Broker Check

In The News: Big Short? More like Big Reach

August 24, 2023

We recently received emails from two separate clients asking my thoughts on the following article.

 What are 'Big Short' Michael Burry and Warren Buffett seeing that we aren't? | CNN Business

I responded to each separately and would like to share the sentiment with you.

My first thought is that I am so glad we are here to help sort through the headlines for our clients and friends. There is so much information available to us all – every day. It can be overwhelming and misleading. I find this article to be an example of both.

My next thought is that there is legitimate reason to be cautious. There has been a flight to technology stocks – especially those linked to AI. Could some of those high-flying names retreat from current levels? We think quite possibly, yes. That does not mean that we see another 2008 on the horizon.

When I read that headline, I infer two things:


  • Michael Burry (Christian Bale's heroic character in the movie "The Big Short") is betting that the market will decline sharply soon.
  • His call must be even more valid because both he and Warren Buffet appear to be making a similar bet.


As I read the article, it became clear that Mr. Buffet's actions were markedly different from Mr. Burry's.

According to the article, Warren Buffet’s BRKA sold $8 billion more than it bought in the most recent quarter. That would represent a modest 2.29% trimming from their $350 billion portfolio.[1]  That portfolio is up nearly 15% for the first half of the year.[2]  So, stated another way, BRKA has increased its equity exposure by over 12% in the past six months. It is not uncommon for a value-conscious investor like Mr. Buffet to harvest some gains into strength.

This appears very much business as usual for BRKA.

Michael Burry’s hedge fund did make two big bets in the past quarter, each close to a Billion dollars; that the market would decline substantially and do so in a specific time.[3]  His bets do indicate that he thinks a decline may be coming. He was really right in 2008. He has also been really wrong at times. In 2021, for example, he bought $192 million in Facebook call options shortly before their pronounced 73% decline.[4] 

Michael Burry is a speculator. Speculators tend to win big and lose big.

Warren Buffet is an investor. Investors are more concerned with things like earnings, dividends, and growth.

We, too, are investors. As are our clients. 

The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.