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Hey, welcome back to Two SuperGuys for Stock Sound, Dylan. And I'm Vinnie. And we're going to look at Michael Burry actually released he's kind of doing these weekly now explanations on his shorts, what he's thinking, that kind of stuff, and specifically Nvidia. Now, the reason why I want to look at this is now that he's not like an official hedge fund manager, we get a deeper insight into what's actually happening, and it's from him, it's not from news reporters, which he hates, as we did multiple videos on it.
Um it's kind of cool to see his line of thinking, and he just released something on his updated short with Nvidia, why he's still thinking, "Hey, this is the time." All this stuff, I get it. Clock's going to be right twice a day. I understand. Uh it is it's interesting to to hear his line of thinking cuz the way that he proposes the argument, it seems like, "Yeah, no, this is not good." Um now granted, he's done it a couple times, but it really doesn't seem good.
Um so, here's the Qs. Just real quick, I just want to show you this insanity. This is a weekly chart. Let me uh weekly chart going back 10 years. We are here on the lowest possible volume during all of this, which that makes perfect sense. Um I am going to talk about the volume of the Qs because his entire thesis on Nvidia is built around volume.
So, anyway, here's this rally where it's just absolute Like it's the classic needle formation. Dude, like I don't even understand. I don't I I don't get this one. I Obviously, I'm wrong. I'm you know, but market's correct, I'm not, but it it seems weird. Um here's the Nvidia um crash stock options volume, so I'm going to I'm going to go to the description first, and I'll go back to that chart.
But, he says, "Looking at that chart, I noticed that the volume has really fallen off, not dissimilar to the steady trending lower volume conditions before three significant crashes. So, that's the red, green, and yellow he has them marked. I'll go back to that. So, each crash was set off by demand worries.
So, you had the 2021 crash pre-AI FOMO, but there was crypto mining demand where during the the call the video blamed crypto mining demand. Um and then uh there was COVID crash, there was another one. I don't remember what it was. But, basically classic volume trending lower as a stock rallies could indicate everyone that can buy the stock has bought the stock.
Now, there is an absolute opposite thesis of this, which I'm also going to show to be fair. But, when you see a rally on really low volume, that is the typical belief. Everyone that has that can buy the stock has bought the stock and no one's selling, hence lower volume. Yeah, limited by the price. Yeah.
So, let me move my face here. Boom. What else we got up here? So, you can see you have the crypto crash uh September 2018. You had a 56% drop from the peak. Then, you had that SPAC NFT. Who would have thought NFTs would crash, huh? I thought that was I thought that was going to be here forever, right?
Yeah, yeah. I mean Monkeys in space. You draw a picture of a gorilla and you sell it for $20,000. That's the genius business plan. Yeah, I love it. Man, also have you ever taken the time to look back on our videos when we criticize something? Oh, the comments that people were like ripping us apart. Yeah.
Yeah. Cuz we did I did I personally did multiple videos on NFTs and I'm like, this is the dumbest I don't know how to short this, but if I could I I mean this is the stupidest thing I've seen. I got ripped apart in those, dude. I don't have I don't want to be mean and like comment like, "Hey, where are you now?"
Um Yeah. They're still there. They're It's pretty wild. It's just like the Nikola one, right? I'm still getting ripped apart on this and the company is just dead. But yeah, and then the deep seek tariff, that's kind of that wasn't Nvidia specific. That was all stocks as soon as that tariff thing. But you can see you have declining stock options volume crash, declining crash, declining crash, and then we're right here declining.
So that's that's his logic, okay? Um Yeah, but the baseline looks very different from those, too. So I I don't know. I see what you're saying. It's just that the the volume looks so much higher back then. Yeah, I would agree. Actually, I'm going to show you that. I do agree with that. Um here, this is also in his thing, the 50-day moving average for Nvidia volume is at its lowest since 1999.
So below the share count is green. Shares outstanding is not a reason for falling volume, easily seen in a white in the lower panel. So basically, you can see the Nvidia US equity volume and then the 50, it's down to the lowest since this actual level here. Um that it was definitely a little bit surprising to me, especially when you have the shares outstanding like this.
Um yeah, it this one threw me. This is the one where I was reading it cuz I had the same remark with you where if you draw a line on a chart, you can kind of make it do whatever you want with certain studies, right? That's why I don't believe in a lot of these. I have a tough time with this one compared to this one.
That this is not I again, anyone can draw a line and when you have so much data squeezed so close together, you're like, "Oh, yeah, I guess that kind of works." Yeah. So I do agree with you. This one this one weirded me out a little bit. This one was like, "Oh, wow, that's that's actually kind of insane."
It the company has changed a lot though since then, too, cuz now it's like the largest market cap in the world, right? It It's now largely owned by index funds, so it is not going to have that same volatility it would have been in its earlier days. I would still think when you're going from like a $1 trillion company a $5 trillion company, you'd have a lot of volume.
Yes. Yes. But it didn't. That's That's the That's the odd part. So, this was his blurb here. So, market activity is quiet because an extreme consensus has formed regarding Nvidia. And the There's a dearth of hedging activity as puts are kind of cheap for this stock specifically. That alone does not mean the stock's going to die or anything like that, but the conditions for an aggressive fall are as strong as they have been in the history of the stock.
Okay? So, that's his his This is complete conjecture down here. How much could it fall? Could it be this much? Could it be that much? I don't know. No one knows. That's pointless. But, this sentence here I I would have to agree. Um I get it, and then you look at like people who are saying like, "Well, you need GPUs for all this stuff." The argument against that is like there's, you know, a couple companies that are trying to do everything you can to to mass-produce Google's TPUs to put Nvidia's GPUs out of business.
So, there there's a lot of different variables here. It's It's never that easy. Um here's the Nvidia trade volume chart going back 10 years. So, just so you know, the reason why this is um not as detailed is just there were smaller data points. So, this is more closely data points. I don't know why the chart did that, but that's just what it did.
Um but you can tell we are pretty low. And when you look at the stock of Nvidia, it it is a little bit surprising. I was not expecting this. And then you look at the Qs in general going from 2020 to now, and I just want to show this this first thing here one more time. Look at that. That is a lot, and then you look at the overall volume.
Let me move my face. It's not what I would think. It is weird to me. I don't know how you feel about that. I mean, I I completely understand the thought, but don't forget by the dip bro in the line No, I I agree. I'm I'm I have I've learned my lesson on that one. The stock market can only go up. All those guys from 2019 with Tesla, they were correct.
That is how you trade the stock market. You just only only buy really volatile stocks. It's apparently what you do. But, um just for for sake of argument the the mechanics of this is the bull reason why a low volume rally is a good sign. Okay, so this is this is the bull reason. So, essentially, large institutions, pension funds, and index funds have already accumulated their shares, and they have zero intention of selling them.
Uh the supply of shares for available for sale is incredibly low. So, really small buying pressure uh is all it needs to force it really high cuz essentially, so many people are holding not willing to sell, thus lower volume to have it go higher, they sell it a much higher bid, that kind of stuff. Um I I mean, I guess I I think that that would be fair, um especially with what's happening right now.
Um this is the bear version. Traditionally, in the past, I don't think this is accurate in the last 15 years, but in the past a low volume rally is usually a bad sign, and the argument was big money's not participating in the move. They're sitting on their hands, refusing to buy. Uh upward movement is being driven by us, retail traders, and not the smart money, and you always follow the smart money.
And because there's very little volume trade in these higher prices, there's no there's no support lines. This is just really fancy way of saying no support lines. Um Good luck. I I This is how I was thinking when I was shorting these companies, right? Cuz I'm like this should not be worth this much.
Um now I I don't know. How do you feel about this? So, you know, one thing that'd be interesting take on this is that we are seeing in some ways like I think erosion of purchasing price. Like we're seeing stealth inflation, right? Yeah. So, asset price inflation is part of that. Um and what we thought made sense before, I think is just not going to make sense in reality anymore going forward.
It's true. When you have a $40 deficit and you have interest like that, that is That's a good point. It's almost like the stock market can't crash because you constantly have inflation. Yeah. I mean the the inflation gets gets added to the stock performance, right? So, like if you were expecting a 10% return per year on average and then get a 3-4% inflation rate, now you're having a 13-14% increase in asset prices, if you will.
Yeah. Um for stocks I I I know that that's not exactly how it works, but I think it to a degree that that's what we're starting to see some inklings of a little bit here. Yeah. I would agree. Hence the just buy forever. And yeah. That makes sense. All right, guys. Let us uh let us know what you think.
Um Bertie's still in the Nvidia short. He had mentioned in another post he's thinking about um buying it out further, but we'll see. I don't know. All right. Catch you guys in the next one.
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