원문 보기
In 2005, something strange was happening in America. Housing prices were rising. Banks were issuing more loans than ever before. Wall Street was making billions. And almost everyone believed that these good times would last. But one investor looked at the same market and saw something completely different.
His name was Michael Bury. He was not a well-known Wall Street executive. He was not a billionaire. And he wasn't an economist working for the Federal Reserve. He was a qualified doctor who became obsessed with numbers. And while the financial world celebrated the housing boom, Bury studied the mortgages beneath it.
What he discovered eventually earned him hundreds of millions of dollars. But before it happened, his own investors believed he was making a catastrophic mistake. Some wanted to take their money. Some threatened legal action. And Bury himself was losing money. For over a year , the market seemed to prove him wrong.
Until I stopped doing it. This is the story of Michael Bury, an investor who saw the weakness of the American housing market before the 2008 crisis erupted. But there is an important caveat. Bury did not predict every event of the 2008 financial crisis . He did not predict the exact date of the collapse of Lehman Brothers .
It was Monday morning, September 15, 2008. Asian markets had just opened, and everyone was absorbing the news. Lehman Brothers went bankrupt. Its debt was 613 billion US dollars. He discovered something more specific and perhaps startling. He saw that the US subprime mortgage market was fundamentally broken, and he bet against it.
Michael James Bury was born in California in 1971. His path to Wall Street was anything but standard. He studied economics and medicine at the University of California before earning his medical degree at Vanderbilt University School of Medicine. He then began his studies in neuroscience at Stanford.
But medicine wasn't the only thing on his mind. Bury became interested in investing. While still in medical school, he spent hours researching companies, reading financial reports, and writing detailed investment analyses online. His approach was simple. To look beyond the headlines, ignore the crowd, and find what the numbers really say.
His works have attracted the attention of professional investors. One of them was legendary investor Joel Greenblatt. By 2000, Bury had made a decision . He will leave medicine and pursue investing full- time. That same year, he founded Scion Capital. The fund started with approximately $1 million. What happened next was extraordinary.
Scion began to show exceptional results . Bury has built a reputation for himself as an investor who seeks out undervalued assets. Someone who is willing to buy assets that the market has ignored. But in the early 2000s, his attention began to shift to something much larger—the American housing market.
To understand what Barry saw, you have to understand what everyone else saw. America was experiencing a housing boom. From the beginning of 2000 to the peak in 2006, house prices in the country increased by approximately 90 %. In many parts of the country, prices rose even faster. People bought houses because they believed that prices would continue to rise.
Banks were willing to provide mortgage loans. Mortgage companies were issuing huge amounts of loans, and Wall Street found a way to turn these mortgages into financial products that could be sold to investors around the world. But there was a problem. The quality of many of these mortgages was deteriorating.
Subprime lending expanded rapidly. These were loans made to borrowers who were considered riskier. Some had bad credit histories. Some had little money for a down payment. And some loans had variable interest rates. At first, these loans might seem affordable . But many of them contained so-called attractive rates.
The initial payments were low. Over time, rates could increase significantly. And Barry noticed something important. These recalculations did not happen by chance. A large number of mortgages were due to be reviewed around the same time period. And if borrowers are unable to pay the new amounts, the number of defaults could increase rapidly.
It was this crack that Barry began to explore. Barry didn't just say, "Houses are too expensive." His research was much deeper. He studied mortgage data. He analyzed the prospectuses. He investigated the loans underlying mortgage-backed securities. He looked at the actual borrowers, their credit ratings, loan- to-value ratios, and the structure of the mortgages themselves.
He found that many supposedly sound mortgage securities depended on borrowers who were far less financially stable than the market believed. And then another problem arose. Many of these mortgages had variable rates. Initial rates may have been attractive, but when they were revised, monthly payments could increase dramatically.
Barry believed that the market was pricing these securities as if defaults would remain relatively low . He considered this assumption dangerously erroneous. By 2003 and 2004, his research increasingly focused on the mortgage market. By mid-2005, he was confident enough to take action, but there was one problem.
How do you bet against the housing market when everyone believes in its continued growth? You can't just open a short position on a house. So Barry found another way. This instrument was called a credit default swap. A credit default swap, or CDS , can be considered a form of financial protection against default on a debt instrument.
Barry wanted protection for mortgage-backed securities. If these securities remained sound , he would continue to pay premiums, but if the mortgages underlying them began to fail, such protection could become extremely valuable. In other words, Bury was willing to lose money while waiting because he believed the eventual profit could be enormous.
In May 2005, he began opening his positions, and it was not a small bet. By October, Scion had accumulated more than $1 billion in notional credit default swaps tied to subprime mortgage bonds. For Bury, it was a calculated investment. To most of the financial world, this looked like madness. Why bet against the housing market?
Why pay millions in bonuses every year? Why fight an industry that seemed to make money effortlessly ? But Bury studied the numbers and was convinced that the market was wrong. Then came the hardest part—the waiting. Throughout 2006, housing prices continued to rise. The mortgage market did not collapse instantly, and Bury's positions only brought losses.
Scion Capital recorded an 18 percent loss in 2006. His investors were furious . They invested in Bury because of his value investing strategy. Now their money was being used to bet against mortgage bonds, and the market seemed to be proving him wrong. Investors wanted out of the game. Some tried to withdraw their money.
The pressure became so intense that Bury invoked contractual clauses that allowed him to limit certain withdrawals related to the deal. Imagine this situation. Your investment manager is losing money by assuring you that America's largest housing market is about to collapse. You look out the window and housing prices continue to rise .
Banks continue to operate. The economy continues to grow, and everyone around you tells you that your manager is wrong. But Bury did not renege on his deal. He continued to monitor the data. And then the numbers started to change. By the second half of 2006, the warning signs were becoming increasingly difficult to ignore.
The number of defaults on subprime mortgages was increasing. Borrowers were starting to fall behind on their payment schedule. The housing market stopped behaving like it did during the boom, and the mortgages Bury was tracking began to fail. This was exactly the development he had been waiting for.
In 2007, the consequences became much more extensive . Mortgage-backed securities began to lose value. The financial institutions that owned them suddenly faced huge losses . And Bury's position, which had seemed painful for years , became extremely valuable. The bet finally worked. Scion Capital recorded a return of over 166% in 2007.
The man everyone doubted was now making money on the collapse she herself had warned about. But the crisis was just beginning. In June 2007, two hedge funds associated with Bear Stearns went bankrupt after huge losses on mortgage-backed securities. The problem began to spread. The housing market bubble has burst.
But the financial system was deeply interconnected. Mortgage-backed securities were packaged, repackaged, and distributed throughout the global financial system. What looked like isolated mortgage defaults could now cause losses far beyond the original borrowers. Then came March 2008 . Bear Stearns, once one of America's most powerful investment banks, collapsed .
J.P. Morgan Chase agreed to acquire the firm with government support. But the crisis continued . In September, the government introduced external management at Fannie Mae and Freddie Mac. Then, on September 15, 2008, Lehman Brothers filed for bankruptcy. It was one of the most dramatic moments in modern financial history.
The next day, the Federal Reserve made a huge loan to AIG. Financial markets were in a state of turbulence. Lending has stopped. Stock markets were collapsing. And governments around the world tried to prevent the collapse of the financial system. The housing market problem has escalated into a global financial crisis.
But Michael Bury's story has already reached its most important turning point. As the mortgage market deteriorated, its credit default swaps became extremely valuable. Bury paid premiums for years, waiting for the market to realize what he believed the data already showed. And finally, it happened. This deal brought hundreds of millions of dollars to Scion investors.
According to generally accepted data, investor profits exceeded $700 million. While Bury's personal earnings were approximately $100 million. Oho.
Comments 0