131–140 of 352 posts
The problem with these kinds of bets is the Fed Put. That's the invisible force levitating stocks. I don't really see that changing unless/until the country genuinely enters a debt or currency crisis. The path is unsustainable, but they'll keep it going as long as they possibly can.
When Trump replaces Powell next year, the odds of the Fed doing something other than bathing a crisis in liquidity goes way up.
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Selling (writing) options is NOT how you bet against a company. You either sell the stock short or buy puts.
Technically writing calls is also taking the downside.
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When Trump replaces Powell next year, the odds of the Fed doing something other than bathing a crisis in liquidity goes way up.
To add some context - Powell's 4-year term ends January 31, 2026. Whether he is reconfirmed by the Senate for another term is an open question.
The implication here is that there's a prediction of a crash, but this could equally just be a hedge. Fund managers don't want their whole fund to become devalued if AI-driven valuations collapse. A put against Nvidia helps de-correlated the fund value from AI values.
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You're betting against a middle-east Marshall Plan and AIPAC lobbyists vs. a company that just set up its AI industrial Hub in Europe and has some serious compute-engine hosting cost sticker-shock incoming. As far as I can see, shorting Thiel is shorting Israel at the moment. Don't do it while Trump is in Cabinet and pressuring Tel Aviv to pardon Bibi.
I will never understand what it is about Israel that makes people lose their minds.
A bet against Nvidia is smart. A bet against Palantir is not. Palantir has become deeply integrated into the surveillance states of America, and won't be going anywhere anytime soon.
I'm not sure the bet is as big as it seems from the headline. When you buy options, you pay a fixed premium to get the right to buy/sell a very large value of shares, called the notional. But the notional is not what you are losing if it goes wrong, you lose the premium. The premium can be quite a small number compared to the notional.
A bet against Nvidia is smart. A bet against Palantir is not. Palantir has become deeply integrated into the surveillance states of America, and won't be going anywhere anytime soon.
It doesn't matter if it's the best firm ever and will get its dividends forever. You still calculate reasonably.
People say this kind of thing about Tesla as well, and Tesla has been stuck as a slightly-smaller-than-Mercedes-Benz sized firm for years and will stay like that forever, or even shrink relative to MB.
NVIDIA has a much more reasonable P/E ratio, even though it is of course very high.
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> high IVs. You’re paying for that. Glad to see someone say it. A lot of people have a hypothesis about the market, but fail to do the follow through to see if the market has already priced that in . The real aim should be to see when your model (mental or mathematical) prices things differently than the market. In this case, it's actually quite reasonable to believe that the market has over priced the risk no matter…
With options, the market has nearly always priced in the obvious risk. But not the non-obvious risk. Burry is not just saying, “I think these companies are overvalued.” Rather, he’s saying, “I think the bubble is about ready to pop.” While many people see the bubble, Burry is making a bet on the timing of the pop.
Does Michael Burry actually have $1.1B liquid? That margin call could obliterate him. Also, this is not an argument in favor of Nvidia or Palantir.
The sources I can readily find put Burry's current net worth in the neighbourhood of $300 million. Depending on the regulations, he probably actually could put his entire life savings into a short of this magnitude. Of course, that's sort of like having your entire 401(k) in a -4x levered ETF, even worse because it's on individual stocks.
The filing doesn't appear to disclose strike prices or expiration dates. But my guess is that he loaded up on very cheap puts (low strike price) to hedge against the apocalypse (low probability of winning big to cover losses from everything else; high probability of just paying some insurance money). The same form shows bullish positions in other sectors — health care, finance and energy, as well as some corporate bonds. Given what the portfolio in the filing looks like overall, it's hard for me to imagine him being willing to risk more than a few million on this.