As of right now, michael burley is famous for two actions he's done over his lifetime. The first action is being part of the big short and making tons of money by shorting the housing market before the 2008 recession. The second more recent movement was when he bet big against tesla. Yet behind this a lot is going on, including a vast amount of large bets on certain asset classes and bury actually deleting his twitter account in this video.

I will cover why michael brewery is warning of the potential of a huge stock market movement and whether i personally believe there's any substance behind these predictions. Welcome to cast games academy if you're new to the channel, please consider subscribing for more content like this and let's get right into it. A lot of you likely know michael burry, for shorting the housing market before the 2008 recession, but he's actually been in the investment space for much longer than 2008. In fact, he's actually done quite well in the previous years that he managed to fund scion capital.

As you can see in this image that dates back to the first quarter of 2008, michael burley generated massive returns before the 2008 housing bubble. There are four columns here the year, the gross return, the net return and the s p. 500. The gross return is a return he had before his performance fees and the net return is his return.

After the performance fees, even net of fees, michael burrie, was able to beat the market most of the time. In the end, he returned 472.4 since inception of his fund, which was much more than the s p 500. Corresponding return of just five percent. Clearly, michael bury is fantastic at spotting and betting on short-term trends, which is why i believe we should all at least pay attention to what he doesn't says now.

You might think that michael burry's latest bet against tesla was because he doesn't believe in tesla stock as a long-term investment opportunity. However, the truth is that michael's bet against tesla was simply just one bet out of many on a major stock market movement with that being said, let me explain what i mean by that, unless, if you've been living under a rock you'd know that the us government Has printed a substantial amount of money over the past few months with this massive increase in the money supply michael bury believes that there is a huge macroeconomic trend occurring right now, which ultimately ties down to two words: speculation and inflation in order to gain some context. Clues as to what macroeconomic trend he's betting on, we need to go back to what happened with michael bury's twitter drama. If you hadn't, heard of that before bury, was putting out tweets in early 2021 that ended up leading the sec to pay him a visit because of this, he deleted his twitter account.

First of all, to start with speculation. He believes that the speculative stock bubbles ultimately see the gamblers take on too much debt. In other words, investors are purchasing too much stock with loans, which is better known as margin when a lot of investors are investing on margin. A stock market crash is inevitable due to margin calls a margin.

Call is when investors on margin are forced to pay back their loans when their margin account ends up being low on funds. When this happens, these investors have two choices: to sell stocks in order to cover the loans or to deposit money in their account. Both choices negatively impact the market. If investors sell stocks, the market goes down, and if investors have to deposit money in their account, then they don't have as much money to buy stocks which lowers the buying activity.

The problem is that when this happens, a cycle happens, the market drops lower, which leads more investors and margin to get margin. Calls when more investors get margin calls. Then the market drops lower, which leads more investors to get margin calls leading the market to drop even lower. As you can see, more margin means that market crashes become exaggerated.

Even a sliver of bad news could drop the market by a significant amount by starting this cycle. Michael brewery believes that this situation demonstrates how the market is dancing on a knife's edge buried then went on to say that people say i didn't warn last time. I did, but no one listened, so i warned this time and still no one listens, but i will have proof i warmed michael bury also went on to change his username and profile picture to cassandra. By doing this, brewery is referring to a priestess in greek mythology who had a curse where she was forced to share true prophecies, but nobody ever believed her.

The other factor that michael bury is concerned about is inflation back in february, bury stated that the us government is in fighting inflation with mmt teen's policies, risk debt, gdp m2 increase, while retail sales, pmi stage 5 recovery, trillion more stimulus and reopening to boost demand as Employee and supply chain costs skyrocket, paradigm shift that might have sounded like nonsense, but there's a lot of meaning packs behind these three sentences. First, let's start with the us government is inviting inflation with its mmt team's policies. Mmt stands for modern monetary theory, which is an economic theory that governments who control their currency, like the u.s, should print money in order to pay for government spending. So, in simpler words, michael brewery is stating that the government printing is going to create inflation in the following sentence.

Berry mentions how this brisk debt gdp m2 increase, wow retail sales, pmi stage 5 recovery. Firstly, the u.s debt is increasing relative to gdp and doing so abruptly to explain the next part. M2 is a measure of money supply that is included in the calculation for money. Supply brewery is saying that the government is boosting the money supply, while retail sales in the pmi, also known as the purchasing manufacturers index are experiencing a v-shaped recovery.

In other words, the government is printing money, while the economy is already recovering in the last sentence. He explains how the reopening of the economy and stimulus money are both boosting the price level of consumer goods. As a result, wages are on the rise, as supply chains are struggling to meet demand. Now you might be asking.

What will this all lead to michael bury hinted on twitter? This could lead to the black swan event of hyperinflation is when there is excessive inflation in the government's currency. Typically, a currency would have to depreciate more than 50 percent per month for the situation to qualify. As hyperinflation michael berry explained how, throughout these years, the structure was quietly building itself up for the blow, germany's inflation cycle ran not for a year, but for nine years, representing eight years of gestation and only one year of collapse, in other words, the process of inflation. With the us dollar could be fast and stretched.

As you can see in this graph, the german market experienced massive inflation in the early 1900s. The y-axis starts with the range of 1-10 german marks and eventually goes all the way up to 1 trillion marks. By the end of 1923., of course, the chances of hyperinflation are likely low and bury is only using it to show how inflation can be a multi-year process. Now, after knowing these macroeconomic trends, michael brewery is taking advantage of them by making huge bets, which of course includes tesla in michael bury's, most recent 13f filing with the sec.

He revealed his massive bet on the two factors we talked about earlier: speculation and inflation. You may have seen on the mainstream media of michael, bury purchasing tesla put option contracts for 530 million dollars of stock. However, there's plenty of other components of his macroeconomic bet. As you can see, he purchased put options on 171 million dollars worth of tlt, which is a treasury bond etf.

This signals how he's predicting for either higher inflation or the federal reserve being forced to raise interest rates. This is because, when interest rates go up, bond prices must go down. So essentially, his put option on tlt is betting on higher interest rates. Additionally, we can see how he has call options on google facebook, a fund that shows treasury bonds, craft heinz cvs and netapp.

On the bear side, he also purchased put options in the russell 2000 growth etf, which trades under the ticker symbol of iwo. So, given all of this information, you may be wondering what burri is actually betting on. First of all, it's important to understand that these are short-term bets. Michael's bet against tesla is a short-term bet on the stock price, not the long-term business.

The reason why he chose tesla is somewhat obvious. Tesla is a stock that has a lot of investors that are using margin and, as i discussed earlier, when a lot of investors are on margin, the short-term downside risk is higher due to the downwards margin cycle. Additionally, tesla is the model of the entire growth investing audience and if interest rates rise, the cost to borrow money increases as a result, since tesla is a growth company, it would have to borrow money at a higher cost to grow. Personally, as you should all know from my previous videos, i'm invested in tesla stock for the long term, and i don't see michael burry's bet as an action that goes against my investment philosophy.

After all, if tesla stock goes down in the short term, i will simply dollar cost average for long term gains. For example, when tesla stock dropped in march of 2020 during the pandemic, short-term short sellers could have made a significant amount of money. On the other hand, long-term investors who purchased the dip in tesla stock in the pandemic also made substantial amounts of money when it comes to bury's options on iwo, tlt and tbt, the trend is quite obvious. Burry is betting on higher interest rates.

He owns put options on iwo and tlt, which are both etfs that trend downwards. If interest rates go up additionally, he owns call options on twt, which is an etf that shorts treasury bonds and goes up. If interest rates go up going forward on the list, you might have been surprised to see that michael brewery owns call options on a lot of consumer staple stocks, even though he is predicting a market crash due to rampant inflation. One of the reasons for this is because of the way his fund works.

Michael bury is a hedge fund manager, and hedge fund managers typically use the same strategy to try to beat the market. They short the stocks that they believe have the highest chance of going down and that bullishly on the stocks that they think have the greatest chance of succeeding. By doing this, hedge fund managers lower their risk by using bullish and bearish bets to hedge against each other. So that when the overall stock market goes up or down, it doesn't matter as much since they are closer to being market neutral.

In this case, michael brewery has called options on many consumer staple companies like kraft, heinz and cvs. This is likely because he believes that these companies are inflation, resistant craft times and cvs are not borrowing money to grow and they can simply raise prices to account for inflation. Not only that, but wages are signed by contract, so they don't catch up immediately with consumer staples. That way, the cost of goods is still roughly the same for consumer staples, even while prices increase, which means that profits will increase disproportionately.

Additionally, bury also made a large bet on call options for google and facebook, which accounted for over 325 million dollars worth of stock. In those two stocks, the pattern i see with those two companies is their advertising platforms. Google and facebook are both well known for advertising, which is inflation hedged. This is because, when profits increase disproportionately for companies like craft times, advertising budgets increase when advertising spending increases advertising profits increase in the short term for google and facebook.

Ultimately, there could be another movement going on here with google and facebook, so if you have any ideas, feel free to leave them down below. So now that we went through michael brewery's, massive bet, let's talk about what i'm personally doing and what you can do in this situation during this changing market climate. There's a lot of uncertainty about what is going to happen for all we know, michael bury, could be wrong about this entire movement. After what happened in 2008, many often say that michael brewery is often too early and, like the famous economist john maynard keynes, has said, the markets can remain irrational longer than you can remain.

Solvent. Bury's prediction for the 2008 crash was three years premature, and the same occurrence could be happening right now with that being said, as a long-term investor who is optimistic about the u.s economy in the next few decades, i'm personally reacting to the situation in a way that Sets me up for the long term, essentially, what i'm doing is holding my positions in some form of gold, crypto stocks, commodities and cash, so that i'm prepared for anything in the short term. However, all of it ties down to being a long-term bull in the stock market. If inflation is rampant, i'll sell my golden crypto to purchase stocks.

On the other hand, if the market continues to go up in the long term, i will already have a relatively large amount of money in stocks and, lastly, if predictions for inflation are overblown now simply purchase stocks with my cash position, this is just my perspective on What i'm doing as a long-term investor, michael burry, is a short-term investor and i watch him speculate on what could happen in the short term accordingly. However, in the end, i still believe that the u.s economy is going to come out strong. If you decide that you're a short-term investor, i would warn you to not be too risky and only invest with money you can afford to lose, especially with options trading. There are many constraints with options, including time decay implied volatility delta and much more now, as always, keep in mind that i'm not a financial advisor, and you should always do your own due diligence here on this channel.

I will continue uploading investing content on how to best deal with these changing market climates. I hope to provide as much value to you guys and set up your portfolios, who have substantial returns long term. If you can support the channel and also want to receive insight on how i am personally navigating my brand new 25 000 portfolio towards one hundred thousand dollars check out my patreon in the description below. Thank you for watching.

As always, and if you enjoyed this video, please hit the like button and subscribe and i'll see you in the next one.