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michael bury's big bet on inflation the big short 2.0 watch this before it's too late the investor made famous by the big short has issued a dire warning about the state of the stock market michael bury warns that the stock market speculation has reached levels not seen since before the 1929 crash and assets are more overvalued than before the dot-com bubble burst today we're going to talk all about michael bury's big bet on inflation a michael bury warns that stock market speculation has reached levels not seen since before the 1929 crash and assets are more overvalued than before the dot-com bubble burst he also worries that geopolitical and economic strife exceeds that scene in the 1970s his fear appears to be that we're fast moving towards an economic calamity and government regulators such as the securities and exchange commission and the federal reserve are taking no action to prevent it in a tweet mr bury wrote more speculation than the 1920s more overvaluation than the 1990s more geopolitical and economic strife than the 1970s he added players grabbing the barrel of kyle rittenhouse's rifle while sec gov and federal reserve not approvingly he attached an opinion piece from the editorial board of the wall street journal headlined rivien the government unicorn and subheaded the ev truck maker is worth 120.5 billion dollars it has sold 156 vehicles electric vehicle manufacturer rivien backed by ford and amazon went public this week fast becoming the second highest valued automaker in the u.s after tesla valued at more than 100 million dollars by the end of its first day of trading it has nevertheless only sold less than 200 trucks and makes almost no revenue the company plans to manufacture more than one million vehicles a year by the end of the decade on the same theme mr bury also alleged in a tweet this week that tesla ceo elon musk might be selling stock in the company to cover personal debts and raises the possibility of the company losing up to 90 percent of its value as happened to many firms in the dot com crash he noted that even mr musk said that the company was overpriced in may 2020 when it was approximately 16 of its current value the tweet has since been deleted mr bury is most widely known for calling the housing price bubble that developed in the 2000s he's short of the housing market selling market positions on the assumption that housing prices will drop and when the market collapsed as he had predicted in 2007 and 2008 he made a fortune the subsequent fallout of the housing bubble bursting saw 3.8 million americans lose their homes and trigger the global financial crisis that rippled around the world leading to the great recession mr bury also focused on inflation this week noting that the current high rate of inflation is effectively depressing wages which although growing cannot keep pace he adds that as a regressive tax it hurts lower income people the most two of america's most respected investors each with their own claim on the affections of cryptocurrency bulls are locking horns over their conflicting views of the economic future on one side is kathy wood head of arc invest whose arc innovation etf holds bullish positions on companies like tesla and coinbase on the other side is michael bury whose 2007 bet against the housing market just before it triggered a financial crisis and the great recession has turned him into a near mythic doomsayer it was reported that bury through his scion asset management fund is betting against the success of woods innovation etf to the tune of 235 500 shares shorted or about 31 million dollars worth of put options the conflict has been largely framed as one between data-driven fundamental investing and more ideas-driven big-picture approach analysts who agree with bury's bet have pointed out the massively inflated price earnings ratio of arc holdings that debate is exemplified by arc's very large position in tesla an automaker whose market cap is larger than the next five largest auto companies combined yet only occasionally turns a profit wood as chronicled in coindesk's in-depth profile was vaulted into the upper tier of investors by her unwavering faith in tesla during the company's dark stretch in 2018.
even before shorting arc bury had a huge 534 million dollar short position against tesla aligning him with the tesla q skeptics who believe that elon musk's big promises about things like full self-driving or hot air but this is just the sexy philosophical surface of the debate look closer and the face-off between wood and bury is about something both simpler and bigger their different thinking about inflation bury as befits his doomsaying reputation is a notorious inflation hawk who in february compared u.s monetary policy to weimer germany that's a widely shared perspective among bitcoin advocates bury believes inflation spells doom for the kinds of companies arc holds including somewhat ironically coinbase inflation is a threat to the valuation of growth or innovation stocks largely because even moderate sustained inflation would lead the federal reserve to raise interest rates to rein in the money supply because so few of ark's portfolio companies are profitable they can be expected to need continued cash through loans or other financing as they grow higher base interest rates make the capital more expensive it would have a similar or even stronger effect on venture capital and private equity hedge funds wood meanwhile says she now believes current inflation is transitory correctly pointing out that commodity and used car prices are crashing back to earth in a tweet thread responding to reports of bury's short position she argued the equity market is likely to reward disruptive innovation strategies once again when headline inflation breaks and or fears of recession increase this is perhaps a bit surprising from wood who had supported the re-election of donald trump and so might be expected to join the mostly right-leaning inflation hawks her contrary position might show a flexible mind willing to reassess conditions on the ground on the other hand it might be a matter of convenience since predicting low inflation makes her fun's thesis look better and wood certainly has a motive to talk her own book after a sustained run of impressive annual returns around 30 percent arc returned a staggering 150 percent in 2020 thanks to positions in companies like zoom that saw outsized gains during the pandemic that success has both grown the balance sheet and attracted more capital and arc now manages nearly 22 billion up from nine billion dollars in october of last year but wood's impressive returns have at least for the moment dried up arc is down six percent so far this year while the dow jones big cap index is up 20 ouch woods signed off a long rebuttal of brewery with this i do not believe that burri understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space for arc those fundamentals could actually include continued heavy us public spending as long as wood and her fellow travelers can coax enough of that cash into their own high-risk bets ] so so guys you
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