Michael Burry Is Not Making This Up ?

Michael Burry, a former Medical Resident turned hedge fund manager, gave a poignant 20+ minute speech at the UCLA Commencement 2012 - Department of Economics recently. While there were few interesting tidbits here and there (and some useful advice for graduating students towards the end of his speech), LongShortTrader believes Burry’s  main objective in his speech was to speak truth to power, specifically to the Federal Reserve, Congress, and the President.

Burry said:

“In 2010 I published an op-ed in the New York Times posing what I thought was a valid question of the Federal Reserve, Congress, and the President: ‘I Saw The Crisis Coming, Why Didn’t the Fed?’ Never did any member of Congress, any member of Government for that matter, reach out to me for an open collegial discussion on what went wrong, or what could be done.

Rather, within 2 weeks, all 6 of my defunct funds were audited. The congressional financial crisis inquiry commission demanded all my emails, and list of people with whom I had 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 the 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.

Sadly, at the highest levels of economic thought in government, questions are not tolerated. it is as if we are dealing with the binary judgment of a fundamentalist religion.”

The above is excerpted from the full video here:

Although LongShortTrader is not aware of the specific circumstances that led to the Fed’s inquiry/investigation into Michael Burry/Scion Capital, Burry does suggest that the inquiry/investigation was in response (in part?) to his New York Times Op-Ed, I Saw the Crisis Coming Why Didn’t the Fed?

If this explanation is largely correct, it would appear to bear some resemblance to Allied Capital’s war against David Einhorn/Greenlight Capital (as detailed in Fooling Some of the People All of the Time, or Patrick Byrne/Overstock.com’s jihad against Rocker Partners, etc.

Speaking of Patrick Byrne/Overstock.com … it is LongShortTrader’s understanding that Scion Capital was OSTK’s largest shareholder (ex-Byrne) at one point. LongShortTrader finds this very peculiar, considering that Patrick Byrne did to its critics (and worse?) precisely what the Feds have done to Burry.

LongShortTrader has questions for Burry, relating to Burry/Scion Capital’s past support of OSTK/Byrne, and plans to contact Burry within the next few days. Will keep y’all posted.

::UPDATED::

Dr. Burry graciously responded to LongShortTrader’s questions, and will honor Burry’s request that his response stay off the record. Suffice it to say, his response answers some questions, while raising new ones.

In closing: LongShortTrader thanks Michael Burry for being a positive influence on LST’s investing career, and for encouraging us all to ask questions, in pursuit of the truth.