Michael Burry Is Warning Of Something Big

This is a warning that Michael Burry recently sent to investors. If you have studied trading, you know exactly what happens next. He sent this along with a prediction of where he thinks Bitcoin is going, what will happen to Alphabet stock, Tesla stock and what he thinks will happen to the market overall. At the end, I will show you where he believes the best place to invest is. But first, let's start with his thoughts on Bitcoin. He tweeted. BTC patterns. The pattern refers to a graph of Bitcoin's price history. One stage, back in late 2021, looks very similar to what's happening today. You can see the up curve, the peak, then you got the follow down to a support level, that goes back up to another peak, followed by a decent collapse downwards. We can see something very similar that has happened recently. You got the two peaks, and the downturn. So what does this mean? You would think that Burry is saying that Bitcoin will keep going down a bit, followed by a support level, and then a huge price increase in the future, just like it had done in the past. Well, he doesn't really think this. And he's right when talking about criminal activity. No matter what the orange-pilled, laser-eyes enthusiast will say, Bitcoin does attract criminals. When Colonial Pipeline paid its hackers $4.4 million in 2021, they paid in Bitcoin. When JBS, the world's largest meat processor, got hit that same year, they paid $11 million in Bitcoin. This is one reason why Burry thinks that Bitcoin will end up like the tulip bulb era. All hype, all mania, but not a very good asset that underlies it all. And, if you know Michael Burry, you know he's not afraid to take high-conviction positions when he sees opportunity. A platform that you can use to explore markets in a similar way is Plus500. One of the key advantages is that you don't need to start with real capital straight away. You can use Plus500's demo so you can study the game and the risks, rewards that come with it, and the strategies that work, without losing your hard-earned money. Plus500 is an online trading platform. It is listed on the London Stock Exchange and it is CFTC and NFA regulated in the US, which adds an additional layer of oversight and credibility. It also partners with major organizations globally and has tens of millions of registered users. Basically, Plus500 gives retail traders access to futures across asset classes like indices, forex, energy, metals, agriculture, and these type of instruments slash assets. So, futures trading, what is it? Futures are an agreement to buy or sell something, a stock, an index, a currency, oil, wheat, at a set price on a set date in the future. Traders use it to speculate on where these prices are heading, without ever needing to own the actual asset. Okay, as you can see, we are logged on to Plus500 now. Once you log in, you can switch straight into demo mode. This way, we can walk through the platform, we can place trades, and get a proper feel for how everything works without any real money on the line. So yeah, the platform includes a wide range of instruments, gold, the S&P 500, cocoa, and more. What I like the most is the simplicity of the interface. Instead of overwhelming you with clutter, it keeps things structured and just easy to navigate. If you want to search up your own instrument, let's say copper, just type that in on the search bar and it comes up straight away. It gives you a nice clean interface, it gives you the latest info, the life statistics, the sell and the buy, you can add or remove it from your watch list, or you can click on trade and you can see the different order types that you can do, the risk management tools that you have at your disposal. Now obviously, if you know anything about futures trading, you will know that it carries risk, but Plus500 do give us advanced risk management tools like the stop loss and take profit, so you can protect your capital from extreme downturns. For anyone interested in exploring futures trading, Plus500 is a good place to start. Use the demo mode to test your strategies and get familiar with the platform's full set of built-in tools before trading live. You can also get a $30 bonus when you deposit at least $300 using the code COOPER30, links in my bio. And that brings us to Alphabet slash Google Stock. But with Alphabet, I think there is a pretty obvious use case. Who has not found Google useful? So what is Burry saying will happen to this stock? Burry made a tweet warning Alphabet stockholders. And this tweet was all about Alphabet's plans to issue a 100-year bond, which would be the first tech 100-year bond since the dot-com era. Burry said, Alphabet looking to issue a 100-year bond. Last time this happened was Motorola in 1997, which was the last year Motorola was considered a big deal. At the start of 1997, Motorola was a top 25 market cap and top 25 revenue corporation in America. Never again. The Motorola corporate brand in 1997 was ranked number one in the US, ahead of Microsoft. In 1998, Nokia overtook Motorola in cell phones. And after the iPhone, it fell out of the consumer eye. Today, Motorola is the 232nd largest market cap with only $11 billion in sales. If you look at Motorola stock, it issued its 100-year bond in 1997. We then saw peak mania and a price topping in March 2000. After that, we saw the stock drop over 90%, and it took 21 years to recover to that price. Burry is saying, essentially, that the same thing can happen to Google. It can go from number one, or at least around that, to a mid-tier, largely irrelevant company worth a fraction of its current value. And Google search, the magic thing about Google search was how little it cost. Because most requests were not monetizable. So for the 85% of searches they get that are not, nobody's going to buy, even looking to buy anything, or think it's not product related. It's history, you know, what did Columbus really do, you know? It's not monetizable. And so they better not lose a lot of money on that. AI changes that. AI is expensive. I run queries regularly that I know cost tens of dollars just for my inquiry. Inquiry. One inquiry. Google had had those searches down to infinitesimal fractions of a cent. So that business is the golden goose, and it's really basically all their cash flow. Burry's main point is that when you have a golden goose for so long, sometimes you can get arrogant. You think you are the king. You lose innovation, and you think your business model is eternal. So you issue a 100-year bond. The Motorola Parallel is the smoking gun. Motorola was the undisputed king of communications in 1997. Within one year, Nokia humbled them. Within a decade, Apple destroyed them entirely. The 100-year bond was issued near the exact top. But it is not just Google that Burry has a warning for. Today, it's all passive money. And it's a lot. It's over 50% passive money. There's index funds. Less than 10% of money, some say, is actively managed by managers who are actually thinking about the stocks in any kind of way that's long-term. And so the problem is, in the United States, I think when the market goes down, it's not like in 2000 where there was this bunch of stocks that were being ignored, and they'll come up even if the NASDAQ crashes. Now I think the whole thing is just going to come down. And it would be very hard to be in a long stock in the United States and protect yourself. And so that's why I decided to get out of it. So let me explain what he's actually saying here. When you buy an index fund, an S&P 500 ETF, a total market fund, whatever, you're not picking stocks. The fund just automatically buys a little bit of every company in the index, proportional to their size. Apple's big, so you get a lot of Apple. A random mid-cap company is small, so you get a tiny sliver. Nobody is asking, is this stock actually worth buying? The money just flows in, and everything goes up together. Now that is fine, great even, when markets are going up. But Burry's point is about what happens when people sell. When panic hits and everybody starts pulling money out of index funds, the fund has to sell. Not just the bad stocks, not just the overvalued ones, all of them indiscriminately, because that's how it works in reverse too. In 2000, when the dot-com bubble burst, the NASDAQ crashed. But value stocks, boring companies, stuff that had been ignored during the mania, that held or even went up. There was a flight to quality. Active managers could hide in those corners of the market. Burry is saying that that escape hatch doesn't really exist anymore. Everything is so interconnected through passive flows, that when the tide goes out, it all goes out together. There's nowhere to hide now inside US equities. And he tweeted some clues on a few deeper reasons that can be the catalyst for the crash. He said in a reply to a Barron's tech writer, The market is just jittery over historic overvaluation, historic capital expenditures, and tiny AI revenue. These points are all fundamentals with investing. Historic overvaluations means the stock prices are very high. Historic capital expenditures means these stocks are spending crazy amounts of money. And Burry went into detail on how this causes a market crash. Which is not really a dot-com bubble. It was a data transmission bubble. It was a huge build out of fiber, and a huge fiber needed routers, and routers needed fiber, and it just blew up. So the market peak was in March 10th of 2000. Cisco grew 55% that year, revenues in 2000. And it grew 17% in 2001, because the investment continued. It actually peaked for about a year after the top in the market. And so what you can do is you can look at net investment, which is capital expenditures less depreciation over time. And you can put it against GDP to kind of nominal GDP to compare it across eras. And you get these nice mounds of investment manias. And what you see in every prior one was the relevant stock market peak was before you're even halfway done with the capital expenditure. In the majority of cases, the capital expenditure hadn't even peaked yet. And so right now we're ramping up the capital expenditure. And the last thing that he said was that there is tiny AI revenues. That means that the cash that they're bringing in, in return for this AI spending, is minimal. Just from an investor's perspective, these are the opposite of what you want. High prices, high spending, and low revenue. Burry lets us know exactly where this puts us in terms of the market cycle. Where are we? I can't say because it hasn't happened fully yet. We are at levels of prior peaks. We're at the level of the shale revolution relative to GP. We're at the level, near the level of the dot com, when the dot com, the NASDAQ peaked. So he thinks that the overall market will get hurt from this, but there are three stocks in particular that will lead the way. First I will show you these, and then I will show you where Burry thinks the safe haven is. First we will address Tesla stock, then Nvidia, then Palantir. Michael Burry tweeted, Say what you want but I am right. Tesla's market capitalisation is ridiculously overvalued today and has been for a long time. He said this when the news came out that Tesla will be scrapping its Model S and Model X cars to build robots, which is quite an extreme thing to do. He said, As an aside, the Elon cult was all in on electric cars until competition showed up, then all in on autonomous driving until competition showed up, and now it is all in on robots until competition shows up. The point that he is making is pretty clear. Tesla's story keeps changing, and the fans keep following. Electric cars, self-driving, now robots, every time competition arrives or exposes the weaknesses, are new. This is the real reason why Tesla is worth everything, narrative appears. But for a business to be sustainable and actually worth $1 trillion, they need to have a sustainable business model, and actually out-compete their rivals for a long period of time. Tesla currently makes $3.8 billion a year in profit mainly from their cars, how many years will they have to make this until it justifies the price? And now let's address the Nvidia situation. What Burry is pointing out is that Nvidia didn't design a product for AI, the GPU was built for gaming and graphics, it just so happened to be the right architecture at the right time, first for crypto mining and then for AI training. His argument is that Nvidia's dominance isn't the result of visionary AI strategy, it's the result of being in the right place, twice, and the market is pricing it like it was genius. And of course we know that he has put his money where his mouth is, he put a short on Nvidia stock, which means he will profit the more the stock goes down, and another stock he shorted was this one here, and I believe Palantir he's even more bearish on. He tweeted that, I am working on something, PLTR, if you are a trader, you will understand that this is the classic head and shoulders pattern, it looks like a human body, you have the body on the left, then you got the left shoulder, then you got the head, then you got the right shoulder, and what comes after the right shoulder? Obviously, the rest of the body down. And this is one trading pattern that suggests that Palantir could crash, he put a support level around $80, and a landing level just over $50. With Palantir priced at $150, he's suggesting that the stock is going to go down in price. After all of the interviews and articles and tweets that I read, I could only find 3 places of where Burry actually recommended to invest, apart from shorting stocks. The first one was response to this guy's tweet who said, JD clearly I was wrong, JD will continue to go down and no one will ever buy them, but Burry responded saying, haha but it is just getting good, Hong Kong on sale! So there, that's the first area of opportunity Burry sees, see if you can catch the other 2 areas here.