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Wow, talk about a bold move! Michael Burry’s decision to short the housing market back in 2005 was a risky one, but it paid off big time. He saw the writing on the wall and bet against subprime mortgages, making him one of the few people who profited from the 2008 financial crisis. It took guts to go against conventional wisdom and make such a daring move - but it sure paid off!
How Michael Burry Shorted The Housing Market? [Solved]
He saw the writing on the wall and knew he had to act fast, so he convinced Goldman Sachs and other big banks to sell him CDSs on subprime deals. Basically, he bet that housing prices would go down - and boy, was he right!
Predicted Housing Bubble: Michael Burry was one of the first investors to recognize the potential for a housing bubble in the United States. He correctly predicted that a combination of loose lending standards, rising home prices, and over-leveraged borrowers would lead to a collapse in the housing market.
Short Selling Strategy: To capitalize on his prediction, Burry began short selling mortgage-backed securities (MBS). This involved borrowing shares of MBS from other investors and then selling them at current prices with the expectation that they would decline in value over time.
Profiting from Collapse: As expected, when the housing market collapsed in 2008, Burry was able to buy back his borrowed shares at much lower prices than he had sold them for and pocketed huge profits as a result.
Controversial Move: At the time, many people viewed Burry’s move as unethical since it profited off of other people’s misfortune during an economic crisis. However, it is now widely accepted that his actions were instrumental in helping to prevent an even greater financial disaster from occurring during this period.
Michael Burry was one of the first to see the writing on the wall: he shorted housing. He bet against it, meaning he predicted that its value would go down. Smart move! He made a killing when the housing market crashed in 2008.