Michael Burry He became famous for being one of the few people – if not the only one – who predicted the subprime mortgage crisis. That prediction made him a myth for an entire generation of analysts, investors and influencers.
Unfortunately, his latest prediction has led him to have to retire from fund management, at least temporarily. Your bet against the market has not worked and Investors have turned their backs on him.
Regardless of whether on this occasion he was wrong and did not adequately assess the importance of the arrival of artificial intelligence (AI) to the productive fabric, its withdrawal is a signal to take into account.
Burry insists that the prices of large technology companies are excessive
Because Burry is not one of the many flip flops that is on the networks trying to attract attention by creating fear to get followers, views, likes or sell books.
He is a serious and professional manager, who He has always put his money where he has put his words.which cannot be said about all those people who give their opinion from the stands without taking any risk. Including missing the climbs.
Burry, who became famous thanks to the movie The Big Short, insists that the prices of large technology companies are excessive, which led it to make a whole series of investments contrary to what has subsequently been the evolution of the market.
This is what is known as putting on short (short) and, if you go short an asset, You win if it goes down, but you lose if it goes up.
Burry has always shown unusual greatness and professional honesty
Burry has always displayed unusual greatness and professional honesty. For a start, with one, nothing to do with the analysts and strategists of the many Spanish financial entities, If you ask them about their vision of the market, they always say “you have to diversify”, which is the same for a broken one as for a torn one.
Then They limit themselves to imitating what the stock indices doenter the typical variable income percentage for each profile and live, which is two days.
Burry at least did his job and earned the management commissionalthough on this occasion its downward-biased style was the least appropriate given the arrival of a new technological and industrial revolution such as AI.
Since I founded Nextep (in July 2019), My view of the market has been just the opposite of Burry’s. With the only exception of the year 2022 and a certain accumulation of liquidity before Trump’s tariffs (mostly because he had announced it in his election campaign).
AI represents one of the greatest technological and industrial revolutions in history
Aside from those exceptions, I have not only been bullish, but I have insisted ad nauseum that AI represents one of the greatest technological and industrial revolutions in historygreater than the steam engine or even electricity.
And, like all these revolutions, it triggers productivity and, consequently, business benefits. And they are opportunities that must be taken advantage of and have the greatest possible exposure to equities, which is what we have recommended to our clients.
In our opinion, there are still things missing before we enter that period in which we must begin to seriously consider withdrawing from the market and moving to defensive assets.
But the fact that someone serious like Burry throws in the towel is a fact that has much more weight than if one of those who have been announcing the bubble and the crisis every day for years does so. And it is noted. Because it’s when everyone changes sidewalks that they increase the probabilities of trend change.
It is when everyone changes sides that the chances of a trend change increase.
There is another lesson, this one more long-term, and it would be good for millennials and Generation Z to take note: Bears win battles, but bulls win wars. Starting in 2009, a change occurred that, 16 years later, is still valid, and it is the insistence that there is always a bubble about to deflate and a crisis about to explode.
The consequence is that many investors have missed a long bullish period, only interrupted by Covid-19 – which obviously no one predicted -, the difficult 2022 and the tariff scare.
The new generations have been able to verify that the markets go down, but also that they go up. That you do not have to be bearish or bullish as if you were from Real Madrid or Barcelona, but it will depend on the factors and drivers that are moving the market on each occasion.
Burry doesn’t retire because he’s bad at what he doesbut for being too influenced by a bearish view of the markets.
You don’t have to be bearish or bullish as if you were from Real Madrid or Barcelona
Burry will finally get it right. In our opinion, their mistake has been not valuing the arrival of AI and the timing. Most likely AI ends up in a big bubble with terrible consequences for the stock marketsbut we won’t be able to say until the valuations are similar to those of, for example, March 2000.
Or when excess credit occurs (to AI companies), similar to those that led to the subprime crisis. But, for now, Big Tech makes a lot of money and the banks’ credit exposures are not of such low quality.
Thank you Michael Burry for teaching many to be bassists -something as important as knowing how to take advantage of stock market increases-, what a shame that there wasn’t someone like you who taught them to also enjoy bullish markets.
***Víctor Alvargonzález is a founding partner of the independent financial advisory company Nextep Finance.