People told me they liked the recently-released movie The Big Short based on the book of the same name by Michael Lewis, so I did go to see it at a theater, something I’m loathe to do these days because the theaters seem determined to crush all human sensitivity out of their patrons during the overlong and overloud Coming Retractions segment that precedes the main show. Seems to me that earplugs are a better theater accessory these days than 3D glasses.
Anyway, the movie has been well-received by both critics and audiences. It is a well-crafted dramatization of the true story of a few traders who foresaw the collapse of the housing bubble and figured out how to make large profits from that event. It shows aspects of the lead-up and crash that are not well-known by the public. And it shows the vitriol and threats directed at anyone who sees important events sooner than the general public, especially when what they see means that people are going to lose some or all of their elusive spondulix.
The main character is Michael Burry, who not only foresaw the coming real estate bubble collapse, but had a very good idea of just how devastating it would be for the economy. It’s exceedingly rare for the hero of a movie to be someone as intelligent as Burry.
But more important than the movie is what Burry is doing these days. Remember, Burry does intelligent things before the crowd. He’s a rather private fellow, but has made a few public appearances, one on 60 Minutes, and this one on Bloomberg where he talked about what he was currently buying–farmland with water on site, and gold:
Here is Burry giving a fabulous commencement speech at UCLA in 2012. Burry’s speech starts at the 2:15 into the video:
It’s an age of infinite distraction, for those so willing. You are the generation that has had instant messaging, Facebook, Twitter, an angry bird nagging your fingertips at every moment. It’s been arguably as addictive as any drug throughout history, and I do imagine, it took some terrific will power during your studies … to study.
In 2010, I published an op-ed in the New York Times posting what I thought was a valid question of the Federal Reserve, Congress, and the President. I saw the crisis coming … why did not the Fed? Never did any member of Congress, any member of government for the matter, reach out to me for an open collegial discussion on what went wrong or what could be done. Rather, within two weeks, all six of my defunct funds were audited. The Congressional Financial Finance Inquiry Commission demanded all my emails and lists of people with whom I conversed going back to 2003, and a little later the FBI showed up. A million in legal and accounting costs and thousands of hours of time wasted – all because I asked questions. It seemed they would pump me at gun point or not at all. That summer the Federal Reserve put out a paper that concluded nothing in the field of economics or finance could have predicted what happened with regards to the housing bust and subsequent economic fallout. Ben Bernanke continues to backfill this logic and I fear that history is being written wrong yet again. The ignorance is willful.
And here is an interview he gave a week ago ago:
Michael Burry, Real-Life Market Genius From The Big Short, Thinks Another Financial Crisis Is Looming
I am shocked that executives at some of the worst lenders were not punished for what they did. But this is the nature of these things. The ones running the machine did not get punished after the dot-com bubble either — all those VCs and dot-com executives still live in their mansions lining the 280 corridor on the San Francisco peninsula. The little guy will pay for it — the small investor, the borrower. Which is why the little guy needs to be warned to be more diligent and to be more suspicious of society’s sanctioned suits offering free money. It will always be seductive, but that’s the devil that wants your soul.
The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough. And the interest the Federal Reserve pays on the excess reserves of lending institutions … handcuffed lending to small and midsized enterprises, where the majority of job creation and upward mobility in wages occurs. Government policies and regulations in the post-crisis era have aided the hollowing-out of middle America…These changes even expanded the wealth gap by making asset owners richer at the expense of renters. Maybe there are some positive changes in there, but it seems I fail to see beyond the absurdity.
All these people found others to blame, and to that extent, an unhelpful narrative was created. Whether it’s the one percent or hedge funds or Wall Street, I do not think society is well served by failing to encourage every last American to look within.
Americans have so much natural entrepreneurial drive. The caveat is that it is technology that should be a tool making lives better in the real world, and in line with the American spirit of getting better and better at something, whether it’s curing cancer or creating a better taxi service. I am less impressed with the market values assigned to technology that enhances distraction.
So folks, do you have your farmland with water on site and some gold? Are you looking within and working like mad to avoid formidable distraction? Or are you following a path designed by what Burry calls “society’s sanctioned suits” offering free money and a million tantalizing distractions?