Comment by eqmvii
4 days ago
Many people (including Michael Burry) have had this feeling over and over since 2008, and were basically always wrong! Markets are tricky beasts to predict.
4 days ago
Many people (including Michael Burry) have had this feeling over and over since 2008, and were basically always wrong! Markets are tricky beasts to predict.
To plagiarize Howard Marks, when you try to time the market, you have to be right twice: both on when to get out and when to get back in. Even being right once is incredibly hard.
Or, to quote Peter Lynch: "Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves."
Ya I listen to this space a lot. 2015, 2016, 2018 and 2020 were a blur of “I’m cashing out and moving my 401k to money market” on several podcasts because of impending doom
It sucks because eventually they're right (and the rest of us were still laughing at the earlier podcasts).
I always wonder if they somewhat right. Using the chart from the article we have large spikes in margin debt at a bunch of years that initially were followed by a crash but now are possibly followed by money printing preventing the crash. So although Burry has the right idea the rules/market has changed and his analysis no longer holds.
That said, I think 2025 is too early for the AI bubble to pop. Even Burry was buying CDS in 2005 [1] so if you're seeing something your convinced is a crack right now it's going to take a few years to actually fracture.
- 2000 -- Followed by a crash
- 2007 -- Followed by a crash
- 2011 -- (ish) USG added a bunch of money into the system
- 2015 -- Counter example?
- 2018 -- Counter example?
- 2021 -- Large crash, USG added a bunch of money into the system
- 2025q1 -- Tariff crash
- 2025q3 -- Too early to tell
[1]: https://en.wikipedia.org/wiki/Scion_Asset_Management
The problem is Tina!
There Is No Alternative
- Gold? Dead asset
- Cash? Good luck with inflation
- Bitcoin? My ass…
So what else can you do as a rational investor than to invest most of your cash into an S&P500 or World fund?
Instead of cash, I hold treasuries. The rest is spread out among low holding cost index funds (watch out for fees... they will kill your profits) and use dividend re-investment. Split things between tax advantaged and non tax advantaged depending on your short and long term goals (ask a certified financial advisor with fiduciary duty for strategies that work for you. It's worth the small fee)
Every time the market takes a crap, I buy. I rarely sell. Keep enough cash or near cash assets in a no penalty account(s) to cover unexpected costs so aren't forced to sell.
A luxurious set up for sure (which took about a decade to get set up) but it's repeatable and fairly stable.
Now, if you have real wealth (like $10s of millions of liquid assets) then look to setting up a MFO or SFO and focus on tax efficiency, etc. That's a whole different set of strategies.
Interesting.
So US Treasury securities instead of cash right?
And then every time there is a dip, sell the treasuries and buy ETFs?
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Give it to entrepeneurs/researchers doing intrinsicly cool things like cancer research, without knowing how you will get any of it back right at the start. The problem is NOT lack of productive investments, its that Uber rich people think its not fair if they ever lose.
Military manufacturers are a reasonably safe haven these days as Europe is desperately trying to re-arm itself following the Russian invasion of Ukraine, the Middle East is in flames once again and there's a ton of uncertainty and small scale hostilities around China/India/Pakistan.
Urban residential real estate is also a safe haven assuming you still are allowed to invest there. Demand is not going to shrink any time soon (as most Western governments are running rural areas to the ground for them being too expensive to bring on modern standards and expectations in infrastructure), and supply is so scarce that even large developments and re-zoning will hardly make a dent in demand.
Invest in a fund which underweights bubble stocks by tracking a suitable alternative index:
https://www.bogleheads.org/wiki/Alternative_indices
Dividend weighted indexes are the classic option, and fundamental weighted index are a newer one.
Maybe unfashionable equities? Utility stocks, Japan/S Korea, BRKB etc?
Golds been rallying really aggressively recently
So, too late now, you're saying. I read overvalued, soon to crash…
Perhaps we should be buying up Yuan…
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Yes I know, same with Bitcoin.
I mean it’s a dead asset class since it doesn’t fund any economic activity. It’s just a store of wealth
Yeah, frankly I think there is no truly safe place for investments at this point.
We might as well just enjoy the ride knowing at least when it hits the bottom, we'll all of us be in the same tough spot.
Well isn't that the whole point? At a fundamental level, investment profits are a payment for the risk you take. No risk equals no profit. There are "safe" investments currently. You can get paid 4% a year roughly to hold treasuries right now. Considered a "risk free" investment (Which sure, maybe the merits can be argued).
But at the end of the day the only way to profit from an investment is taking some risk. It all comes down to pricing that risk.
> Gold? Dead asset
What? Gold is at a record high, and with inflation it will only go higher.
https://www.macrotrends.net/1333/historical-gold-prices-100-...
> https://www.macrotrends.net/1333/historical-gold-prices-100-...
In nominal terms perhaps, but in inflation adjust terms it's roughly what it hit in 1980:
* https://www.investopedia.com/gold-price-history-highs-and-lo...
https://graphics.thomsonreuters.com/11/07/CMD_GLDNFLT0711_VF...
And there have been long (10y) stretches where it's remained flat: it takes a lot of patience to HODL through something like that. Even if equities (e.g., holding an index fund) are flat at least you get some yield.
With a pure commodity play like gold (or BTC) your only way of returns in price appreciation.
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Dead in the sense that it is not useful for society.
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It is not that the markets are tricky. Predicting what the Fed will do with interest rates is tricky. By lowering rates they feed more money into the market. Take a look at the last 15 years and you will realize the only thing that gave us a minor recession was COVID, adn that was becasue intrest rates were zero.
https://fred.stlouisfed.org/series/FEDFUNDS
But they can't do this for much longer, inflation is the first sign, which is why Trump is raising tariffs.
You can see Bond prices going up. Trumps tarrifs are aimed and lowering T Bill rates:
https://fred.stlouisfed.org/series/DGS10
> But they can't do this for much longer, inflation is the first sign, which is why Trump is raising tariffs.
Trump is raising tariffs because he thinks they are a good idea and has since the 1980s:
> “The fact is, you don’t have free trade. We think of it as free trade, but you right now don’t have free trade,” Trump said in a 1987 episode of Larry King Live that’s excerpted in Trump’s Trade War. “A lot of people are tired of watching the other countries ripping off the United States. This is a great country.”
* https://www.pbs.org/wgbh/frontline/article/trumps-tariff-str...
Trump's mindset is a 1980s NYC real estate guy (zero-sum, one-off games), which when applied to global trade, is basically mercantilist:
* https://en.wikipedia.org/wiki/Mercantilism
Meanwhile, in the real world, commerce is often non-zero-sum (both parties get something of value, i.e., "win-win"), and you play multiple rounds with each trading partner and reputation matters (rather than one-off, where burning your bridges could be an actual strategy).
Trump was talking about free trade in the 80s, not in increasing tarrifs, which is not free trade. In fact, it’s the complete opposite.
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> which is why Trump is raising tariffs.
I question this bit. (That may be why he's raising tariffs; I question whether it will work.)
When tariffs go up, prices go up (delusions that "other countries will pay" notwithstanding). That shows up in inflation statistics, which in turn will (probably) show up in T Bill rates, but as a higher rate, not a lower one.
Except... tariffs might be a one-off increase. They may not compound the way "regular" inflation does. So maybe it will work in the medium term?
Who knows if this is the reason that Trump is putting in place this trade war and increasing tariffs, but this paper is a very interesting perspective on why someone in the position the US is in, in regards to the global economy is extremely thought provoking [1].
Seeing as how Trump appointed the author into his political circle though could be evidence this is the ultimate goal.
The paper is quite lengthy, however, in the beginning Stephen explains this idea of the Triffin Dilemma. A country that acts as the worlds reserve currency and thus creates enormous demand for their currency for things outside of goods are at a disadvantage that exasperate their trade deficit. This is implicit for a countries currency where most global trade is settled in their dollars, not to mention the benefits of holding the world reserve currency as a value store or investment.
I've wondered since the tarifs were announced how much impact they can actually have, but besides that point what is a reserve currency country to do? Give up their reserve currency status? There are significant downsides to that as well...
[1] https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...
Oh, I don’t think it’s going to work at all. For some reason, he doesn’t think it’s gonna raise inflation enough to matter.
The market can be irrational longer then you can be solvent.
Sure, if you bet against the crowd with leverage or a tight funding leash.
Global equity index ETF have reliably yielded 5% returns over 12-15 year periods for ~75 years.