Getting It Right Once Can Be Enough To Retire

What do all those investors who have profited from market inefficiencies in extreme situations have in common?

Photo by Urip Dunker on Unsplash

It is 2005 and Michael Burry starts buying CDS (Credit Default Swaps) on some subprime mortgage bonds. He is convinced that they were going to explode in two years, the moment the interest rates that the system had kept artificially low would rise. No, I am not talking about 2021.

In 2007, subprime mortgages stopped paying off as Burry had predicted, and, in the middle of 2008, he and his fund’s investors made a net profit of 489.34%. Burry alone, not including his fund, made a profit of $100M. Thereafter, he closed the fund and went on to live off and manage his own capital.

This story of Michael Burry is not an isolated one. There are countless cases of people who have benefited from the inefficiencies of the markets and who, as a result of a specific event or ‘black swan’, have retired to devote their lives to other things. 

Among the most outstanding examples, we have Nassim Taleb, Lebanese researcher and financier, who took advantage of the collapse o…