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Hello everyone welcome to a sink and I am your friend. Recently, a very big investor of America, Michael Burry has made a billion dollar bet against the American market, where he has made a bet against America's Stock 500 and NASA, that is, in simple words, he feels that in the coming time, there is going to be a huge crash in the American market and of course, if you see in today's time, every expert keeps saying something or the other, but why is Michael Burry taken seriously because he had predicted the financial crisis of 2008, which was basically initiated due to the housing market crisis, well and in advance and he had also earned a lot of money from that prediction, so if Michael Burry has made a billion dollar bet, then is there going to be a crash in the stock market, to know this you will have to watch the entire video, that too without skipping the explanation, because what is seen on the surface in the stock market is not actually true because in the stock market, you get a lot of tweets and tons of truth along with these, so these Due to all the tweets and terms, many questions are being raised regarding the billion-dollar rain bet that Michael Burry has just made.
We're going to discuss those questions in today's video. The major questions include how much of his own money has Michael Burry actually invested in this bearish bet? What is his non-linear exposure? What is his actual exposure? Is a crash really coming or is it just a rumor? If a crash is coming, what are the hidden risks in the economy that could trigger it?
And then, most importantly, Michael Burry predicted the 2008 market crash. But after that, we'll try to look at some facts and data related to whether his predictions were correct or wrong. But before we proceed, I'd like to tell you that if you want to appreciate me and my team for such quality content, you can like the video by pressing the "Like" button above the video and also subscribe to the channel.
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Please check them out. Let's move forward with the discussion. First, let's try to understand how Michael Burry has made this move against the American market. Michael Burry's company, Sion Asset Management, has used spyware. He purchased around $866 million worth of stocks and then why did he triple it?
He also purchased $739 million worth of stocks. So, many people might be wondering what these stocks are, what is SBI, and what is Triple K. So, first of all, what is this SPY against which Michael Burry purchased around $866 million worth of stocks? First of all, it represents the SPD Sum 500 IFT Trust, which is one of the most popular exchange-traded funds in the world.
In simple words, consider SPY as a basket containing all the stocks of big American companies. If you buy SPY, then you are actually buying the shares of all these big American companies. If all these big companies perform well, then the overall American market will also perform well, due to which the value of your investment in SPY will also increase.
It will go up, meaning this SPY, which is a type of SAT, allows you to invest in the performance of the overall American market without picking individual stocks or companies. Then there's Triple Quote, in which Michael Burry bought around $739 million worth of stock. It represents Invesco's Triple Quote Trust, another popular exchange rate fund.
This Exchange Rate Fund is specifically designed to track the NSE 100 Index. This NSE 100 Index is basically a collection of the 100 largest non-financial companies on the NSE stock exchange. It tracks the performance of all these companies. In simple terms, just like we have the Nifty 50 in India, we have the NSE 100 Index in the US.
What our Indian Nifty 50 does is it represents the top 50 companies in India, from different sectors. Because of this, we get a forecast based on how the Nifty performs. And the idea that comes to how our overall stock market is performing, so right now if suppose someone is positive on the Indian stock market, very positive, then what will he do, he will buy Nifty options which represent the entire Indian stock market and if someone is negative on the Indian stock market and he wants to debate against the entire Indian stock market, then what will he do, he will go against Nifty options because Nifty represents our entire Indian stock market in a way, so right now if someone wants to debate against the entire market or wants to sit in its fever, then how can he do it, he can do this by issuing options and there are two categories of options in options, if suppose I am positive on the Indian stock market, then what will I do, I will buy Nifty put options because put options are bought when you are positive on an asset, so in this way, suppose if I am negative on the Indian stock market, then I will buy Nifty put options.
He will buy options because put options are bought when you are negative on an asset. What happens in a put option? If the value of an asset goes up, you make money. And what happens in a put option? If the value of an asset falls, you make money. So right now, Michael Burry is bullish or negative on that stock market because he thinks that the stock market is going to crash in the coming time.
Because of this, what he has done is he has bought put options on SPY and Triple K, which in a way represent the entire stock market. That is, if the overall stock market goes down, the value of SPY and Triple K will go down. When you buy put options on an asset and the value of those assets falls, then you make money.
That is why, right now, to make money on that stock market crash, Michael Burry has traded throughput options against some of the big FSs in the American market. So, after hearing this, some people may panic thinking that Michael Burry has taken a short trade of one billion dollars. This represents 90% of his portfolio's exposure.
Seeing this, some people might think that if Michael Burry has invested so much money against the market, it's also possible that Michael Burry is overly confident about the market crash, which is why he has invested so much money against the market. However, before you believe this, it's crucial to understand some investing terminology.
On the surface, you might think a big investor has invested a lot of money, but the actual amount invested is quite different. There are two key terms here: actual exposure and non-real exposure. To understand the concept of actual exposure and non-real exposure, I'll give you a small example. Consider an investor named Ramlal.
Like Michael Burry, he is also extremely negative on the Indian stock market. He believes that a market crash is expected in the near future and the market should go down. So what he does to take advantage of this opportunity is that he buys the Nifty 17000 strike put and the value of these strike puts is 5 paisa and he has invested one lakh rupees in these strike puts.
So, on this basis, if you calculate his non-real exposure, it comes to around 3400 crores. That is, Ramlal ji's actual investment exposure here is only ₹1 lakh, but his national exposure is around 3000 crores because in options, contracts are made on real assets, they are at a fractional price of the asset value and due to this reason, Ramlal ji has invested only ₹1 lakh and for this ₹1 lakh, he has taken a notional exposure of 3400.
So, in the same way, Michael Burry has also not bought 1.5 or 1.6 billion dollars worth of put, this 1.5 or The $1.6 billion exposure is merely non-performing exposure. I hope you understand the difference between actual investment exposure and non-performing investment exposure. You also understand the true value of Michael Burry's $1.5 or $1.6 billion exposure and the true nature of the actual investment behind it.
Then, a big question arises: is Michael really a genius? Of course, he is. Then, another question arises: could he be right? He could also be absolutely right. Who knows? If he is right, will the market crash start tomorrow? The answer is, I also note that when Michael Burry predicted the 2008 market crash, it took a year or two to actually manifest.
So, how can this be true? Even if Michael Burry is right, the market crash is not going to happen immediately. After this, some people may also say this. Sir, a crash won't happen immediately, but it could happen ultimately. Thinking this, many people may take short positions in the market or buy put options.
But here I would like to tell you that if an investor does such activity based on Michael Burry's predictions, it could be a big mistake because even though Michael Burry had predicted the 2008 housing market crisis well in advance, many of his predictions after that have turned out to be wrong. For example, in December 2015, he had predicted that the market would crash, but in the next 12 months the market had gone up by 11%.
In May 2017, he had predicted a new financial collapse, but in the next 12 months the market had gone up by 19%. In 2019, he had forecast a stock market crash because of an index bubble, and after that the market had gone up by 15% in the next 12 months. He had predicted this in March. He also predicted a bearish view in 2020, but the S&P 500 had already risen by 72% in the next few weeks.
Then, in February 2021, he predicted a significant stock market decline based on a speculative bubble. However, in some markets, the S&P 500 had already risen by 16%. Then, in September 2022, he made another forecast that the market had not yet actually touched its losses, which could cause the market to go down.
But after that, the market had risen by 21% in some markets. Then, recently in January of this year, he predicted that a new cycle of growth and inflation was about to come. It has been eight months now, but the S&P 500's performance is still remarkably positive. Of course, it's not that I'm trying to showcase Michael Burry's findings and predictions here.
It's not at all like Michael Burry's earlier predictions. Many of those predictions have turned out to be correct, but here I am trying to show you that whatever Michael Burry says or predicts is not 100% accurate. Some of them may be correct and some may be wrong, and this is my point. That is why if Michael has given a very cautious view and on that basis an investor has to take action, if any investor does so, then he may be wrong because Michael Burry himself has been wrong many times before.
Now we have learned that some of Michael Burry 's predictions are correct and some are wrong, but what is the logic behind the very view that Michael Burry has taken and the put options he has bought on that basis. So let's try to understand that a little bit. In the stock market, a general perception is that in the long term the market will go up, and I am talking about this from the perspective of that market.
Today, if you want to see the proof, then that stock market last 17 It's only going up through the air, but here it's also important for us to understand why the stock market has only been going up in the last 17 years. Many analysts and experts say that the US central bank, the Fed, prints trillions of dollars, and even after printing these dollars, it forces the interest rate to be kept at zero.
That is, in simple terms, if I were to tell you what America was doing, it was printing money, lending it to itself at zero interest rates, and infusing that money into its economy, which led to growth. Here, I've explained this to you in basic terms, only on the surface level, but this topic itself is a very big topic, a very deep topic.
If you'd like a detailed video on it, let us know in the comments section. If we get more comments, we'll try our best to make a detailed video on it. So, right now, this stock market has been going up through the air in the last 17 years. Why was it going because it was printing that money, lending itself at zero interest, and investing that money in the economy, which led to growth.
This growth also led to the stock market going up. But what's happening now is that the US is having to forcefully shut down this pipeline of money, where it was printing money, taking loans, and investing it in the economy, because its interest rates are currently at their highest level in 17 years.
This is why many investors and experts are feeling that the market can't stay up without the Fed's gushing dollars. Because if the flood of trillions of dollars it was printing slows down, the capital infusion into the economy will also slow down, which will also slow down growth. But these are the reasons many exporters and investors feel that without those trillions of dollars, many exporters and investors feel that That the market can't stay up or the market can't go up.
Because of this reason, Michael Burry is also feeling that after 17 years, there could be a huge collection in the market. So this was today's detailed report, where we discussed what Michael Burry actually did, how much money he invested, what is his exposure, how Michael Burry's predictions have performed, and why Michael Burry currently sees the possibility of a crash.
We also discussed that in detail. So I hope you liked today's report. If you want to appreciate us, you can like the video by pressing the 'like' button above. After that, on our other channel, we recently posted more stock-related analysis. If you want, you can watch that video and subscribe to our new channel.
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