Preamble: Michael Burry is definitely a controversial figure. He rose to fame betting against the subprime mortgage market and making a 489% return for his investors between Nov’00 and Jun’08 (SP500 returned just 3% in the same period).
But, I recently observed that in every news article/tweet, he always talks about an impending crash. As recently as last week, he issued another warning stating that there would a “mother of all crashes soon due to the meme-stock and \\\\\*currency rally that will approach the size of countries”. Basically, what I wanted to analyze was
Whether Michael Burry always predicts a crash and gets lucky when there is an actual crash or does his prediction actually turns out to be true most of the time?
Analysis
The various news articles spanning over the last 15 years were obtained from Google News \[1\]. I flagged the date of each crash prediction and then analyzed the performance of the market/stock over the
a. Next 1 Month
b. Next 1 Quarter
c. Till Date
I will not be including the subprime mortgage crash prediction in this analysis as we all know how that turned out and how that made him famous. Also, there are no news reports covering Burry before that.
The performance figures are calculated based on the prediction. If Burry specifies a stock, then I am using that particular stock as the benchmark. If its broader prediction relating to the overall market, then the benchmark used is S&P 500.
Results
There was a long gap of 9 years after the 2008 crash where Burry stayed out of the public view and did not make any warnings or predictions about the market.
His first verifiable prediction after the 2008 crisis came in May 2017 where he warned that we can expect a global financial meltdown and World War 3. In his exact words
>I didn’t go out looking for this, I just did the math. Every bit of my logic is telling me the global financial system is going to collapse
But it’s been 4 years since the prediction and the market is chugging along just fine. S&P500 has returned a respectable 93% to date and there is no imminent threat of a World War happening.
Burry’s next prediction was in Sep 2019 where he said that index funds are the next market bubble and are comparable to subprime CDOs. He said that index fund inflows are now distorting prices for stocks and bonds in the same way that CDO purchases did for subprime mortgages more than a decade ago. He said the flows will reverse at some point, and “it will be ugly” when they do.
This prediction also did not pan out as S&P500 has returned 50% to date over the last two years and the only crash that occurred during this period was the Covid-19 flash crash from which the market made a sudden recovery.
Burry’s next target was on Tesla where he said that Tesla’s stock price is ridiculous and that it would collapse like the housing stock bubble. I have kept both the articles there which had only one month difference as we don’t know exactly when he shorted the stock. The returns would be substantially different if he did it in Dec’20 when compared to Jan’21 as Tesla had a phenomenal run in December.
He [reiterated](https://www.businessinsider.in/stock-market/n