Michael Burry Warns of Greatest Stock Market Bubble EVER

Well, Michael Burry is back, baby! I thought he was gone forever. And we just have to follow him through the Scion Asset Management 13Fs from now on. However, he is back! His Twitter is back online, at least for now, and he has some pretty interesting things to say from a man that's been pretty good at predicting bubbles in the past. So let's talk about Michael Burry, why I pay attention to what he says, and what he's saying now about the current state of the stock market.

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So, Michael Burry, who is he? Well, he is one of the few people that accurately predicted the decline of the American housing market in 2007 and 2008, which of course led to a collapse of the global financial system. So he profited about 100 million dollars from betting on this collapse, and he made his shareholders about 700 million dollars.

Although the crazy thing about this was that Burry saw this coming for many years before it actually happened. He started betting against the housing market in 2005. So it was actually very early. It was May 19, 2005, he bought 60 million dollars of credit default swaps from Deutsche Bank. So he was ready to pull the trigger, but then had to wait another three years for the payoff.

The reason that he had figured it out so early is because he is about the deepest researcher you will find. He is someone that digs and digs and digs and just keeps on digging. Of course, he was played by Christian Bale in the movie adaptation of "The Big Short" by Michael Lewis. If you remember, there's a scene where Bale is actually sitting down reading through the thousands of individual mortgages in each mortgage bond. Now that actually happened; Michael Burry actually read those filings.

That's the kind of investor that he is, and that's the reason I follow what he's doing and what he's saying. Not because he guessed the stock market crash once and profited heavily from it, but because he isn't reading CNBC articles all day and he isn't going to client lunches. No, he's the type of person that is reading SEC filings. He is digging around for the hard info to make informed decisions based on data.

That's also why my ears perk up when he comes out of the blue, seemingly randomly, and starts tweeting again about the imminent fall of the stock market. He was very active on Twitter earlier this year talking about potential inflation in the U.S. He was comparing the U.S. now to Germany back in the early 1920s when they experienced hyperinflation, and he was tweeting multiple times per day about this stuff.

Finally finishing his tweet storm with this: he said, "People say I didn’t warn last time I did but no one listened, so I warn this time and still no one listens, but I will have proof I warned." And then that was it. After that, he took down all of his posts, leaving nothing but a review of a local restaurant. So that was back in March, then nothing—radio silence for a few months. You know, I thought that was it. I thought no more Michael Burry on Twitter.

But now, fast forward to June, and out of nowhere, he just starts tweeting again. Now, this to me says that, you know, he clearly wants to say something, right? He wants to get through to us. He wants to send a message because, you know, he could have just left it at that. He didn't have to go back to Twitter. He's clearly got something to say. So anyway, I start following him again, and then he hits us with this: "People always ask me what is going on in the markets; it is simple: greatest speculative bubble of all time in all things by two orders of magnitude."

Well, not much left to interpretation there. And honestly, I'm kind of with him. But that's just what happens in this kind of economic environment that we're in at the moment. You know, with interest rates at zero, money is easier to access than ever before. But you know, it's still borrowed money, so you still have to give it back. So what do you do? You try and turn the borrowed money into even more money so that you profit.

Now investing is all about, you know, risk and reward. Actually, let's say that the other way around: investing is all about reward and risk. You know, in normal conditions, a lot of money just flows into risk-free bonds or blue-chip stocks. There, you get a decent reward, and you take on minimal risk. In the case of T-bills, you take on no risk.

But what's happening right now is that money is so cheap to access, these markets are flooded. They are just maxed out. Bonds aren't giving you a return anymore; blue-chip stocks are way overvalued, and thus the same outcome. So then the money starts flowing into other areas as investors still seek some sort of return. It starts flowing into riskier stocks, then they shoot up. Then even riskier stocks, and they shoot up. Now it's very hard to find any company at all that isn’t really overvalued.

But the interest rates are so low, money is so cheap, that people just keep going, and they start finding new ways to chase returns. Hamish spoke about this a lot on our most recent podcast. He was saying, you know, we’re seeing right now things like SPACs, where money is being invested in large quantities in shell companies before they've even acquired a business. That sounds pretty risky to me; you know, you don't even know what you're buying.

People are also shoveling money into things like cryptocurrency, which doesn't produce cash at all, and it's an asset class that conflicts with the interests of the institutions that set the rules of our society. So that's what's happening right now, and all this, as Barry says, leads to great speculation across the markets.

But wait, you thought that was it? There's more! Barry has also taken a particular swing at the cryptocurrency bubble. He says, "All hype speculation is doing is drawing in retail." That's retail investors, aka us plebs, drawing us in before the mother of all crashes. "FOMO parabolas don’t resolve sideways. When crypto falls from trillions or meme stocks fall from tens of billions, main street losses will approach the size of countries. History ain’t changed."

And I know some of you guys are in the crypto camp, and I know select few are in the meme stocks, so I may not be particularly popular in saying this, but you know I think Barry is right here. Now, of course, who am I to tell you what to do with your own money? You know, invest it however you like, I don't care.

But I think the main thing to do right now is, you know, if you're in the crypto space or if you're in a meme stock or something that's highly speculative, just be comfortable with potentially losing that money. You know, going with the mindset that you're having fun with your friends at the casino. You know, it can be fun to play some poker, but you don't throw your life savings down on the table, do you? You know, and going to the casino, you don't think that you'll come out with more money than you started with. You're just in there to have some fun.

I mean personally, my strategy is to just avoid these kind of bubbles. So I'm not touching crypto; I'm not touching meme stocks. But you know, if you are, then just be comfortable with the idea of coming away with nothing. And actually, as a follow-up to that last tweet, Michael Burry has just said this a couple of hours ago: he said, "The problem with crypto, as in most things, is the leverage. If you don’t know how much leverage is in crypto, you don’t know anything about crypto, no matter how much else you think you know."

And this goes back to what I was saying before about how borrowed money is inflating all asset classes right now—in a lot of cases, not just crypto. People are out there thinking, you know, they’re this investing genius because everything they bought has gone up. But they don't realize that most of the reason that it's gone up is because borrowed money is just being pumped into that market.

So it's worth considering: what happens if that money had to be taken out and repaid tomorrow? You know, if that happened, are you actually still holding a valuable asset? You know, if you own a great business pumping out huge cash flow, then yes, you are. If you're holding an asset that produces no cash, no cash flow at all, then there might be an argument that you aren't holding a valuable asset.

Anyway, that is what Michael Burry is saying right now, and I would honestly love to hear whether you guys agree or disagree. So please let me know down in the comment section below. You know, do you agree that we are in the biggest speculative bubble of practically all time in all markets? I'd love to hear your opinion. Do you agree that leverage could cause a huge downturn? Do you agree with Michael Burry's thoughts on cryptocurrency?

Anyway, let me know that stuff down in the comments section below. But overall, that will do us for this video. Thank you guys very much for watching. It's good to have Michael Burry back on Twitter. Not gonna lie, I do like—I mean, I don't agree with all the stuff that he comes out with. He can be a little bit out there sometimes, kind of like Elon Musk. Sometimes most of the stuff is like, yeah, I agree with you, but sometimes he just comes out with just some random, just random stuff.

But overall, I am very happy because I do like to follow what Michael Burry is saying, what he is doing. Of course, we saw in the 13Fs that, you know, he's short Tesla at the moment. He was making bets against the bond market, so he's anticipating inflation. So he's definitely making some moves at the moment.

And I happen to think—my kind of conspiracy theory—is the reason that he went dark on Twitter is because he was getting knocks on the door from a couple of agencies over in the States saying, "Hey, can you shut up?" I think the reason for that was because he had open positions against the market at the time. So I think maybe he just went quiet on Twitter so that there wasn't any chance that he might be questioned about market manipulation. But that's just one of my crazy conspiracy theories.

But anyway, guys, that will do me for today's video. I hope you enjoyed the video. Leave a like on it if you did or if you found it useful. Subscribe to the channel if you want to see more videos similar to this about stock market investing. And if you're interested in how I go about my investing, then you can check out Profitful. Links are down in the description below—two courses over there, one factor investing, one for passive investing. If you're interested in learning how I go about my investing, a full in-depth walkthrough, step-by-step, it's like an eight-hour course introduction to stock analysis. So if you're interested, check it out.

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