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Michael Burry needs no introduction. Over the 13 years that Burry managed money, he averaged a return of over 26% per year by predicting short term events. Burry foresaw the dot-com bubble, the 2008 recession, the rise of Gamestop, and is now predicting the largest market crash in history. The purpose of this video is not to spread fear, but to inform you about Burry’s opinion and how you can hedge your portfolio against the worst outcome. Unlike most other market crash videos, this video will not tell you to sell all your stocks. We’ll actually cover an extremely asymmetric bet that Burry is initiating with low risk and high reward.
Almost every investor knows that the market valuations are at all-time highs and that a crash is inevitable. Michael Burry tweeted about how “the S&P 500’s nominal PE ratio is 26, and Shiller’s CAPE is 39.23. Neither necessary nor sufficient, but S&P’s PE was 18 before 2008-2009’s 58% crash, 20 before 1929-1932’s 80% crash, and 19 before 1973-1975 48% crash. How? Earnings fell 91% in 2008-9, 73% in 29-32, etc.” The S&P 500’s nominal PE ratio represents the price to earnings ratio of the S&P when not adjusted for inflation. Even when going back to the 1880s, the S&P’s current PE ratio is clearly elevated to historical highs. Unlike the S&P 500 nominal PE, the Shiller cyclically adjusted PE ratio, or CAPE ratio, adjusts the PE ratio for inflation over the past 10 years. The Shiller CAPE ratio has risen all the way to 39, which is incredibly high. The only other time the Shiller PE ratio passed these levels was during the dot-com bubble, where the Shiller PE ratio peaked at 44. Everyone knows that the market is overvalued, but nobody knows decisively when the market will crash. Michael Burry believes he knows exactly what is going to happen. The Federal Reserve has been printing substantial amounts of money over the past 18 months. Inflation has continued to take off since then, as the CPI inflation rate recently came in at 6.2% in October. The Fed has touted this inflation as transitory, but Burry found a statistic that contradicts that. Burry stated, “inflation...it’s not just reopening anymore, folks. Not that anyone could have seen this coming.” He then attached a graph that categorized the inflationary factors into components. The reopening components have clearly been shrinking as energy and non-reopening components are increasing. This is a sign that maybe inflation isn’t transitory like the Fed claims it to be. Inflation is continuing to increase despite the reopening demand already disappearing. While inflation is taking off, American wages are not still not catching up to consumer prices. Burry explained how “American real wages - adjusted for inflation - are down 2.2% since Jan 1. Seems the ONLY truly meaningful thing that’s down this manic, manic year. Inflation is a massively regressive tax. Never forget it.” Inflation is hurting the middle and lower class the most right now. The reason why is because inflation is simply taxation but in a different form. When it comes to taxes, the government reduces our wages by taxing our income, and therefore reducing our net wages. Instead of outright taxing citizens, the government is reducing our wages by printing money. Inflation practically has the same end result for lower to middle class citizens. Both taxes and government printing reduce our purchasing power, but inflation just does so in a more subtle manner. On the contrary, the majority of the upper class are often educated about how to protect their wealth from inflation with assets. With that being said, we have seen an influx of new retail investors over the past 12 months, so that is beginning to change. Michael Burry believes that the influx of new investors has led to immense speculation. The most obvious example of this is Rivian, a pre-revenue EV startup that recently crossed a $160 billion valuation. I am a supporter of EVs and believe that ICE will inevitably get disrupted, but even I was shocked by the valuation of Rivian. Burry believes that Rivian is the exemplar of speculation and that the biggest crash of all time is coming. He tweeted, “more speculation than the 1920s. More overvaluation than the 1990s. More geopolitical and economic strife than the 1970s.
Join Interactive Brokers here: https://www.interactivebrokers.com/mkt/?src=casgainsy&url=%2Fen%2Findex.php%3Ff%3D1338
Casgains's Recommended Investing/Business Books: https://docs.google.com/spreadsheets/d/1DI8ca5GLEfQXU34uplO3E3w6YHXbvMbK1JR-GxXBeUc/edit?usp=sharing
My Second Channel:
https://www.youtube.com/channel/UCPkDot_lMk7HB_c68HubbUg
Twitter: https://twitter.com/casgains
Instagram: https://www.instagram.com/casgainsacademy/
Contact for business inquiries only: casgainsacademy @gmail.com
Michael Burry needs no introduction. Over the 13 years that Burry managed money, he averaged a return of over 26% per year by predicting short term events. Burry foresaw the dot-com bubble, the 2008 recession, the rise of Gamestop, and is now predicting the largest market crash in history. The purpose of this video is not to spread fear, but to inform you about Burry’s opinion and how you can hedge your portfolio against the worst outcome. Unlike most other market crash videos, this video will not tell you to sell all your stocks. We’ll actually cover an extremely asymmetric bet that Burry is initiating with low risk and high reward.
Almost every investor knows that the market valuations are at all-time highs and that a crash is inevitable. Michael Burry tweeted about how “the S&P 500’s nominal PE ratio is 26, and Shiller’s CAPE is 39.23. Neither necessary nor sufficient, but S&P’s PE was 18 before 2008-2009’s 58% crash, 20 before 1929-1932’s 80% crash, and 19 before 1973-1975 48% crash. How? Earnings fell 91% in 2008-9, 73% in 29-32, etc.” The S&P 500’s nominal PE ratio represents the price to earnings ratio of the S&P when not adjusted for inflation. Even when going back to the 1880s, the S&P’s current PE ratio is clearly elevated to historical highs. Unlike the S&P 500 nominal PE, the Shiller cyclically adjusted PE ratio, or CAPE ratio, adjusts the PE ratio for inflation over the past 10 years. The Shiller CAPE ratio has risen all the way to 39, which is incredibly high. The only other time the Shiller PE ratio passed these levels was during the dot-com bubble, where the Shiller PE ratio peaked at 44. Everyone knows that the market is overvalued, but nobody knows decisively when the market will crash. Michael Burry believes he knows exactly what is going to happen. The Federal Reserve has been printing substantial amounts of money over the past 18 months. Inflation has continued to take off since then, as the CPI inflation rate recently came in at 6.2% in October. The Fed has touted this inflation as transitory, but Burry found a statistic that contradicts that. Burry stated, “inflation...it’s not just reopening anymore, folks. Not that anyone could have seen this coming.” He then attached a graph that categorized the inflationary factors into components. The reopening components have clearly been shrinking as energy and non-reopening components are increasing. This is a sign that maybe inflation isn’t transitory like the Fed claims it to be. Inflation is continuing to increase despite the reopening demand already disappearing. While inflation is taking off, American wages are not still not catching up to consumer prices. Burry explained how “American real wages - adjusted for inflation - are down 2.2% since Jan 1. Seems the ONLY truly meaningful thing that’s down this manic, manic year. Inflation is a massively regressive tax. Never forget it.” Inflation is hurting the middle and lower class the most right now. The reason why is because inflation is simply taxation but in a different form. When it comes to taxes, the government reduces our wages by taxing our income, and therefore reducing our net wages. Instead of outright taxing citizens, the government is reducing our wages by printing money. Inflation practically has the same end result for lower to middle class citizens. Both taxes and government printing reduce our purchasing power, but inflation just does so in a more subtle manner. On the contrary, the majority of the upper class are often educated about how to protect their wealth from inflation with assets. With that being said, we have seen an influx of new retail investors over the past 12 months, so that is beginning to change. Michael Burry believes that the influx of new investors has led to immense speculation. The most obvious example of this is Rivian, a pre-revenue EV startup that recently crossed a $160 billion valuation. I am a supporter of EVs and believe that ICE will inevitably get disrupted, but even I was shocked by the valuation of Rivian. Burry believes that Rivian is the exemplar of speculation and that the biggest crash of all time is coming. He tweeted, “more speculation than the 1920s. More overvaluation than the 1990s. More geopolitical and economic strife than the 1970s.
I tend to agree with the big short guy. Seemed all emerging technologies had to crash to skim off "scum". Not saying Tesla is, but it will take its toll.
The comments on this video are very telling – when everyone is stammering in 1 direction, you might be better placed considering a contrarian position.
Sure, I’m not a fan of a click bait just like everyone else, but recognise the YT ecosphere almost requires it to gain traction.
Having been in the financial industry for 10 years, I can say with reasonable confidence that Casagan understands and explains finance topics better than 99% of creators. In fact this is probably one of a handful of channels I watch seriously (others include Patrick Boyle, Tom Nash, and others I don’t recall off hand).
Talking about Tom Nash: I respect a lot of the stuff he puts out – it’s sound – but his recent obsession with crapping on anyone who even marginally disagrees with him on Tesla is concerning. That being said, I’m able to separate the logical takes from the …. emotional?… ones, so all good.
2 more points:
– people who crap on Burry are hilarious: 1) he owes no one on Twitter or elsewhere anything, so he can talk crap or troll all he wants 2) just because you’re only familiar with a few big publicised wins he’s had doesn’t mean he’s not grinding away and making money in a controlled/risk managed way.
– I saw a comment along the lines of ‘I keep losing money on your stock picks’: are you joking? If you drop your hard earned money into a security someone on the internet mentions without a larger overal strategy, and not taking your existing book, etc into account, your hard earned money will likely be a donation to a market maker, hedge fund, or an investor who knows what they’re doing
The best investment one can do right now is investing on forex trading though stocks and crypto are good but ever since I swapped to forex I've seen so much difference.
An 80% crash, yeah in the fossil fuel industry, thats the biggest bubble out there. Take coals history over the last decade as a lesson. I'm holding and continuing to buy, been long term in view point a crash is just a buying opportunity.
Companies riding on the tail feathers of Tesla are at crazy valuations, people that missed out on Tesla trying to get on the train to late.
Funny how only a ten year period was shown on Burry's returns and not the last decade, wonder why that was.
Shorting 30 yr bonds could be nasty if we go into deflation long term which is very likely.
Burry's purposely misleading people about why Elon Musk is selling his shares or he is a bit simple. Maybe a bit salty with all the money he's lost shorting Tesla and most taking their cash out of his company.
Crypto I've kept away from, to much risk in how governments will seek to control them. So not a clue what will happen there, but in the end crypto will be used in some form.
I couldn’t care less about Tesla crashing 80+% short term because it’s gonna OWN the Decade regardless. Screw everything else that gives dividends 😅
Inflation is a tax levied by private debtors? That doesn't make sense. It's more logical to think of it as forced debt forgiveness.
Burry’s implication that Elon is trying to find excuses to sell stock in order to raise cash is misinformed at best, and sadly mistaken at worst. Elon doesn’t give a damn about cash or diversification. This belief alone disqualifies most of Burrys other opinions and assertions in my mind.
Isn't it a bit reductive to call inflation a tax? Imagine if you had 300k in student loans, you'd probably welcome inflation, no?
Burry just wants to short Tesla one more time!
He is a has been! He try’s to scare stock holders to manipulate the stock prices! His predictions on Tesla stock has lost him a fortune but he’s like a dog with a bone and can’t stop shorting Tesla . Or you could just buy and hold Tesla! I have doubled my investment in 18 months! Tesla is just getting started! Don’t bet against Elon or you will loose! IMO 💎🙌😎Tesla’s
Casgains Academy: “the purpose of this video is not to spread fear”
also Casgains Academy: puts “stock crash” in every other video title for the past year
Okay this is nothing new it's just a reposting of something that's already been done before. Why is it showing 4 hours new?
Micheal Burry every single month: "The ENTIRE Stock Market Is Collapsing" like Elon says he is a broken clock.
Comparing the PE ratios of the year 1880 to today's values is nonsensical. Of course they are higher. We are living in a different world where innovation happens a lot faster for once. And the stock market is also more available to everyone today as well.
We know theres an market crash comming you have been saying it for soon a year now, still not selling my Tesla shares 😛
Why is that the next crash been coming since the last crash in march 2020. I`m not sure why Burry hates tesla and Electric vehicles so much, when clearly they are the future and consumers cant get enough of them. Why isn't he shorting GM, Ford, VW , oil companies ect. If crypto is so dangerous, why doesn't he short it. This guy is a full of shit. Does he really think Tesla stock price will fall by 90%. He needs to get off the cool aid. The new EV tax credit is coming soon where EV`s are going to explode. Just my opinion about a washed up short seller.
The fact he closed his short on Tesla says everything.
Of course everything is pumped, they printed 40% of cash in about 2 years what do you expect? The question is if you manipulate the cash reserves so much valuation metrics have to be adjusted as well.
At some point eventually a crash will come one have just predict every few months…
If Michael Burry predicts market crashes every other day he will be no more than 24 hours off when the next correction happens. Accuracy by volume.
I don't trust any video that sounds like a robot is talking, do-you-understand-? Rivian is up there because the people that missed Tesla (in their minds) do not want to miss the boat this time. Tesla is on sale now! Swallow your ignorant pride and jump on the Tesla bandwagon and it will secure you and your families future.
He just didn’t get the psychology of Tesla buyers, both cars and stock… it’s about making it better… not making profit! Ironically Tesla is a profit machine!
we all know it's coming at some point….yes he is a broken clock. I can say the same thing everyday. which day will it be. Take China!
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It's a completely different world now. He is dead wrong. TSLA will continue to grow at a rapid pace. I can't say the same for other stocks. Elon has positioned himself to outlast and outperform the markets ina great way.
Even a blind man can see that markets are going to tank, the only question is When. People like Burrey, Schiff, Dalio, Rickets and others have taken a lot of heat for their dire forecast but they will be right and I believe it very very soon, it may have already started. Just because some can see a tsunami coming before others doesn’t mean the tsunami isn’t coming
Correction: In the first chart, the red line is the S&P and the blue line represents Burry’s gross returns