Here's a twist nobody saw coming: Michael Burry, the investor who made his fortune betting against the housing market in 2008, is now all-in on the very institutions that collapsed during that crisis. According to a Reuters report, Burry has revealed "sizable positions" in Fannie Mae (FNMA) and Freddie Mac (FMCC), the mortgage finance giants he once warned about.

The Bull Case for America's Mortgage Machine

Writing in his "Cassandra Unchained" newsletter, Burry laid out an optimistic scenario for the government-sponsored enterprises. His thesis? These companies are fundamentally different now, hence his declaration: "Toxic Twins No More."

Burry projects that an initial public offering could price shares between 1 and 1.25 times book value. But that's just the starting point. Once listed, he expects the shares to trade at 1.5 to 2 times book value within one to two years. "Once each company is released from capital restraint by their IPOs, I expect growth to accelerate naturally," Burry wrote.

A Remarkable About-Face

The investment represents a dramatic pivot for someone who warned about the GSEs' "foreboding history" and "fragility" as early as 2003. Burry didn't sugarcoat their track record in his newsletter either. He acknowledged their past disasters, including the 2008 crisis when they "tempted fate and lost," plus an earlier insolvency back in 1981.

So what changed? By branding his thesis "Toxic Twins No More," Burry is signaling that these entities have undergone sufficient rehabilitation to justify aggressive investment. It's the kind of contrarian bet that made him famous, just in reverse.

Berkshire and the IPO Timeline

Burry also floated an intriguing possibility: Berkshire Hathaway (BRK) could take a "substantial position" in the mortgage giants if they go public. It wouldn't be unprecedented—Warren Buffett's company previously held a stake in Fannie Mae before the 2008 crash.

The timing appears opportune. Reports suggest the Trump administration may launch IPOs for both companies later this year. That matters because Fannie and Freddie currently guarantee roughly 62% of outstanding U.S. mortgages, making them absolutely central to the American housing market.

Whether Burry's bet pays off remains to be seen, but one thing is clear: the man who saw disaster coming in 2008 now sees opportunity in the rubble he once profited from shorting.