Have The Last Laugh

TruePoint Capital

When an individual or group is trying to defend a weak argument, they’ll usually attack those opposing their point of view with a strategy exemplified by the acronym FUD (fear, uncertainty, and doubt). Doubters are silenced as doomsayers and berated as ones who know nothing about what they’re talking about.

FUD was on full display these past two years in the crypto market. While everyone jumped on the bandwagon, doubters were silenced by bandwagoners with FUD. One of these biggest doubters of crypto in the past two years has been Michael Burry of Big Short fame, who made a fortune shorting the subprime loan market (i.e., mortgage-backed securities), the collapse of which led to a depression-level financial collapse of the economy.

Burry tweeted the following on November 8th:

“The very acronym FUD served to minimize the folly in which so many engage. No matter how logical an argument, if contrary to the bullish narrative, it deserved scorn as FUD. Well. Well. Well.” 

Burry’s never backed down from an opportunity to say, “I told you so,” and this time, he had every right to gloat. Burry has consistently stuck to his guns regarding his criticism of crypto these past two years. He sounded the alarm on inflated crypto prices and how the stimulus-fueled boom of 2021 was not sustainable.

It was easy for the investing public to hop on the crypto hype train. When high-profile investors like BlackRock, celebrities, athletes, and even El Salvador’s President touted crypto, it was hard for everyone else to resist the pull.

​​So, how did crypto devotees stand up to their critics? The answer is avarice and obstinance, exemplified by the acronym FUD — fear, uncertainty, and doubt. Doubters were silenced as doomsayers, neophyte Cassandras (one who predicts misfortune or disaster), and ignorants who knew nothing about blockchain or the coming digital wave.

Unfortunately, crypto naysayers like Burry were right for a lot of inexperienced and ma and pa investors. Since hitting record highs exceeding $65,000 last November, Bitcoin has fallen 75%.

Well, we know where Burry does not have money, which is crypto. Stocks are another asset he doesn’t appear to be high on. In August, he sold every stock his Scion Asset Management hedge fund owned.

​​He seemed to be predicting a stock market crash when he tweeted:

​​”As I said about 2008, it is like watching a plane crash. It hurts, it is not fun, and I’m not smiling.” 

He continued to express his lack of confidence in the stock market when he tweeted, “You have no idea how short I am.” The tweet has since been deleted, but it gave us a glimpse into Burry’s pessimism.

Although Burry didn’t reveal which stocks he was shorting, his tweet reinforced his pessimism about the markets and economy.

​​This latest tweet follows on the heels of his tweet on September 29th (since deleted):

​​”Today I wondered aloud if this could be worse than 2008. What interest rates are doing, exchange rates globally, central banks seem reactionary and in [cover your a–] mode.”

We know Burry is short on crypto and stocks, but where is he reallocating his resources? Ironically, while Burry was short on real estate in 2008, this time around, he’s long on it.

“The Big Short’s Michael Burry Buys Real Assets Hand Over Fist.” – seekingalpha.com

Interestingly enough, personally, Burry is heavily invested in commercial real estate, with a particular preference for farmland.

The mainstream investor may be scratching their heads over Burry’s allocations to real assets, but ultra-high-net-worth investors (UHNWIs) completely understand the strategy. They’ve been relying on UHNWIs for years to shield their portfolios from market volatility. Besides insulation from market volatility, real assets offer the one advantage stocks, and crypto can’t offer during inflationary times: inflation-insulated cash flow.

Inflation-Insulated Income – The ideal asset generates cash flow that keeps pace with inflation. This would explain Burry’s interest in farmland. In inflationary times, the prices of essential goods like food, fuel, and rents keep pace with rising prices. Consumers experience pain at the checkout stand, gas pump, and when signing new leases.

“Rents in U.S. Rise at Fastest Pace Since 1986.”bloomberg.com

Don’t fear inflation. There are ways to make money in this environment, and real assets like income-producing commercial real estate like multifamily and farmland are ideal for generating cash flow that keeps pace with or exceeds inflation.

​​So while the stock and crypto markets reel, protect your portfolio with real assets.