In a surprising move, renowned investor Michael Burry has unveiled his latest portfolio, signaling his confidence in distressed US regional bank stocks. Burry, best known for his successful bet against the 2007 mortgage bond market, is once again making waves in the investment community with his strategic choices.
As the US regional banking crisis continues to get worse, his selection displays some hope. Read on for some interesting insights!
A bet on Sinking boats?
The US banking crisis has underscored the disparity between Wall Street giants and smaller banks, with Silicon Valley Bank and Signature Bank being hit the hardest. This turmoil has created a climate of fear and uncertainty among investors. However, Burry, known for his contrarian approach, sees opportunity where others see risk. He believes that this crisis presents a unique buying opportunity, as the stocks of these distressed banks trade at their lowest levels.
According to his annual shareholder report, he has strategically invested in a range of distressed banks, including New York Community Bancorp, Capital One, Wells Fargo, Western Alliance Bancorp, Huntington Bancshares, PacWest, and First Republic Bank.
Additionally, his portfolio includes major holdings in JD.com and Alibaba Group.
Like Jerome Powell said earlier these banks heavily depend on big shots to invest while most of the top-rated US banks are still healthy, despite the slump.
Another Market Bottom On The Horizon?
Drawing parallels to his famous short position against the 2007 mortgage bond market, Burry has indicated that he envisions a similar scenario unfolding in March 2023. This prediction has garnered attention and piqued the interest of market observers who closely follow his investment moves.
Despite the ongoing SVB and Silvergate scandal, Michael Burry is once again indicating a market bottom. Burry, who is a hedge fund manager famously known as “The Big Short,” is an investor who often makes headlines for predicting the direction of the financial markets.
The US regulators intervened to protect the deposits of the bank’s customers in the wake of the collapse of Silicon Valley Bank, in a manner similar to how JP Morgan intervened in the Knickerbocker Crisis in 1907, and he also subtly hinted that the markets might bottom out as a result of this action, according to Burry.
“In October 1907, Knickerbocker Trust failed due to risky bets, sparking a panic. Two others soon failed, and it spread. When a run began on a healthy Trust, J.P. Morgan made a stand. 3 weeks later the Panic was resolved & markets bottomed. A stand was made this past weekend,” he wrote on Twitter.
Bitcoin’s surprise Tuesday breach of the $26,000 level caused the cryptocurrency market to move in the opposite direction of the US financial sector. It seems that the crypto sector is currently unfazed by the events occurring and it is paving way for BTC to breach the $30k mark.
Burry is known for his bearish predictions for the markets and the economy. He became famous for his bets against the US housing market in the years leading up to the 2008 financial crisis. The investor has also lately compared Silicon Valley Bank to Enron, the energy trading giant that made headlines in 2001 when it went bankrupt owing to accounting fraud. The banking sector needs more transparency, as shown by Burry’s warnings.
He also warned about the status of the financial sector in a now-deleted March 12 tweet while criticizing Silicon Valley Bank’s (SBV) executives for their actions.”My hope is that the human race will reverse direction, away from impatient, lazy shortcuts always and everywhere,” Burry said.
Wall Street’s most revered investor, Michael Burry, appears to agree with the bleak prognosis that the U.S. economy will enter a recession in 2023.
The inflation rate has reached its high, Burry tweeted on January 1. “Of course, this is hardly the cycle’s final zenith. Recession by any measure is projected to hit the United States in the second half of 2023, with CPI falling to negative territory.”
The protagonist’s cryptic tweets anticipate the stock surge and more. Find out.
Michael burry’s bearish prediction in Jan
- For the uninitiated, Burry tweeted “Sell” on Feb. 1 as a premonition. In January, the S&P 500 Index rose 6.18% after a rough 2022.
- Burry suggested a meltdown against the backdrop. The S&P 500 Index graphic projected a 30% drop in seven months starting in March 2022. He noted the bullish crossover before this timeframe.
- Burry tweeted this historical S&P 500 chart just before a bullish crossover.
This time, the investor assured the press things will be different. Burry’s words may suggest a change of heart, but the data suggests he is still intent on selling off the company. Even if his tone was pessimistic, he believes there is little prospect of a stock market rally in the near future due to macro considerations.
In the graph he has made available, Burry draws parallels between the Effective Federal Funds Rate and the S&P 500 Index for the years 2001 and 2002. Similar to the effective interest rate index, the stock market index has been falling. So, Burry makes it plain that when the U.S. Federal Reserve begins to shift its monetary policy, investors shouldn’t put their money (or cryptocurrency) in the stock market or expect it to appreciate in the longer run.
A brief on his outlook on his Twitter post
- The hedge fund manager implied the market was sending a false signal and would sell precipitously.
- Burry, who frequently deletes his tweets and Twitter account, erased it again a day after the tweet and disappeared for a week.
- Burry Returns: Burry reactivated his Twitter account on Tuesday, tweeting a message that implied a change in position.
- “This time is different,” he continued, showing the 2001-02 S&P 500 chart.
- Musk responded immediately. Musk replied to Burry’s quote-tweet with “Cracks me up every time” and the “rolling-on-the-floor-laughing” emoji.
The discussion of whether to purchase or sell stocks continues online, with many investors keeping an eye on Burry’s every word for clues on how to proceed with their portfolios. The investor’s prediction, which seemed to imply that the stock market will crash, has baffled some investors and inexperienced traders.
When Michael Burry shoots, he “generally doesn’t miss,” as one Twitter user put it. In 2005, he started shorting the subprime mortgage market, and in 2007, the housing market bubble burst, which triggered a worldwide economic meltdown.
Thus, while the markets are currently defying Burry’s projections, as they did in the late 2000s, this is merely a short-term picture. Time will again show who is right.
How likely is a catastrophe on Binance on par with FTX, if at all, or is this all just a lot of fuss?
The cryptocurrency exchange Binance has faced criticism and “FUD” (fear, uncertainty, and doubt) from some quarters, with some questioning the company’s viability. However, Binance has responded by highlighting its recent withdrawals and releasing a proof-of-reserves report.
According to blockchain analytics tool Nansen, $2.2 billion worth of ether was stolen from Binance in the preceding week. Binance reports that about $1.9 billion, or 80%, of average daily net withdrawals, occurred over the past 24 hours.
While it is difficult to predict the likelihood of a catastrophic event occurring on Binance, the company has implemented various security measures and has a track record of responding promptly to potential security threats.
It is worth noting that the cryptocurrency industry as a whole is continuously improving its security measures to reduce the risk of such events.
Why is Proof of reserves in question?
In the wake of the arrest of FTX’s CEO SBF in the Bahamas and the subsequent demise of the exchange, other cryptocurrency exchanges, including Binance, have taken steps to be more transparent, such as issuing proof-of-reserves reports.
Binance recently released a proof-of-reserves report, which was audited by global accounting and tax advisory firm Mazars. The report indicates that Binance has enough funds to fully cover all of its users’ assets. The release of this report has sparked new concerns about Binance and the overall transparency of the cryptocurrency industry.
The cryptocurrency market’s reaction to the “FUD” regarding Binance sent Bitcoin down to $17,000, so let’s examine why Michael Burry deems such speculation “meaningless.” Crypto firm audits are “Pointless”: why?
Michael Burry, the founder of Scion Asset Management and renowned for predicting and profiting from the 2007-2010 U.S. subprime mortgage crisis as depicted in Michael Lewis’s book “The Big Short,” has stated that proof-of-reserves (POR) audits of cryptocurrency exchanges are pointless.
Burry, who is featured in the book and was portrayed by Christian Bale in the film adaptation, has commented on the current Binance auditings.
Burry tweeted about Mazars Group ceasing crypto proof-of-reserves audits:
Burry’s tweet addresses a Bloomberg article stating that the French accounting company ceased work on crypto firms due to strong media scrutiny and evidence that markets have not been satisfied by its proof-of-reserves reports, notably for Binance, Crypto.com, and Kucoin.
Despite Binance’s growth compared to other exchanges, the cryptocurrency industry as a whole has faced challenges. According to CryptoCompare, spot exchange trading volume slightly increased between October and November 2022.
However, Binance CEO Changpeng Zhao has argued that many auditing firms are unable or unwilling to examine cryptocurrency exchanges, user accounts, and blockchains, leading to a lack of confidence in centralized exchanges as demonstrated by the frequency of customer withdrawals.
Zhao also pointed out that audits do not always reveal all potential issues, and some have suggested that such auditing is simply a cover-up and lacks ethical value. It has been a relatively quiet period in terms of hacks and failures in the crypto sector, but the concerns about centralized exchanges and the validity of audits persist.