Common hedging techniques include shorting stocks, buying put options, writing call options, and various types of leverage and paired transactions. While I do reserve the right to use these tools if and when appropriate, my firm opinion is that the best hedge is buying an appropriately safe and cheap stock.

Michael Burry

It is ludicrous to believe that asset bubbles can only be recognized in hindsight.

Michael Burry

hindsight assets believe

Sometimes markets err big time. Markets erred when they gave America Online the currency to buy Time Warner. They erred when they bet against George Soros and for the British pound. And they are erring right now by continuing to float along as if the most significant credit bubble history has ever seen does not exist. Opportunities are rare, and large opportunities on which one can put nearly unlimited capital to work at tremendous potential returns are even more rare. Selectively shorting the most problematic mortgage-backed securities in history today amounts to just such an opportunity.

Michael Burry

erring opportunity america

I don't believe anything unless I understand it inside out. And even if I understand something, it is not uncommon that I disagree with accepted view (even if it's a Nobel laureate).

Michael Burry

accepted views believe

My natural state is an outsider. I've always felt outside the group, and I've always been analyzing the group.

Michael Burry

analyzing outsiders groups

If you are going to be a great investor, you have to fit the style to who you are.

Michael Burry

fit style ifs

I hated discussing ideas with investors, because then I become a Defender of the Idea, and that influences your thought process.

Michael Burry

influence process ideas

In essence, the stock market represents three separate categories of business. They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value. The preference, always, would be to buy a long-term franchise at a substantial discount from growing intrinsic value.

Michael Burry

essence would-be long

I have always believed that a single talented analyst, working very hard, can cover an amazing amount of investment landscape, and this belief remains unchallenged in my mind.

Michael Burry

working-very-hard landscape mind

I didn't offer transparency. I provided one quarterly report in letter form. That was all you got. I basically demanded that if you're going to invest in my fund you need to accept my terms. The terms not being super highs, but just, I'm not going to cater to you.

Michael Burry

accepting letters needs

The borrowers will always be willing to take a great deal for themselves. It’s up to the lenders to show restraint, and when they lose it, watch out.

Michael Burry

restraint shows watches

However, if one has been playing the buy-and-hold game with quality securities, one has been exposed to a substantial amount of market risk because the valuations placed on these securities have implied overly rosy scenarios prone to popular revision in times of more realistic expectation. This is one of those times, but it is my feeling that the revisions have not been severe enough, the expectations not yet realistic enough. Hence, the world's best companies largely remain overpriced in the marketplace.

Michael Burry

risk expectations games

When I stand on my special-issue "Intelligent Investor" ladder and peer out over the frenzied crowd, I see very few others doing the same. Many stocks remain overvalued, and speculative excess - both on the upside and on the downside - is embedded in the frenzy around stocks of all stripes. And yes, I am talking about March 2001, not March 2000.

Michael Burry

issues intelligent talking

Early on, people invested in me because of my letters and then, somehow, after they invested, they stopped reading them.

Michael Burry

reading letters people

The late 90s almost forced me to identify myself as a value investor, because I thought what everybody else was doing was insane.

Michael Burry

investors late insane

I just really like to find my own ideas.

Michael Burry

my-own ideas

Read every line item until you get it.

Michael Burry

items lines

I think a lot of funds get their ideas from Wall Street. I just like to find my own ideas. I read a lot. A lot of news. I just follow my nose. A lot of times it's a dead end, but sometimes there's value there.

Michael Burry

wall ideas thinking

Everything I do in investment is just very different.

Michael Burry

investment different

My positioning with my investors was always, I need three to five years.

Michael Burry

three years needs

Fresh, clean water cannot be taken for granted. And it is not - water is political, and litigious. Transporting water is impractical for both political and physical reasons, so buying up water rights did not make a lot of sense to me, unless I was pursuing a greater fool theory of investment - which was not my intention.

Michael Burry

me fool political water