Burry The Seer Talks Housing, Gold, and Goldman

Michael Burry, the former head of Scion and well-known maverick who had the stones to short those nefarious mortgage deals as early as 2005, recently sat down for an exclusive interview with Bloomberg, in which he discusses his thoughts on the housing market, who's to blame for the financial crisis, gold, and where he's putting his money.

Burry, who has been diagnosed with Asberger's and is both clinically and financially somewhat of a savant, was recently profiled in Michael Lewis's "The Big Short" and Gregory Zuckerman's "The Greatest Trade Ever" for his forecasts of the housing bubble, his convincing Goldman to sell him credit default swaps and, later, his investor revolt that ended up costing him nearly as much as his spot-on-predictions would earn. In 2008 he liquidated Scion to focus on his individual portfolio, which he talks about above.

Most of what he tells Bloomberg is sensible, conservative and right on the money -- just the kind of outlandish, wacky psychology that he was once questioned for -- housing bubble? Vulnerable subprime deals? Pshaw! That's crazy talk! We could have predicted this little whoopsee-doodle as early as 2003? What a bunch of claptrap!

Perhaps unsurprisingly, all I'm seeing in these segments is a guy looking to buy him some land, a little gold, and probably a few chickens and a mule. When asked about who he thinks is to blame for the financial crisis, he remains shocked by the lack of willingness to take responsibility on a national scale -- that is to say everyone from the average investor up to the president -- had a hand in the crisis:

“My number one concern is that there has been a complete utter total abdication of personal responsibility though out our entire society. I don’t think anyone anywhere is taking blame themselves for what they did to contribute to the crisis. And again I think it gets back to that blame game. It is the most damaging thing we can do as a country is to blame a narrow set and not look within ourselves for what each of us did or didn’t do to the basic wrong that led to this mess.”

In reference to the housing market, Burry says something that seems so simple it's difficult for most to say: thanks to Fanny, Freddy and Big Brother, the private mortgage market doesn't really exist: "It’s an artificial market. There are a tremendous number of homes where the home homeowner, I think it’s between 2.5 to 3 million homes, where the home homeowner are more than 9 months past due and are not giving notices that they are past due and they’re just living there for free. I actually know one that has been there for a few years without having to pay anything. I think that Fannie and Freddie are basically being used as special purpose vehicles by our government to support the housing market. The private mortgage market is practically nonexistent; 96-97% of mortgages are flowing through Fannie and Freddie now. I think Fannie and Freddie are exercising a tremendous amount of power over the market by withholding properties from sale and not forcing foreclosure, the foreclosure process. I think that it would be best for the government just completely got out of the mortgage market and let the housing, because home prices are a function of income the leverage applied."

Wait, but they're not -- how would you say -- "too sizable to fumble"?

On what he's been up to since liquidating his company and going solo? It sounds like he's heading out with a few snaggle-toothed hobo prospectors, to them thar hills, lookin' for land and a place to hang his hat -- he sounds like he's reading from the script for Chinatown. It's all about water, people, and call me a cross-eyed baboon if he ain't makin' sense:

“I believe that agricultural land, productive agricultural land with water on site, will be very valuable in the future. And I’ve put a good amount of money into that. So I’m investing in alternative investments as well as stocks.”

“I think there is some value in real estate. You have to buy it right. It’s not in general, that’s the problem. I think that there are an awful lot of people out there looking to buy these distressed properties out there and so you need to find special situations ... In my situation I’d rather go long on housing itself, real estate itself. Depending on how you structure it, in the real market, in the physical market, you can get some pretty good deals and I’ve done some of that too.”

“Paulson is big in gold and that is something is interesting to me and given how I see the world playing out. Other than that, I’m just saying, other than gold I haven’t really bought into the other stuff."

On Goldman shutting down their prop trading biz: “I think that brokers should not trade for their own account in securities -- and securities that are also available to their clients. I just don't think that's pa -- that should be done. I think broking should be pretty boring -- safe, boring, low return business. And I think the same is true for banks. They should be very safe, solid, indestructible businesses. And so there are -- some of these seemingly Draconian measures, I think, do need to be taken.”

It's all pretty straightforward from Burry, and maybe that's why some think he's such a genius. Why haven't those in Washington asked him for his view on the crisis? Probably because they're worried how plainly he'd tell us all what we don't want to hear. Your thoughts?