Down River II

The Big Short film (an Adam McKay adaptation of Michael Lewis’ 2010 book) ends with a provocatively brief update on Christian Bale’s character: “Michael Burry is focusing all of his trading on one commodity: Water.” What does this mean? How, exactly, is this investing genius trading in water?

From brief dispatches Burry has sent into the world, it turns out that for years he’s been fascinated by the fact that crops represent water’s power, and how water can be transported and traded as a commodity. Water itself isn’t an easily transferable product, but the food it produces can often be shipped all over the world, effectively taking with it the value of the water that helped produce it. Essentially, Michael Burry has been investing in farmland.

“I believe that agriculture land – productive agricultural land with water on site – will be very valuable in the future,” he said during an interview with Bloomberg in 2010. “I’ve put a good amount of money into that.” At that time, Burry was also invested in gold and small tech companies, but it’s unknown if that’s still the case.

Michael Burry and Christian Bale as Michael Burry in The Big Shot

Michael Burry and Christian Bale as Michael Burry in The Big Shot

In a more recent interview with, Burry says he’s been interested in water investment for about 15 years. “Fresh, clean water cannot be taken for granted. And it is not — water is political, and litigious,” he explained. “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. What became clear to me is that food is the way to invest in water. That is, grow food in water-rich areas and transport it for sale in water-poor areas. This is the method for redistributing water that is least contentious, and ultimately it can be profitable, which will ensure that this redistribution is sustainable. A bottle of wine takes over 400 bottles of water to produce — the water embedded in food is what I found interesting.”

There’s every reason to believe that when it comes to investing, Burry’s a man worth listening to because he knows a very important secret. It’s a simple secret, it’s an obvious one, and it’s best illustrated by a story he told his investors in an 2008 email shortly after he made them a 472% (after hefty fees) by betting against the toxic housing bubble. He was able to make his decision to short simply by looking into what exactly was inside the mortgage bundles that were being traded. The task itself was monotonous and the findings were sure, but the true brilliance on Burry’s part came from knowing to look.

In this email, one of his last before closing his blockbuster Scion fund for other pursuits, Burry shared with his investors a photo of himself posing with two black swans. The swans are a potent example of Burry’s insight because in the world of economics the term “black swan,” as coined by Nassim Taleb, means a rare market event no one predicts before it happens. The housing crisis of 2007-8 could be seen as a black swan, but if anyone had looked at the data Burry looked at, it’s obvious that the crash wasn’t unpredictable at all.


Earlier this month, I took my family on our first extended vacation far away from California, and we ran headlong into a flock of black swans. Real, breathing black swans. You’ve got to be kidding me. One cannot make this stuff up. Or so I thought.

But, of course, this was indeed predictable. We were visiting Leeds Castle in Kent, England, and if I had done the work, I would have known about the flock of black swans that reside at this castle. And that is about how I view Mr. Taleb’s premise of the Black Swan. I have found markets to be anything but random, and I find many of the future events that are bound to be dismissed as random or explainable only in hindsight in fact can be foretold in time with the rhythm of history. If one does the work.

This rhythm of history is always pulsing with information we’re often too distracted, or even scared, to look for. We like to think there’s a newness to the moment, a catastrophic exception or a brink of discovery, but the truth is the span of tomorrow is always informed by the span of yesterday. That doesn’t mean that everything is predictable and knowable. But, if we are to learn anything about how to proceed when we lay our plans with tomorrow, it’s that it’es foolish to pretend the past – the obscure, tedious past that’s hidden beneath the gloss of cultural generalization – doesn’t shape how these plans will turn out.

Black Swan Noarlunga Adelaide #dailyshoot.

Soon after Burry wrote a 2010 piece for the New York Times about how he saw the housing crisis coming, he was investigated by the FBI. He explained the fallout of his audits during a 2012 commencement address at UCLA.

“In 2010 I published an op-ed in the New York Times posing what I thought was a valid question of the Federal Reserve, Congress, and the President: ‘I Saw The Crisis Coming, Why Didn’t the Fed?’ Never did any member of Congress, any member of Government for that matter, reach out to me for an open collegial discussion on what went wrong, or what could be done.

Rather, within 2 weeks, all 6 of my defunct funds were audited. The congressional financial crisis inquiry commission demanded all my emails, and list of people with whom I had conversed going back to 2003. And a little later the FBI showed up. A million in legal and accounting costs, and thousands of hours of time wasted… all because I asked questions.

It seemed they would pump me at gun point, or not at all.
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 regards to the housing bust and the subsequent economic fallout.”

This investigation cost Burry $1 million in legal and accounting fees and, probably more of a loss to Burry, thousands of his hours.

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