The Big Short
🚀 The quick version: As we approach the end of August and see a stock market showing strong gains year to date, it is worth highlighting some cautious information to keep in mind.
Michael Burry bets big. Famous investor Michael Burry, from the film “The Big Short”, revealed through a 13F filing last week he had put on a $1.6 billion bet that the market will go down (this represented 90% of his funds total holdings translation: it’s a big bet).
Beware of September and October (historically). No one ever truly knows what the future holds, but Michael Burry’s bet does have some historical backing to it. Looking back at history the stock market’s worst month by far is September (average monthly return since 1950 has been -0.5%); October has also seen many of the market’s worst crashes historically; the Bank Panic of 1907, the Stock Market Crash of 1929, and Black Monday 1987 all happened during the month of October.
Professional investors are not confident on any direction. The S&P 500 has traded “sideways” (term for in a band) in a range of about 4300 to 4600 since about May. When the market does this it tends to mean that investors are less sure of where the market goes from here. This in itself does not mean the next move will be down, but it just highlights the overall lack of conviction either way in where the market is headed in the near term.
👪 How it affects your family: First of all, for most families and long term investors, we would suggest ignoring most of the above and treating it as noise. The best course of action for truly long term minded investors would just be to continue to focus on consistently investing a little when you can (and also teaching your kids the basics of the stock market).
Also, for what it’s worth, we are a bit more optimistic on the market in the short term than Mr. Burry (he has been wrong before) although we would be the first to say that anyone’s short term prediction is a fool’s errand (including ours!).
With all of this in mind, here are some further resources we created to help you where ever you are along your investing journey:
Watch your brokerage account. Even if you are more of a long term investor, it’s worth paying attention to these 5 common mistakes people make with their brokerage accounts that wind up eating into their returns.
Watch these indicators. If you want to try to be more strategic about when to invest, here is a guide on a few indicators you can watch to help you better determine when to make your moves.
Learn from the best. For anyone interested in going further and learning which stocks some of the best investors like Mr. Burry are invested in, there is actually a way to do that. Every money manager in the U.S. managing over $100 million has to file a form called a 13F that discloses all of their holdings no later than 45 days after each quarter. Here is a step by step guide on how to read a 13F filing (and teach your kids).
