The Big Short
Investment legend Michael Burry met his wife on a dating website.
His profile read as follows:
“I’m a medical student with only one eye, an awkward social manner, and 145 thousand dollars in student loans.”
She wrote back: “You’re just what I’ve been looking for!”
(In other words, she was looking for honesty.)
Burry was profiled in the book, and later movie, The Big Short, where he predicted the US housing meltdown before anyone else, and made himself a hundred million bucks in the process.
My favourite scene:
Goldman Sachs: “You want to bet against the housing market?”
Burry: “Yes.”
Goldman Sachs: “Why? Those bonds only fail if millions of Americans don’t pay their mortgages. That’s never happened in history. If you’ll forgive me, Dr Burry, it seems like a foolish investment.”
Burry: “Well, based on prevailing sentiment, the market, the banks and popular culture, yes, it’s a foolish investment. But everyone’s wrong.”
Fast-forward to today, and Burry is back making three more ‘foolish’ bets:
First, he’s wagered a massive $680 million bet against Tesla.
Tesla’s share price rocketed 743% in 2020, making founder Elon Musk one of the richest people on earth.
Yet just as the share price was roaring towards its peak last year, Burry said it was ‘ridiculous’ and started shorting the stock (which means that if Tesla’s share price falls then Burry can sell his Tesla shares for a profit). It seems his bet is already paying off: Tesla shares have fallen 40% from their all-time high.
Second, he’s said that he thinks Bitcoin is in a speculative bubble.
(Duck for cover!)
Third, and most alarmingly, he believes that the massive money printing experiment the US is currently doing will lead to hyperinflation and economic catastrophe.
Here’s the point: while the stock market hits daily record highs, Burry is betting on doom ahead.
So, is he right?
Well if you’ve been following me for any time you’ll know how I feel about short-term predictions. Studies have repeatedly shown that they mostly come down to luck. No-one has a crystal ball.
Yet what’s interesting to me is Burry’s psychology: he’s proven that he’s willing to look past the ‘herd mentality’ that grips markets to make his own judgments, even if it makes him look stupid at the time.
In other words, he’s a wolf, not a sheep.
Speaking of which, I met a few young rams the other day … apprentice tradies who were flipping crypto on their smoko. These blokes, and just about everyone I talk to lately, are convinced that making money is quick and easy.
Now, I honestly don’t know if Burry will come out on top, or come a cropper.
But there’s one I do know: making money (and keeping it) is never easy. And making it quickly is even harder.
Tread Your Own Path!