- Michael Burry compared the Silicon Valley Bank fiasco to the dot-com and housing crashes.
- The “Big Short” investor blamed SVB’s collapse on the greed and recklessness of its managers.
- Burry suggested that government bailouts can lead to problems such as asset bubbles and inflation.
Michael Burry has blasted Silicon Valley Bank bosses for their recklessness, comparing the failure to the dot-com and housing busts.
“2000, 2008, 2023, it’s always the same,” the investor of “The Big Short” fame said in a now deleted tweet on Sunday. “People full of hubris and greed take stupid risks and fail.”
The Scion Asset Management chief also called the Federal Reserve, the US Treasury and the Federal Deposit Insurance Corp. to step in to guarantee that SVB depositors do not lose any money.
He compared it to previous government interventions to help bankrupt companies and prop up the economy during past crises. However, he suggested that bailouts and excessive spending have consequences such as asset bubbles and inflation.
“Money is so printed,” Burry tweeted. “Because it works so well.”
SVB appears to have failed for a couple of reasons. It had a large volume of uninsured deposits and had a concentrated customer base of cash-hungry businesses backed by venture capital. It also bought long-term bonds, which fell in price after the Fed raised interest rates from near zero to upwards of 4.5% over the course of a year.
The lender launched a share sale last week to shore up finances, sparking fears it could collapse. Its share price fell rapidly and depositors ran to withdraw their money, effectively causing a bank run. The FDIC took control of SVB on Friday, and Treasury Secretary Janet Yellen announced on Sunday that depositors’ money would be guaranteed.
Burry recently compared SVB to Enron, the energy trading giant that was busted for accounting fraud and went bankrupt in 2001.
Bethany McLean, the co-author of a book about Enron titled “The Smartest Guys in the Room,” questioned that parallel. She noted that there is no evidence of fraud at SVB, Enron’s collapse did not pose systemic risks, and the authorities did not save the day in that case.
“SVB and the VCs that have put money into it may not have been the smartest guys in the room (couldn’t resist) but I don’t see any fraud (haven’t looked further though),” McLean said to Insider.
“Maybe the lesson is, don’t be Enron!” she continued. “If you’re going to collapse under the weight of your bad decisions, make sure you take enough others with you — especially innocent others like employees who might not get their paychecks — that the government has to step in.”
Burry has predicted that another major company will eventually collapse.
“Next we find our WorldCom,” he said in a since-deleted tweet Saturday, referring to a telecom titan that faced its own accounting scandal and exploded in 2002. “Patience,” he added.
Burry has been sounding the alarm on financial markets and the US economy for several years now. For example, he warned of the “biggest speculative bubble ever in all things” in the summer of 2021 and warned retail investors buying up meme stocks and cryptocurrencies that they were signing up for “the mother of all crashes.”
The investor, known for his gloomy predictions, rose to fame after his billion-dollar bet against the housing bubble in the mid-2000s was immortalized in the book and movie “The Big Short.”
Here’s a screenshot of Burry’s deleted tweet:
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