Why mirroring 'Ace Investors' can be a very poor idea
By Vivek Banka

Should you panic because of famous investor Michael Burry's short positions

Michael Burry ( of the Big Short fame) who shot to prominence with his bearish bet against US Sub prime in 2008 has taken a bet against US banks and stocks with a large put option holding ( 1.6 US billion in bet) - This has led to a lot of panic in US markets

Should you follow suit - Well lets take a quick look at some of his recent trades

He bet against Tesla ( shorted) but then unwound very quick

He had bought Game Stop before the company had a major short squeeze

He has been very vocal about Gold, US Farmland and also holding cash

Some of his largest holdings are Private Prison stocks in the US ;)

So should u panic - don't think so - BECAUSE

  1. We don't know when he is going to unwind his short position ( it could be very quick and you as an investor not get time to react

  2. He is human and just because he has got 2008 right doesn't mean he will get it right again - I have rarely seen many fund managers get calls right all the time ( especially in the short term) , however a legend they might be. Also we dont know much about whats the context of his bet ( little knowledge can be dangerous)

  3. We should stick to the game that we are good at ( which is predicting long term cycles and sticking to it) -

  • You should believe that we aren't in a bubble territory

  • The next few years economies globally would be in a better shape that it is now

4. However yes these times are important to just realise and not get carried away in the market euphoria

5. When markets are expecting a correction, they rarely come

So 'stick to your game' ( asset allocation), exit investments you wouldn't hold for the long term and answer the questions in point 3 above for holding on

#thebigshort #usmarket #marketcommentary #nasdaq100

GoalTeller Pankaj Fitkariwala

Related Articles