In his 2001 Scion Capital Letter, Michael Burry explained why he embraces short-run declines, and doesn’t fear long-term impairment of his net worth. Here’s an excerpt from the letter:
As I have noted in previous letters, I will always choose the dollar bill carrying a wildly fluctuating discount rather than the dollar bill selling for a quite stable premium.
This will often result in surprising quarterly results. To the extent prudent, I will attempt to explain surprising results when they occur.
During the third quarter we saw an attempt to buy a cheap security become a process of averaging down into what is now, apparently, the most undervalued security available on any exchange.
We saw investors start to dump illiquid small capitalization stocks using an order process that may be summarized as “Just get me out of this stock!”
And to top it off, we saw a human tragedy of rare proportion directly and negatively impact the market values of several of the largest portfolio holdings of the Fund — with surprisingly little offset.
Thus, a confluence of happenings seems to have knocked the Fund for a decent price decline in just three mouths time.
I however, my entire net worth resides alongside your investment in the Fund, and I neither bemoan these recent short-run declines nor fear long-term impairment of my net worth.
On the contrary, I am enthused that the market is offering up values on a scale not seen previously during the Fund’s existence.
Moreover the Fund holds significant cash and sources of cash to put to work in such an environment.
You can read the entire letter here:
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