Famed bear Michael Burry says he’s bullish on Fannie and Freddie

Burry earned renown for predicting the collapse of the US housing market before the 2008 financial crisis

Michael Burry, the money manager made famous in The Big Short, says he holds sizable positions in both Fannie Mae and Freddie Mac common stock and believes a re-listing of the US housing-finance giants is “nearly upon us.”

In a 6,000-word blog post Monday, Burry outlined why he’s now bullish on the government-sponsored enterprises, the political and regulatory hurdles that still stand in the way of a public offering, and the steps he says Washington must take before the pair can stage a comeback on Wall Street.

Burry earned renown for predicting the collapse of the US housing market before the 2008 financial crisis. In the post, he shared excerpts from an old note in which he dubbed the company “Frauddie Mac,” and said that he had bought the company’s five-year credit-default swaps in the years leading up to its meltdown, which led to government conservatorship. While some investors have famously held Fannie and Freddie positions for over a decade, Burry said he became bullish on the shares only after President Donald Trump’s election last year.

“I personally own both Fannie Mae and Freddie Mac common stock in good size,” Burry wrote in the post, in which he examined the current political dynamics and how shares may be valued in a sale and beyond. The offering price “is a key determinant of the intrinsic value of these companies, and I will certainly revisit this thesis as those numbers come into focus.”

Shares of Fannie Mae rose 2% Monday, while Freddie Mac climbed 2.4%. The pair, which trade over-the-counter and are prone to volatile swings, have added about 12% since late November.

For a public offering to occur, Burry argues that regulators will need to ease Fannie and Freddie’s capital requirements, convert certain preferred shares into common stock, and scale back the government’s claim on the companies, warning that without the latter, their common shares are “worthless.”

Still, he noted “there remains a final steep, windy and rocky climb to IPO for both.”

Burry’s Scion Asset Management last month terminated its registration status with the SEC, raising the possibility that he is shuttering his hedge fund or closing it to outside investors.

His post comes less than a month after billionaire investor and long-time Fannie and Freddie shareholder Bill Ackman took to social media to outline a proposal that calls for relisting Fannie and Freddie on the New York Stock Exchange.