♒ Michael Burry: Genie of Doom
Analyzing the Big Short guy's Tweets to see if he's still worth your attention (spoiler: yes)
Welcome to Market Mood, the newsletter that gobbles up stock market chatter & spits raw insight into your mouth like a momma bird feeding it’s young. Talk about ~information diet~ 🐥
‘BIG SHORT’ GUY IS BACK AT IT ⛈️
Dr. Michael Burry. The hedge fund manager made famous for predicting the ‘08 Housing Crisis (& getting rich off it). One of the most famous bears of all time.
They literally made a whole movie about him & his quirky doomsday vibes: The Big Short (played by Christian Bale, a personal favorite).
He’s basically like the real-life Chicken Little. 🐣
Over the past few years, he’s regained some notoriety for yeeting & deleting Tweets about — you guessed it — more impending doom. He’ll tweet something cryptic about the market (always bearish), then a day later delete his whole account 👇
Makes it kinda tough for folks to keep an eye on what he’s saying (which I suppose is his goal). Some people think he’s crazy, others have written him off as an old head who needs to get with the times.
Or on the other hand, perhaps he’s still got it. It’s hard to say.🤔
Either way: what if we could go back & analyze all his deleted Tweets about the market… could we tell how often he was actually right? Let’s see…
THE BURRY ARCHIVE 🗃️
After some digging, we found a few gracious people who’ve created bot accounts dedicated to archiving Michael Burry’s tweets before he deletes ‘em (@burrytracker on Twitter, & r/BurryArchive on Reddit). From there, we:
Piled his archived tweets from the past few years into a database (going back to September 2021)
Filtered down to those talking about the market as a whole 📈 (~18% of total; the rest are about covid, the government, China, or heavy metal)
Calculated their sentiment (on a scale from -100%🔴 to +100%🟢)
Calculated the performance of the market (S&P 500) over the week following each of his market tweets
The results? Well… he’s actually pretty damn good 👇
Turns out, Michael Burry is usually right when he says something bearish. 🔥 By the numbers:
In Tweets about the stock market as a whole since 2021, Burry’s sentiment has been bearish 🔴 roughly 86% of the time (ie. 5 of every 6 tweets are doom & gloom)
When he tweets something bearish about the market, roughly 75% of the time the market goes down over the following week (ie, he’s usually correct even over the short term) 👀
More generally, the 7-day return of the market (S&P 500) following each of his tweets shows a signifcant correlation with the sentiment of each tweet (0.56)
IN OTHER WORDS: when Big Short Burry says boo, the market says “AHH!” 👻
Not only is he directionally right most of the time, but *proportionally* right. Usually when the markets going down (as you’d probably expect), but also when the market’s gone up….
And sure the market is now much lower than it was in 2021, but tbh it’s been pretty choppy between now & then — making his performance that much more impressive.
BURRY’S GREATEST HITS 🎷
Now, it’s only right that we do a quick review of some of his best-performing takes. Some of these are eerily well-timed:
1. Super Inflation Incoming ☄️
Oct 2021: at this point inflation is at 5.4% (which isn’t low) — Burry hints that we should prepare for some of the worst inflation we’ve seen in 50 years. Next, inflation reaches 9% within the 8 months
2. Calling The Top 🌄
Nov 2021: amidst one of the strongest bull runs in recent history in 2020-2021, Burry says the market looks suspiciously similar to previous recessions. 3 weeks later, the S&P 500 reaches it’s peak, and hasn’t recovered since
3. Next Up: Earnings Compression 🪗
Jun 2022: after calling the market downturn correctly, Burry says that corporate earnings growth will fall next. At that time S&P 500 earnings were up ~15% year-over-year. But sure enough, YoY%m earnings change turns negative by Q4
4. Banking Fiasco 🚮
Mar 2023: the day before Silicon Valley Bank famously declared bankruptcy on March 10th, Burry says ‘we may have found our next Enron’ (ie. a major cornerstone corporate collapse that catalyzed the ‘08 recession). Then he predicts more will come… of course then a handful of other banks are run on, and it seems the worst is yet to come.
So there you have it. Bears will be bears — and the king of Bears has eaten pretty well during the down market of the past two years.
Of course he hasn’t been right *every* time (early on in 2023 he admitted this), but it’s kinda scary just how much he has seen coming as of late.
Plenty more to write on this topic, and it feels like we’re only scratching the surface. But with substack’s word limit we’ll have to leave it at that for today. Let us know what you’d like to see next!
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
SENTIMENT KEY: 🟢=bullish, 🌑=neutral, 🔴=bearish