Big Short 2.0: Michael Burry Closes Fund!

Michael Bur just threw in the towel.

Michael Bur has closed his fund, Scion

Asset Management. This is actually

similar to what he did in 2008 when

clients started banging on the door

demanding their money back. Because even

though Michael Bur ended up being right

about the housing crisis, investors were

pissed because they were losing money on

these short position bets and they had

not yet played out. That's one of the

downsides, unfortunately, of managing

money for other people. You could have

the best strategy in the world and you

could be 100% correct, but if you're

wrong on your timing, investors are not

going to give you the privilege of time.

They want results or they want their

money back. That's why most fund

managers tend to just invest in the

biggest names in the market as the core

of their fund because they don't want to

risk really underperforming the S&P 500

or a benchmark like the NASDAQ and then

they end up getting screwed because

people get mad even if they could be

right in the long term. See, dear

investors, says Michael Bur with a heavy

heart, I will liquidate the fund and

return capital with obviously the

exception for a small holdback for taxes

and an audit uh by the year end or the

end of the year. My estimation of value,

this is the big line right here, my

estimation of value in securities is not

now and has not been for some time in

sync with markets.

With heartfelt thanks, but also with

apologies, I wish you well in your

future investments. Contact my other PM

if you got questions or you want my

money managed somewhere else. Sincerely,

Michael Bur, portfolio manager. So, it

seems like he's sort of like exiting.

He's out now. He did this in 2008.

Still kept money though, still had his

bets in play, obviously made money on

his personal portfolio, and then in 2013

reopened uh his management fund. Instead

of being called Scion Capital like what

he closed in 2008, he ended up calling

it Scion Asset Management, which he just

closed. Now, it's interesting because

the letter is dated October 7th. But if

you uh sorry, October 27th, but if you

actually look at Palanteer's slump,

Palanteer's slump came just a few days

ago when his 13F filing came out. You

can see here that that decline for

Palanteer really started over here uh on

the well, let's go to the unaveraged

candlesticks right here. There you go.

You can kind of see the decline over

here. We've got a 7 8% decline on the

fourth, a two one and a half% decline

over here on the fifth and then another

7% decline on the 7th. I mean, if even

if Michael Bur timed this perfectly and

exited his shorts on Palunteer uh

somewhere here, the lowest closing price

was 174. And if you actually look back

over here to September 30th, uh the

lowest closing price uh or actually the

closing price on the day was about 180,

but it did get as low as 178. If you

took the low of the day, it's possible

that Michael Bur actually closed his

shorts for lower than what he paid for

them. But it depends when in the quarter

he also bought those securities. Because

if he bought them over here in July or

if he bought them over here in August or

September, it's not entirely clear that

he actually profited on what the media

called his $900 million short. Now, the

irony of all of that was that it wasn't

actually a $900 million short. And I

actually first covered this short on

Palunteer and Nvidia, and I said, I

don't know, man. I feel like people are

multiplying the actual bet he made by

100 again because of options. And the

media gets this wrong all the time. And

folks, that's literally exactly what

happened. Take a look at this. $912

million of put options as of September

30th. You even have the transcript over

here that he showed up. I actually think

what was happening was market

manipulation. I strongly think he was

getting out of his position by bagging

on Nvidia and Palanteer. somebody trying

to defend Palanteer and Nvidia. And

there are really three outcomes for this

uh based on well frankly what kind of

investor you are. So the three outcomes

of this are group number one they look

at this and go bro moon Michael Bur was

wrong again. Bur wrong again. Uh he was

wrong uh brief or he was right briefly

but he was also wrong with timing right

but also wrong with timing. uh and

therefore we're going to the moon on AI.

Then you've got this like second group

of people we'll talk about in the middle

in just a moment. But then you got this

third group of people and they're like,

"Bro, it doesn't matter. Even though

Michael Bur folded, all this accounting

stuff is still fraud. This is accounting

fraud." You know, cuz I I read the

comments that you all leave. This is

accounting fraud. This is bull crap. Uh

this is a scam. And and this is really a

reference to why are we giving, you

know, chips a uh depreciation curve of

six years, maybe even longer in some

cases. Uh and I actually don't think

that's fraud. I think that's just

alignment with market values uh for

chips. And it makes sense because if the

residual value of your chip is still

high a few years later, which we've seen

with Tensor processors or older Nvidia

chips, the A100s, H100s, whatever, uh

then it makes sense to extend your

depreciation curves. And my counter to

this whole fraud thing is that you

actually end up uh increasing uh your

current expenses, which means you might

actually be overstating what your

expenses are today. Now, don't get me

wrong. I actually think right now, while

Michael Bur is wrong now, I think he'll

probably be exactly correct in the

future. Like, people will come back and

go, "Damn, Murray Bur was right." But

not yet. Here's the SEC form where he

terminated his fund. And if you look

over here, he says, uh, he bought $9.2

million of those option contracts, not

$912 million. And look at the dates on

them. These are put contracts at 110 for

December 17th, 2027 and January 15th,

2027.

So his option bets were really set up to

take advantage of a Palunteer crash in

2026 or 7.

So what's crazy is he's even telling us

and forecasting that no you like this

this isn't for a now play. This is in

the future. just like he expects uh

depreciation curves not to really hit

hard uh or the the rescheduling of

depreciation curves not to hit hard

until 2028 which is possible. He's

basically trying to make a 2 to

threeyear bet here in a market that is

obsessed with daily performance charts

and daily gains. That's what the market

is obsessed with. So if you were

investing with Michael Bur, you had like

a million bucks with Bur and you look

and you're like, "Dude, the S&P is up,

you know, 30% or whatever from

liberation lows and then Michael Bur is

down 30%." The delta there is like

massive, right? I mean, it's crazy

because in that case, you would have

$1.3 million. Instead, you've got 700

grand, right? 700 grand divided by $1.3

million you might think is is, you know,

oh, 30 plus 30 60% on first. It's about

53% is what you would have. So you'd

have 53% of what you would have, which

is indicative of almost having a double.

So it's even worse, right? Like the

underperformance is so bad, you actually

underperform by 85%.

Crazy, right? So

when what do you like, what's the

takeaway of this? Like what does this

mean? Is is Bur wrong? Again, if you

watch my Bur video that I made where I

broke down these depreciation schedules,

he is wrong today. And unfortunately,

when you're wrong today with your

timing, you could be totally right about

what's to happen in the future, but it

just means you're wrong. And the amount

of stress that comes from having clients

banging on your door is often too much

for investment managers. Take a look at

this though. There's a a report here

that GPT's quiet slum ZAI bubble

warning. Basically, OpenAI CFO investors

told uh private uh investors in OpenAI,

so OpenAI's CFO said that engagement in

GPT had softened recently and part of

that was due to recent content

restrictions that they've had with

children or mental health, suicides,

otherwise. These are all rough things.

the CFO is trying to blame this all on

uh temporary issues that they say will

be temporary and that this softening

trend is expected to quote reverse. But

then it makes me wonder, no, maybe it's

not expected to reverse. Maybe you're

maxing out on your user base while at

the same time you're also running ads on

Facebook or you know Copilot is trying

to compete with you by running ads on uh

X. These are ads we've seen pictures of.

OpenAI is actively now running ads for

their chatbot on Facebook and Copilot's

doing it on X. And we think, oh well,

it's normal for businesses to advertise,

of course, but they didn't have to until

just recently. And it's sort of

indicative of, oh crap, let's spend

money to keep the growth going, which

means some of the big growth that you're

seeing at these companies in expenses

isn't all going into chips. It's

actually starting to go into marketing.

It's one of the reasons why I think

there are big advantages for being a

recipient to that marketing money,

whether you are Netflix or Disney or

YouTube, you know, obviously which one

you pick, topic for a different video.

But this Michael Bur letter where he

tells us, hey, look, you know, I'm

shutting down. I'm giving people money

back is not, in my opinion, a fold that

he was wrong. Obviously, uh, in the

short term, you know, people are going

to look at this and go, "Oh, well, I

guess Bur's wrong. He probably just

doesn't believe it anymore. I bet you he

still believes in it on a regular basis.

And he's so frustrated that he believes

he is right so much. He's just saying,

"I can't handle dealing with investors

calling every single day anymore

wondering why we're outperforming until

the bubble pops." Like, why don't we

just admit we're wrong already? Right?

And in fairness, he's had a lot of

calls. And here's somebody on X, uh,

Sensei on X, who put together this

spreadsheet, which I thought was really

interesting. Uh, they say in September

2019, he called an index fund bubble.

Well, he was wrong about that. In

September 19, February 2020, he called

for put options on the S&P 500 for a

broad downturn. This was correct.

December 2020 to January 2021, Tesla

overvalued. Well, Tesla went up like

743%, so that didn't work out. Late

January 2021, no more GameStop like

short squeezes. And then immediately

after that, AMC skyrocketed.

February 2021, the market is on knife

eds from a knife's edge from speculation

crash imminent. Well, that was wrong. We

definitely still boomed in 2021 all the

way through November uh when we peaked

out some stocks in December of 21.

February to March of 21. Bitcoin is a

speculative bubble. Consider shorting.

Uh, Bitcoin did end up dropping 28% in

the short term, but hit new all-time

highs later. June 2021, greatest bubble

ever, he called S&P 500 up over uh or

looking for a 50% crash. Still wrong

because the market kept going up in 21.

He called for an epic crash from crypto,

spaxs, and memes in full swing by

September. This was right. He called

this in January of 2022. That happens to

be when I went bearish as well. And that

entire year pretty much sucked until

about the fourth quarter when you had

sort of the bottoming out of the chips

recession which was great. It's actually

when I had launched a fund in November

of 2022 expecting this Nike swoosh

recovery which we got for you know over

two 3 years now which is phenomenal. And

the question is are we at that euphoric

end of the tail now? Where where do we

sit? January 2023 tweeted sell admitted

he was wrong on that. That was an oopsy

doopsies. Uh and uh yeah, that's uh and

what Oh yeah, then what else we have

here? That's a redo. January 23 sell

August 2023 $1.6 billion puts. Well,

again, those are probably nominal, so

divide by 100, right? So this is

probably closer to like $16 million,

whatever. $16 million of puts on the S&P

500 and NASDAQ. Uh positions contributed

to underperformance. So he's been trying

to pull off these shorts for a while on

tech plays right here. This was so early

in the AI cycle and then puts on Chinese

technology companies and Nvidia amid

slowdown mixed performance over here

early 2025. I mean Nvidia is at alltime

highs so I near alltime highs so

probably not mixed probably down on both

of those. So anyway this gives us a

little bit of insight into

Michael Bur's situation. I think he is

absolutely convinced that he's right and

it depends what group of person you are.

Again, you're either thinking we're

going to the moon or this is all a

fraud. Those are the two extremes. And

then the middle is he's wrong now, but

he will probably end up being right in

the future. It's kind of an interesting

point of view. Now, if you actually look

at his latest sort of uh imagery where

he uh how should you put it tries to

depict how he's feeling. There it is. Me

then, me now. Oh well, it worked out. it

will work out. He's basically trying to

argue like just got to give it time.

We'll close the fund uh and uh we'll

take what we've got left, pick up the

pieces, and keep making bets against the

bubble, so to speak. Well, let me know

what you think in the comments down

below.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.