Above: Christian Bale, playing Dr. Michael Burry in “The Big Short“
The more things change, the more they stay the same
Shorting in the stock market has gotten a bad rep recently among the “WallStreetBets” crowd on Reddit, and those that were in the run-up frenzy over Game-Stop and AMC, Koss, etc. This was, for the most part, due to a lack of understanding of what shorting is, how it works and why it adds liquidity and has other benefits to markets as a whole.
Many of the crowd from that frenzy has now moved on to the crypto frenzy, which has a lot of speculators worried after relatively large drops in many of the top coins. Similar to the misunderstanding of short positions many of the speculators in crypto are new arrivals and, for a short time, had no experience of the fact that volatile, fast moving instruments, such as shares in tech companies or “alt-coins” also go down faster than slow moving investments. They don’t “only go up” as was the “slogan” for the Game Stop crowd and others at the time.
Michael Burry, the genius founder of Scion Asset Management, the firm that was chronicled in “The Big Short” (both the book and the film) which tells the story of how Burry bet against the US housing market at the peak of the bubble and experienced massive success when his billion dollar bet paid off.
That bet was, as the name of the book implies, the longest of long shots, and in the movie the skepticism and outright scorn and derision that he experienced for even thinking of taking that gamble was shown and formed the backbone of the story.
The power of that story was how a man with knowledge and experience could see clearly, even with one good eye, what millions of “experts” either could not see or were too corrupt to admit or accept.
That the housing market and the products devised to profit off of it, mortgage backed securities, collateralized debt obligations, credit default swaps, and so forth, were about to take the entire world economy to the brink of doom.
A collapse did occur, and were it not for desperate and questionable bail-outs by the governments and the central banks around the world, could have collapsed the world economy to a level that would have taken decades to recover from.
Instead this “largest band-aid” in the history of the universe has been followed up by larger and larger ones until as of the writing some 14 trillion has been created to prop up the original “fix” and kick the can further and further down the road.
Fast forward to 2021 and see where Burry sees a big opportunity now…
Michael Burry, the same man who say the end of the housing bubble in 2006 and 2007, and bet big against the one market that no one, literally no one, believed could ever go down, appears to believe that the end of the road for the current speculative bubble ( at least in Tesla stock prices) is near.
Michael Burry’s Scion Asset Management has disclosed a major, half-a-billion dollar short position against Tesla Inc.
Scion Asset Management disclosed via a regulatory filing on May 17th that purchases were made for bearish put options on 800,100 shares in Tesla. In the disclosure was also the further information that, as of the end of the first quarter, the options had a value of US$534 million.
“my last Big Short got bigger and Bigger and BIGGER,” Burry said in a tweet from February, apparently referring to Tesla’s large surge in market capitalization. “Enjoy it while it lasts,” he continued.
It appears that, as of May 18th, he may have deleted his Twitter account entirely. Which, if true, may be over concerns that the SEC could have questions about the tweets, as wells as earlier tweets he made referring to other short position in GameStop Corp.
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