For Burry, the best answer I can find seems to be these two links, where he describes his method in his own words. I underlined the part below which best describes his method. Somewhere in this interview he mentions that Paulson may have gotten the idea from someone else.John wrote:The interesting questions are these:
What methodologies did Bass, Paulson and Burry use to reach their
conclusions?
http://www.scribd.com/doc/37453934/Mich ... Transcript
This links to a 26 page interview with Michael Burry. This interview may be a year old.
I will try to summarize in no particular order.
The top of the real estate bubble could be timed. We are still in a bubble environment. None of the tops of the future bubbles will be able to be timed - he hasn't figured out how to do it. It was obvious high tech was in a bubble back in the late 1990s but there was no way to tell how long it would go on. He is buying farmland. He won't say how much as a percentage. He is buying gold. He doesn't say how much. He is buying stocks that are overlooked by the market with small high tech companies being an interest, especially in Asia. He talks about Paulson mostly because he's asked a lot of questions about him. He has never talked to Paulson. He has never talked to Buffett. He would not accept a job offer from Buffett because there would be no reason for him to be at Buffett's firm. There's only one Warren Buffett. He says that he doesn't get his ideas from the same sources as the New York hedge funds and the only investment he has in common with Paulson is gold. He is not short anything. The only thing he ever shorted was real estate credit default swaps. He knew the real estate bubble, when it burst, would tip over the stock market too. He gets most of his investing ideas by reading news. It's very difficult to find good investments and it takes a lot of time. He is long term bearish on the dollar and US Treasuries but has no time frame. He started shorting real estate in the Summer of 2005 when as he calls it the penultimate subprime nortgage came into being. He wanted to start a very big fund dedicated to shorting real estate but couldn't get it off the ground. Nobody was interested. Nobody was shorting real estate at the time he was doing it - the securities he bought were offered on the market as protection to investors who were invested in real estate. He's lost faith in our leaders to do the right thing. He doesn't know if there's a bond bubble right now - it can go on awhile, he thinks.
http://news.yahoo.com/weve-become-natio ... 01364.html
QUESTION: Are you a U.S. dollar bear?
BURRY:Long time bearish.I think that I don't have a lot to say in terms of timing. One of the issues -- one of the features of the sub -- the subprime short, the real estate short, is I can put a very specific time on it because I was waiting for the worst possible mortgage, basically, the -- the pay option arm, the cash flow arm, which, in a world where people buy homes because -- on -- on the monthly payment that they need to make, when they don't need to make hardly any payment, that's about as -- as -- the -- the -- the penultimate extension of credit to a homebuyer.
And when I saw those worked through the -- the -- the prime credits and then a little bit into subprime credits, I said, OK, the timer has been set.And I thought 2007, it -- if not before, things are going to come down.
You don't have -- I don't -- I can't find that -- that timer on any of these other theories -- Treasuries, China.I mean there's all these theories.I think we've become a nation of -- of -- of bubbleheads where we've just had this huge bubble burst and now everybody has got their ideas on what the next bubble is and what's going to blow up next.
And that's not hard to do. It's not hard to say there's going to be a -- there's a bubble and this and that. The tough part is when -- when will it come blow -- come down? And with -- with mortgages, I could do that. With housing, I could do that. I think it's more difficult to time that out with some of these other things -- China and Treasuries, that sort of thing.