How do you make poor people feel wealthy when wages are stagnant? You give them cheap loans.

 the Salomon Brothers trading floor gave birth to small markets in bonds funded by all sorts of strange stuff: credit card receivables, aircraft leases, auto loans, health club dues. To invent a new market was only a matter of finding a new asset to hock. The most obvious untapped asset in America was still the home. People with first mortgages had vast amounts of equity locked up in their houses; why shouldn't this untapped equity, too, be securitized?

l. "Growing up in Queens, you very quickly figure out where the money is," said Vinny. "It's in Manhattan."

How do you make poor people feel wealthy when wages are stagnant? You give them cheap loans.


 he became friendly with the Association of Community Organizations for Reform Now (ACORN), which must be the first time a guy from a Wall Street hedge fund exhibited such interest in an organization devoted to guarding the interests of the poor.

now it is with great honor that I introduce today's keynote speaker dr.

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michael burry Michael is one of our own and economics graduate of the class of

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nineteen ninety-three and we are thrilled that he has come back to campus

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to speak today

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he is joined by his wife aunty and his sons Michael and Nicholas his

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brother-in-law John and sister-in-law on men

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Michael was an exceptional undergraduate here at UCLA as if a full course load as

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an econ major wasn't enough he also managed to fulfill rigorous pre-med

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requirements

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after leaving UCLA he proceeded to earn his medical degree at Vanderbilt

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but the drawer of the investment world soon i became his desire to practice

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medicine

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by the time he founded sion capital in two thousand Michael had already earned

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a stellar reputation as an investor with extraordinary vision now about a year

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and a half after the financial crisis hit in  Queen Elizabeth of England

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visited the london school of economics and she asked the distinguished faculty

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there

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why nobody had predicted the financial crisis

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she should have come to UCLA because Michael did he used his vision to

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predict the collapse of America's financial and real estate markets

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he foresaw the failure of companies such as aig Fannie Mae Freddie Mac

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countrywide financial and washington mutual

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you might recognize his story from his profile in Michael Lewis's

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best-selling book the big short

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Michael closed so I on Capitol in  and these days he fund startups and

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invests his own money

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Michael will no doubt have some predictions for all of us in the

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audience today and certainly some prescient words of advice for the class

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of

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I know we will all be inspired by his story and his vision and now it gives me

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great pleasure to welcome the UCLA economics commencement speaker for the

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class of

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dr. michael berry

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well thank you professor farmer class of

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congratulations quite an achievement to graduate from UCLA

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you know it's nice to be back in westwood I certainly have fond memories

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of my time here in many ways the campus is much the same but in some ways I can

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see it's different

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I do know your campus life and much different than mine

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twenty years ago I had no internet no cell no smart phone no cell phone i

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don't think you know what i did invest my summer earnings and stocks and

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futures and I remember being absolutely starved for information

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I had to send away for financial statements

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sometimes waiting weeks for a response and i would take a near daily trip to

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westwood to pick up a wall street journal to check yesterday stock quotes

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today it's much different information swarms us comforts us

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it disrupts us it's an age of infinite distraction for those so willing

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you are the generation that had instant messaging facebook twitter and angry

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birds nagging your fingertips at every moment

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it's been arguably as addictive as any drugs throughout history and I do

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imagine

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it took some terrific will power during your studies to study of course it's not

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lost on anyone that you started your term UCLA in the midst of a global

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financial panic

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the consequences of which are far from settled

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the fault is not your own but the future it leaves certainly is

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as a result of what happened while you were growing up

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you now face the future that will feature either

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another great recession during your twenties ordering your forties a u.s.

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debt to gdp ratio exceeding two hundred percent and that's not me that's the

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Congressional Budget Office me

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I think they're ignoring reflectivity and I think you face both

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now Greece was that one hundred and sixty percent gdp debt-to-gdp when its

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last of its Diane life started running out from my perspective this is all the

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more tragic because the financial meltdown was both predictable and

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preventable

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this was no black swan and no other serendipitous excuse should be

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acceptable to anyone of late

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europe convulsions or in the news even this should not be surprising back in

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two thousand six when a bunch of a shorted portugal italy greece and spain

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we call them the pigs for a reason

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I can explain it in one sentence when the entitled elect themselves the party

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accelerates the brutal hangover is inevitable

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Californians and indeed all Americans ought to take note my career after UCLA

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arced in such a manner that i found myself right in the middle of the

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financial meltdown profiting from it because i had predicted it

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I have been a chicken little or a Cassandra to some especially in

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government

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I'm one lucky sob and truth

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I was just trying to figure it all out from my earliest years

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I found that life for all its amazing possibilities

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very often does not make sense and at least as often is not fair

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today it is absolutely not fair the world you are being dealt

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there are many ways to deal with an unfair world one make tune out drop out

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run away when they get angry when they fight one could do ultimately what I did

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except the world for what it is work hard to exploit the opportunities it

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presents and try to do so it is just a manner as possible

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now there are two kinds of working hard you can work hard you can work smart or

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you can work dumb when I was in sixth grade my dad dumped a pile of bricks in

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the backyard and after school you had us move me my brother's move the bricks to

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the side yard

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the next day he had us moving back to the backyard

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the next day back to the side yard and so forth this continued for quite a

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while

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I'm not sure what he intended by this but I did learn that work hard work for

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hard work sake alone would not do later in observing the tenure system so

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endemic to academic ventures

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I would think that myself hey we're just moving a pile of bricks

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in fact i began to doubt traditional education

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I committed myself to educating myself as opportunities arose

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still as I graduated from UCLA I had a Vanderbilt Medical School and read liars

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poker by michael lewis and it nearly convinced me that even if I could become

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a great money manager

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I shouldn't besides medicine appear just my interest in medicine would fade

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however as the act as I studied economics and regulation of health care

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while in chicago in  the government payer would weigh far too heavily on

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that playing field and I did not think it would be fair enough

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so during medical school I put up a website some ideas on stocks and markets

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as I graduated medical school in  microsoft out of the blue offered me a

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dollar a word to write for the new msn money website being wordy and being in

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debt naturally I said yes so therefore during my medicine internship I wrote for

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microsoft and ran my website there are synergies between two of the three and i

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had unknowingly found a back door to wall street

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none of this was nearly as well planned as it seems in retrospect

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there were a number of crises including a divorce and at one point I was so

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despondent over my direction that I even applied to law school

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again and again I figured as long as I kept asking questions

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working so hard to answer questions I would eventually find my way as I turned

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I ran out of reasons why I couldn't or shouldn't left medicine start an

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investment firm that . the decision became came very easily as perhaps

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should be the case more often than not i simply way the paths before me without

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considering the path on which I had been at sayan capital my job   was to ask

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ask questions and seek answers

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I mostly examined stocks and bonds as long investments but one day I came

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across a sub prime residential mortgage back securities ation and I wondered if

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I could figure out any of that other questions soon followed

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why are home prices diverging up and away from the household income trendline

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answer if it's not income

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it's leverage what exactly are the incentives of lenders that make

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mortgages only to sell them on through the wall street answer

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volume at the expense of credit standards when interest rates bottom

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how far could lenders push mortgage terms in order to keep refinancings home

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prices and loan volumes rising the answer to this question would put a

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ticking timer on the boom and a date on the crash back in two thousand five

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other questions stood out how much is consumer spending dependent on cash out

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refinancing what percentage of jobs are dependent on the assumption of rising

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home prices

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well aig have to start posting massive cash collateral for the first time

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if it were downgraded isn't it worrisome that fannie mae cannot find term sheets

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that describe perfect hedges against its massive mortgage portfolio are the

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rating agencies so conflicted that they could be this blind in my letters to

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investors

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I described the downturn that would be unprecedented know with no counter power

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in the mount in the modern era

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Wall Street's risk models would fall all at once and every single CEO and every

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single politician would be disastrously wrong

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I put my money where my mouth was at its peak of a short eight point four billion

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dollars worth of subprime mortgages and certain financial companies

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the most we could lose was less than  million dollars

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thanks to credit derivatives and at first we did lose it was a negative

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carry trade investors business partners and even employees questions strategy

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lawsuits were threatened our distress was reported in the press and Wall

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Street look to squeeze are short

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besides all this

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I had to stomach what I knew was coming a tragic end to the follies

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this was not fun

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I did not tap dance to work but the firm survived

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we turned the tables on Wall Street and I became the one percent in a way I

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never imagined when I was sitting where you sit today i had bet against America

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and one in  I public published an op-ed in the New York Times posing what

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i thought was a valid question of the Federal Reserve Congress and the

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president

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I saw the crisis coming why did not the Fed never did any member of Congress any

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member of government for that matter

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reach out to me for an open collegial discussion on what went wrong or what

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could be done rather within two weeks

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all six of my defunct funds were audited the Congressional financial crisis

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inquiry commission demanded all my emails and list the people with whom i

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converse going back to two thousand three and a little later the FBI showed

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up a million and legal and accounting costs and thousands of hours of time

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wasted all because

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I asked questions

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it seemed they would pop me at gunpoint or not at all

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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 regard to

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the housing bust and subsequent economic fallout

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Ben Bernanke continued ben bernanke continues to backfill this logic and I

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fear that history is being written wrong yet again the ignorance is will full as

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we move forward as a country it is worth considering mainstream economics and

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finance in light of recent events our nation's economic policies are born of a

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synthesis of theory on how to deal with the Great Depression of the s seems

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unable to honestly examine the most recent one

:

sadly at the highest levels of economic thought in government questions are not

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tolerated it is as if we are dealing with the binary judgment of a

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fundamentalist religion finance theory and practice fare no better the

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continuing crisis makes a mockery of the principles which have guided credit

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policy and risk management since the nineteen sixties as it turns out

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information is not perfect

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volatility does not define risk markets are not efficient

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the individual is adaptable but the dark ages of Finance allow no such light

:

mainstream economist and finance practitioners

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please check your premises

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you have contradictions before you

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truthfully I do not expect much to change

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practically speaking history has demonstrated the ability of sovereign

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nations to justify them themselves and to postpone the moment of crisis

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this will be even more true for the United States is the largest economy by

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far with the strongest central bank as a result over the course of your lives you

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experience withering but stealthy attacks on your quality of life as

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government attempts to manage its faltering finances

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you'll see declines in the quality of healthcare the quality of education the

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quality of public safety and the quality of our currency of course this is a

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false prophecy

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I'm simply describing what is already happening

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class of  by graduating today you are taking a step

:

another step on a path that is fairly well worn a path that in and of itself

:

defines little about your future

:

many have started from where you start today and done great and wonderful

:

things but many to have live lives of another sort

:

whatever you see is the next obvious step consider whether you're being true

:

to yourself

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Your Strengths your weaknesses your needs before you take it

:

the next decade or so before you have kids before you get married is the most

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flexible most genius decade of your life

:

you ought to consider stepping outside your paradigm to for a fresh look

:

now and again if you are considering a career on wall street or in Washington DC

:

you should be aware of the social proof that operates there this is that many if not most people

:

we'll be doing questionable things that obviously make money and obviously earn

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respect from common peers

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if you find yourself in such a place i would ask you to consider a rule i

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learned as a physician first do no harm

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besides life is not that short life is well and long enough for you to come to

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regret any activity or habit involving exchange of long-term risk for

:

short-term benefit

:

this is what many if not most Americans did during the refinancing and

:

consumption boom of last decade and it was what our government didn't egging on

:

the boom

:

this is also the gospel of drunk drivers and cheating spouses of course when you

:

encounter the opposite the short term risk exchanged for long-term benefit

:

consider hitting that button again and again and again

:

past maybe prologue but this is not true for the individual the individual can

:

think different and the individual can act different than those that got us all

:

into this mess

:

no matter how the economic tides may sweep away the majority and in India an

:

individual can stand clear

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each of your lives

:

individually is an epic chance you can leave here today and you can choose to

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never stop learning never to stop asking questions

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I must say it will not be without staggering difficulties there will be

:

times when you will stare at yourself in the mirror and wonder why

:

but faced with a setback you will be

:

most creative under stress you will think better and act stronger

:

so much so that looking back it will seem as though it was all meant to be

:

thank you and good luck