Big Short investor Michael Burry liquidates entire portfolio - except for one stock
In a dramatic move revealed by recent SEC filings, Burry's Scion Asset Management has slashed its portfolio to just seven positions.
Six of them are aggressive short bets: bearish put options against some of the biggest names in tech and Chinese equities, including Nvidia, Alibaba, and Baidu.
Only one company appears to have managed to retain Burry's faith: Estee Lauder, where Burry has doubled down, boosting his holdings to 200,000 shares valued at $13.2 million.
While cosmetics may be an unusual choice ahead of a potential financial meltdown, it's not without logic.
In times of economic distress, consumers often indulge in small luxuries even as they forego big-ticket items - a phenomenon known as the 'lipstick index.'
When wallets tighten, lipsticks replace dresses; with small indulgences offer a balm for economic wounds.
Under new CEO Stephane de La Faverie, Estee Lauder is trying to reassert itself in a struggling global beauty market, particularly in North America and China.
Bearish has taken out aggressive short bets: bearish put options against some of the biggest names in tech and Chinese equities, including Alibaba and Baidu
Only one company appears to have managed to retain Burry's faith: Estee Lauder, where Burry has doubled down, boosting his holdings to 200,000 shares valued at $13.2 million.
Product launches have accelerated. Luxury price tiers have been introduced.
Still, Estee's stock is down 15% year-to-date, although it did gain 2% on Friday amid broader market turmoil.
'Burry's bet suggests belief in Estee Lauder's ability to reclaim its status as a beauty powerhouse in an increasingly competitive global market,' said Angeli Gianchandani, a global brand marketing expert at New York University.
Burry appears to be bracing for a hard crash when it comes to the market and there are warning signs that have not been seen since the depths of the 2008 crisis.
Burry rose to fame with his bets against the US housing market before the 2008 financial crisis. Michael Lewis' nonfiction book The Big Short was released in 2010 and the movie version came out in 2015.
He also profited in the early 2000s by shorting high-flying tech stocks during the peak of the Dot Com bubble.
However, his bets have sometime appeared to misfire. In late 2020, he initiated short positions against Tesla stock, but later said it was just 'a trade' and he'd exited the position after Tesla's stock continued to soar.
This also isn't the first time Burry has gutted his portfolio. In 2023, he famously dumped most of his holdings only to later admit he was wrong.
Markets are also seeing a flight to alternative assets. Gold has surged 24% year-to-date, outperforming Bitcoin's 12% gain, as investors hedge against a weakening U.S. dollar down 8% this year.
Bitcoin has caught a second wind as well, bolstered by adoption from both corporations and state governments.
Arizona and New Hampshire have passed legislation establishing strategic Bitcoin reserves and wwo dozen more states are considering similar measures.
Not everyone is convinced, however, and JPMorgan's analysts recently noted that while Bitcoin may offer high returns, gold remains the safer bet for risk-averse investors seeking protection against geopolitical risks and currency debasement.
'We are skeptical that Bitcoin and other crypto assets offer the potential to improve portfolio resilience. Despite their low correlations to traditional assets, crypto assets have historically made portfolios more fragile,' JPMorgan analysts wrote.
In the bond market, yields on the 10-year Treasury note have surged to 4.54%, while 30-year bonds are touching pre-2008 crisis levels above 5%.
The moves can be seen unsettling because of their cause - the fear that Washington is about to unleash a new wave of new debt.
With Moody's recently downgrading America's credit rating, concerns about fiscal instability have only deepened, reinforcing investor skepticism about the sustainability of Washington's approach.
House Republicans, steered by Speaker Mike Johnson and under the watchful eye of Donald Trump, muscled through the so-called 'One Big Beautiful Bill' - a sprawling package of tax cuts and spending increases that could, according to the nonpartisan Congressional Budget Office, add $3.8 trillion to the deficit over the next decade.
Christian Bale portrayed Burry in the 2015 film The Big Short. Burry rose to fame with his bets against the US housing market before the 2008 financial crisis but has not always been right
With yields rising, equities look increasingly vulnerable as a place to park cash.
The S&P 500 has clawed back most of the losses incurred when Donald Trump introduced his tariffs back in April.
Mortgage rates are at highs not seen since the Great Recession with the average contract interest rate for a 30-year fixed-rate mortgage close to 6.92%.
Credit card and auto loan rates are surging. Households and businesses are feeling the squeeze.
And while politicians in Washington plays games with tax breaks and entitlement cuts, real Americans are bracing for impact.
Cuts to Medicaid and food stamps loom on the horizon. Healthcare for millions could be stripped away. SNAP benefits could shrink hitting low-income Americans the hardest.
'This bill is a debt bomb ticking,' warned Rep. Thomas Massie (R-Ky.).
'I'd love to stand here and tell the American people, "We can cut your taxes and increase spending and everything's going to be just fine." But I can't do that because I'm here to deliver a dose of reality. This bill dramatically increases deficits in the near term but promises our government will be fiscally responsible five years from now. Where have we heard that before? How do you bind a future Congress to these promises? This bill is a debt bomb ticking.'
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US debt is now $37trn – should we be worried?
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Daily Mail
an hour ago
- Daily Mail
Should you switch out of the Wall Street danger zone and into... The land of opportunity?
In just a few months, the emerging markets of Asia, Europe and Latin America have undergone a radical change of image – from danger zone to land of opportunity. At a moment when portfolio diversification has become more vital than ever, this shift in perception is another trend that could be costly to ignore if you are a British investor. Wall Street investors, fearful of the damage that Donald Trump's tariffs could inflict on the American economy, are looking for territories where the President's policies may have less impact. Emerging markets appear to provide a solution, offering bargain shares and other advantages. Patricia Ribeiro, of American Century Investments, says: 'Long-term structural growth in emerging market nations should continue to be fuelled by favourable demographic trends, such as younger populations and rapid urbanisation – and by reforms to policy and regulations.' And Kamil Dimmich, of the emerging market specialist North of South Capital, warns 'the direction is set for more protectionism'. His caution comes ahead of Wednesday's deadline for tariff negotiations, after which Trump may reimpose double-digit levies on some countries' imports to America. But whatever unfolds on the day, emerging market fans such as Bank of America and JP Morgan Chase seem set to be joined by others, persuaded that there are gains to be made in advancing nations such as Argentina, Brazil, China, Hungary, India, Mexico, South Korea, Taiwan, Turkey and UAE. Owing to this optimism, the US S&P 500 index has been outpaced by the MSCI Emerging Markets Index this year (this covers 24 markets). As Chetan Sehgal, co-manager of the £1.9billion Templeton Emerging Market trust, points out, this performance would have been even stronger if Asian markets had not been held back by tariff apprehension. Emerging market enthusiasm is also being amplified by speculation about the future of Jerome Powell, chairman of the US Federal Reserve, whose term expires in May 2026 but who has come under increasing pressure from President Trump. This could expedite interest rate cuts, reducing the value of the dollar – and driving down the cost of borrowing in emerging markets. Rob Burdett, of Nedgroup Investments, says: 'What could trigger the unlocking of emerging markets' potential for investors? One catalyst could well be the weakening of the dollar which, historically, has coincided with good times for emerging market shares.' Some investors may still have reason to be sceptical about emerging markets. At the turn of the century, the source of growth was supposed to be the Brics (Brazil, Russia, India, China and South Africa) economies. But only India has delivered. Russia is out in the cold and the rest have faced a struggle, although the outlook for Brazil and China is more cheerful. The Shanghai Composite index is up by 5 per cent this year, powered by China's trade deal with the US as well as AI innovation. But if you are keen to broaden your investment horizons, here's what you need to know. TRIP TO THE UNKNOWN? Be prepared for a voyage of exploration, involving a considerable degree of hazard – and taking in unexpected stops such as Greece. This country used to be associated with economic stagnation, but is establishing itself as a dynamic force in Europe. Most Latin American nations seem set to be subject only to 10 per cent tariffs. Nevertheless, Brazil still looks to be an unlikely investment prospect with its double-digit interest rates, high inflation and turbulent Left-wing leader Lula Da Silva. Yet fund managers say there is the chance of the election of a more centrist government next year and Brazilian banks like Banco Bradesco, Itau Unibanco and XP are regarded as well-run institutions on which investors could take a gamble. The Mexican bank Grupo Financiero Banorte is also considered worth backing. Mexico's president Claudia Sheinbaum has kept a cool head in her dealings with Trump, aware of the vital importance of its US neighbour has to her country. Getting to know these markets may be fascinating, but the research into individual shares is time-consuming and difficult. Most investors will be better off in a fund or investment trust covering a spread of markets. The low-charge option is Fidelity Emerging Markets, which tracks the MSCI index. Best buy funds and trusts include Artemis SmartGARP Global Emerging Markets Equity, FSSA Global Emerging Markets, JP Morgan Emerging Markets, TT Emerging Markets Equity and Templeton Emerging Markets Investment Trust (Temit). The holdings of these funds and trusts can be found in their factsheets available online. It is worth checking these details to establish the level of risk – and whether you are comfortable backing certain regimes. ASIAN TECHNOLOGY Most funds and trusts prioritise Asia, concentrating on China, India, South Korea and Taiwan. Chinese tech groups such as Alibaba, Baidu and Tencent are popular holdings. But the favourite is the Taiwan Semiconductor Manufacturing Company (TSMC). This group may be threatened by China's predatory stance towards Taiwan, but TSMC is moving some production to the US and remains integral to the global artificial intelligence (AI) industrial revolution. Seghal comments: 'We hold TSMC. The US titan Nvidia may design the microchips for the generative AI system ChatGPT, but TSMC actually manufactures them.' Nvidia is one of the Magnificent Seven of US tech. Like the others in this sector, it relies on another emerging market business. Sehgal adds: 'At Temit, we also own the South Korean group Hynix. It supplies DRAM (dynamic random access memory), which stores code and data on computers.' South Korea has experienced political turbulence. Last year, for example, the former president attempted to declare martial law. But the situation has stabilised and although the country may have to cope with a 25 per cent levy, it could benefit from firms shifting manufacturing from China. EUROPE AND THE MIDDLE EAST If you wish to steer clear of China, given its trade war with the US, or suspect other Asian nations may not cope well with tariffs, there are adventures elsewhere. The Barings Emerging EMEA Opportunities trust focuses on EMEA – Europe, the Middle East and Africa. Alay Patel, its manager, says: 'The economic fundamentals of Eastern Europe are improving.' Patel says that Poland is also benefiting from factors such as defence expenditure – spending 5pc of GDP on this area – and the return of skilled workers. Meanwhile, the Gulf nations – UAE, Saudi Arabia and Qatar – are trying to lessen their reliance on oil by investing in tourism and infrastructure projects. Dimmich is particularly positive about the UAE. The prosperity of Dubai, its largest city, is being boosted by its mix of 'plentiful sunshine and low taxes'. But you should only approach emerging markets if you can afford to take a long-term view and be realistic about the potential rewards. Sehgal says that emerging markets will provide a return of 7 per cent to 8 per cent a year – far better than the yields on government bonds. This may dismay anyone who has grown accustomed to the spectacular gains provided by Magnificent Seven tech shares in recent years. But the Wall Street types who are embracing emerging markets seem undeterred and even rather excited – which is a strong alert to anyone postponing diversification this summer.
