'Big Short' Investor Michael Burry To Close Hedge Fund as He Warns on Valuations (ft.com)
- Reference: 0180065262
- News link: https://slashdot.org/story/25/11/13/1744254/big-short-investor-michael-burry-to-close-hedge-fund-as-he-warns-on-valuations
- Source link: https://www.ft.com/content/cec33db6-7842-4bf5-80d5-677007bcab3e
[2]non-paywalled source
as he warned that market valuations had become unhinged from fundamentals. From a report:> Scion Asset Management this week terminated its registration with US securities regulators, according to a Securities and Exchange Commission database. Burry told investors that he would "liquidate the funds and return capital -- but for a small audit/tax holdback -- by year's end," according to two people with direct knowledge of a letter he sent to investors.
>
> "My estimation of value in securities is not now, and has not been for some time, in sync with the markets," said the letter, which was dated October 27. The move to close Scion comes as some investors have become concerned that markets are trading at frothy levels after years of strong returns. Those jitters flared up on Thursday, with the tech-heavy Nasdaq Composite sliding nearly 2%. Still, the big gains for tech stocks this year, driven by hopes that artificial intelligence will transform business and society, have left valuations at lofty heights compared with their average in recent years.
[1] https://www.ft.com/content/cec33db6-7842-4bf5-80d5-677007bcab3e
[2] https://www.reuters.com/sustainability/sustainable-finance-reporting/michael-burry-big-short-fame-deregisters-scion-asset-management-2025-11-13/
Smart man (Score:1)
AI is not delivering on it's promises, and we're figuring that out. The market is due for a serious correction.
Re: (Score:1)
But now you can create AI apps with MongoDB. Expect higher valuations short-term.
Re:Smart man (Score:5, Insightful)
Why do I get the feeling that it will be just like the last time where all of the people who were acting irresponsibly will get bailed out while the taxpayer gets stuck with the bill? Until the irresponsible actors are held accountable for their own behavior, they have no incentive to change.
Re: (Score:1)
Recessions have been made illegal. Doesn't matter who is running the show, their incentive is always to prop up the markets in any way possible so they can point to those utterly meaningless numbers and claim the economy is great. Its been that way our whole lives, its just that as real conditions continue to worsen, the disconnect gets more and more obvious.
Re: (Score:1)
Not many taxpayers are innocent, everyone wants free money. They want their 401k to go up 1000%, they want to sell their home for 1000% to someone who also expects it to go up 1000%. Everyone is in the MLM.
Re: (Score:2)
Even if it is, and it certainly isn't, the growth is predicated on more electricity generation infrastructure being installed than the world can build right now. And that's all heavy industry, you can't spin up new capacity overnight. It's nonsensical.
When it crashes (Score:2)
It'll be a black swan. It'll come out of the blue. 98% of people won't be prepared for it, and they'll be devastated financially.
2% will likely know in advance and they'll be able to protect most of their investments.
Re: (Score:3)
Maybe, but we actually know that the AI companies do not make nearly the money required to justify the investments in them.
We know that when the head of the Federal Reserve retires the likely replacement will be in favor of keeping interest rates low even when the economy is hot and inflation is rising.
We know we are accumulating debt faster than ever before.
We know that the top 7 stocks are all companies that do the same thing, more or less, and represent 36.6% of the S&P 500 so a downturn in the tech
Damning (Score:5, Insightful)
Translation here is that he knows it's going to break, but there's no way to figure out when, which is important for a hedge fund. So, rather than play any of the games, the safest hedge was to cash in his chips and go home. While he may not have cashed out at the peak, he and his customers have avaoid the inevitable freefall that will reach relativistic speeds before hurtling out of the solar system..
Re:Damning (Score:4, Insightful)
Classic "the market can stay irrational longer than you can stay solvent" situation.
Re: (Score:2)
So true. Sadly these days the market can stay irrational almost indefinitely. The factors that helped constrain this irrationality, like actual government oversight and discipline of equities and debt, willingness to let large corporations fail, and investor discipline in discerning real growth from financial games have all been eroded.
I have no idea when valuations will fall, and I wouldn't want to be better on a market that has no basis in fundamentals at all.
Re:Damning (Score:4, Interesting)
And even audit standards. One of his big red flags are that big tech has been depreciating computer assets over I think 7 years instead of the 3/5 that IRS specifies. No one cares it seems.
Re: (Score:2)
All it takes to crash is for enough people to get nervous. Didn't Warren Buffett sell his stock a little while back? Couple more whales cashing out, combined with the increasing number of stories about AI being vastly overvalued, and peope will begin selling.
Re: (Score:1)
Probably not the bankers, the big banks aren't dumb enough to have lent huge amounts of money to companies in the tech bubble. And they're much better capitalized than last time. The investment firms with large holdings in the magnificent seven have lots of other holdings and can afford to take the hit when things go to shit. But the government will bail out all the stupid VCs who kept pouring money into tech bubble 2.0 companies. “We have to save them so they can invest again or we'll lose the AI wa
Or covering his shorts got too expensive (Score:2)
Tough gambling shorting. Even the movie showed how close he came to collapse and the movie didnt show the many many many other people who lost everything trying to maintain their short against the housing market. He was just lucky enough to have gotten the timing right...
Just last week he was in the news saying he was shorting the AI market guess this week he came up short of the cash to keep it going.
Re: (Score:2)
Lucky, maybe. But smart enough seems more likely.
Government debt causes asset inflation (Score:2)
Originally, the primary purpose of the stock market is as a place where businesses could raise money for to buy or build capital. Investors would get a share of the business and that share would entitle them to some part of the companies future profits. The investor would hope that their part of the profit would cover their purchase price of the share.
Well for most companies that's never going to happen. Share prices to earnings no longer have any relation. The primary purpose of the stock market is a P
He does this a lot (Score:3)
The warning bit comes every so often from him and has done for many years. Doesn't mean he's wrong, though.
Honest man (Score:5, Insightful)
It is rare to have someone that says "Hey, I don't think I know what the market is doing anymore, so here is your money back."
Usually, it's "Yes I do know better than you and better than the market, give your money to me."
Then again, this guy made more than enough money in 2008, he can just live off the cash.
Re: (Score:2)
Followed with: ....aaaaand it's gone!
Re:Honest man [and smart timing, too?] (Score:2)
The future remains fundamentally unknowable, but timing still matters. He's been winning those market timing games, but now he says he can't go on?
I think the root of what destroyed the stock market (pending proof via implosion) is that the metrics became broken. Mostly that means the Dow Jones as the leading metric. Originally the idea was an index of "top companies" based on reality-based factors like sales and assets, but the Dow could always swap out "slower runners" for better ones, which is a fundamen
Re: (Score:2)
He thinks the market is going to shit the bed and sooner rather than later. Rather than risk his and his clients money on short bets and try to time it, since metrics he'd normally use to figure such things out don't seem to be matching up with reality, he's cashing out for now. Presumably he'll be back in once he thinks the market finds a new support level.
Re: (Score:2)
> He thinks the market is going to shit the bed and sooner rather than later. Rather than risk his and his clients money on short bets and try to time it, since metrics he'd normally use to figure such things out don't seem to be matching up with reality, he's cashing out for now. Presumably he'll be back in once he thinks the market finds a new support level.
That's my take as well. The guy understood markets that held some tenuous relationship to reality. What this move really signals is that the market is so detached from reality that even someone with absolutely impeccable instincts on such markets is skittish. Something big is gonna happen, but he can't trust that he can read the tea leaves precisely enough to time it right. If he misses by far enough before the crash, his clients will be pissed that they could have earned more. If he misses the other direct
Re: (Score:3)
He used to win these market timing games because no one was paying attention to huge short positions. You could quietly bet against a company, or, better yet, you could quietly amass a short position and then release stunning negative news that you had uncovered and watch the stock price tank.
These days it is more likely that online investors will notice a large short, and drive the price of the stock up until the person holding the short gets margin called and loses all of their money. The shorters the
Re: (Score:3)
Even before then he had shorted the 2000's tech boom and was probably very wealthy already so it was also it seems hes been in it for love of the game.
For that reason, he was early on the call that the internet had way overvalued companies with little to no revenue or profitability. He began shorting those stocks immediately and his hedge fund went up like a rocket ship. In the first year, Michael J. Burry returned 55% even though the S&P 500 fell 12%. The market continued to fall dramatically the next
Re: (Score:2)
Well, VIX is +20% today and NVidia is down 3,5%. Did the bubble just start bursting, or is it just a temporary setback when ton of people waiting in the wings will now "buy the dip"?
Re: (Score:1)
I doubt it has anything to do with honesty and has more to do with the fact that he's at risk of costing billionaires a lot of money and if you do that you usually go to jail and you don't get to bribe the president for a pardon.
My guess is he's getting out before that.
I do find it hilarious that he's famous for predicting the housing market crash that every single sensible and honest economist was telling us was coming.
We really really hate listening to experts. There's a reason that stupid mov
Re: (Score:2)
I think it has more to do with for some reason unknown, he wants to go dark. He can still keep running a fund, albeit small enough he doesn't need to register. There are many of these. I think they call them family office or something like that. No reporting.