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I am Reed. I am 27, just an average dude. I have made tons of money mistakes in my 20s, and now I want to share everything I've learned to help you take control of your finances and your life. All right, so you might have seen that Michael Burry, the guy from The Big Short, the guy who called the 2008 housing crash before anyone else, he just sent out a massive warning to investors about the market.
And I mean, a massive warning. He has been tweeting a lot lately, dropping hints about Bitcoin crashing, Google falling apart, and the whole US stock market being in serious trouble. And I got to be honest with you, when I first read through all of his it kind of freaked me out. But instead of just panicking, I decided to sit down and really study what he is saying, and then figure out what a normal guy like me should actually do with his money.
So, let me break it all down for you, and I will tell you exactly what I am doing with my own portfolio right now. First, let us talk about Bitcoin, because that is where Burry started. He tweeted something really simple. He just said BTC patterns with a picture of a price chart, and the pattern he was pointing out shows that what is happening with Bitcoin right now looks a lot like what happened back in late 2021.
You had this big run-up, then a peak, then a drop to a support level, then another bounce up to a second peak, and then a big crash down. And if you look at the chart today, you can see something very similar happening. We had the first peak, we had the drop, we bounced, and now we are looking at that second peak and the downturn.
Now, most people would look at that pattern and think, "Okay, so Bitcoin might dip a little and then rocket up again." But Burry doesn't think that at all. In fact, he said something that really stuck with me. He said, "I think Bitcoin at 100,000 is the most ridiculous thing that sane people are sitting on television talking about Bitcoin.
They read it just casually. It is 100,000. It is down. Now it is 98,000. It is not worth anything. Everybody has accepted it. It is the tulip bulb of our time. It is worse than a tulip bulb, because this has enabled so much criminal activity to go deep under. And look, I get it. A lot of people love Bitcoin, and I am not here to tell you to sell or buy anything.
But I remember back in 2021 when I was 23 years old, I was seeing all these videos about crypto millionaires, and I legit thought about throwing my savings into Bitcoin. I had about 3,000 bucks saved up at the time, and I was this close to buying in. Lucky for me, I had just started learning about personal finance, and I realized I had no idea what I was doing.
So, I held off, and honestly, that was one of the best decisions I ever made because I watched so many people around me lose money when crypto crashed. I am not saying Bitcoin is worthless forever, but I am saying that when someone like Michael Burry, who has a track record of being right about these things, makes a comparison to Tulip Mania, I pay attention.
And he is not wrong about the criminal activity part, either. When Colonial Pipeline got hacked in 2021, they paid the hackers $4.4 million in Bitcoin. When JBS, the world's S largest meat processor, got hit that same year, they paid $11 million in Bitcoin. That is a real problem, and it is one of the reasons Burry thinks Bitcoin doesn't T have a solid foundation underneath all the hype.
Now, let me pause here and say something important. I am not a financial advisor, and I am definitely not a professional trader. I am just a guy who has made money mistakes and learned from them. When I was 20, I was living paycheck to paycheck using credit cards to buy stuff I couldn't afford and digging myself into a hole.
I had no savings, no plan, no clue what I was doing. So, when I hear about big market predictions, my first instinct is not to go all in or all out. My instinct is to slow down, think clearly, and make decisions that protect my future, no matter what happens. And that is exactly what I want to share with you today.
So, let S move on to what Burry said about Alphabet, which is Google's parent company. And this one really got my attention because I use Google every single day. Burry tweeted that Alphabet is looking to issue a 100-year bond, and he pointed out that the last time a tech company did this was Motorola back in 1997.
And if you know your history, 1997 was basically the peak for Motorola. They were a top 25 company in America by market cap and revenue. Their brand was ranked number one ahead of Microsoft. But within a few years, Nokia took over in phones, and then Apple destroyed them completely. Motorola stock dropped over 90% from its peak, and it took 21 years to recover.
Burry is basically saying the same thing could happen to Google. It could go from being this unstoppable giant to a mid-tier company worth a fraction of what it is today. And you know what? Honestly, I can see where he is coming from. Think about it. When was the last time you actually got excited about a Google product?
Gmail is fine, Google Maps is fine, but when was the last time they blew your mind? Meanwhile, AI tools like ChatGPT and Claude are changing the way people search for information. I use ChatGPT almost every day now for research and writing and brainstorming. I barely touch Google search the way I used to.
And here is the thing that Burry pointed out that really stuck with me. Google as search business is basically their golden goose. It is where almost all their cash flow comes from. But AI search is expensive to run. He said he runs queries that cost tens of dollars for a single inquiry. Google had those searches down to fractions of a cent.
So if AI replaces traditional search, Google's profit margins could shrink dramatically. And when you combine that with the fact that they're reissuing a 100-year bond just like Motorola did right before they crashed, you start to see why Burry is worried. Now a lot of people in the comments are probably going to say, "But read, Google's too big to fail." And look, I get that, but Motorola was too big to fail in 1997, too.
Nokia was too big to fail in 2007. Blockbuster was too big to fail. The point is no company is invincible. And when a company starts to believe it's own hype and stop innovating, that is usually when the trouble starts. I am not saying sell your Google stock today, but I am saying it is worth paying attention to these warning signs.
Next up, Burry talked about something that really shook me because it affects almost everyone who invests in the stock market these days. He talked about passive investing and index funds. He said that today over 50% of money in the market is passive money. That means people are just buying index funds and ETFs without thinking about what is actually in them.
And he said less than 10% of money is actively managed by managers who are actually thinking about the stocks in a long-term way. So here is the problem. When everybody is buying index funds, the money just flows into every stock automatically. Apple is big, so you get a lot of Apple. A random mid-cap company is small, so you get a tiny sliver.
Nobody is asking, is the stock actually worth buying? The money just flows in and everything goes up together. That works great when the market is going up, but Burry asked questions, what happens when people panic and start selling? When everybody pulls their money out of index funds, the fund has to sell everything.
Not just the bad stocks, not just the overvalued ones, but all of them. And because everything is so interconnected through passive flows, there is nowhere to hide. In 2000, when the dot-com bubble burst, the Nasdaq crashed, but value stocks, boring companies that had been ignored during the mania, actually held up or even went up.
There was a flight to quality. Active managers could hide in those corners of the market. But Burry is saying that escape hatch doesn't he really exist anymore. When the tide goes out, it all goes out together. And that is a scary thought for anyone who has their retirement savings in an S&P 500 index fund, which is like most of us.
Now, let me tell you what I personally do with my index fund investments after hearing this. I still have money in index funds because I believe in long-term investing and dollar cost averaging, but I also make sure I have an emergency fund of 6 months of expenses in a high-yield savings account. I have some money in Treasury bonds, and I keep some cash on hand.
I am not trying to time the market because I know I can't be. But I am trying to build a portfolio that won't be completely collapsed if the market takes a serious hit. And honestly, that is the most important thing you can do. Don't be put all your eggs in one basket, and don't be assume the market will always go up.
Burry also talked about some specific reasons why he thinks a crash could happen. He said the market is jittery over historic overvaluation, historic capital expenditures, and tiny AI revenue. Let me break that down in plain English, because this is important. Historic overvaluation means stock prices are very high relative to how much money these companies actually make.
Historic capital expenditures means these companies are spending insane amounts of money on building stuff, especially AI data centers. And tiny AI revenue means the money they be bringing in from all that spending is really small. So, you have high prices, high spending, and low revenue from an investor.
As perspective, that is the opposite of what you want. And Burry compared it to the dot-com bubble. During the dot-com bubble, there was a huge build-out of fiber optic cables. Companies spent billions and billions laying fiber and buying routers and building infrastructure. The market peaked in March 2000, but the capital spending actually continued for another year after the top.
Cisco grew revenue 55% in 2000 and 17% in 2001, even as the stock was crashing. Burry says we are in a similar situation now with AI. The spending is ramping up, but the revenue isn't here yet. And historically, the stock market peak happens before the capital expenditure even peaks. So, if he is right, we might be closer to the top than most people realize.
Now, let's talk about the specific stocks Burry has been warning about starting with Tesla. Burry tweeted, "Say what you want, but I am right. Tesla's market capitalization is ridiculously overvalued today and has been for a long time." He said this when news came out that Tesla was scrapping its Model S and Model X production to focus on building robots.
And he pointed out that the Elon cult was all in on electric cars until competition showed up, and then all in on autonomous driving until competition showed up, and now all in on robots until competition shows up. And honestly, that is a fair point. Tesla's story keeps changing. First, it was electric cars, then it was self-driving.
Now, it is robots and AI. Every time real competition shows up or exposes weaknesses, the narrative shifts. Tesla makes about $3.8 billion a year in profit, mainly from selling cars. That is a lot of money, but is it enough to justify a trillion-dollar valuation? You do the math. I actually had a personal experience with this.
Back in 2020, when I was still figuring out my finances, a friend of mine told me I should put all my savings into Tesla stock because it was going to the moon. I was so tempted. The stock had already gone up like crazy, and I felt like I was missing out. But I remember the lesson I learned the hard way from my early 20s, never invest in something you don't understand.
I had no idea how to value a car company, let alone one that claimed to be a tech company, AI company, energy company, and robot company all at once. So, I passed, and yeah, I missed out on some gains, but I also avoided the huge drops that happened later. That is the thing about FOMO. It makes you feel like you are losing money by not buying, but you only actually lose money when you buy high and sell low.
Next up is Nvidia, and I know this one is going to be controversial because everyone loves Nvidia right now. Burry actually shorted Nvidia stock, which means he is betting it will go down. And he had some interesting things to say about it. He said Palantir and Nvidia are the two luckiest companies on the planet.
Neither produced a product for AI, but they are the two poster children for AI. Nvidia was a computer graphics chip company. He said he actually knew the CFO and went long the stock back in 2015 or 2016. He said Nvidia got lucky once with crypto mining because crypto mining needed GPUs and then AI came along and it was the same deal.
The GPU was T designed for AI. It was built for gaming and graphics. It just happened to be the right architecture at the right time first for crypto and then for AI training. Burry's argument is that Nvidia's dominance is T the result of visionary strategy. It is the result of being in the right place twice and the market is pricing the stock like it was all genius.
Now I am not going to tell you Nvidia is a bad company because clearly they make great products. But when a stock has gone up 200% in a year and everyone is calling it the greatest investment of all time that is usually when I get nervous. I remember thinking the same thing about Bitcoin in 2021 and about Tesla in 2020.
When the hype is that loud it is usually priced in and if the AI revenue doesn't T materialize as fast as people expect that stock could take a serious hit. Then there is Palantir. Burry is even more bearish on this one. He said Palantir was not an AI company. When chat GPT came out he said they basically put an AI cover on the applications they were already selling and called it AI.
But that is what every company is doing now. He also pointed out a technical chart pattern called head and shoulders which is a classic signal that a stock might crash. He put a support level around $80 and a landing level just over 50 with Palantir trading around 150 bucks at the time. He was suggesting the stock could drop by more than half.
I've never owned Palantir so I don't have a personal story here. But I will say this when a stock has no profits and trades at 100 times revenue and everyone is calling it the next big thing you have to ask yourself what happens if the hype dies down. What happens if a competitor comes along with a better product.
What happens if the government stops handing out huge contracts. These are the questions most people don't T ask because they read too busy watching the price go up. So after all this doom and gloom you are probably wondering is there anywhere safe to invest. Burry actually hinted at three places he sees opportunity.
The first one was Hong Kong stocks. He responded to someone who said JD stock was going down and no one would ever buy them and Burry just said Hong Kong on sale. So, he sees value in beaten-down Chinese stocks trading in Hong Kong. I don't see know enough about Chinese stocks to have a strong opinion on this, but I do know that buying things that are out of favor is a classic value investing move.
The second place was gold. Burry said he has had gold since 2005. That is almost 20 years of holding gold.
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