The “big short” that made money during the subprime mortgage crisis took action, and it was a Chinese company that bought it!

Michael Burry (Michael Burry), a name that once discouraged Wall Street.

He became famous during the subprime mortgage crisis in 2007. He became famous in the international capital community by shorting, and his story was changed to the movie “The Big Short.”

Recently, there has been a new trend in Bury's hedge funds.

He significantly “bought” Chinese companies and sold some US stocks at the same time.

This is somewhat of a “surprise,” and what signals did this hedge fund guru smell?

Do more with JD Ali

According to information disclosed by the US SEC, by the end of the first quarter of 2024, Bury's hedge funds had significantly increased their positions in Chinese securities.

Among them, JD and Alibaba became their largest and second-largest stocks, increasing their positions by 80% and 66.67% month-on-month.

In fact, since the fourth quarter of 2022, the two internet companies mentioned above have entered the Burry portfolio, but the decisive purchase occurred in the first quarter of 2024.

Clearing popular US stocks

According to reports, Bury recently opened a position with Baidu, which is listed on the US stock market in the first quarter. This has become another “proof” that he is optimistic about Chinese securities.

While going long on Chinese securities, Bury cleared out two US internet giant platforms, Google and Amazon, last quarter.

The operation of going long and shorting at the same time really attracted the attention of the market.

A unique experience since childhood

Bury, born in 1971, is 53 years old. He has had a different experience than many of his peers.

In fact, it was difficult for him to maintain proper eye contact with others since he was a child.

Berry had a rare form of cancer as a child. He had to remove his left eye before he was two years old, and he has had a glass eye ever since.

Bury often faced all kinds of social embarrassments. He later recalled that his early experiences enabled others to see the world in a different way. He “has trouble” with relationships and considers himself a loner. To remedy his social difficulties, he learned to use a rigorous perspective to analyze data and see details others couldn't see.

Second-year elementary school students start studying stocks

For example, he began to have “first experience” with the capital market in the second year of elementary school. At the time, he was very fond of toy jeeps, so he went to find various information about jeep companies and taught himself some basic research on car companies. By high school, he had already started investing real money.

In 1993, he graduated from the prestigious University of California, Los Angeles (UCLA) with a degree in economics. Since then, he completed his medical studies at another university and worked as a neurology resident at Stanford University Hospital.

While in medicine, he began writing an investment blog.

Since the late 1990s coincided with an internet gold rush, blogging became the prototype of self-media. Bury is active in a stock trading community called “Silicon Investor” (Silicon Investor). He has spoken a lot in sub-sections such as value investing and Buffett. He has unique opinions, and has contributed more than 3,000 investment ideas in just four years.

Abandon medicine to invest

In 2000, Bury took the initiative to create a turning point in her life — abandoning medicine to invest in the capital market.

He founded a hedge fund called Scion Asset Management (Scion Asset Management).

The name has quite a source.

First, Bury's start-up capital came from a family estate, which was worth 1 million US dollars.

Second, the term Scion (Scion) is taken from the fantasy novel “The Scions of Shannara” (The Scions of Shannara), which came out in 1990. The plot of this book focuses on adventure and magic.

At the time, Bury's startup pilot was critical. At the end of the bursting period of the US stock internet bubble, his net fund value surged by more than 50% in 2001, making a good start.

Facts have proven that he is certainly a talented hedge fund manager. In the first three years of his business, his earnings continued to rise, and by 2004, the size of the hedge fund had grown to 600 million US dollars.

It is worth mentioning that the official website of Passengers Assets is “empty”, with no content other than the contact email address and a map as a background.

Battle of the Bears

After Bury started its business in early 2000, a “foolish bundling” phenomenon appeared in the US market, laying the groundwork for Bury's future fame.

At the time, many large banks foolishly tied their fate to the subprime mortgage-backed securities market. However, this market is fatally structurally flawed. Some wise investors saw the banks' shortsightedness and sensed the dangerous nature of such collateralized bonds. Well, if the fund manager chooses to gamble, then they will receive a huge profit from a short transaction.

Bury was one of those smart investors.

In 2005, Bury was officially sold and began accumulating positions to short the subprime mortgage market, using $1 billion of fund assets in the credit default swap category of subprime mortgage bonds.

His bet on the collapse of American real estate certainly paid off. The final crisis was imminent. This short deal earned Bury customers 725 million US dollars, while at the same time adding about 100 million US dollars to Bury's personal assets.

Bury, which is overcrowded, decided to close the hedge fund and remove the assets of all external customers in June 2008, “if it is good, take it”.

Afterwards, he turned to trading his own funds and family wealth and went into hiding in the fund world. Until 2013, he made a comeback again, solicited funds from external customers, and decided to invest in resources and agricultural products.

Bury's comeback that year had nothing to do with the Federal Reserve's big release. Being sensitive to smell, he naturally sensed an opportunity for the market to “attack.”

Bearish on the US market

In fact, Bury's bearish sentiment about the US market has continued to “intensify” since 2019, continuously hinting at the high risk of US stocks through social platforms.

He even posted in 2022: “That sense of foolishness that seemed familiar hasn't gone away.”

This became the “background board” for Google and Amazon to clear all of their stocks in the first quarter of this year.

According to an article familiar with his investment style, Barry's job is to move between buying stocks and analyzing financial statements. But his method of analyzing reports is unique; no one else wants to do this kind of hard and tedious work to actually research the target company. He will even take the initiative to review court rulings and government regulatory documents that are obscure in language to obtain valuable information that could change the value of the company and the market.

Is this why he is optimistic about China Securities? How long will he hold the shares?

Time will tell.