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Is another recession coming? Michael Berry, the legendary Wall Street figure who predicted the subprime crisis and made a fortune, is sounding the alarm again. This time his bet is simple. Artificial intelligence is a bubble and the world is heading towards recession. But what does an investor who has beaten the big banks and the financial system do?
As usual, he surprises everyone once again. is shorting Nvidia and the Chinese giants, and at the same time is betting everything on lipsticks. Literally. Who is Michael Berry? Michael Berry gained worldwide fame for predicting the 2008 US mortgage crisis . The founder of the S Asset Management fund was one of the first to recognize the impending disaster in the US real estate market.
He bet on the collapse of subprime by buying instruments called credit default swaps, which allowed him to make money on the bankruptcy of borrowers. When the market crashed, Barry made hundreds of millions of dollars. His story was told in Michael Lewis's bestseller The Big Short , and he was played by Christian Bale in the film adaptation.
But that was then. Now in 2025, Barry is challenging the market again and betting on the declines again. In its latest report submitted to the US Securities and Exchange Commission for the first quarter of 2025, the Bargo fund revealed shocking changes. sold all shares except one and opened short positions.
Only one company is a long position, all the rest are put options, i.e. bets on declines. Barry is clearly betting on a market crash. The biggest bets are shorts on Nvidia, almost half of the portfolio, shorts on Alibaba over 13%, PDD Holdings 1188%, JDCOM 8.26%. as well as Putyna, Bajdu and Tripcom.
This is the most bearish portfolio in the history of SCT Management. Why are AI and China shorting the bars? Let's start with Nvidia, the queen of AI, the heroine of the stock market rally of recent years. In the first quarter, Barego's fund had almost half of its portfolio in a position for Nvidia's declines.
For many, this is the foundation of the future of technology, but for Bary, is it a classic speculative bubble? Or perhaps Barry was playing to the tariff-related turmoil in global trade. Are AI company valuations absurd, and is Nvidia overvalued after a historic rally? Michael Berry is known for his contrarian movements.
He previously played against the docom and subprime bubbles. If Barry had closed out his put position during the April declines related to Trump's tariffs, he could have made a fortune. But Barry moves on. not only shorts AI, but also assumes declines in Chinese technology giants Alibaba, JDCOM, PDD and Biddo.
Until recently he owned their shares. Now he has changed it to the Put option. Could it be that he doesn't believe in the durability of China's recovery and is afraid of the consequences of trade tensions and the structural problems of the Middle Kingdom's economy? And here comes the biggest mystery.
Est Lauder, the cosmetic giant, is a long-term position in Barego's portfolio. What's more, he doubled his involvement by purchasing another 100,000 shares. Why Est Laudder? Est Laudder is an owner of luxury cosmetics brands that has been struggling for a long time . The price has been in a deep downtrend since 2022 and has fallen almost 90% from its peak to its last trough .
However, the company is undergoing restructuring under new management. The goal is to rebuild the market, reduce costs, and introduce new product lines. The first effects are already visible. The stock has rebounded by 50% since its April low. Although the company is struggling, especially in Asia and the duty- free segment, Bary sees potential in it, especially if a recession hits.
Why invest in cosmetics during a crisis? The answer lies in the so- called lipstick index . It's a theory that says that in difficult times, people don't stop buying luxury. They simply choose the cheaper version. Instead of Chanel handbags, they buy ST Lauder lipsticks. Instead of the road of holidays Flonic Perfume.
Leonard Lauder, the son of the company's founder, noticed this effect after the September 11 attacks and during the 2001 crisis. Lipstick sales then increased by 11%. While the economic value of the lipstick index is sometimes questioned, the consumer psychology is not. When the world is unstable, a little luxury can be therapy.
And Barry knows this perfectly well and seems to be betting on just that. In 2025, the world's largest economy will vacillate between recession and stagnation. The number of new unemployed people in the US has been slowly rising this year. The Fed is holding off on interest rate cuts because it is not sure whether inflation will return.
The economy is losing momentum and the enormous debt continues to grow. In addition, there is uncertainty related to currency policy and armed conflicts in Ukraine and the Middle East. Michael Berry is clearly betting on a recession. His wallet shows it. A bet on AI declines, a collapse in China, and simultaneously a long position in the luxury cosmetics industry is not a coincidence, it is a strategy.
Some people laugh that Barry predicted 20 of the last two crashes, but one thing is certain, his radical bets are never random. When the whole world is running in one direction, Barry is going against the flow. Is he right again? Will 2025 bring a recession and the collapse of the AI bank? One thing is certain.
The market continues to watch his every move with bated breath. If you are interested in the behind-the-scenes movements of large investors, recessions, crises and survival strategies, subscribe to the channel, leave a like and write in the comment whether you would bet more on Est Laudder or Nvidia today. See you in the next episode. Hi. Yeah.
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