Michael Burry, of Big Short fame, just bet $1.6B on a stock market crash
cnn.comSimultaneous debt collapse and global de-dollarization: good luck timing this one.
Knowing that the markets are massively distorted and unsustainable gets you nothing. Knowing the next wave of irrational distortion gets you good long-term returns. Good timing is either pure luck, insider information, or outright manipulation.
The $ amount listed on 13F is NOT the premium value but rather the value of shares the position represents (100x multiplier)
Back out the 13F SPY value: $886mm/2mm = ~$443
He owns 20k SPY puts (2mm/100) likely worth $10's of millions
Apparently he did this a while ago its just hitting the news now. As they say, its hard to time the market and it can remain illogical longer than you remain solvent. But hey I dont know verify what I say too.
> it can remain illogical longer than you remain solvent
I don't know the details in real life, but in the movie he was mildly early and losing money for a long time before the move started realizing. I and heard rumors that there were other players that were even earlier and had to close their positions before it realized in order to avoid going bankrupt.
BRB buying the book.
The book is not accurate and in particular most of the traders fought the decision to put the short on and then took credit for it afterwards. I really don’t want to say anything further.
Source: I was there (working as a strat for Goldman in mortgages during the crisis).
The movie was outright wrong in some other details that seemed to contradict congressional testimony / public knowledge of 2008 as well.
Movie was a movie. It bothers me that the attention span of Americans is so short that they can't be bothered to look up the known and public facts of 2008 before making opinions on it.
Thanks for the comment I always suspect things like this occur often
Snob comment claiming an inside knowledge and yet refusing to provide any pointers or logical conclusion chains.
Yeah a valid criticism and I apologise. All I would say is read the book/see the movie and enjoy it as a fun experience but don't necessarily take it as historical fact and in particular I wouldn't put any money behind anything just because Michael Burry has done it (as in TFA).
Who fought to put it on then?
The people concerned haven't fought to put themselves in the spotlight so I'm assuming they would prefer to remain in the background. On that basis I'm not going to out them.
The 13Fs are filed quarterly so there’s always a lag. AFAIK he spent 2% of the fund AUM on these so downside pretty capped, it’s an asymmetric bet on indices heading lower.
Anyone know what strike price / expiration date on the puts?
Overall, Burry / Scion bought 27 new stocks and sold 15 stocks when compared to their previous quarter's holdings[1]. This can be hard to see on the SEC.gov filing CNN directly links to since that only shows one quarter of holdings.
The bet against market from someone like him is bot unusual, but the size of the bet: 80% of his portfolio?
It isn’t. CNN and many others have awful financial literacy and reporting standards.
The 13F notional value calculations are horrendous. There is simply no way of knowing how big of a bet it is, but I can all but guarantee that it isn’t remotely close to 80% of his portfolio.
This headline has been making the rounds. Super bearish news from the “Big Short” guy sells headlines.
This reminds me of the Litecoin / Walmart news where someone paid a journalist to report a bs headline. But at a larger scale.
You are right. I'm one that believes that the market will continue its downturn for a few more weeks but there's no way I would bet 80% of my portfolio even if I was 99.99% sure of a downturn. I know better and I'm an amateur. Burry is a professional, he knows better than to be so reckless. The news article is just reporting nonsense. With options it's easy to lose it all even if ultimately you were right since options expire after a period of time. You have to be very careful if you decide to use them as an investment tool. I have no doubt he's betting on a downturn but he's not betting most of his assets. What ever it is, it's small relative to his portfolio.
He's also basically shorting S&P and Nasdaq ETFs - $1.8billion is a blip against these, like throwing a pebble at an oil tanker...yet the article seems to have an air about it like the very presence of this man and this money is enough to help precipitate his expected downturn.
The market does seem overpriced at the moment, particularly stocks like Nvidia undergoing some kind of correction, but it seems that the medium term trajectory is on the rise. I'm not sure what kind of huge downturn the market isn't going to be able to account for when phenomenal, unprecedented shocks like COVID are something it took in its stride even though prices are still recovering due to the debt so many companies took on. The bullish run of the past 6 months seems to have taken analysts by surprise so to be expected that some of them are now betting against its turn in the other direction.
The covid shock was managed because almost every government switched to expansionary fiscal and monetary policy to keep unemployment down. Interest rates have gone up massively, and Covid relief payments have dried up.
heck, it might even be larger-than-usual hedge where he thinks a crash is possible and the reward is relatively high to the small loss he'd be making, there's a lot of nuance skipped over here.
He might be sitting on a bunch of QQQ and SPY and just hedge against the price drop. I don’t know if reporting requirements are the same for long puts vs protective. Can anyone familiar with the topic elaborate?
"Protective" puts are the same thing as long puts. Doesn't matter if you own underlying against.
What doesn't have to be reported are shorts, so he could very well be long put spreads but the short leg would never be reported.
There is really very little point in trying to read the 13F tea leaves.
He has bought options... This is just a contract with a nominal fee attached to buy or sell an instrument at a pre determined price at a point in the future. The fee a small amount compared to the price of the share. So yeah he has tied up a small amount of capital to do this.
We don’t really know how much he tied up in this transaction. Depends on strike price and expiration date.