Michael Burry is an astute investor.
He is one of the legends of Wall Street, which makes him one of those financiers whose every word is closely followed by millions of investors.
Investors look at his strategies and the business choices he makes. When he acquires shares of a company, these share prices tend to rise. This was the case again recently with the stock of the Geo Group (GEO)- Get a Free Report.
He, through his firm Scion Asset Management, bought 501,360 shares worth $3.31 million in the company that invests in private prisons and mental health facilities, as of June 30, according to regulatory filings.
Since it disclosed its stake in Geo on August 15, the group’s shares have gained 34.2%. Since January, Geo Group shares are up 19%.
On November 14, he revealed a new stake in the owner of the home shopping channel (QRTEA)- Get a Free Report. The next day, the stock closed 17% higher, the most since November 2020.
The Great Bet
The investor earned a reputation as a stock maker by successfully betting on the collapse of the US housing market in 2007. He then became a household name after the 2015 film “The Big Short”, which featured his bet on the subprime mortgage. the disaster that triggered the 2008 financial crisis.
What people tend to forget is that, on the other side of Burry’s promise of mortgage-backed debt obligations, there was a prominent investment bank, Goldman Sachs. CDOs are loans, mortgages and other assets that investment banks package and offer to institutional investors.
In the book “The Big Short: Inside the Doomsday Machine” by Michael Lewis, it is said that Burry decided to bet on the subprime market after noticing that many people could not afford to pay their mortgages. But lenders were finding new financial instruments to give them more money.
“It was a clear sign that lenders had lost it, constantly lowering their own standards to increase the number of loans,” Burry said.
The lenders were selling these loans to Goldman Sachs, Morgan Stanley, Wells Fargo and other “too big to fail” banks, who packaged them into bonds and sold them off. These practices almost brought the financial system to its knees. They caused the worst financial crisis since 1929.
For several months now, Burry has been calling out the state of the economy again. He believes it will fall into recession. He says he expects a household debt crisis that would put the economy at serious risk.
“Remember the savings glut problem? No more. COVID helicopter money taught people to spend again, and it’s addictive. Winter is coming,” Burry warned last August.
“The coming of winter” appears to be a reference to the HBO series “Game of Thrones.” Characters used the phrase as a warning.
A mysterious promise
“Stocks closed 13.48% above their 200-day moving average yesterday,” Burry, who runs hedge fund Scion Asset Management, said on Twitter on October 1. “The bottom in 2009 was 1.2%. The bottom in 2020 was 2.8%. 2007 levels.”
It then confirmed this dire prediction by liquidating almost all of its US stock portfolio in the second quarter.
But it began buying stocks in the third quarter, according to regulatory filings. As of September 30, Scion’s portfolio of US-listed companies consisted of six companies.
He bet on Aerojet RocketDyne (AJRD)- Get a Free ReportCharter Communication (CHTR)- Get a Free ReportA civil heart (CXW)- Get a Free ReportGeo Group, Liberty Latin America (LILAB)- Get a Free Report and Qurate Retail. In total, his equity portfolio has a total value of $41.3 million, an increase of $38 million from three months earlier.
A few days after revealing these new bets, Burry has just sent a cryptic message suggesting that he also has a big bet on a company’s stock fall or an industry’s fall, or even an asset class.
“You have no idea how short I am,” Burry posted on Twitter on November 15. The tweet has since been deleted as is often the case with all of her posts.
Burry does not disclose his position. It leaves social network users to speculate. They engaged in a guessing game that mostly involved the names of technology groups. Burry had liquidated its Alphabet and Meta Platforms shares in the second quarter.
What is certain is that Burry has caused a stir again as many are wondering if he is really talking about a bet or if he is talking about his height. The financier is said to be 5′ 6” tall.
Short selling a stock is a bet that the price of the stock will fall.