“The Big Short” investor Michael Burry warned markets would crash, bet against Elon Musk, and criticized the GameStop saga last year. Here are its 6 highlights of 2021.
Michael Burry helped pave the way for GameStop’s short contraction, betting Elon Musk’s Tesla and Cathie Wood’s Ark Invest, and warned of a historic market crash last year.
The head of Scion Asset Management also called bitcoin a “speculative bubble,” predicted inflation would skyrocket, and sold most of his U.S. stocks in 2021.
Burry is best known for his lucrative bet against the mid-2000s real estate bubble. He was played by Christian Bale in the film adaptation of “The Big Short”.
Burry’s Betting Against the Tide on GameStop in 2019 helped lay the groundwork for retail investors to push the stock up to 2,500% in January 2021.
The Scion chief initially encouraged day traders in their battle against powerful hedge funds, but quickly balked at the exposed market manipulation.
“This is unnatural, senseless and dangerous,” he tweeted, calling for legal and regulatory action.
Burry then compared the saga to his signature bet against the real estate bubble.
“It was a particularly perfect setup,” he tweeted, pointing to the small size of game retailer GameStop, the short-term interest in its stock and its massive layoff by much of Wall Street. “There won’t be another like that. Kind of like #thebigshort.”
Scion left its GameStop position in Q4 2020, before the stock skyrocketed. However, Burry later told Barron’s that he made a large profit on the bet.
The GameStop episode culminated when Securities and Exchange Commission officials visited Scion’s offices in March, according to Burry, prompting him to suppress his Twitter account for a few months.
Read more: Michael Burry subreddit founder explains unique investor appeal ‘The Big Short’ – and reveals actions hidden in his tweets
Burry, who revealed in December 2020 that he was betting against Tesla, issued several dire warnings about the automaker’s shares after they soared the following month.
“Well my last Big Shorts just got bigger and bigger and BIGGER too,” he tweeted in January 2021. “Enjoy it while it lasts.”
Scion revealed that it had bearish put options on approximately 800,000 Tesla shares at the end of March and increased that position to 1.1 million shares as of June 30. He also revealed offers on the Ark Innovation ETF of Cathie Wood, a major backer of Tesla.
Burry sounded the Tesla alarm again in November. “Can the $ TSLA drop 80, 90%? After 2000, many frequent travelers did,” he tweeted.
The investor also targeted Elon Musk, accusing the CEO of Tesla of selling shares because he knew the electric vehicle stock was overvalued.
“He doesn’t need the money,” Burry tweeted. “He just wants to sell $ TSLA.”
“Burry is a broken clock,” Musk retorted on Twitter.
Burry sounded the alarm bells on a multitude of assets in 2021 and predicted a historic crash.
“The market is dancing on the edge of the knife,” he tweeted in February, highlighting soaring stock prices and increasing margin debt.
Burry compared the hype around bitcoin, electric vehicles, software as a service companies and memes stocks to dot-com and real estate bubbles in a March tweet.
He warned that these assets had been “driven by speculative fervor to insane heights whose fall will be dramatic and painful.”
“The biggest bubble of all time in all things,” he proclaimed in June. “All the hype / speculation done is attracting retail before the mother of all crashes.”
Burry also said in a November tweet that there was more speculation in the markets than in the 1920s, and more overvaluation than in the 1990s.
Burry correctly predicted in April 2020 that reopening the US economy after the pandemic would trigger inflation. It has sounded the alarm bells about rising prices several times in 2021.
“Prepare for #inflation,” he tweeted in February of last year. “Reopening and relaunch in progress. “
Burry drew a parallel with the German hyperinflation of the 1920s, noting that everyone was gambling in the market and that trading volumes were skyrocketing at the time. “Sounds familiar?” He asked.
The investor also shared Warren Buffett’s famous warning about how inflation discourages companies from investing, erodes the value of future earnings, and results in negative real returns for investors.
“Inflation… it’s not just reopening, folks,” Burry tweeted in November, after the consumer price index jumped 6.2% in October.
“It’s not that anyone could have seen this coming,” he added sarcastically.
Burry reduced his U.S. equity portfolio from more than 20 holdings to just six in the third quarter of 2021, reducing its total value from nearly $ 140 million to just $ 42 million (excluding options).
The founder of r / Burryology, a subreddit for those close to Burry, told Insider that sales are a huge red flag that signals the Scion boss is preparing for a historic crash.