Lecture Notes: Michael Burry's Recent Investment Moves

Overview

• Michael Burry sold ~$50 million worth of his stock portfolio.
• Known for predicting the 2008 housing market collapse.
• In 2024, Burry has been selling his largest holdings, signaling an ominous outlook for the US economy.

Major Sales

• Sold major stocks: Amazon, Alphabet, and Oracle.
• These stocks were 15% of his portfolio in 2023.
• Performance of these stocks:
  • Gained 70-120% since early 2023.
  • US tech stocks have the highest valuations in 20 years, reminiscent of the dotcom bubble.
  • Large-cap tech stocks have a PE ratio of 30 vs. average stocks with a PE ratio of 15.
  • Oracle's PE ratio increased from 25 to 38.
  • Alphabet's PE ratio increased from 19 to 28.

Shift to Chinese Tech Stocks

• Increased holdings in JD.com, Alibaba, and Bilibili.
• Now owns ~$23 million in Chinese tech firms.
• Chinese stocks are at their cheapest relative to US stocks in 15 years.
• Potential large outperformance of Chinese stocks if earnings turn around.
• Chinese stocks' earnings have been declining since 2018.

Investment in Gold

• Added Sprout Physical Gold Trust to portfolio (~7% of his portfolio).
• Gold is a safe haven asset:
  • Keeps or gains value during economic uncertainty and market volatility.
  • Significant rises in gold prices during economic turmoil (1930s, 1970s, early 2000s, 2020).

Historical Context of Gold Prices

• 1930s: Great Depression doubled gold prices.
• 1970s: High inflation, oil shocks, rising interest rates led to a 15-fold increase in gold prices.
• Early 2000s: Tech bubble burst, housing bubble burst, global financial crisis resulted in a sevenfold increase in gold prices.
• 2020: Covid-19 pandemic triggered a global economic crisis, increasing gold value.

Current Outlook

• Burry's increased allocation to gold signals pessimism about the future.
• Concerns about economic vulnerability and inflation.
• Gold has broken out above long-term resistance, showing a strong uptrend.
• Investments in gold miners have increased by ~30% since late 2023.