This guy is an independent trader because no one would hire him. He's misguided in his understanding of the markets. Goldman Sachs is an investment bank. When he says "anyone can make money from a crash", he's right: any INDEPENDENT investor/fund. Such as a hedge fund or himself, an "independent trader". These people are referred to as the "buy side". However, Goldman Sachs, as well as all the other banks he probably thinks "rules the world" is on the sell-side. The sell-side provides "prime" brokerage services to the buy-side clients -- that is they connect buyers and sellers via the exchanges. In fact, with the upcoming Volker rule, no investment banks will be allowed to engage in proprietary trading (trading for profit with the firms money), which is what the buy-side does.
Investment banks might actually lose money in recessions because they might take illiquid, toxic assets onto their books to service demand (point and case: the mortgage crisis). And securities is only a part of the investment bank business model. Advisory services, largely driven by M&A and IPO volume, provide a decent chunk of profits for banks. Capital markets dry up during recessions, which will completely stifle M&A and IPO activity and therefore revenue on that side of the bank.
This guy is full of shit. When asked what to invest in when the market goes down, his best advice is bonds and "hedging strategies". Bonds do indeed rise in value during bear markets, however hedging has almost nothing to do with profit or loss. Hedging is risk management: covering your ass in case of an unexpected move. For example, if I expect a downward market turn, as per his advice, I might buy up treasuries. But, to "hedge" the possibility that the market moves UPWARDS instead, I might buy an index tracking the Dow, which will increase in value as the market moves up. In this case, hedging is actually DECREASING my profits in the case of a downward movement in the markets. There are much more intuitive ways to play a downward market.
The basic thing is that while there are ways to play down-markets, down-markets and up-markets are not mirror image and are not simply "different ways to make money".
An up-market inherently creates - maybe-not-money - but the appearance of money, the availability of money, "liquidity". An healthy up-market inspires healthy production and makes the liquidity it generates really correspond to people having more wealth on average. An unhealthy up-market naturally involves mis-allocated resources and its liquidity thus becomes illusory and so it is followed by a down-market. A down-market eats liquidity and decreases production meaning the decreased-money people have really corresponds the people also having less stuff, on average. So given the downer that is a down market, profiting become harder on average. Some do great but the average person should assume that the law of averages to applies to them...
For any interested in Burry's story, pick up Michael Lewis's The Big Short. Great (if somewhat miscontrued) tale of the housing crisis, ripe with corrupt financiers and the "smartest men in the room".
Burry's lightbulb concerning the crumbling housing market was a product of a staggering amount of research on mortgages, contra to the research (mostly by rating agencies) already published. No average Joe is going to foresee a bubble about to explode.
I was thinking something more conventional. For example, contrary to what many may believe, history actually IS a good predictor of future. As an investor, I am not only limited to investing in individual companies -- I can also bet on entire markets/sectors (for example, Burry bet against the housing market). Also recall that the markets are cyclical (that is, recessions follow booms and vice versa).
With that in mind, I could, for instance, have a sector-based model hinging upon the business cycle. Certain sectors, historically, have tended to outperform during different segments of the cycle, and with well-timed bets I can always make money just by recognizing what state of the business cycle we are in.
For example, currently we are in a (if somewhat shaky) "recovery" phase. During recovery, financials and tech companies tend to outperform. I might use ETFs (IXG and IXN) to go long on these markets. I might even enhance my bet and short Consumer Staples, which are expected to underperform during recovery.
However, any kind of shorting strategy involves not just an expectation that the market will go down some time in the future but instead requires that you say exactly when.
Especially, if the stock that you are short begins rises, you may be forced to buy back the stock you've sold - the traditional "short squeeze".
http://wiki.fool.com/Short_squeeze
Basically, playing to a down market is inherently harder than playing to an up market. It can be done but it is harder. Just another way the video is full-of-shit as many folks have mentioned.
Investment banks might actually lose money in recessions because they might take illiquid, toxic assets onto their books to service demand (point and case: the mortgage crisis). And securities is only a part of the investment bank business model. Advisory services, largely driven by M&A and IPO volume, provide a decent chunk of profits for banks. Capital markets dry up during recessions, which will completely stifle M&A and IPO activity and therefore revenue on that side of the bank.
This guy is full of shit. When asked what to invest in when the market goes down, his best advice is bonds and "hedging strategies". Bonds do indeed rise in value during bear markets, however hedging has almost nothing to do with profit or loss. Hedging is risk management: covering your ass in case of an unexpected move. For example, if I expect a downward market turn, as per his advice, I might buy up treasuries. But, to "hedge" the possibility that the market moves UPWARDS instead, I might buy an index tracking the Dow, which will increase in value as the market moves up. In this case, hedging is actually DECREASING my profits in the case of a downward movement in the markets. There are much more intuitive ways to play a downward market.