COLLEAGUE: Dr. Mike Burry Opines on the Markets

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By Dr. David Edward Marcinko MBA

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Big Short’ investor Michael Burry MD warns stocks will crash and rallies won’t last.

  • “The Big Short” investor Michael Burry expects a far steeper decline in the stock market.
  • The Scion Asset Management chief’s view is based on how past crashes have played out.
  • Burry warned brief rallies were likely, and joked about his penchant for premature predictions.

Michael Burry, the hedge fund manager of “The Big Short” fame, rang the alarm on the “greatest speculative bubble of all time in all things” last summer. He warned the retail investors piling into meme stocks and cryptocurrencies that they were careening towards the “mother of all crashes.”

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Mike also wrote a popular chapter in our financial planning textbook for physician investors. With our appreciation and gratitude.

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COMMENTS APPRECIATED

Thank You

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UPDATE: Dr. Mike Burry, I-Bond Web-Site Crash and Wall Street

By Staff Reporters

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“The Big Short” celebrity investor and colleague Michael Burry MD recently disclosed that he is short Apple stock. Could he be right about AAPL dipping even further from here? Famous hedge fund manager Michael Burry, the real-life character in “The Big Short”, became famous for his short position on subprime CDOs ahead of the 2008 crash. This time, he is shorting Apple stock. The bombshell news has come recently via a 13F filing released by Burry’s hedge fund.

CITE: https://www.r2library.com/Resource/Title/082610254

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People searching for a respite from inflation have flooded the Treasury Department phone lines and website to try to buy Series I savings bonds, causing much longer waits than usual. It’s the latest example of outdated government computer systems causing anguish for Americans. On May 2nd, the Treasury Department announced that the inflation-protected I bonds will earn 9.62 percent interest at least until the end of October. A day later, TreasuryDirect, the website that people have to use to purchase the bonds, crashed.

Finally, Wall Street rumbled to the edge of a bear market after another drop for stocks briefly sent the S&P 500 more than 20% below its peak set early this year. The S&P 500 index, which sits at the heart of most workers’ 401(k) accounts, was down as much as 2.3% for the day before a furious comeback in the final hour of trading sent it to a tiny gain of less than 0.1%. It finished 18.7% below its record, set on January 3rd. The tumultuous trading capped a seventh straight losing week, its longest such streak since the dot-com bubble was deflating in 2001.

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COMMENTS APPRECIATED

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HEDGE FUNDS – A History Rooted in Medicine?

HEDGE FUNDS – Really Rooted in Medicine?

By Dr. David E. Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

The investment profession has come a long way since the door-to-door stock salesmen of the 1920s sold a willing public on worthless stock certificates. The stock market crash of 1929 and ensuing Great Depression of the 1930s forever changed the way investment operations are run. A bewildering array of laws and regulations sprung up, all geared to protecting the individual investor from fraud. These laws also set out specific guidelines on what types of investment can be marketed to the general public – and allowed for the creation of a set of investment products specifically not marketed to the general public.

These early-mid 20th century lawmakers specifically exempted from the definition of “general public,” for all practical purposes, those investors that meet certain minimum net worth guidelines. The lawmakers decided that wealth brings the sophistication required to evaluate, either independently or together with wise counsel, investment options that fall outside the mainstream.

Not surprisingly, an investment industry catering to such wealthy individuals, such as doctors and healthcare professionals, and qualifying institutions has sprung up.

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READ MORE HERE

https://www.linkedin.com/pulse/hedge-funds-history-rooted-medicine-mbbs-dpm-mba-m-ed-cmp-

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Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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A Brief Interview on Investing with Dr. David E. Marcinko MBA CMP™

On Opportunities for Risk Tolerant and Investment Minded Physicians

Sponsored by: www.CertifiedMedicalPlanner.org

By Hope R. Hetico RN MHA [Managing Editor]

This is my second interview with ME-P Founder and Publisher-in-Chief, David Edward Marcinko. Our first formal interview was during the Thanksgiving weekend of 2007. I caught up with him recently on client engagements, in Chicago, Illinois.

And, while he may not always be right; he is never equivocal with his opinions, and is always passionate about them.

HETICO: Well, David, what have you been up to since our last interview?

MARCINKO: The usual; writing, editing, teaching, speaking, consulting engagements and servicing private clients. All noted on this blog forum, of course.

HETICO: So, refresh our readers, and tell us a little bit about yourself

MARCINKO: A doctor, surgeon, and bone and joint lower extremity specialist by training, I took down my medical shingle in 2000 and sold my ASC to become a full-time health 2.0 consultant that never looked back. I’ve also got an MBA degree in marketing and micro-economics, and was a registered BD representative, RIA rep, insurance agent, Series #7, #63 and #65 licensee and, certified financial planner for almost 15 years before eschewing them all. I then started the www.CertifiedMedicalPlanner.com online educational and certification program for physician focused financial advisors and fiduciary medical management consultants. My CV, fingerprints and DNA, are all over this e-publication.

HETICO: So, back on point. What is your investment style and where do you see market opportunities today?

MARCINKO: I am a non-conformist and contrarian by nature; when others zig; I zag. I use ETFs and index funds, and as a strategic investor have a personal ten-year time line, at least. I like cash-on-hand, too.

HETICO: I know you like international investing; when did this proclivity start.

MARCINKO: I did very well investing in long term Federal and state municipal bonds back in the early 1980’s. This was against the investment advice of everyone I spoke to at the time; except my mother – a banker. Interest rates were sky-high, so listening to her was a no-brainer. I then saw an international opportunity right after the Asian contagion crisis back in 1997-98. I lost a bit with Japan, but more than made up most everywhere else. I’m still underweighted in the US, and must admit, I missed the bottom-feeder boat domestically back during the flash-crash of 2008.

HETICO: How have your international products changed over time?

MARCINKO: I used ADRs and index funds, at first, mostly Vanguard. But, I moved to ETFs as they emerged. I stay away from individual foreign or international stocks

HETICO: What kind of foreign assets do you prefer?

MARCINKO: Equities strictly; no foreign bonds or currencies.

HETICO: What about gold?

MARCINKO: Nope, missed the run-up, but I hate commodities based solely on the supple-demand curve.

HETICO: What parts of the world do you see as hot investing opportunities, right now?

MARCINKO: The Middle-East, and Singapore which provide higher dividend returns than most US equities. I’m patiently waiting for Europe to implode.

HETICO: What kind of research do you do?

MARCINKO: I read everything written and online, but try to follow the massive macro-economic trends and demographics. For example, now is not the time to invest in US bonds as IRs are near historical lows, and cannot go much further, I think.

HETICO: Any other domestic opportunities?

MARCINKO: Not that I can see. Horde cash! Maybe domestic equity based REITs with the real estate lows.

HETICO: How often do you adjust your portfolio?

MARCINKO: Every 3-5 years I might buy if the opportunity [screams] presents itself. Generally, we never sell.

HETICO: Do you believe in asset allocation and balanced investment portfolios?

MARCINKO: No. It is the surest way I know to mediocre returns.

HETICO: Do you believe in dollar cost averaging?

MARCINKO: No, it is a theoretical artifice – merely a mechanism to “keep you in the game” so that mutual fund companies, SBs and BDs, RIAs, IAs and FAs can earn commissions, trails, 12b-1 fees and/or AUM percentage revenues, etc. It gets and keeps [your] money rolling into their coffers. And,  it smooths out their cash flow. Remember, DCA is a no brainer – and it is fit for those with no brains.

HETICO: What is your forecast for 2012?

MARCINKO: I’m with Bill Gross, who runs the world’s biggest bond fund at PIMCO, and thinks the global economy and financial markets are at risk in 2012.

HETICO: If you and Bill are correct, what will you do?

MARCINKO: Yawn!

HETICO: Who is your favorite health economist?

MARCINKO: Noble prize winner Ken Arrow PhD, of course. He is the god-father of the industry.

HETICO: Where do you see yourself in 5 or 10 years; or thereafter?

MARCINKO: Well, in five years my daughter will be out of college. In ten years, I see myself doing the same things I do now. And, I just love my engaged clients at: www.MedicalBusinessAdvisors.com Then, perhaps some private philanthropy work.

HETICO: Who is your financial investing hero?

MARCINKO: My colleague and former hedge fund manager Mike Burry, MD.

Link: https://medicalexecutivepost.com/2010/03/24/video-on-hedge-fund-manager-michael-burry-md/

Assessment

Thank you; David!

Conclusion

And so, your thoughts and comments on this ME-P are appreciated. Is Dr. Marcinko correct; what do you think about his style and candor? Please review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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Is Malta a Hedge Fund Haven?

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Island in the Mediterranean Sea – South of Sicily (Italy)

By Dr. David Edward Marcinko MBA CMP

[Editor-in-Chief]

OK; I’ve written about hedge funds before, on this ME-P and in our www.MedicalBusinessAdvisors.com print publications for various textbooks, handbooks, white papers and journal. And, we discuss the concept in our online educational www.CertifiedMedicalPlanner.org program, as well. Some medical professionals love them, and some financial advisors use them in their work; others do not.

Of course, I’ve written frequently about my colleague – the now retired and newly anointed philanthropist  and uber-hedge fund manager Mike Burry MD; ad nauseam.

Link: https://medicalexecutivepost.com/2010/03/24/video-on-hedge-fund-manager-michael-burry-md/

But, now there is a new wrinkle on the island that I first visited about ten years ago, while on a working vacation

Rising Visibility

Malta–yes, Malta–has quietly leveraged the rising transparency imperative to attract hedge funds. There was a time when the quaint island sought to play on the traditional terrain, offering anonymity and a “laissez-faire regulatory regime,” not to mention very low taxes, as in no capital gains taxes and no taxes on dividends; all while English speaking and USD currency denominated.

Maybe back then, no more today, if this essay is to be believed.

Link: http://www.bloomberg.com/news/2012-01-05/malta-lures-connecticut-hedge-funds-with-300-days-of-sun-aided-by-eu-rules.html

Image 1

Why Malta?

Link: http://www.firstgozo.com/maltafacts.htm

Malta

Assessment

While many leading domiciles for offshore hedge funds remain in the Caribbean–notably the Cayman Islands, the British Virgin Islands, Bermuda, and the Bahamas–the island of Mata is drawing attention, especially from European funds.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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How One Hedge Fund Helped Keep the Bubble Going

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On the Magnetar Trade

By Jesse Eisinger and Jake Bernstein, ProPublica – April 9, 2010 1:00 pm EDT

In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe.

Precise Timing

At just that moment, a few savvy financial engineers at a suburban Chicago hedge fund [1] helped revive the Wall Street money machine, spawning billions of dollars of securities ultimately backed by home mortgages.

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When the crash came, nearly all of these securities became worthless, a loss of an estimated $40 billion paid by investors, the investment banks who helped bring them into the world, and, eventually, American taxpayers.

Yet the hedge fund, named Magnetar for the super-magnetic field created by the last moments of a dying star, earned outsized returns in the year the financial crisis began.

The Magnetar Trade

How Magnetar pulled this off is one of the untold stories of the meltdown. Only a small group of Wall Street insiders was privy to what became known as the Magnetar Trade [2]. Nearly all of those approached by ProPublica declined to talk on the record, fearing their careers would be hurt if they spoke publicly. But interviews with participants, e-mails [3], thousands of pages of documents and details about the securities that until now have not been publicly disclosed shed light on an arcane, secretive corner of Wall Street.

According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations — CDOs. If housing prices kept rising, this would provide a solid return for many years. But that’s not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.

Chance Enhancement

Along the way, it did something to enhance the chances of that happening, according to several people with direct knowledge of the deals. They say Magnetar pressed to include riskier assets in their CDOs that would make the investments more vulnerable to failure. The hedge fund acknowledges it bet against its own deals but says the majority of its short positions, as they are known on Wall Street, involved similar CDOs that it did not own. Magnetar says it never selected the assets that went into its CDOs.

Magnetar says it was “market neutral,” meaning it would make money whether housing rose or fell. (Read their full statement. [4]) Dozens of Wall Street professionals, including many who had direct dealings with Magnetar, are skeptical of that assertion. They understood the Magnetar Trade as a bet against the subprime mortgage securities market. Why else, they ask, would a hedge fund sponsor tens of billions of dollars of new CDOs at a time of rising uncertainty about housing?

Key details of the Magnetar Trade remain shrouded in secrecy and the fund declined to respond to most of our questions. Magnetar invested in 30 CDOs from the spring of 2006 to the summer of 2007, though it declined to name them. ProPublica has identified 26 [5].

Independent Analysis

An independent analysis [6] commissioned by ProPublica shows that these deals defaulted faster and at a higher rate compared to other similar CDOs. According to the analysis, 96 percent of the Magnetar deals were in default by the end of 2008, compared with 68 percent for comparable CDOs. The study [6] was conducted by PF2 Securities Evaluations, a CDO valuation firm. (Magnetar says defaults don’t necessarily indicate the quality of the underlying CDO assets.)

From what we’ve learned, there was nothing illegal in what Magnetar did; it was playing by the rules in place at the time. And the hedge fund didn’t cause the housing bubble or the financial crisis. But the Magnetar Trade does illustrate the perverse incentives and reckless behavior that characterized the last days of the boom.

Major Players

Magnetar worked with major banks, including Merrill Lynch, Citigroup, and UBS. At least nine banks helped Magnetar hatch deals. Merrill Lynch, Citigroup and UBS all did multiple deals with Magnetar. JPMorgan Chase, often lauded for having avoided the worst of the CDO craze, actually ended up doing one of the riskiest deals with Magnetar, in May 2007, nearly a year after housing prices started to decline. According to marketing material and prospectuses [5], the banks didn’t disclose to CDO investors the role Magnetar played.

Many of the bankers who worked on these deals personally benefited, earning millions in annual bonuses. The banks booked profits at the outset. But those gains were fleeting. As it turned out, the banks that assembled and marketed the Magnetar CDOs had trouble selling them. And when the crash came, they were among the biggest losers.

Assessment

Of course, some bankers involved in the Magnetar Trade now regret what they did. We showed one of the many people fired as a result of the CDO collapse a list of unusually risky mortgage bonds included in a Magnetar deal he had worked on. The deal was a disaster. He shook his head at being reminded of the details and said: “After looking at this, I deserved to lose my job.”

Magnetar wasn’t the only market player to come up with clever ways to bet against housing. Many articles and books, including a bestseller by Michael Lewis [7], have recounted how a few investors saw trouble coming and bet big. Such short bets can be helpful; they can serve as a counterweight to manias and keep bubbles from expanding.

Magnetar’s approach had the opposite effect — by helping create investments it also bet against, the hedge fund was actually fueling the market. Magnetar wasn’t alone in that: A few other hedge funds also created CDOs they bet against. And, as the New York Times has reported, Goldman Sachs did too. But Magnetar industrialized the process, creating more and bigger CDOs.

Conclusion

Several journalists have alluded to the Magnetar Trade in recent years, but until now none has assembled a full narrative. Yves Smith, a prominent financial blogger who has reported on aspects of the Magnetar Trade, writes in her new book, “Econned,” [8] that “Magnetar went into the business of creating subprime CDOs on an unheard of scale. If the world had been spared their cunning, the insanity of 2006-2007 would have been less extreme and the unwinding milder.”

And so, your thoughts and comments on this ME-P are appreciated. Dr. Mike Burry, please opine. All feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe. It is fast, free and secure.

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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