The man who arguably made the first call about the imminent collapse of the subprime market, Michael Burry, “really went after Goldman” at a speech at Vanderbilt University (where he was in med school) on Monday night.Burry noted that e-mails have subsequently been disclosed that reveal Goldman Sachs orchestrated a short squeeze “to cause maximum pain” to existing shorts in order to get in on the trade themselves at better levels, according to Hunter from the Distressed Debt Investing blog, who was at the speech.
Goldman’s Managing Director of the Structured Products group, Michael Swenson, wrote two emails that probably pissed Burry off:
1. “We should start killing the . . . shorts in the street… This will have people totally demoralised.” – Mr Swenson wrote in an e-mail to Deeb Salem, a trader, in May 2007
2. In another e-mail, he said Goldman should reduce prices on CDSs to “cause maximum pain” for existing holders of credit insurance.
The emails were published after the Senate called Goldman to testify about the cause of the financial crisis.
Clearly Burry saw them, and he is pissed that he didn’t make as much money as Paulson.
Burry told the audience that he was “forced to sell his corporate CDS and side pocket his subprime bets,” according to Hunter, because Goldman and the rest of Wall Street were “marking against him” and his investors were growing uneasy with the unconventional trade (which they surely now regret).
Also interesting: “He is amazed that Paulson didn’t realise the extent of sub-prime exposure given his tenure at Goldman,” according to Hunter.
Here’s what Burry said about what he’s investing in, according to Hunter:
- He was very reluctant to reveal details of what he is investing in now
- He has funded some venture capital type investments in Silicon Valley
- He has bought some farmland, but for very specific factors including currency (See also: UH OH Michael Burry agrees with John Paulson again)
Burry’s investment/money management advice:
- Open a bank account in Canada
- “Silicon Valley is the only place where pure capitalism exists today”
- There are opportunities in small caps because they have lost sponsorship at most sell-side firms
- Large caps aren’t as cheap as others think they are
More on Burry’s speech is available by clicking here >
Via Barry Ritholtz