'Big Short' investor Michael Burry warns of a massive bubble and epic market crash

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#31
To be honest, I think Bronte Capital's June2021 letter sums up the situation nicely. We all gonna look stupid, some way or another - ie. We have to choose our poison.

Some of Howard Marks' wisdom might be apt - Going contrarian against the Market is a losing game at most times (eg. those shorting a bull market, or those catching a falling knife). It only pays to go contrarian at market extremes. Unfortunately, timing market extremes is a low probability proposition but as OPMIs, we may be less affected by the institutional imperative and I reckon the best we can do, is really to weigh and hedge our bets accordingly.

I guess that is one of the best form of hedge and action we can take, as OPMIs - is to really spend the majority of our efforts to understanding businesses like an owner, and insisting on a margin of safety.

How to look stupid: choose wisely

This is a bubble. Bubbles make market participants look stupid.

i. If you participate in the bubble you will – like other participants – implode on the way down. You will look stupid in a crowd after the bubble. Being stupid in a crowd has limited career risk, but it is still stupid.

ii. If you do not participate in a bubble you will underperform on the way up, your returns will be lousy, and your clients will leave you. As a money manager your perfectly good business will disappear, and you will look stupid. Moreover, you will
look uniquely stupid and thus be the subject of derision.

iii. If you fight the bubble, your shorts will roll you over, you will lose frightening amounts of money and you will look stupid because you are stupid.

http://files.brontecapital.com/amalthea/...202106.pdf
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#32
Being over-confident and speaking in absolutes on inherently unpredictable and unknowable events, often enough, will eventually make you look stupid.


Interesting recent Ray Dalio interview (June 2021):
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#33
Calling something a bubble VS calling when the bubble pops are 2 different tings.

The former is not "inherently unpredictable and unknowable events". It is the latter that is.

Then again, calling something a bubble doesn't mean you need to "sell everything and stay away". It simply means one needs to be cautious moving ahead - whether is it in terms of temperament (managing our "FOMO") and insisting on the margin of safety. Investing is always probabilistic (in the words of specuvestor, it is not binary decision making)

I do not smell any sort of "over confidence or speaking in absolutes", from these folks (Ray Dalio or John Hempton)
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#34
(26-07-2021, 09:30 PM)weijian Wrote: Calling something a bubble VS calling when the bubble pops are 2 different tings.

The former is not "inherently unpredictable and unknowable events". It is the latter that is.

..

My comment was not specific to any particular claim or individual per se. But a general statement on absolute statements.

But specifically with regards to calling something a "bubble"; I think in general, one needs to be careful what it means and implies (usually a certainty of massive deflation of value at some point, right?). And when it does not come into fruition, that's when one would look foolish. Even if you hedge your bets by not specifying time frame. As the old cliché goes: "Being early is as good as being wrong." IMO, it's fair to be judged accordingly.  

Remember when Amazon (2010) and Apple (2012) were called bubbles? These predictions will get no credit, even if Amazon and Apple decline 50% in 2021.

And it's easy to not look foolish, instead of "bubbles", one can use wordings like "frothy", "valuation is too rich for my risk profile" Smile
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#35
Is China meltdown providing the spark? Let's see if the Fed will alleviate or add to the pain tomorrow

(30-06-2021, 12:30 PM)specuvestor Wrote: Spark can come from anywhere including a failure along the chain, but the conditions has to be there in the first place. Breaking the buck for money market instrument during GFC was another unforseen. Don't fight the Fed with the hike coming could be one this time as catalyst but probably won't be THE one.

Looking back it's hard to know how at the time, but the why is easily explained. And of course ex-post people can write books about it like it's all predictable.

I think it's "more" and major shareholder index funds don't attend AGMs or briefings to question management
https://www.theatlantic.com/ideas/archiv...my/618497/
Indexing has gone big, very big. For nine in 10 companies on the S&P 500, their largest single shareholder is one of the Big Three. For many, the big indexers control 20 percent or more of their shares. Index funds now control 20 to 30 percent of the American equities market, if not more.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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