Sept. 7 (Bloomberg) -- Michael Burry, the former head of Scion Capital LLC who predicted the housing market's plunge, talks with Bloomberg's Jon Erlichman about his investments in agricultural land, real estate and gold. (This is an excerpt. Source: Bloomberg)
Being an African in Africa, I see how food production's gravitating to the global south while at the same time water slowly starts getting scarce. He's literally let the cat out of the bag. Many decades down the line folks will look at this & facepalm. Once again.
Everyone who thinks that this man his some kind of HERO are very much in the wrong, this man is basically saying he's buying up farms and the land that goes with it. Farms that have been worked by the same hands" family" for decades. I don't like tis man, trust me he could of gone to the media and shouted at the top of his voice about what was about to happen with the housing market, but no he decided f*%k all those family's who were about to become homeless, the only thing this man cared about was his own gain no matter that he knew in his heart that it would come at the expense of other human beings. Truth is he should never have been allowed to do what he did, he should of been sent to prison along with all them other criminals that worked in high finance, and don't even get me started on what I think of hedge fund managers.
Not just land. Land with its own water source. Spot on.
Read data on the aquifer underneath kansas, texas, and oklahoma. It's limited.
Then read up on the dust bowl of the '30's to see what happens when there's no grass, crops, or trees.
ThePatsyMusic : The situation in OZ is phenomenal. I actually from Germany, but I never saw Property Price growing like in Australia. Friend of mine owns >15 Houses in Melbourne and he bought it for about 200K each (1995-2000). And now? I think you can imagine the value ....
buying mortgage stocks would of beat buying gold, if he bought gold then then he's maybe -30% right now. The mortgage stocks would be down about the same but would have returned a lot of money in dividends.
Do they actually need to study to become an interviewer? They think it is "smart" to ask a question pointing irony?......."so, you made billions betting against house value, and now you are investing in house value?".
First, not only the logical thing to do is invest in something when it reached its lowest point, obviously will go up again.......but also, point an irony doesn't make you smart.....in fact, this case proven you have to be very stupid to ask that question, specially in the market business where you have fluctuations.
"gold is an interesting investment based off how I see the world turning out" he went from wallstreet at 50k Birdseye view to investing based off how he sees the complete world market and collapse. This guys on another level altogether
bassbird the financial crisis of '07 now lays back 10 years. It is said, that he quit his position as a hedgefond Investment manager, which might has led him to change or improve on his social behavior. Though he made a big amount of money, which might also give him some rest, not juggling with third party capital anymore.
Yup he doesn't realize in collapse his investments would be useless in todays world lets just say land is a temporary solution specially land in california! He needs to liquidate it all and go into something else.
Other then farm land with water on site, He gave NO definitive answers. He's good in this, two ways. 1) No responsibility if people think this is advice, and lose their shirts. 2) He's just simply playing his hand of cards close to the vest. "It's my plan. Get your own."
You realize that the return to Dasani (a subsidiary of Coca-Cola), just made a KILLING off of your purchase, as did the 7-11.
A 20 oz plastic bottle, made in The U.S., is roughly 2 cents to manufacture, and the filtered water inside is about 1/2 a cent. So, do the math; 3 1/2 cents to produce, sold to the distributor for, say, 60 cents per bottle, and they then sell it at $1.25.
Coca-Cola (whose biggest shareholder is Berkshire Hathaway headed up by Warren Buffett), made 56.5 cents (estimating cost/profit here), and the gas station made 65 cents.
Total gross profit, $1.21.5 (approximately) off of ONE single bottle of water.
Now multiply that times X number of customers, Y number of bottle(s) per customer, Z number of customers a day, AND 365 days a year. Yeahhh.... $$$$$$
Dasani confessed, it's just tap water that's been RO'd Reverse-Osmosis
BTW I use to work for the Health Dept. I'll give you this tip! The two DIRTIEST bottled water are Crystal Geyser and Arrowhead!. The cleanest by far is Sparkletts! BTW this test was performed on about 50 bottled water companies and it was published on yahoo a few years ago!
Hmm not sure about the water aspect, there are water treatment plants and we could always just drink and use ocean water although it would take a large amount of energy to transfer it to be drinkable. Possible genius investment could be, trust Burry over the person interviewing him any day.
I can't remember the last time I watched this, over a year ago I think? His land with water comment has stuck with me this entire time.
This morning I open SnapChat and look at The Economist newsfeed and Every. Single. Article. is about a growing water crisis, even that a war might be fought over water in the future.
WTF is going on lol. This guy is incredible.
I actually wrote a short essay a few days ago about why I didn't think "water wars" were going to be a thing. My reasoning comes down to two things. Economies of scale and the law of supply and demand.
Around 2.5 pct of Earth's water is fresh and we have yet to exhaust that. Assuming that was going to happen within the foreseeable future a freshwater shortage would result in higher prices. The reason water desalination is not economically viable in most places is due to naturally occurring fresh water being in adequate supply. It's too expensive. Higher water prices would likely change that.
Economies of scale come into play with the nature of innovation in desalination. As with many things when some entrepreneur thinks he can do something cheaper than his competitors he invests in R&D in order to refine the idea. R&D costs are what you call fixed costs and when a company has large fixed costs they can be said to have a fixed cost structure or high operating leverage, etc. This means they stand to benefit from increasing the size or "scale" of their operations. Within a relevant range of operation fixed costs don't change the more you produce. In fact fixed costs decrease if you think about it on a per unit basis. That's economies of scale.
My ultimate point being water shortages are not an unsolvable problem. There's more water on Earth than we'd conceivably use in the foreseeable future unless human industrial demand for water grew exponentially. Further, the costs (and thus price) of desalination will decrease given time while the price of extracting naturally occurring freshwater will increase. Desalination will likely become a common source of freshwater.
Yeah, this seems sound. You just find what is the most basic, and underpins everything else. In times of scarcity, this resource will take many small hits from everywhere, but the avarage will follow this trend. It's its own risk mitigation mechanism. Interesting.
What resources would this include? Wheat, rice, water and electricity seems the most obvious.
Then... Musk is doing well to invest in solar roofing, Burry does well to invest in water, and Monstanto is just grabbing the world by the balls and squeezing as hard as it can.
there is a read somewhere floating around the internet where he had an interview with time magazine where he talks about Clean, drinkable water obviously having value especially to people who don't have access to it. But his interest is more in the food that it can produce. Because areas that are low on food are also low on water. And how many ounces of water is required to make one ounce of wine?
You embarrass yourself thats about the only person embarrassed here.Processing water is NOT a solution Israel has the largest distillation system in the world and has been successfully running the country on 30% recycled water it proves to COSTLY and more importantly economically DEVASTATING.The salt has to go somewhere! and dumping millions of tons of salt on land like the middle east has done has been devastating.It is said to be a luxury solution not a solution or china would have done it.
why Michael, why land with water, why gold? why? like you said don't we have a right to know? now that you're a commodity and public figure why not give a background thesis on why we should be investing in these things? I'm just curious and would like to know ;)
+Hifza ahmed You've just proven my point...thank you. You accused someone of being racist when they clearly were not. I called you out for being ridiculous. When you cannot criticize somebody of anything as a HUMAN BEING without being accused of being prejudiced, something is clearly wrong. Nobody criticize Hifza. If you do you hate Muslims...it's a fact! LOL Additionally, how were I to know you are Muslim? Not all people who look like you are Muslim. Stop being so narrow-minded.
Here we are, 5+ years later. Was he right?
Sure, arable land is a premium, but has it changed with the severe drought patterns? I wonder if his calculations included that bit of information, or if he's invested in a bunch of deserts?
Banks will always have money, and money will always have the attention of most politicians, so one new president won't be able to change things - an entire congress would have to go. For these reasons, the banks will always be profitable.
that population growth is an exponential function. That half of the arable land in the world is already used as farmland and that our population by the end of 2050 will have doubled. Arable land next to sustainable water sources are a gold mine. It's the reason water is a private enterprise atm.
+parisjwalk You are correct. We haven't even legislated the problems that led to the housing bubble in the first place either; the repeal of Glass-Stegall. I would bet that a huge reason Burry is betting on farmland, also involves water rights. We are not far away from a major water crises. The only thing I see that can subvert that is figuring out a way to desalinize water cheaply.
I think it should be pretty clear why he is betting on gold. Warren Buffet bought $1 billion in silver not too long ago. We could very well be sitting on a huge fiat bubble. That would be catastrophic.
+Lance Baker No gold is perfect. Once the next bubble bursts on most likely "student loans" gold prices will go back up and gold will be worth several times what he bought it for. The housing market will also fall again because millennials can't get jobs or at least jobs that paid what their parents used to make to buy houses. Regardless people are still being given homes and cars with very little money or assets to back it up. Also how will they take care of their parents houses when the parents are too sick to work and kids are too poor to keep up mortgage payments? It's all going to happen again very soon and even worse because we're still making the same mistakes. That's why land and agricultural skills will be valuable. Pretty soon the American dream will be reduced to just putting food on the table.
Of course he wouldnt part with any details. To all these individuals crying Armaggedon...what is seen in the market will forever be arbitrary as its nature was that of complete fabrication from inception. What were seeing at most will only be a pendulum swing with a well thought out but impossible to decipher story behind it...barring the possibility of literal destruction of the earth or large land masses of course.
+Eric Mann No not the destruction of the earth just yet, Just the downfall of the American Empire and a complete change in our way of thinking. I think it's important to realize the demands of the new world order and how you can have all of the qualifications to be as useful as possible to avoid being on the bottom of the hierarchy, which is not really anything new, just life. We have to decided how we want our new world to be and that may involve many wars and many innovations just as it always has but we have to embrace change in order to be successful.
He's just human.
He was spectacularly wrong about the market's recovery (3:00). The stock market has basically doubled since 2010 when this video was uploaded.
Also, Gold has massively underperformed compared to the market at large in the half decade since this video was uploaded (3:20). It's grown like 30%, well under what the actual market did.
Overall, this guy is human. He makes mistakes. He isn't some messiah.
Wow you were wrong on gold. It was a good buy in 2006 and for sure in 2010 when you posted. And land is so critical being that it is in such short supply now and days, and he isn't buying just any land. It is a long term investment and you dont have a pockets deep enough to make it work for you like Michael.
Burry made 100m USD and walked. His 'investors' lost their balls and cost him a LOT more though, and considering the realities of running a fund during those times, handling the risks and waiting for the trade to come good, he walked away and rightly said 'FU I'm outa here!'.
He's going into 'real' property, long term land ownership, which is wise and not really a big deal, its the sensible thing to do. @10k per hectare (guess here) for good land, thats 1sq kilometer per mil. Sensible.