Michael Burry had a turbulent 2023, marked by his pessimistic predictions regarding the economy and stock market, his bets against the S&P 500 and microchip equities, and his pursuit of deals during the regional banking crisis.
The investor gained notoriety for his accurate prediction and subsequent profit from the housing bubble that occurred in the mid-2000s; his enormous wager became a symbol of success and was documented in the book and film “The Big Short.” Additionally, in 2021, he executed noteworthy wagers against the flagship Ark fund of Cathie Wood and Elon Musk, and invested in GameStop well in advance of its transformation into a meme stock.
Here are three milestones of 2023 for Burry:
1. Obsess and melancholy
Burry began the year with a litany of pessimistic forecasts, as he always does.
“The peak of inflation was reached.” “However, this does not represent the final peak of the cycle,” he wrote on X in early January. “We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition.”
“The government will stimulate while the Fed reduces,” he continued. “Thereafter, there will be an additional inflation spike.” “It’s not difficult.”
As predicted by Burry, inflation will decline in the latter half of the current year; it has decreased from more than 9 percent during its highest point last summer to less than 4 percent in recent months. Despite this, a recession has not yet manifested, as the US gross domestic product expanded by 5.2% annually in the third quarter. Neither has inflation returned, and the Federal Reserve has yet to reduce interest rates from their 5% increase intended to restrain price expansion.
In the coming weeks, the head of Scion Asset Management distributed several unsettling charts, one of which compared the current trajectory of the S&P 500 to its disastrous rally that occurred during the dot-com collapse in the early 2000s.
Towards the end of January, he issued a single wording message that sounded the alarm: “Sell.” Burry has issued investor advisories regarding the present market condition for several years. He lamented the existence of the “ultimate speculative bubble in the history of everything” and predicted that 2021 would witness the “mother of all crashes.”
Additionally, he cautioned Bed, Bath & Beyond shareholders in February that the stock was en route to catastrophe. In April, the homewares retailer initiated the bankruptcy process, and in May, the Nasdaq delisted its shares.
Burry seemingly recanted his recommendation to sell in a March post titled “I erred in my assessment.” He appeared to adopt a mocking tone in a subsequent tweet: “Since the 1920s, no BTFD cohort has been comparable to yours. He wrote, “Congratulations,” employing the abbreviation “buy the f****** dip.”
2. Bank crises and negotiations
Burry commented on the March regional banking crisis, which resulted in the failure of Silicon Valley Bank, Signature Bank, and Silvergate Capital due to consumer withdrawals of deposits. He likened the errors committed by the lenders to those observed during the dot-com and housing crises.
“2000, 2008, 2023, it is always the same,” he commented. “People full of hubris and greed take stupid risks, and fail.”
However, Burry accurately predicted that the disorder would quickly dissipate and did not present a significant risk to the economy as a whole.
The value investor took advantage of the market volatility that occurred during the first quarter by purchasing shares of underperforming banks, such as First Republic and PacWest. In pursuit of additional opportunities, he acquired a multitude of energy, commodity, and shipping securities during the second quarter, such as Sibanye Stillwater and Coterra Energy.
In the third quarter, Burry improved several of those positions, including those of Euronav and Star Bulk Carriers. However, during the same period, he reduced his stock portfolio from 33 to 13 holdings, thereby more than halving its total value (options excluded) from $111 million to $44 million.
3. Short material
The briefness of Burry’s most impressive actions of 2023 was notable. During the second quarter, he acquired bearish put options on two exchange-traded funds that monitored the S&P 500 and Nasdaq-100, respectively. The positions in question represented fictitious bets worth $1.6 billion placed against the aforementioned stock indices.
At the time, UBS’ director of European equity strategy and global derivative strategy, Gerry Fowler, told Business Insider, “That is a significant position, even for a large fund.” Fowler stated that despite the fact that Burry paid a negligible amount of $1.6 billion for the hedges, “the exposure he is employing demonstrates a significant amount of leverage.”
Once more, the Scion leader caused a stir with his maneuvers in the third quarter. He purchased puts on 100,000 shares of Blackrock’s iShares Semiconductor ETF with a notional value of $47 million while closing out his previous short positions. The graphics-chip stock Nvidia, whose value has quadrupled this year due to AI enthusiasm, is the third-largest holding of the ETF.
Although portfolio disclosures do not specify the dates of transaction execution or closure, it appears that Burry’s wagers were not successful. Between the beginning of April and the end of September, both the S&P 500 and Nasdaq increased, and the semiconductor ETF reached a near-record high.
Will Burry once more speak?
Due to the fact that Burry rarely interacts with the media and has not updated X since April, his actions this year are largely devoid of context. Supporters will be anticipating his return to delivering commentary on markets and the economy in the coming year. This anticipation stems not only from the often enlightening, colorful, and prognostic nature of his posts, but also from the profound uncertainty that surrounds the present state of investors.
