brewing for a while
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nice can pin another thing on clinton
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It goes deeper than that, the recession might have been the Fed's fault lmao
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Post pics of wife
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dude did his opsec I can't find his wife after 20 seconds of googling
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That's some good opsec'in
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Snapshots:
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There's the part in the big short where Selena Gomez and economist guy talk about how all of the bets people made on the morgage bonds made things a million times worse but they don't really identify that these bets are the exact instruments created for Michael Burry and the rest to buy. Without these extra billions being bet against the housing market by the good guys of the movie with the banks holding the bag the housing crash would have been a nothingburger.
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yea see that's the part I don't quite understand. I assume it's the CDOs which are the MBSs just with another layer of obfuscation?
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Iβm going to about this: I always thought of CDOs as basically being βbonds of bondsβ where the number of securities created a kind of safe average by appealing to the law of large numbers/other shitty statistical analysis but didnβt actually reflect that the mortgages were all the same shit from a risk perspective.
I think CDOs were around before the ones they made using the payments from swaps, it wa s just that some / realized you could just treat swaps like bonds too. Frick I hate wallstreeters.
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Not a financebro but from my limited reading, TSLA is a huge scam right? If so, how bad will it be if it unravels?
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It's not a scam, it's just massively overvalued.
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If he was poor he could be a dramanaut - nukes his twitter all the time and occasionally tries to provide social commentary that is physically painful to read.
Hearing/reading him and DFV talk about Gamestop's fundamentals, I'm pretty sure they orchestrated the squeeze based purely on short interest and a gamble on retail in the RH/fintwit era.
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Michael J Bussy made millions investing in vascodilation pharmaceuticals used in industrial quantities in bathhouses
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just read the tldr, he's a rich neurodivergent who don't need no social media acceptance
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