market folly

A big hat tip to Greenbackd for originally bringing this to our attention. Below you will find a very interesting primer on credit default swaps and the subprime mortgage short from Scion Capital's hedge fund manager Michael Burry. Burry of course was recently featured in Michael Lewis' latest book, The Big Short (which we highly recommend reading) for his notable early short position in subprime mortgages.

Michael Burry penned his primer back on November 7th, 2006 and it's almost comical now to think about how he was running a value fund focused on equities and then all of a sudden has to explain his short subprime trade and complex derivatives to his certainly surprised and confused investors.

Embedded below is Michael Burry's primer on subprime mortgages and you can directly download the .pdf here. It is a truly fascinating read now looking back and here's the document embedded via two formats to make sure everyone can read it at work, etc:




And then here is the second iteration of the exact same streamed document so hopefully one of the two is visible for you on the site:




Needless to say, what better way to learn about subprime mortgages than from the man who was one of the first (if not THE first) to short them. To read Michael Burry & Scion Capital's fully story, definitely pick up Michael Lewis' new book, The Big Short. Additionally, you can see Burry & Lewis from their appearance on 60 Minutes. Lastly, if you're looking to learn from Burry's origins and evolution as an investor, StreetCapitalist has an excellent post up here.