'The Big Short' Fame Michael Burry Has Bet Against the Market, SEC Filings Show (reuters.com) 62
Michael Burry, the money manager made famous in the book and film "The Big Short," held bearish options against the broad S&P 500 and Nasdaq 100 Index at the end of the second quarter, according to securities fillings released on Monday. From a report: Burry's Scion Asset Management bought put options with a notional value of $739 million against the popular Invesco QQQ Trust ETF during the quarter, and separate put options with a notional value of $886 million against the SPDR S&P 500 ETF. Put options convey the right to sell shares at a fixed price in the future and are typically bought to express a bearish or defensive view. Burry rose to fame with his bets against the U.S. housing market before the 2008 financial crisis. Michael Lewis' nonfiction book "The Big Short" was released in 2010 and the movie version came out in 2015.
I don't think he will win this one (Score:4, Insightful)
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It's August (Score:3)
I would expect a move to happen when everyone is back from the Hamptons.
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May be he holds far out of the money put options and will keep rolling them over, quarter after quarter.
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Multiple ways exist to 'win', but to consistently have remarkably above-average returns requires insider knowledge. For big enough players in the game, they share that knowledge with each other as favours to be returned in kind.
There are many reasons wealth concentration marches on, this is just one of them.
Re:I don't think he will win this one (Score:5, Interesting)
1 yr) 35.15% (11.11%)
3 yr) 194.23% (40.29%)
5 yr) 196.27% (62.94%)
10 yr) 321.80% (172.2%)
So, he's doing awfully well on a range of timescales all of which post-date the 2008 mortgage crisis.
https://stockcircle.com/portfo... [stockcircle.com]
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As long as you ignore the 5 year period (2016-2020) where he lost 25%.
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As long as you ignore the 5 year period (2016-2020) where he lost 25%.
Well yes. Historically, on the wider market overall 2 out of 3 five year periods of time (take your pick) have poor or mediocre performance overall. Conversely, any 15 consecutive years (take your pick) is earns a profit overall. The point is that the market is a long term investment and a risky short term investment. So stay the hell out of it if you need to retire next year, or you think you need that cash to buy something you you really need in the next few years. Too bad so many people's retireme
Re:I don't think he will win this one (Score:4, Interesting)
This.
In the 2000s the company I was working for was designing a lot of new mid-rise condos, hotels, etc. At one site visit to track down why kitchen odors were traveling from apartment to apartment, I asked why the apartment we were walking through was vacant, I thought they had all been sold. The developer said that it had been sold, but vacant, and that more than 20% of the downtown condo buyers were speculators with no intent to ever move in. So I knew by 2004 that the housing market was due for a collapse.
But, if I had had money to bet against it I would have lost, because I never imagined the housing bubble could last as long as it did.
He's worth $300m (Score:2, Interesting)
Not to mention we've got the head of the Federal Reserve going around saying he wants minimum 2 million layoffs [youtube.com], is expecting 3.5m and has zero plans to stop the layoffs once they start.
If you work for a living the world really is rigged against you and there really is a conspiracy, it's just right the fuck out there in the open where people least expect it.
Re:He's worth $300m (Score:4, Insightful)
Run away inflation can cause more damage to the economy and can cause much higher unemployment rates. To nip the inflation bud before it blooms is what the fed is trying to do. But in all honesty, the inflation is the feds own making too. What we are seeing is a result of the fed dramatically increasing the money supply as a reaction to the 2008 financial crisis, getting interest rates to near 0 percent.
Re: He's worth $300m (Score:2)
Why doesn't indexation of both savings and income solve nominal inflation? What if the Fed paid you 6% on a CBDC account to get you to save in inflationary times?
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Because it makes it worse.
Inflation isn't some mysterious thing that happens and you can fix it by just measuring it and compensating. It's straight up law of supply and demand. If demand goes up and supply doesn't, or supply goes down and demand doesn't, price goes up. That's inflation. Note that people having more money makes demand go up.
Unfortuantely, when there's inflation most people's reaction is "I need a cost of living pay increase." That makes the inflation worse. You need most people's reaction t
Re: He's worth $300m (Score:1)
Inflation isn't mysterious, it's a broad increase in prices across multiple markets. And its origin isn't mysterious either, over half of the recent inflation is known to be due to increases in corporate profits. They are selling less and charging more, with costs increasing about 15% and profits increasing over 50%. The reduction in activity coupled with increases in automation mean less expenditure on wages and also reductions in estimated retirement fund costs.
As economic activity increases the money sup
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Ah, agreement on the Internet.
I'm not sure about your claim that "over half of the recent inflation is known to be due to increases in corporate profits." Changes in actual margins don't seem to be well correlated with inflation and may actually be negative:
https://libertystreeteconomics... [newyorkfed.org]
https://www.bankofcanada.ca/wp... [bankofcanada.ca]
A more likely explanation seems to be pent up demand during the pandemic combined with some idiot invading his neighb
Re:He's worth $300m (Score:4, Interesting)
But taxes are unpopular with the rich. So, layoffs for the poor...here we come.
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Taxes on the rich are very popular with voters (Score:2)
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Uh, okay.
https://www.cato.org/cato-jour... [cato.org].
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Back that off to 1913 (ratification of the 16th Amendment and passage of the first federal income tax) and you might have something that matches reality. Wisconsin was even earlier to the party. But do go on...
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@fropenn stated:
> The roads in the US are also covered with trash, debris, garbage...
You left out tents.
(-:
So do something about monopolies (Score:2, Interesting)
What do you think happens to a capitalist economy without competition? Guess what you're finding out.
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This is somewhat true, except that post 2008 the inflation for the next decade+ was largely sector-inflation, and the only sector that consistently exhibited the behavior was the equities markets themselves. The combination in the run-up to the 2020 elections of the Fed goosing the money supply (in response to Nixon's oops I mean Trump's p
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The market holds an insane amount of debt and the government is cranking rates higher and higher to artificially stabilize core inflation while headline inflation is continuing at double digit rates. The headline inflation is causing debts to float even higher, people stop being able to afford to things, including rent and the credit payments as real wages have gone down significantly.
The government will eventually run out of options to print more paper and people will run out of money to pay off the rising
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> you need a catalyst for it to drop and then you need to guess when it will drop.
It's going to drop, and _relatively_ soon. I don't think there's much question about that.
The devil, however, is, as they say, in the details...
> but to time it within a quarter?
Therein lies the rub. It's definitely possible that it will take a few more months than that to happen.
On the gripping hand, he's a large-portfolio investor, meaning, h
His prerogative (Score:2)
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Past performance not indicative of future results (Score:2)
If you are right once, you may feel like you can do it again. But sometimes you're just lucky and over time it evens out.
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It's not luck if you know how the market responds to certain influences. I would say day trading is a lot of luck and a bit of knowledge, trading over years and decades as this guy or someone like Warren Buffet is doing is based on little luck and being able to properly read where society, the market and politicians are going.
Guy who does the thing for a living did the thing. (Score:3, Informative)
What's the point of this article? Is it just stealth advertising for The Big Short? Granted, that's a pretty good film about a truly stupendous blunder by a whole lot of people that led us to some interesting times, but I'm not sure a guy who was the basis for a character in the film doing exactly what you'd expect him to do based on his past history is really article worthy. Now, if he does this and AGAIN manages to make a fortune from it, then you may have an interesting story. As it is, he's sitting down at the poker table and tossing chips on the pile. Hardly a newsworthy event.
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If you are hoping for a big drop in something that has always been a consistent gainer, you sometimes have to force that drop to happen. This article is likely one of those puzzle pieces.
My understanding of this guy is he's a watcher that tries to capture trends. I suppose everything's a conspiracy now, so I guess at some point we decided that meant he makes the trends?
Color me skeptical.
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What's the point of this article? Is it just stealth advertising for The Big Short?
That is my first guess, yes. It has to be about publicity, because there's no actual news here.
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Can you really not understand? (Score:2, Insightful)
What's the point of this article?... I'm not sure a guy who was the basis for a character in the film doing exactly what you'd expect him to do based on his past history is really article worthy.
Nice gaslighting, but a way more accurate description of what is happening here is:
Guy who through careful analysis said there was a big problem when everyone else said there was not a problem, says there is a big problem ahead...
Pretty obviously this guy has an astute understanding of the market. When he puts arou
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When he puts around 93% of his money on the notion the market is going down, at a time when almost everyone says there is no problem... how is that not newsworthy?
Where are you getting that figure, nothing in the story says anything like that. He bought put options, which are basically insurance against share price dropping. It's a hedge against a market drop, it's exactly what hedge funds do every day. The "notional value" listed in the summary is not the cost of the puts, the actual cost is a small fraction. Even if those "notional values" were actual values of something it would still be a fraction of the total assets his fund manages (around $107B). Where ar
The biggest thing in his favor (Score:1)
The biggest thing in his favor is the inverted yield curve. It almost always portends doom. Against him is the long running trend of markets doing well during Democratic administrations. Make of that what you will, but the correlation is there. GOPers will always say it's because the previous administration set them up well. Dems will always say it's because their policies are really better.
This administration may come to an end soon, and there could be other wildcards out there that would be the catal
Re:The biggest thing in his favor (Score:4, Interesting)
Against him is the long running trend of markets doing well during Democratic administrations.
https://markets.businessinside... [businessinsider.com] "An analysis from Detrick showed that since 1950, the S&P 500 delivered its highest average annual return when the power of a Democratic president was checked by a Republican-controlled Congress."
It doesn't mean what you think it means (Score:4, Interesting)
Umm... (Score:1, Insightful)
It doesn't necessarily mean he's bearish on the market. He might just be buying protection against the downside of other investments
When you are hedging you don't put 93% of your money on the hedge.
This is a bet/prediction, not a hedge.
The stuff he still has that is long, that is the hedge....
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Why is this on slashdot (Score:2)
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Have cash and precious metals ready for the crash (Score:3)
It would take too long to lay out all of the details about what could happen when the fireworks finally start, but the TL;DR is that the meme "Mother of All Short Squeezes" is likely to turn into a financial apocalypse given the current state of the banking system combined with the utter disregard for the law the SEC has allowed in short sellers and market makers.
It won't be retail burning the system down, it will be the whales and financial kaiju like JPM and Goldman doing it as they ruthlessly try to liquidated each other and pass the buck.
This isn't 2008, this is much worse when it happens. Our debt is already about 3x higher than it was in 2008; on present course it will be about 3.5x higher when this likely happens. The Fed and Congress won't have the freedom to do a "TARP 2.0" because the scale of the problem will be much bigger and our currency and financial position not nearly strong enough.
The return of the Sub-Prime Three Card Monty (Score:2)
‘On October 27, Burry wrote to one of his two e-mail friends: "I'm selling off the positions tonight. I think I hit a breaking point. I haven't eaten today, I'm not sleeping, I'm not talking with my kids, not talking with my wife, I'm broken. Asperger's has given me some great gifts, but life's been too hard for too long because of it as well.’
‘Dear Reader: If you have followed the story this far, you deserve not only a gold star but an answer to a comp
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Overvalued Market (Score:2)
Say what you will (Score:4, Funny)
Say what you will, but Burry has successfully predicted nine of the last five recessions
Cheap insurance on long position gains (Score:3)
This is news why exactly? (Score:2)
This is news why exactly?