Charlie Munger weighed in on Elon Musk, and called BYD one of his best-ever investments.
Warren Buffett’s right-hand man called the Tesla CEO a “genius” in some ways, but a strange man.
Munger said BYD is miles ahead of Tesla in China and raking in massive profits there.
‘Big Short’ investor Michael Burry warned stocks would crash and rallies wouldn’t last. Here are 6 of his key tweets in 2022, and what they meant.
“The Big Short” investor Michael Burry suggested the S&P 500 could plunge below 1,900 points.
The Scion Asset Management chief based his prediction on how past crashes have played out.
Burry said brief rallies were likely, and joked about his penchant for premature predictions.
Michael Burry, the hedge fund manager of “The Big Short” fame, rang the alarm on the “greatest speculative bubble of all time in all things” in the summer of 2021. He warned the retail investors buying up meme stocks and cryptocurrencies that they were headed towards the “mother of all crashes.”
The Scion Asset Management chief’s grim prediction may be coming true, as the S&P 500 and Nasdaq indexes tumbled by 19% and 33% respectively in 2022. In tweets posted in May 2022 then subsequently deleted, Burry took credit for calling the sell-off, explained why he expects further declines, and cautioned against buying into relief rallies.
Here’s a roundup of Burry’s best tweets about the stock-market slump:
The pandemic crash was just the start
The S&P 500 index has rebounded strongly from the pandemic crash in the spring of 2020, rising from a low of 2,192 points to around 3,800 points today. However, it could halve in value to below 1,900 points over the next few years, Burry tweeted on May 3, 2022.
When the S&P 500 has crashed in the past, it has traded lower several years later, Burry noted. He pointed to the index bottoming 13% lower in 2009 than it did in 2002, 17% lower in 2002 than it did during the Long-Term Capital Management fiasco in 1998, and 10% lower in 1975 than in 1970.
If the benchmark index follows that historical pattern, it could trade 15% lower than its level in the spring of 2020, Burry said.
There may be epic but short-lived rallies
A “dead cat bounce” refers to a temporary rebound in stock prices after a significant fall, often because speculators buy shares to cover their positions.
They often occur during major declines in the stock market, Burry said in a May 4 tweet. The implication is that investors shouldn’t get their hopes up about any rallies in the coming months, as they’re likely to be brief respites that won’t result in a market recovery.
Burry noted that 12 of the 20 largest one-day rallies in the Nasdaq index took place as the dot-com bubble burst, while nine of the S&P 500’s 20 biggest one-day rallies occurred in the aftermath of the Great Crash in 1929.
Don’t be fooled by stocks rebounding
Stocks could stage multiple rallies before the crash is over, Burry warned in a May 5 tweet.
He noted that after the dot-com bubble burst, the Nasdaq rallied 16 times by more than 10% — gaining on average 23% each time — on its way to a 78% decline at its nadir.
Burry also emphasized that after the Great Crash of 1929, the Dow Jones index rallied 10 times by more than 10%, rising by an average of 23% each time, before bottoming at a 89% decline.
Stocks are on a dangerous trajectory
The US stock market appears to be following the pattern of previous bubbles, leaving it poised for a monumental crash, Burry noted in a May 8 tweet.
The Scion chief pointed to the S&P 500’s trajectory over the past 10 years, noting it was strikingly similar to the index’s chart for the decade leading up to the dot-com crash, and the Dow’s chart for the 10 years before the Great Crash of 1929.
Burry suggested that human nature was behind the consistently decade-long buildups, and implied that history is repeating itself.
Burry predicts correctly, but early
Burry appeared to take a victory lap in a May 10 tweet, suggesting he believes the stock-market crash that he’s been warning about has finally arrived.
The Scion boss joked he was early with his prediction, just as he was during the mid-2000s US housing bubble.
Burry also nodded to Elon Musk calling him a “broken clock” last year, after the Scion chief bet against Tesla stock, predicted it would collapse in value, and questioned Musk’s motives for selling his company’s shares.
Stocks are set to tumble a lot further
7/7 SLIDES
Warren Buffett’s right-hand man has described Elon Musk as a gifted but weird individual, and touted Chinese carmaker BYD as a serious threat to Tesla and one of the best investments of his career.
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“My policy on Elon Musk is that he’s a very talented man but also peculiar, so I don’t buy him and I don’t sell him short,” Charlie Munger said during Daily Journal‘s annual meeting on Wednesday, which was aired live by CNBC.
“He’s a smart man — sometimes,” the 99-year-old investor and Berkshire Hathaway vice-chairman added. “Like all the rest of us.”
Munger recognized the unlikely success of Tesla in the fiercely competitive automotive industry. But he suggested BYD is pulling ahead of Musk’s company in the electric-vehicle race.
“Even if you’re a genius like Musk is in some ways, there’s always some little BYD that comes out and does better,” he noted.
The billionaire stock picker has previously praised Musk for his innovations in clean energy and space transportation. Meanwhile, Buffett has traded both compliments and barbs with Musk, who has described the Berkshire chief’s job of allocating capital as dull.
Winning big with BYD
Munger, who persuaded Buffett to bet on BYD and also bought the carmaker’s shares for Daily Journal, described it as a once-in-a-lifetime investment.
“I have never helped do anything at Berkshire that was as good as BYD,” he said, noting the conglomerate’s $232 million investment in 2008 soared in value by more than 30 times within 15 years. “That’s a pretty good rate of return.”
Munger lauded BYD for growing rapidly in its home market and leaving Musk in the dust. “BYD is so much ahead of Tesla in China it’s almost ridiculous,” he said.
The billionaire investor pointed out that Tesla cut its car prices in China last year, while BYD was able to raise prices. He also noted BYD’s auto division made over $2 billion in after-tax profits in the country last year.
“Who in the hell makes $2 billion as a brand-new entrant in the auto business, for all practical purposes?” Munger exclaimed. “It’s incredible what happened.”
