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Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
- AzzyHN 11mo agoA bet against Nvidia is smart. A bet against Palantir is not. Palantir has become deeply integrated into the surveillance states of America, and won't be going anywhere anytime soon.
- giraffe_lady 11mo agoWelll.... I'm old enough to remember it being impossible to imagine a world without the USSR in it.
- actionfromafar 11mo agoPutin still can't imagine it.
- ProjectArcturis 11mo agoDoes that mean it should trade at a 600 P/E?
- impossiblefork 11mo agoBut it has an unreasonable P/E ratio. The price is simply wrong. It doesn't matter if it's the best firm ever and will get its dividends forever. You still calculate reasonably. People say this kind of thing about Tesla as well, and Tesla has been stuck as a slightly-smaller-than-Mercedes-Benz sized firm for years and will stay like that forever, or even shrink relative to MB. NVIDIA has a much more reasonable P/E ratio, even though it is of course very high.
- zahlman 11mo agoGiven that the market has moved so strongly away from dividends in favour of stock buybacks and other reinvestment (i.e. the successful companies are now much more often "growth" companies rather than "value" companies), and given e.g. Buffett's wisdom about total return, I don't know that traditional rules of thumb about P/E make sense any more.
- impossiblefork 11mo agoIn the end the value is just discounted dividends or there's an arbitrage opportunity under the risk neutral measure. This isn't a matter of rules of thumb. This is what's required to have prices that do not create an arbitrage opportunity.
- nr378 11mo agoPalantir is trading at 80x revenue (NTM), whereas Nvidia is only trading at 19x revenue (NTM). Both companies are growing revenue at a similar rate (~50% YoY), and Nvidia has a higher net margin, however Palantir's share price is up 717% over 18 months, whereas Nvidia is only up 124%. It's hard to argue Palantir's valuation reflects its fundamentals, even if you believe Palantir will be benefit from lucrative government contracts for years to come. Buying companies at 80x revenue has not historically been a great way to make money, unless they're growing revenue at several hundred percent per year.
- phendrenad2 11mo agoBetting against Palantir is interesting. I guess he saw the margins on that Mamdani victory and decided it means that the table is turning.
- springjjj 11mo ago[flagged]
- dh2022 11mo agoThanks for sharing. Michael Bury also shorted S&P 500 in Sep 2023 and closed his position in Nov 2023 for a nice payoff… he seems to know what he is doing.
- bgirard 11mo agoI'm legitimately curious what his overall performance is. Are those just cherry picked trades?
- Havoc 11mo agoHis wins were quite big so I’d imagine he’s doing really well overall
- bgirard 11mo agoIs there anything more concrete than that? Large wins on their own aren't meaningful if they aren't good risk adjusted trades or repeatable. I've made big wins but I don't consider myself a good trader.
- zipy124 11mo agoFrom may 2020 to may 2023 they did 56% annualised. Performance apart from that is unreported, so likely lower or negative.
- lotsofpulp 11mo agoIf this is the source, it does not seem like an objective, audited figure: https://edition.cnn.com/2023/08/15/investing/michael-burry-stock-market-crash/index.html https://edition.cnn.com/2023/08/15/investing/michael-burry-s... >Traders following the investments disclosed by Scion’s over the last 3 years (between May of 2020 and May 2023) would have made annualized returns of 56% according to an analysis by Sure Dividend Seems like Scion Capital could have just disclosed winning trades, that they may or may not have made?
- prodigycorp 11mo agoPalantir's valuation is far more egregious than Nvidia's. Palantir is Becky (IBM) with the good hair.
- piltdownman 11mo agoYou're betting against a middle-east Marshall Plan and AIPAC lobbyists vs. a company that just set up its AI industrial Hub in Europe and has some serious compute-engine hosting cost sticker-shock incoming. As far as I can see, shorting Thiel is shorting Israel at the moment. Don't do it while Trump is in Cabinet and pressuring Tel Aviv to pardon Bibi.
- devJdeed 11mo agoSHORT SHORT SHORT. Someone has to pay the price for the G side.
- impossiblefork 11mo agoBut how would those guys keep the stock price up?
- UltraSane 11mo agoI will never understand what it is about Israel that makes people lose their minds.
- abcd_f 11mo agoThe market will correct before mid-terms next year. This is almost a certainty. By how much and when exactly - now, that's where the shorting profits are. PS. Burry infamously made several more bets after the "big short", bets that misfired. That is, his record is far from being 100% right.
- ambicapter 11mo agoWhat makes it an (almost) certainty?
- abcd_f 11mo agoPolitical volatility and the dirty nasty hustle on the Trump/republicans' part that will precede the mid-terms. Combined with the general state of bizarre market bonanza of the past few months. It's a powder keg just waiting for a match.
- JKCalhoun 11mo agoLong overdue? Fairly constant stream of bad news in other sectors of the economy?
- fragmede 11mo agoReminder that economist have predicted 9 of the past 7 recessions. General handwavy statements like "there's a bubble" aren't worth paying attention to. Ones with specific timelines attached to it (like the one above, or the article we're commenting on), are worth listening to a bit more, but unless they have the funds to back it up (like Michael Burry has put down here), it's still hot air.
- blitzar 11mo agoEconomist have predicted 179 of the past 7 recessions.
- darth_avocado 11mo agoPalantir has a market cap of $400B+ and Nvidia is $5T. This short translates to 0.225% and 0.00374%. This mostly translates to a thesis that the stocks would “probably” go down a bit than a bet that predicts recession.
- _f9cu 11mo agohow to do such betting ?
- sc68cal 11mo agohave enough money to pay the premiums
- _f9cu 11mo agodoes this technique, in alternative words, mean, buying a company at a price in advance? I mean, lets say I evaluate a company, and I know what its worth is. Then I put a bid.
- JKCalhoun 11mo agoAsk an LLM how to short specific stocks.
- Havoc 11mo agoThese are put options not shorts
- pinko 11mo agoI did exactly this last Friday as an experiment and Claude Sonnet 4.5 recommended that I go long in an inverse ETF lol. When I told it that was terrible advice, it apologized and suggested buying puts.
- deleted 11mo ago[deleted]
- toss1 11mo agoUm, please do not suggest people ask that. If you are having to ask an LLM how to do it, I strongly suggest NOT starting with shorting. Ask about Put options, which is what Burry is doing here — not even Burry is shorting for this situation. I'm no expert trader, but the potential losses for shorting are unlimited. You borrow X shares of a stock, and will have to repay your loan in that stock, whatever it costs. If the trade goes against you, you will get a margin call and will need to (re-)fill your account with whatever funds are necessary to pay that amount, or all your other holdings and that position will get sold automatically at whatever that loss amount is. Situations called a "Short Squeeze" arise not infrequently, and even though they are temporary, they can cause a stock price to skyrocket, specifically because so many people are shorting it, and everyone needs to buy to fill their short positions & margin calls. The fact that the price soon falls again helps you not one bit. Plus, the maximum profit is limited to the value of the short. E.g., you short the stock at $100/share, if the company goes bankrupt, you can repay the shares for $zero, making $100/share; but you could lose $1000/share if it goes up 10x. In contrast, purchasing Put options, the right to sell the stock at a certain price, limits your loss to the cost of the Put options — if your idea turns out to be no good, it just fails and expires worthless. Here's some MUCH better information: https://www.investopedia.com/terms/l/long_put.asp https://www.investopedia.com/terms/l/long_put.asp
- lordnacho 11mo agoI'm not sure the bet is as big as it seems from the headline. When you buy options, you pay a fixed premium to get the right to buy/sell a very large value of shares, called the notional. But the notional is not what you are losing if it goes wrong, you lose the premium. The premium can be quite a small number compared to the notional.
- selim17 11mo agoYou can check here: https://www.sec.gov/Archives/edgar/data/1649339/000164933925000007/xslForm13F_X02/infotable.xml https://www.sec.gov/Archives/edgar/data/1649339/000164933925... Is this like what you say?
- humanlion87 11mo agoNot the OP. I agree with what OP is mentioning. As part of the report you have to file the notional value of the underlying stock. Let's assume I buy one put option for palantir at a price of $1/contract ( say for an extremely OTM strike price of $10 ). I have paid a premium of $100. Assuming stock price of palantir is $200, the notional value I have to report is $200*100 = $20k. And not the $100 premium I paid.
- pksebben 11mo agoThis seems to back that up: https://www.sec.gov/files/form13f.pdf https://www.sec.gov/files/form13f.pdf FWIG you can't actually see what premium was paid on an option unless the buyer chooses to disclose that themselves.
- JumpCrisscross 11mo ago> you can't actually see what premium was paid on an option Nor the strike or tenor. (Options are more thinly traded than stocks. This confidentiality is practical.)
- ericmcer 11mo agoYeah I feel like 200m of PLTR put options would distort the market so much the contracts would struggle to overcome their own premium. They must be referring the the value of the shares the contracts represent?
- rockyj 11mo agoIn any case for a normal investor, just remember - "The market can stay irrational longer than you can remain solvent".
- paxys 11mo agoThis is also good advice for prominent investors. Burry himself has lost a ton of money in the recent past by shorting Tesla.
- lvl155 11mo agoJust because something is expensive doesn’t mean you should short it via puts as Burry had done. Both Palantir and Nvidia have high IVs. You’re paying for that. You’re much better off looking for cheaper puts on securities with enough correlation. Since Volmageddon and pandemic craze, deep OTM options have been scalped to death. Rarely good value. Nvidia also didn’t report earnings yet which means you’re paying for that risk event. Not saying bullish or bearish. It’s all speculation BOTH ways.
- lordnacho 11mo agoMuch simpler: I sat on an option desk for years, and whenever someone had a directional thought, the quip was "why don't you just buy/sell it then?"
- blitzar 11mo agoI would ask the options desk to price it up, decide it was too expensive, and just go short. Of course they did have a cheaper double no touch broken wing structure that would pay for their next mclaren.
- the__alchemist 11mo agoCan someone explain why puts make sense over shorting? For example, I'm betting against 5 quantum computing companies with short positions. I considered adding puts to the position, but it didn't make sense based on 2 reasons: High bid ask spread, and if it's a fraudulent company/otherwise worth betting against, the volatility will be high, so you option costs too much compared to the upside; the amount it has to drop to break even is too big.
- candiddevmike 11mo agoWith a put, you can only lose what the put is worth. With shorting, you can in theory have infinite loses.
- the__alchemist 11mo ago
- deleted 11mo ago[deleted]
- sfblah 11mo agoThe problem with these kinds of bets is the Fed Put. That's the invisible force levitating stocks. I don't really see that changing unless/until the country genuinely enters a debt or currency crisis. The path is unsustainable, but they'll keep it going as long as they possibly can.
- ProjectArcturis 11mo agoWhen Trump replaces Powell next year, the odds of the Fed doing something other than bathing a crisis in liquidity goes way up.
- huhtenberg 11mo agoTo add some context - Powell's 4-year term ends January 31, 2026. Whether he is reconfirmed by the Senate for another term is an open question.
- ProjectArcturis 11mo agoUhh... Powell's term as chairman ends in May 2026. His term as a board member ends Jan 2028. Senate confirmation is irrelevant because Trump will not nominate him again for anything.
- huhtenberg 11mo agoBah, you are correct [1]. I got my date from the Wikipedia page and apparently it's wrong. [1] https://www.congress.gov/crs-product/R48233 https://www.congress.gov/crs-product/R48233 [2] https://en.wikipedia.org/wiki/Jerome_Powell#Federal_Reserve_Chairman_(2018%E2%80%93present) https://en.wikipedia.org/wiki/Jerome_Powell#Federal_Reserve_...
- deleted 11mo ago[deleted]
- impossiblefork 11mo ago
- moralestapia 11mo agoDoes Michael Burry actually have $1.1B liquid? That margin call could obliterate him. Also, this is not an argument in favor of Nvidia or Palantir.
- ProjectArcturis 11mo agoRead the article. He used options, which can't be margin called because they're already paid in full.
- SilverElfin 11mo agoThat’s why he did options instead of directly shorting the stock. You’re betting against them but with a capped downside effectively.
- zahlman 11mo agoPutting aside that he's using puts (which caps the downside), with a classical short sell you don't need the current value of the stock liquid, but typically some percentage. That represents how much the stock can go up before you get the margin call. A short position is fundamentally unlike a long one, in that the future price movement of the underlying is bounded below at $0 but not bounded above. The sources I can readily find put Burry's current net worth in the neighbourhood of $300 million. Depending on the regulations, he probably actually could put his entire life savings into a short of this magnitude. Of course, that's sort of like having your entire 401(k) in a -4x levered ETF, even worse because it's on individual stocks. The filing doesn't appear to disclose strike prices or expiration dates. But my guess is that he loaded up on very cheap puts (low strike price) to hedge against the apocalypse (low probability of winning big to cover losses from everything else; high probability of just paying some insurance money). The same form shows bullish positions in other sectors — health care, finance and energy, as well as some corporate bonds. Given what the portfolio in the filing looks like overall, it's hard for me to imagine him being willing to risk more than a few million on this.
- moralestapia 11mo agoThanks, man. It was nice to read a thoughtful reply for a change, lol.
- ProjectArcturis 11mo agoMichael Burry is a stopped clock. He's predicted 20 of the last 1 crashes.
- ivape 11mo agoBurry was right about a scam. AI is not a scam. His short positions could simply be a conviction on rate of growth. If he was truly shorting it into collapse, then I'd say he's misguided here. There are also other factors that affect Nvidia. Any move on Taiwan can collapse Nvidia's price down to zero. Hyperscalers can also shift orders over to AMD, Intel, ARM and Broadcom. This is inevitable, but you can't be too early with this. Lastly. I don't know how technical Burry is. If you showed him LLM tech in 2017, would he have recognized it? There are things about this tech that he may not even recognize even if you showed it to him. You can literally show some people full generated video and they still wouldn't get how much compute it takes to do that. Finally, the world is not just a giant Tulip bubble. There's actually trillions of dollars moving around every day and people innovate and consume. It's not just a giant Ponzi scheme waiting to collapse. -- As for Palantir, as many have mentioned, I would not consider shorting Palantir until year three of this administration. Palantir may lose favoritism with the next administration. Maybe. As we witnessed with the MAG7 CEOs, these people are prepared to change their entire value set to win the business of those in power.
- zahlman 11mo ago> If he was truly shorting it into collapse, then I'd say he's misguided here. He's not shorting this time. He has put options. This is a "short position" i.e. one that behaves inversely to the stock price, but his downside is limited (at the expense that he pays the full downside up front, and can lose money even if the stock goes down, if it doesn't go down by enough). TFA says the options are on "roughly 1 million NVDA shares worth $187 million", implying NVDA was around $187 at the time of acquisition. That more or less tracks with the September 26 close, and this was apparently disclosed in a September 30 filing. NVDA is currently above $200. Similarly, he would have options on PLTR bought when that was also somewhere around $182 (roughly matching the September 30 close); even with today's crash, the stock is hovering around $190 as I write this. So depending on the duration of the options there's a pretty decent chance he's going to lose money, and depending on the strike price it might well be the entire premium. As far as I can tell, neither of these is disclosed in the filing.
- _f9cu 11mo agoAI is a scam, from eye of an computer engineer. Its not a scam, from eye of others. AI is not the only way to address challenge that it aims to solve.
- paxys 11mo ago"Last year's lottery winner picks new numbers for this year. Copy them and you are sure to win as well."
- jasonjmcghee 11mo agoCan you explain what this means?
- rappatic 11mo agoAs my friend likes to say, Michael Burry has predicted 20 of the last 1 crashes. I saw some apocryphal analysis that showed you'd be beating the S&P 500 (and by a decent margin) if you bought every time he predicted a market crash since the recession.
- aunty_helen 11mo agoYes but market goes up and market is unhealthy aren’t necessarily correlated. He’s making calls that things should crash but somehow, here we are.
- BennyH26 11mo agoPalantir is down 8% as of this comment post. Nice call Burry.
- nextworddev 11mo ago1.1BN notional probably. not premium. people need basic options education..
- dviney 11mo agoTotal portfolio 1.4bn in Sep 13F. 0.6bn in June 13F. So yes, my guess is most if not all of that 0.8bn spike is notional in excess of premium on the 1.1bn puts. All the same, 80% of his entire hedge fund notional is still a BIG bet. And he will probably 10x that 1.1bn if he is right.
- brokencode 11mo agoHasn’t he been incorrectly predicting massive crashes every few years ever since he was right that one time? How many bad predictions does he need to make before people stop caring what he has to say?
- stronglikedan 11mo agoAsk Nostradamus. Big Short has a nice ring to it in future history books.
- IAmBroom 11mo agoHe's predicted 20 of the last 2 recessions, so there's that.
- Gud 11mo agoHas he or are you just repeating a funny joke?
- locallost 11mo agoHe's been bearish for the last n years. His Twitter handle is Cassandra because he tries to warn people about impending doom, but nobody listens. He gave up at one point because he tweeted SELL and then everything was fine. tl;dr he's a perma bear. I actually don't think he's wrong, but one thing I've learned is that it's not enough to recognize a bubble. Almost everyone sees the markets are, as they say, frothy. But you need to see if there's a needle nearby. Without that you're just trying to get lucky. Puts especially are really hard because they expire. They limit your loss compared to shorts, but you need to time it perfectly.
- hyperadvanced 11mo agoHe has. He’s notably been burned a few times, one of the worst of which was 2021 TSLA. Iirc he was early but not wrong, with the 2022 collapse of all things ARKK related crashing and burning.
- 11mo ago
- advisedwang 11mo agoThe implication here is that there's a prediction of a crash, but this could equally just be a hedge. Fund managers don't want their whole fund to become devalued if AI-driven valuations collapse. A put against Nvidia helps de-correlated the fund value from AI values.
- ProjectArcturis 11mo agoThis is Michael Burry we're talking about.
- t1234s 11mo agoCould this just be a collar (sell calls to buy puts)?
- dh2022 11mo agoIf the calls are not covered this is a very bearish position: if the market rises he will lose money on the puts and will have to buy the stock at the higher price (to cover the calls). It is easy to go bankrupt with this position. I would not do this unless I have some type of information that the stock will decline with certainty.
- harmmonica 11mo agoMy two cents... He might think the bubble is about to burst; he might be hedging his downside risk after a serious rise in his overall portfolio, picking the two stocks he thinks are the most out of whack valuation-wise to execute that hedge (the premium for the puts would likely be a fraction of the paper gain he's sitting on so not the end of the world if they expire worthless); he might be hedging significant material gains in these exact two stocks; he might be doing it for some only-billionaires-get-it reason. I guess I'm just saying that the reason could be pretty detached from "I think the bubble is about to burst!"
- geoka9 11mo agoWhat is the expiry of those options? And how much of his capital is he betting on them? If I'm not mistaken, what made the big short spectacular was him betting the farm on it. Otherwise, wouldn't it be just another day in the office for him?
- nuc1e0n 11mo agoIs now the right time for a short position with them? Yes they're overvalued, but the market still seems kinda frothy.
- spwa4 11mo agoThere is no way a crash happens when everybody thinks it's going to happen. The 2008 prediction was notable because, as shown in the movie, his bet was so contrarian people were refusing to write about it)
- fennecbutt 11mo agoParasite. Overly complex stock markets that produce nothing of value should be abolished. Real people have no need for high level financial concepts like that. The stock market should be for real trade, not incestuous exchanges between egregious executives.
- john-h-k 11mo ago> Overly complex stock markets that produce nothing of value should be abolished. Real people have no need for high level financial concepts like that This is a pretty huge assumption with no real reasoning. Some substance regarding _why_ “high level financial concepts” produce nothing of value would be useful
- IAmBroom 11mo agoYou sound like people who condemn drug companies for avoiding this one simple herbal remedy "because they can't make big profits off of it." It's far more complicated than you make it sound.
- mrandish 11mo agoI know little about the details puts/shorts etc but just curious... does Burry doing media about his position (after he's got it), potentially help increase the odds of his bet working in a self-fulfilling way or is it neutral for his bet.
- Frannky 11mo agoI envision AI saturating every corner of life—yet its market is ultimately bounded by how much users will actually pay, weighed against the tangible value delivered. The rift arises from overoptimistic guesses about user spending, a chasm that only deepens as open-source models hit that critical "good enough" threshold, and AI data centers devolve into a cutthroat commodity arena, vying on price for off-the-shelf compute power accessible to all—particularly if agile rivals eclipse Nvidia through breakthroughs in efficient/smarter hardware.
- edoceo 11mo agoThe positions: https://www.sec.gov/Archives/edgar/data/1649339/000164933925000007/xslForm13F_X02/infotable.xml https://www.sec.gov/Archives/edgar/data/1649339/000164933925...
- rib3ye 11mo agoRight. He also went long on Lulu Lemon. Where’s the undervaluation thesis on yoga pants?
- andyfilms1 11mo agoLululemon benefits humanity just as much as AI. For different reasons, of course.
- nodesocket 11mo agoHis track record since “the big short” has been horrific. That’s the problem with being a perma-bear, eventually the market dips but you missed out on extraordinary gains vastly out weighing your negative thesis. It’s a hellva lot easier to be bullish American companies then try and time draw downs. Doesn’t make any sense.
- chollida1 11mo ago> His track record since “the big short” has been horrific. Has it? I couldn't find the returns for his fund. Since you have them can you post them and highlight what about them are horrific?
- nodesocket 11mo ago- In late 2020, Scion sold its entire stake in GameStop. Scion missed out of the GameStop short squeeze which occurred only a few months later. Its 5.3% stake would have been worth over $1.5 billion at its height. - In May 2021, Scion disclosed it acquired put options on Tesla shares. - In August 2023, it was reported Scion anticipated a stock market crash and acquired $1.6 billion worth of put options to bet against the ETFs that tracked the S&P 500 and the Nasdaq-100. - Scion also was noted to have held a large put option against the iShares Semiconductor ETF.
- chollida1 11mo agoFirst, I appreciate the response. However, nothing about any of those points indicate his performance has been horrific. All that matters are his returns against his reference index. That's the only relevant measure. EDIT I did manage to find his returns via chatgpt and the OP is correct that they haven't been great in some periods, but his last 5 year average is +85% which isn't bad, not great, but not bad. He is also up about 10% over the past year, so not great and not terrible, he's mid as the kids say.
- ketanmaheshwari 11mo agoI am interested in quantitative / probabilistic analysis on your thesis. Where should I go look?
- mapt 11mo agoYou don't just need to decide that Nvidia is overvalued by the market and will crash in price to make money on a short position. You need to time the crash. If you're off, it could still crash and you could spend more money sustaining the position than you'd make. Or you could end up getting margin called, not just by semi-impotent private investors as Michael Burry was, but by the platform you're trading on itself. "You've lost too much money so far based on the current valuation, so we're going to seize this option and you'll owe us the balance". Trading at high leverages with Daddy's money, people on /r/wallstreetbets sometimes get margin called and end up owing much, much more money than they put in. Before putting any money in, make damn sure you're able to write at least a 101-level summary of the different types of trades. I did this in February 2020, and then bet a modest amount on the proposition "People keep saying that COVID isn't going to be a big deal, and I think they're very wrong". I still managed to lose out because I didn't foresee the Federal Reserve bombing the market with freshly printed cash. I lost it all. But what I didn't do, is end up owing millions of dollars I don't have to the brokerage, because I stuck to buying put options rather than selling call options or shorting stocks outright. Timing aside? To what extent the Federal Reserve would intervene in an NVDA price collapse is an open question, because at this point a collapse in AI investment would threaten the solvency of entirely unrelated financial institutions.
- vasco 11mo agoThere's no way he gets margin called, these surely are puts, not pure stock shorting. This isn't some random guy.
- jb1991 11mo agoyeah the article is clear they are puts
- MikeNotThePope 11mo agoInvestors can & do make mistakes. “Markets can remain irrational longer than you can remain solvent.” ― John Maynard Keynes
- deleted 11mo ago
- 5hstazqT 11mo ago“When I hear short sellers attacking what I believe is clearly the most important software company in America, therefore in the world, in terms of our impact, … it just is super triggering,” Karp said. Now, now. Palantir received social security from In-Q-Tel during its incubation. Alan Wade was the CIO of the CIA and had previously founded Chiliad with Christine Maxwell (sister of that Maxwell). On the other hand, Karp knows Lutnick (who lived next to Epstein) from Haverford College. It's a small world. So with this administration bets against Palantir might be risky. But "the most important software company in America"? Please, many here have said that it started out as a database search company (like Chiliad).
- vasco 11mo agoCome on, Karp is such a nice guy: “I love the idea of getting a drone and having light fentanyl-laced urine spraying on analysts that tried to screw us,” he said during a talk in New York to promote his new book in February." https://www.ft.com/content/64a2345e-3961-4d5d-ae04-82d933fa5a2c https://www.ft.com/content/64a2345e-3961-4d5d-ae04-82d933fa5...
- cjbarber 11mo agoArticle is misleading/wrong on the sizing: > Scion bought roughly $187.6 million in puts on Nvidia and $912 million in puts on Palantir, according to Securities and Exchange Commission filings. But 13F reports the market value of the underlying shares for options, not the premium paid for the options All we know is at time of filing he has 10k NVDA puts and 50k PLTR puts. We don't know the strike price or the duration or how much he paid
- jb1991 11mo agoPersonally I find the reporting of underlying value more useful than the price paid in puts, since it reflects the asset itself rather than an arbitrary price for an option that could be any of many different strikes or expirations. The option price itself is not that meaningful.
- weird-eye-issue 11mo ago> The option price itself is not that meaningful. Except it's literally what determines how much money is at risk in the trade. If you buy puts the actual underlying asset value doesn't matter as much as the value of the option itself (which is based on several factors such as time, strike price, etc)
- jb1991 11mo agoThe amount of money that is at risk with options is irrelevant because two different option positions with the same overall cost can have completely different risk profiles, which makes the actual value of those options not so interesting. In the absence of all the other details about the options trades, the actual amount paid for them is without much meaning.
- chollida1 11mo ago> Personally I find the reporting of underlying value more useful than the price paid in puts How so? If I buy TSLA puts at a $10 strike or a $500 strike they show up the exact same on the 13F as both have to be reported as if they are delta 1 when showing a share count. One is a very meaningful bet and one is throwing money away.
- Jun8 11mo agoI periodically read this ACT post to degauss my brain so I can think about these matters from a fresh perspective: https://www.astralcodexten.com/p/heuristics-that-almost-always-work https://www.astralcodexten.com/p/heuristics-that-almost-alwa...
- danielmarkbruce 11mo agoThis kind of thing happens with investors... they work their butt off for years, do well, then think it's them rather than the work.
- causal 11mo agoThat's sort of Taleb's whole thing: most successful investors just happened to be riding a wave and cannot claim any sort of genius. The Black Swan event is always explained away as some kind of environmental blip and investment success explained as the inevitable outcome of hard work- when in fact it is Black Swans that are inevitable and hard-working investors are just a background constant.
- danielmarkbruce 11mo agoWhile what you are saying is almost certainly true, I'm actually talking about something else - people who did good work and then stop doing good work in fields where good work = good decisions. It's easy to stop doing the work and keep making the decisions and no one is the wiser for years.
- Yizahi 11mo agoThis is a correct and at the same time rather misleading article. Sure, in principle it would be prudent to investigate literally everything every time. And he makes it sounds like not doing so makes a person literally 100% useless and dysfunctional. But he "forgets" to mention that investigation is non-free. And depending on the topic, the amount of such investigations and the length of each one can vary dramatically. Up to the point where whole life and all of the resources could be spent doing it. Heuristics That Almost Always Work have a helpful hint right there in the name. They do work, and they do it almost every time. And depending on the topic that 99.99% may be even 100%, but we just can't reliably prove it. Stuff that works 99.99% of the time is very valuable and helps humans free resources and time for the less reliable or more severe problems. Or just for leisure. Personally, I invite author to go disprove every single idea on the internet and do it in careful and deep detail, let's see how long he would last without heuristics. :)
- SilverElfin 11mo agoWhat does Palantir actually do? I feel like every earnings discussion is vague and goes on about things like “Ontology” without sharing trustworthy details. As far as I can tell they are more like a consulting firm. Why are they not viewed like another IBM?
- datadrivenangel 11mo agoThey're basically IBM + Oracle but sexy because tech is different this time around for some reason?
- rib3ye 11mo agoThey are of the industry formerly known as “Big Data” or “data science.” They think hard about how to collect and make use of, what most would describe as, grains of sand. A common use case for their data is figuring out for a government who they should kill that week.
- mapt 11mo agoIn East Germany, the Stasi had 90,000 full-time staff deciphering reports from maybe 400,000 regular informants and around 1/6th of the population as occasional informants. They used this to run a totalitarian surveillance state which abducted 250,000 supposed dissidents. This is a horrendously inefficient system. 90,000? 400,000? In a population of 16 million? The expense! The time! The sensitivity to data irregularities! The friction which the non-dissidents must feel! This is a worse imposition than an occupying army. How many of those 250,000 were actually conspiring against the state in a meaningfully threatening way? 1/10th? 1/100th? How many actual dissidents make it through the sieve, because the security service was unable to cross-reference suspicious entries on three pages in files occupying different filing cabinets in different buildings in the complex? The US, despite its military might, rapidly hit a manpower limit in the occupation of Afghanistan & Iraq, and was largely unable to effectively fight a collection of counterinsurgencies and "sympathizers". In the 2020's we have much greater capability to surveil. We have electronics tracking everything, we have phones that listen all the time, we have cameras at every streetcorner, data brokers know more about us than our diary does. But manually checking these things in untargeted surveillance would be almost impossible. It would take our entire population spying on ourselves. Enter Palantir. Proposition: "We would like to explore if we could make this possible & efficient, using modern database & machine learning techniques. We will collect, categorize, transcribe and cross-reference all the data, of every type, we will generate suspicious activity reports autonomously, we will make follow-up trivial". This was literally George Orwell's nightmare in 1984 - that looking back at the long history of repression and rebellion, the cycle of violence and freedom, of authority and abuse of authority, that perhaps at some point, eventually, technology gives so much power to the authority that it's simply impossible to overthrow them.
- chollida1 11mo agoOne thing to remember with 13F filings is that funds are required to report the full value of their option positions as if they were delta 1. Some outlets then took this and wrote the story that Burry has a short bet of billions on NVIDA and Palentir. His put's are most likely well out of the money so their delta is no where near 1 so his bet is far smaller than places are reporting just due to how the SEC requries funds to report their holdings on 13F filings.
- rollulus 11mo agoMakes me wonder how much of a self-fulfilling prophecy this can be.
- daft_pink 11mo agoHe’s clearly right, but shares could take a really long time before they actually come back to reality.
- danielmarkbruce 11mo agoHe's not clearly right on Nvidia. People have been saying "it's clearly overvalued" for years now. And it just keeps growing at an insane pace and quite frankly their position in the market isn't really being eroded by anyone. There are hopes and dreams, but little real competition.
- boringg 11mo agoEspecially if you take the view that AI is the new compute. There so many chips that need to get upgraded Thats maybe one of the largest TAMs of all time that hasn't even been touched at this point.
- itsoktocry 11mo agoAnd Nvidia is going to own the whole thing, forever?
- Der_Einzige 11mo agoGiven how fucked it’s competition is and how the delta between CUDA/NCCL and everything else like rocm/zulda has only grown yeah, Nvidia will own the whole thing for minimum 10 years. Everyone who tried to compete failed hard because no one has the money, and raw talent or ability to get that talent needed to beat Nvidia at the software game.
- jb1991 11mo agoThis game is far from over and I find your prediction almost naive.
- boringg 11mo agoBurry nailing real estate - good for him! Burry nailing tech valuations? That one is a more finicky beast - super high risk almost infinite growth going forward - best of luck!
- tsenturk 11mo agoIt might become the modern Tulip Mania of our time.
- cosmicgadget 11mo agoTulips didn't largely replace the most popular search engine. They didn't replace employees. Tulips were a meme stock, AI is a breakthrough. Could be overvalued, but it is not vaporware.
- sambapa 11mo agoTulips almost can replace employees, just like AI
- cs702 11mo agoBefore Burry's bets were disclosed, Palantir's trailing price-earnings ratio (P/E) peaked at 486x. What does that mean? I like to think about it this way: Absent growth, had a private investor purchased the business at 486x earnings, it would have taken the investor 486 years to recoup the investment. Only crazy-fast future growth could justify that multiple. I estimate earnings/share would have to grow 30-fold within a foreseeable time frame, like 5-7 years, to justify the peak price per share.[a] --- [a] Back-of-the-envelope math: 486x peak / 15x long-term average P/E = 32-fold increase to justify valuation. I rounded it to 30-fold.
- weird-eye-issue 11mo agoExpenses can be reduced too. It's not solely about earnings growth.
- danielmarkbruce 11mo agoIf a company has 1 billion in revenue and 999 million in costs, they are doing 1 million in earnings. It's trivially easy for them to grow earnings 30x, they can just decide to do it in most cases. You have to look at the cost structure now v what it should be in a "steady state" situation, perhaps 10 years out.
- svantana 11mo agoThis math doesn't always hold up to common sense, as these ratios will explode when E hovers around zero, but it has a very small effect on the business itself.
- thedudeabides5 11mo agoPretty sure they are reporting on the option deltas as if he spent $900m in premium. Which is wrong.
- jpfromlondon 11mo ago"the market will stay irrational longer than you can stay solvent" He's a clever man, and maybe the bubble will burst, and when it does there will inevitably be some hugely profitable short positions held by a new generation of Michael Burrys who will lose capital and reputation taking a premature short position on the subsequent major bubble.
- keeda 11mo agoI could see the case for Palantir purely from the ridiculous P/E ratio. On the other hand hey, so does Tesla and it's stayed irrational longer than many shorters have stayed solvent. But Nvidia seems highly risky to bet against. Also a very high P/E ratio, but not too crazy. And the demand is extremely real and keeps growing. Until the latest earnings, all the hyperscalers were basically telling us quarter after quarter that they were capacity constrained and backlogged largely due to AI workloads. And capacity generally translated to GPUs. Only now has MSFT reported being constrained on power, which might signal a shift. But that doesn't mean lower demand, it just means folks lower down the totem pole can finally get their hands on GPUs. Large sovereign nations, including US and China, are jockeying over these things. Even if this bubble pops, I still don't see demand going down. If you look honestly for indicators, there is tons of data showing rocketing usage which is translating into real productivity wins. In a capitalistic world, that dependency is going to be impossible to wean off of. I also don't see any real competition on the horizon yet. I kinda understand NVDA's moat is more than just their chips, it's also the ecosystem. I don't claim to deeply understand this (as another comment points out: https://news.ycombinator.com/item?id=45826309 https://news.ycombinator.com/item?id=45826309), but there are other signs I see: 1. Huawei was forced to train their models on non-Nvidia hardware, and they couldn't get a single training run completed, AIUI due to showstopping bugs and other issues in the stack. 2. Anecdotally I hear AWS has been unsuccessfully trying to get customers to use Trainium. They all prefer Nvidia. 3. Google announced OpenAI would use TPUs on GCP and now is leasing Nvidia capacity from Coreweave to support the deal. With everyone locked in a Red Queen's race to train the most powerful models ASAP, they can't afford any delays inevitably introduced by new platforms. The real threat right now is that behind all the smiling partnership announcements, everyone is trying desperately to diversify away from this monopsony. They will eventually succeed, but doesn't seem it will happen anytime soon.