The Big Short: Lessons from Michael Burry’s Misjudgment
We witnessed that the world’s largest companies were mistaken in their views for 2023. This is an important lesson for investors. Michael Burry, who made huge profits with short positions during the 2008 crisis, was wrong. So what is the story behind it? What lessons should investors take from here?
Closing Big Short Positions
Michael Burry, who made huge profits with short positions during the 2008 crisis, had $1.6 billion worth of short positions as of the second quarter of 2023. Where do you remember this name from? Of course, it is familiar from the movie The Big Short that almost everyone watched. We had seen in the same-named book and movie how Burry’s correct decisions resulted in huge profits during the 2008 crisis.
However, everyone can be mistaken. The world’s largest companies significantly reduced their workforce in 2023 due to the expectation of a major recession. Burry opened short positions for the stock markets. So much so that the size of these positions reached $1.6 billion at its peak.
But the recession did not come, and the expected stock market collapse did not happen. The same applies to crypto, and if there had been a recession, the price of Bitcoin (seen as a risky asset) would have also collapsed along with the S&P 500.
Michael Burry and His Current Positions
Burry’s company, Scion Asset Management, is now short selling against Blackrock’s iShares Semiconductor ETF. The third largest asset of this ETF is Nvidia, whose price has tripled this year. The 2008 prophet who took short positions against Nvidia and other semiconductor stocks must think that the increasing demand driven by artificial intelligence enthusiasm will weaken.
Burry also took short positions against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation fund, making him a true crypto opponent. His warning, made in the summer of 2021 when crypto investors were younger, had not experienced so much chaos, and their hair had not turned gray, is still on everyone’s mind.
The maverick of traditional finance described crypto as the “biggest speculative bubble of all time” and said that crypto buyers were preparing for the “greatest of all crashes.”