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The “Big Short” Investor Michael Burry Bet $1.6B That We’re Heading for a Dangerous Recession

by | Aug 17, 2023 | Money, Personal Finance

Most of you reading this aren’t finance nerds.

So let me give you the simple version. In 2005 Michael Burry and his firm bet against the housing market, predicting it would crash. In 2008 it did. Burry got rich off it.

They later made a movie about Burry called “The Big Short.” It had some unforgettable acting and Christian Bale smashed it playing Burry.

Since then everyone has paid close attention to what Burry says.

Michael Burry’s performance to date

  • 2005: Predicts housing market will collapse. Correct
  • Dec 2015: Predicts market will crash within a few months. Market pumps 11% over the next 12 months. Wrong.
  • May 2017: “A global financial meltdown is coming.” The market goes up 19% in the next 12 months. Wrong.
  • Sept 2019: “There’s an index fund bubble. Everything is gonna crash.” Market goes up another 15% in the following 12 months. Wrong.
  • March 2020: Bat virus hits the world. He makes a massive bet that everything will collapse. MARKET GOES UP 70% IN 12 MONTHS! Wrong.
  • Feb 2021: “Huge bubble.” He places a large bet that Tesla stock crashes and we never see Elon’s cars again. Market goes up another 16%. Wrong.
  • Sept 2022: “The bottom in the stock market is still to come.” Market goes up 21% in the following 11 months. Wrong.
  • Jan 2023: “Recession coming and inflation rising. He tweets “SELL.” The stock market is up 17% this year. Inflation has eased significantly. Wrong.

Then on August 23 we find out he bet $1.6 Billion on a crash…

News headlines everywhere light up like my neighbor’s rainbow tree lights. Everyone loses their sh*t.

When you dig below the surface what you find is Michael Burry used a product called options to bet against the stock market. This means he didn’t give a bank $1.6B at all. He likely invested a few hundred million.

Then you find out if you do the research that he made this bet more than 60 days ago. He may have sold this investment. He may have made a totally new bet on some other collapse of some other country.

People like Michael Burry are doomers. They make a living and inflate their ego by making chaos predictions. They don’t care how many people their statements hurt. They don’t care about our financial mental health.

They just want to be right. They just want us all to burn. They just want us all to be poor while they sit in their castle full of millions. Yuck.

How can we respect these sorts of people?

Since 2008 the doomer bears have predicted roughly 30 recessions. We’ve had two. The trouble is they over-predict how many times things will get bad. They under-predict how markets behave over the long term.

What this all means for you

1. The story of investing in 2 simple pictures

The picture on the left is the S&P 500. The right one is the Nasdaq. Over the long term markets tend to always do well. If you shut off the noise and just invest in what is obvious, hundreds of percent in gains are possible.

Financial freedom is a given.

2. Don’t let recessions scare you

Burry wants you to be scared of recessions.

He wants you to sell everything and sit in cash. He wants America to collapse — the place where he lives. This mindset is silly.

Recessions are a good thing. It’s how we exit or the sludge out of the system the same way you take a dump in the morning to clear your bowels. Recessions are something to look forward to.

Falling stock prices is another way of saying “discounts.”

Why wouldn’t you want discounts given the historical performance of the stock market?

Fortune tellers are always right at least once every few years, the same way a broken clock tells the correct time at least once per day. Being able to predict the complex nature of the global economy is impossible.

Anyone who pretends to is a fool. Stop letting fake emergencies & Wall Street gurus influence how you invest.

The best — like Warren Buffett — just rely on the long-term predictability of markets. And they focus on buying good businesses despite the economic conditions.

This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.

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