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Michael Berry the Wall Street Titan who famously predicted the housing bubble now has his sights on something even bigger will lightning strike twice tune in as I dissect Michael Berry's latest jaw-dropping move a high-stakes bet against the QQ and the Spy the markets are trembling and you are about to find out why what's up strangers welcome to the webcam Nation my name is Vedo and I'm here to help you better understand the Wolf Game and become part of the ultimation as I aspire to be a great investor I am putting myself publicly to the test I think that all Finance creators should do the same and share the investment publicly as that is my intention I started sharing my brokerage account regularly in real time without any fancy spreadsheet or gimmicks this is my own personal brokerage account as you can see the current stock value is 90 and 700 euros I hold 18 different Investments 14 in individual companies and for ETFs if I scroll down to the performance we can see that around 3 000 Euros is in profits if you want a review of my full stock portfolio check out my portfolio Reveal video the link is in the description of this video now let's look at what has Michael Berry been up to lately this article by CNN business reads Michael Berry of big shorts Fame just bet 1.6 billion on a stock market crash further down in this article it says that Barry is making his bearish bets against the S P 500 and the NASDAQ according to the security Exchange Commission filings released Monday various funds Scion Asset Management bought 866 million input options that's the right to sell an asset at a particular price against the fund that tracks the S P 500 and 739 million input options against the funded tracks the NASDAQ 100 we will get into the details of put options just in a moment it also says that Barry is using more than 90 of his portfolio to bet on a market downturn according to the filings this is also not the true and I will explain you why if we showed a look at what is short selling basically the short seller borrows shares of a certain company from the broker and then the short seller sells those shares on the open stock market right away in this example the short seller bought 10 shares and sold them right away for five hundred dollars then he raised the stock market to go down he then buys back the 10 shares on the open stock market for let's say 400 dollars and then the short seller Returns the 10 shares of that stock and keeps the Delta which in this case is hundred dollars sounds simple enough right there are other things to know when you're doing options trading the option or also called a contract is always one option represents 100 shares so if you have 10 options that means you hold a contract for a thousand shares then there's the strike price the stock price would need to reach this strike price in order for the option holder to be able to execute that option for example if the stock price is hundred dollars and the strike price is 70 dollars the stock would need to drop to 70 dollars in order for the options holder to be able to execute his right to sell that option during all this time there is something called a premium that the option holder needs to pay to the broker for simply borrowing his shares the last thing that you need to consider is the expiration date the expiration date is sometimes in the future and if the stock price drops to 80 and the option expires then that contract is useless so in Michael Berry's case we do not know what is his strike price we do not know what is the expiration date and we do not know how much premium is he paying if the premium that the option holder exceeds the drop in stock price then you're still losing money if we stay with the same example and we say that the strike price is 70 dollars but the expiration date is further out in the future and eventually the stock drops to seventy dollars it can happen that a short seller has paid 40 dollars in premium therefore he would be at a loss of ten dollars so those are all different things that need to be considered then there is also the possibility of the market going up if the market goes up then the short seller has to have enough funds in his brokerage account to cover the increase in price if the stock price keeps climbing and the short seller runs out of money to cover the increase in price then he gets margin called that's why I think that the article is saying ninety percent of his funds it's not correct he's basically paying premiums and making sure he has enough funds to cover for the potential increase in stock price now let's look at what did Michael Berry do in the past how did his shorting so far go if you look at this article from Wikipedia we can see it says in 2005 Barry started to focus on the sub Prime markets throughout his analysis of mortgage lending practices in 2003 and 2004 he correctly predicted that the real estate bubble would collapse as early as 2007.
remember these years 2003 2004 2005 and 2007. during his payment toward the credit default swaps basically the premium Berry suffered an investor Revolt basically his investors were not happy that their money is being used for premiums and this is money that you do not get back eventually various analysis proved correct he made a personal profit of 100 millions and a profit for his remaining investors of more than 700 million Scion Capital ultimately recorded returns of 489 percent net of fees and expenses between its November 1st 2000 Inception and June 2008.
the S P 500 widely regarded as The Benchmark for the stock market returned just under three percent including dividends over the same period here it's important to note that between November 1st 2000 and June 2008 there was also the.com bubble in 2001 as well as the housing market crash in 2008. so this is a very subjective time period to look at it so this has worked out for him however further down in the article it says that Berry initiated short positions on Tesla before or around early December 2020.
he was saying that my last big short got bigger and bigger and bigger and taunted Tesla Bulls to enjoy wildlass in October 2021 after 100 rise in Tesla stock value he revealed that he was no longer shorting Tesla so throughout history Michael Berry is known to try to show the market and what he believes are overvalued companies that was Wikipedia now let's look at the S P 500 for the last 20 years remember the article says he started to investigate in 2003 and 2004.
then he started Short Selling in 2005 and he predicted that the market will collapse in 2007 since 2003 and 2007 from when he started investigating and started Short Selling and his initial prediction the market went up almost 90 percent then the actual market crash was happening around October 2008 and very closed his short position and closed his fund completely between October 2010 and actual bottom of the market there was almost 30 percent the market bottom was in March of 2009 so between the time the very started investigating and the actual bottom of the market six years have passed and he was predicting a market crash early 2007.
if the stock market crash would have happened six months or a year later today nobody would know who Michael Berry is that is because his fund would have been depleted paying for the premiums just to hold the options so yes he did predict the 2008 crash same as he predicted everything else he predicts five crashes a year based on one or the other Factor but the stock market and the world economy is too big of a beast to be manipulated by one or two factors there are too many variables at play at all times and nobody can account for all the variables let's see why is Michael Berry shorting the market now the company's earnings are going down interest rates are up inflation is sticky recession is looming around and so on as my brokerage account only shows the absolute values of my portfolio I have created a replica of my portfolio in Google Finance here we can see that at one point the S P 500 has gone 20 year to date the NASDAQ for the same period Year date has gone up 45 my portfolio has gone up almost 49 that was at the peak today the market has already had a pullback a little bit and the S P 500 is at 15 and the NASDAQ is at 37 my portfolio is around 40 so given all the data that we have that all the macroeconomic factors are not very good at the moment and the stock market has been going up constantly this year it is not very difficult to say that everything points to the correction in the stock market another indicator for this is the s p 500pe ratio the current P iteration of the S P 500 is a 25.
that means that investors are paying 25 times future earnings the average of the S P 500 however is 16. so there is a huge difference between the historical average of the S P 500 based on the p ratio and today's current p e ratio that is also an indicator that there is a higher possibility of a market correction but there is always a possibility of a market correction same as there's always a possibility of the stock market going up lastly let's look at various investment philosophy I'm sure many of you know this website data Roma this is a website where we can see what the super investors have been doing with their stock portfolios 45 days after every quarter the super investors have to file something called the 13f filing to show what was their activity for the past quarter here it's also important to note that a quarter is three months and we get the data 45 days later that means that if an investor has bought something at the beginning of the quarter and we get the information about it 45 days after the quarter ends there's potentially up to four and a half months of lag in the data even by the time the 45 days have passed there is already half a quarter gone and that if information is by then already outdated because the super investor could have already sold out of this position now let's look what Michael Berry has been doing lately Michael Berry's fund called Scion Asset Management has 111 million in assets under management his portfolio also holds 31 different companies and this is dated 30th of June 2023 basically the Q2 of 2023.
31 companies is quite a lot of companies to be invested in this is a lot of diversification without going into the details of the Holdings we can see that there are a lot of buys and the word buy basically means that this is a brand new holding adding means it's been added and reduction obviously reduction in this overview we don't see what he has sold out of but we will look at that in a moment we can see there has been a lot of bias into brand new companies if we look at the buys all these bye bye bye bye bye all these buys are new companies with a couple of additions if we look at the cells we can see only three additions and everything else has been sold if we look at Michael Barry's activity over the last few quarters we can see that there is a lot of activity actually this was just one quarter q1 2023 also a lot of activity so I don't think it's very wise to follow anybody in their Investments especially not somebody who is an active Trader like Barry is you cannot follow his logic you can't follow that strategy because you don't know what the strategy is to me it seems that Michael Berry is a swing Trader or a momentum Trader if we scroll back up and look at the history of his fund only a year ago in Q2 2022 his portfolio was only 3 million and it was in in the Geo Group one holding one year later he is 111 millions in his portfolio with 31 companies so those are huge swings if we would look at another extreme example such as Charlie Munger Warren Buffett's right-hand man who is worth over 2 billion dollars his Q2 filings shows that he has only four stocks he has a portfolio value of 163 million and the column for a recent activity is completely empty that means he did not do anything in the last quarter if you look at his activity this is his activity for the last decade since Q4 2014 till today he has done six trades that is because he has a completely different investment philosophy which is investing great companies let them grow long term and do nothing if you look at the history of Charlie munger's Daily Journal Corp we see that he has had up to five different companies in his portfolio this is the opposite of diversification in conclusion I would like to say that I believe that when it's all said and done Michael Berry's long-term performance will be nothing special I will be bold and predicted over the long run Michael Berry's performance will be mediocre at best and there I say it in the end he will underperform the average of the stock market the man has predicted 10 out of the last two crashes they say even a broken clock is right twice per day or even a blind squirrel finds a not once in a while and when I think of Michael Berry those are the two phrases that come to my mind he will never be in the same discussions as Peter Lynch Warren Buffett or Benjamin Graham the man is a genius but also a gambler he finds rationale and patterns in the data and then bets that Mr Market the allegory created by Benjamin Graham will see it also the same way and react accordingly and we all know that Mr Market is irrational and in the short term there are extreme swings in the Market's price which are sometimes words apart from the actual state of the market this reminds me of a quote by Benjamin Graham where he says in the short run the market is a voting machine but in the long run it is a weighing machine that means that nobody can predict the stock market in the short term not even Michael Berry however in the long term the stock price will reflect the actual fundamentals tell you what since I'm in a great mood I will leave you with a short clip from my favorite investor Peter Lynch what you're saying to people today about the future of the market over the near term is what what's your feeling we can talk about the bad business we could take a coin out and flip it I have no idea what the next thousand point is going to do the next 6 000 points gonna be up the next 14 000 points can be up the next 20 000 points can be up but you don't know what the next thousand is going to be you're coming down could be up nobody does and it's futile to try and guess it corporate profits will be a lot higher 10 years from now it'll be a lot higher 20 years from now that's what you could rely on that's a prediction you can take to the bank he has been right every single time ever since this clip has aired in 1997.
so I will do me I will continue to learn about investing concentrate on the fundamentals learn from the grades which does not include Michael Berry and I will search for great opportunities and always think long term there you have it that was my review of Michael Berry's latest moves in the market I hope you found this video informative if you have any questions or comments please leave them down below and if you're not already subscribed to my channels please hit the Subscribe button and share this video with your friends and family I will do my best to create regular videos with updates of my portfolio I will do more fundamental analysis and review other companies that earnings other investors buys and sells and everything around investing thank you so much for watching and I'll see you in my next video
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