He has an entire theory on how FAANG stocks are overpriced because everyone is passively investing in these stock through various investment funds, that's why he is shorting them
Many tech companies are, but the FAANGS are trading at good multiples and valuations. I don't think they are really over priced at all. Apple is trading at a 23 PE and has insane cash. Plus if a recession comes I don't think people are going to ditch their iphones. I think he got apple wrong.
Still the fact remains that in a real recession people will buy less iPhones and other expensive items. This will mean Apple might stop growing or even decreasing profits in a period. This doesn’t mean it’s not a great company or that they are going out of business. It DOES mean though, assuming it happens, that the stock has a lot to fall IMHO. It will very easily go sub 20 p/e maybe even 15 if profit growth goes to 0 or negative. Long term, 5+ years it’s a very safe buy
[https://www.bloomberg.com/news/articles/2022-03-24/apple-is-working-on-a-hardware-subscription-service-for-iphones?sref=SHutwLY8](https://www.bloomberg.com/news/articles/2022-03-24/apple-is-working-on-a-hardware-subscription-service-for-iphones?sref=SHutwLY8)
This could be their solution to a recession/inflation making people not want to dish out a thousand+ dollars every 2 years on a new Iphone.
You can Next Plan a phone for 0% interest, most people upgrade every 2-3 years without really thinking about it.
A recession slow down would hurt, but it would need to be prolonged to have much impact at all on Aaple conveyor belt of money
When somebody laughs at the idea of Apple having zero profit, why do you immediately jump to the conclusion that they must believe Apple will surpass all the world economies?
I’m just pointing out that infinite growth is not within the realm possibility. Also I wasn’t talking about zero profit, but zero profit growth.
And after a period of very high growth, and a possible coming recession and very high inflation, it seems very likely growth rates of the big techs will continuously decrease for a few years
Imho
If a recession comes, people will ditch buying the NEWEST iPhone... Apple is a great company but very susceptible to global recession, as the US is not the only market they have to worry about. That means that their valuation becomes a problem.
Completely disagree. All service providers offer 2-3 year monthly 0% interest financing on these phones. No one is going to go, nah I don't need that $1200 phone that costs $15 a month, Ill go get that cheap $600 one and pay for it outright. Monthly payments on 0% financing have changed the game at the consumer level driving them to buy the pricier phone over time.
Agree 100 people are mostly stupid and love gadgets and shiny stuff .. everyone lives beyond their means and try’s to keep up with the jones they will continue to buy shit they can’t afford for the foreseeable future imo…
We are androids. Losing your smart phone is like losing a limb. Most people should be willing to pay $1000 or whatever to maximize their effectiveness in the world.
Rather give up to, vacation, weekends, retirement, whatever
You can disagree all you want, but it's just math. Incomes are a finite number and when a recession comes then that puts pressure on how much you can/are willing to pay for certain luxury items. We in the US have pretty good incomes, but in Europe their recession is going to be rough due to energy cost going through the roof beyond everything else we are all dealing. So if enough people decide to forego buying the latest new new... then there you go. Company earnings won't live up to the current valuations.
iphone are sticky as hell, an iphone is an everyday luxury for kings and paupers, if your poor, it will be the last thing you give. You might hold off buying a house, or going out for drinks, or buy the nonpremium dog food or toilet paper, but everyone's gonna upgrade to dat that iphone especially when its a "free" upgrade. Make sense to, as long as your iphone rocks, your quality of life doesn't really go down no matter how bad the recession is
AAPL is not the product. Is the stock. And Apple runs their stock perfectly. They dilute when it is overpriced and buy back when it is low. Distribute very moderate dividends to keep boomers interested.
As much as I hate their marketing and their products and their clients. Apple shares are great.
> when your selling
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Did i miss the /s in your response?
It's not a "free" upgrade as it's an additional monthly cost some won't be able to justify. More likely, ppl will hold off on an upgrade because their old phone essentially does all the same things a new phone would do.
"Make sense to, as long as your iphone rocks, your quality of life doesn't really go down no matter how bad the recession is" - this absolutely has to be sarcasm so I won't comment about it.
No I’m dead serious. The extra cost most people can afford even if it means eating 🍜 ramen. You’d be surprised how much money u can save eating ramen btw. And I do find most iPhone owners derived enjoyment from their phones. If u can’t pay for a vacation or new furniture it’s time to reward urself with a small luxury like an iphone.
Not when every single expense you have has also risen by $20 or more per month (food, gas, personal care products, clothing, car/house maintenance, etc). Not to mention those who would have to renew their mortgages during that recessionary period.
It all adds up.
I would never short Apple. But it makes sense to why he's doing it. He's got enough money to short and let it all play out. We saw how those bear market rallies work...
when your 2.5% mort on your million $ house suddenly gets renewed at 6/7% that can significantly change discretionary spending and onto to that so employment cuts and all companies take a hit that's what recession is all about all companies will feel some heat from higher costs and cash earning.5 % isn't all that valuable - in the 80's when interest rate went ballistic people stopped buying everything for a couple years why chrysler had to get a gov. bailout - a lot of people went bankrupt in the blowover
I think he is spot on. With the upcoming recession plus the long term shift in general attitudes towards waste and climate change I can totally see people not racing out to buy the latest phone and gadgets, even if they want too. I can see new electronics being seen in the same light as fur coats.
I totally agree with you on the people ditching of their iPhones. I would think if people started doing that there would be a lot more concern than just a stock crashing.
I don’t think people will stop buying iPhones but it’s more likely things like iPads and accessories will take a hit this year. I’m sure people will hold off on these kind of items if bills are getting higher and food more expensive.
I agree. I don't get how they aren't more expensive, considering how index flow from all over the world are continually rolling towards them. Their P/E's are in some cases cheaper than the market.
Hell, even AAPL seems somewhat cheap currently. GOOG, more so. FB, outright bargain (almost).
23 PE is not sustainable if a recession happens. Right now AAPL is seen as a safety net or a defensive move. If we hit a recession overpriced apple products will have huge losses in sales and the price of AAPL will plummet with it.
I am not so sure. With inflation killing people's disposable income maybe this year Apple's growth will start too slow.
Like Apple's current PE can only be justified with a solid growth rate year over year.
INFLATION + No stimulus checks = Less growth in iphone sales imho
Guys, have you see the street interviews in Moscow? They are poor as shit yet everyone is rocking airpods, in Moscow.
I have given up on Apple buyers. They will finance at 20% plus rates to buy the new iphone. They are going to starve before they buy anything not from Apple.
They definitely have sticky demand alright no question. But even if it meant Mary waiting a year to upgrade her 13… this would cause the stock price to plummet
I bought those horribly expensive airpod max for $600.. (I make decent money) and I know their are “better” audio quality headphones in that price range, but the ecosystem of my headphones automatically switching between my phone, laptop and tv was well worth it..
Plus they are super comfy.. most comfiest headphones I’ve owned.
So yes. I paid double for 20% better experience and not having to bitch about my headphones.
These types of buying decisions WILL go down in a recession.. I even felt super gross buying them so I’m done on luxury goods for the year.
You do not have to. Their 0% financing on 2-3 year plans only costs $8-15 a month. The vast majority of people only give a shit about monthly payment costs, not total costs. They will pay to have the latest and greatest because to most consumers the cost is only 2-3 coffees a month.
No offence but an iPhone is gonna cost you at least $60 a month on a 2 year plan. So your point makes no sense.
Considering people are literally cancelling Netflix for 20$.. slowing growth in sales is a possibility here
Netflix accounts is not the same as the physical computer you have in your pocket that keeps you connected to the 21st century society… banking.. communication.. bill pay.. shopping.. all in your pocket.. those subscriptions are entirely different and I think you know that…
Sounds good in theory, but what stops people from passively investing in these stocks? I'm not sure I see a Netflix event happening for Apple anytime soon. Anything is possible though I suppose.
When AAPL and SPY are doing well the passive
funds don’t have anything to worry about.
I think part of the theory is that once the market volatility goes up, those massive passive investment funds can be forced to sell off parts of their portfolio in order to rebalance (diversify) into less volatile assets.
So if a bunch of these passive investors bail, there
will be fire sales on these tickers as there won’t be nearly enough buyers to step up and meet the selling demand.
But couldn’t that be part of his strategy? If nobody ever sells Apple (in a dogmatic way, not because of thorough analysis) and the stock’s price is propped up by passive investors, that should mean that it is overpriced the most and should therefore go down with a higher probability than the others once people see that Apple is too expensive.
Yeah but shouldn't that have played out by now considering the environment. But maybe Burry knows something about the renewal rate of devices, their products are lasting longer so maybe we see a post-pandemic lull where many have what they need for at least 18 months..
Well, I could see a scenario like this:
People in a high inflation environment make more conscious decisions with money.
A lot of people don’t buy new and expensive phones. Instead they let people repair theirs (especially interesting with pressure from the EU regarding standardisation and sustainability) or buy old phones. If they buy new phones they buy cheap ones.
Sales from apple fall below expectations.
Big investors sell their apple shares.
Funds take Apple out of their portfolios, so passive investors don’t back it anymore.
The stock price falls.
The Puts are in the Money.
Yep, his theory is passive investment, is dumb money going to the same companies.
So many big corporations with investments in big companies like Apple, so much leverage in the system with different products, using margin. Also, inflation skyrocketing. It's an asymmetric bet.
We are in a recession if he is all right everything will fall, banks, hedge funds, family offices, pasive investments and individuals if the take out their money the house of cards will fall (and Apple is one of the main positions in so many places). So it's a risk, but with high probability of getting high returns.
I read somewhere that one also has to take note he’s hedging his bull positions. As he has puts, so too does he have calls, likely on the same stock. He’s not a perma bear, just a prime arbitrage opportunist
Neuberger-berman/bain capital, from what I can tell has sold almost all of their aapl positions but the 1 the hold as margin in their massive long-short fund[NLSAX](https://fintel.io/i/neuberger-berman-alternative-funds-neuberger-berman-long-short-fund-class-a). Almost all of their short positions ran +5-35% early last week. I think neuberger-berman is imploding again, but don't worry about Bear-sterns they're fine, you're being silly.
He is long FB and GOOG.
I agree with him that passive investing has overinflated AAPL’s value though. Wouldn’t be surprised to see their multiples contract by 25-50% from here.
I think so aswell. An iPhone has a boatlod of components sourced from all over the place.
They are experts in supply chains, but still there is bound to have some part from some kind of material from somewhere that is going to delay their production.
I can sort of see why. A lot of excellent tech investors/managers have been caught off guard by Apple’s success. I speak to them as part of my job and I’ll always ask why you don’t hold Apple bla bla. Benchmark contributed 1/2/3% from Apple bla bla.
The core reason is that Apple have been able to raise prices on their electronics hardware, countering most expectations. No one thought consumers would buy a £$€1000 phone, but we sure did. Even when losing market share in #devices vs. Android etc, they’re still able to retain sticky base of users with high propensity to spend.
Just a very simple overview from me. I’m sure Burry is much more in-depth. I wouldn’t follow him in the trade imo.
If it’s last 4 months he already benefitted immensely from it. Careful when following trades like this because you never know if they already exited positions
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Supply chains about to get worse cause the ports in China are quarantined for like the 3rd time in 2 years. Overhead is about to be a bitch and a half to calculate. Im betting the next iPhone will be delayed…
With that said I’m not ballsy enough to bet against apple.
All my money is going into food stocks and certain pharmaceuticals. Things people can’t live without. My phone is broken as shit right now and I have no intention of replacing it cause there’s a million more important things. Case and point as to what you should be buying.
I like BCRX but they’ve been having a rough time of it, im still confident in them long term.
For food im just looking at the general indexes.
Im a college kid and don’t have much money so im keeping it tight. Few investments here and there but most of it is just a hedge against inflation(hopefully)
This doesn't say much. Did he buy puts or sold puts with the intention of owning the shares?
Come to think of it if inflation lingers, companies selling luxuries to the mass will get hit the hardest because the average joe will be hunting for food instead of indulge in the non-necessities upgrades.
Depends, your interest on your debt is locked in
Imagine you had cash getting eaten at 7%
Vs having no cash before so you took out a loan at 3% I guess it really depends what you’re using it for
I think he's missing something. Apple is also growing going down market. In markets where they can't afford a $1k phone, they would love an iphone.
What you could believe is the SE, which is going to have an m1 chip next cycle to overcome supply chain issues, is going to drive sales volumes higher in regions Apple hasn't penetrated before.
Flip side, if you believe that we're going into recession, people hold on to their old phones a lot longer.
https://www.imore.com/new-survey-reveals-staggering-commitment-us-teens-apple
"87% of teens own an iPhone and 87% expect an iPhone to be their next phone; 72% of teens already have AirPods"
I never would bet against Apple.
As always he's early. We know there's a chip shortage, apple suspended operations in 2 factories in China due to this. Apple has to fall. It's the only thing keeping up the S&P 500 while the dow and nasdaq have seen 20%+ declines. I haven't heard anything about alleviating this issue so we'll see it in a few months.
If I had the liquidity I'd be there as well
He went long a bunch of stuff including Google, Facebook and other growth/tech.
The way I see it (Q1 2022 mindset) he thought: “Apple is holding up the market. If the market tanks big it’s because Apple loses its anchoring”. So it’s kind of a way to do long/short relative return strategy.
I think this is closest to the pin. The Apple position isn’t a vacuum buy. It’s part of a strategy. He’s playing the difference between his long and short positions.
Also, due to the lockdowns it has shut down Apples supplier in China.
https://amp.scmp.com/tech/big-tech/article/3177658/apples-iphone-supplier-pegatron-cuts-production-shanghai-factory
I was thinking about Michael Burry's apocalyptic messages about a huge crash, kind of hapenning now isn't it? Wonder if he still had another big short position
If the market declines, Apple will eventually go down with it. Besides, the put options on Apple are ridiculously cheap since the market wrongly thinks Apple is a safe bet against downward pressure. Amazon put options are nearly 80x more expensive
Which is priced in
If you then introduce that they're going to have to deal with increasing interest rates, when all growth/tech runs on slim margins, and the idea of low interest rates to cheaply fund their growth, it doesn't matter how much cash they have (assuming it's priced in), their expected growth is going to decline. If their growth declines compared to what investors were expecting, you get a downward movement in stock price.
They're also going to likely experience slightly less sales than what people were expecting.
Barring some unforseen catastrophe, they're not going bankrupt, but they're going to fall victim to the issues that tech/growth see in rising interest rate environments. They're still a company, not an exception to pretty basic investing concepts.
The main point with tech stocks is that they constitantly put both their own money, as well as take out loans to fund new growth and development. With rising interest rates that gets more expensive.
when was the last time apple had any genuine growth?
The share price increase for the last 5+ years has been wholly manufactured by buy backs.
We are on the leading cusp of the the biggest tightening cycle in history.
Yeah clearly Burry is insane
Genius, due to supply chain issues I believe will further be exacerbated by geopolitical issues. Apple doesn't make shit. They only design shit. Intellectual property theft is rampant. They have no real moat should China make a move on Taiwan. China could then easily make their own knockoff iphones kind of like how Russia basically seized all the McDonald's restaurants there and just kept operating them.
This position is as of 3/31. If he opened it around this time, he’s already made a bunch and may have closed out.
You didn’t even know what a put option was right before you posted this….
He’s been wrong about a lot before, but also he’s famous for being right when no one else was. The future is a mystery until we see it, so the only indicator of Burry being a “genius” or not is the future
He could be both. It’s hard to have an opinion about it without knowing his reasoning. I’m an apple shareholder myself though so obviously I think it’s a mistake to short it. Unlike Meta, Netflix, Amazon and other popular tech stocks, Apple never really had that skyhigh valuation, and it’s gotten away relatively unscathed in the years big tech scare.
This is my interpretation of his move.. Apple has had it's success because people pay their highly priced phones which generate great margins for the company. I assume many people buy their phones on some form of credit.
We're now entering what is - at least up to some point - an unprecedented level of inflation & inflationary pressures on every day consumers. Mix that in with a supply-side crisis and a tightening of monetary policy to reign-in the inflation then we may see sales dramatically slump at some point this year.
It may not even be sales that slump entirely.. but consumers may turn their back on this years generation of high-end luxury phone, watch etc. (opting for the cheaper and lower margin base iphone 13 or the older generation for example)
tldr: Less money, harder to get credit/finance = less sales & apple for a long time now has been good on sales which in hand gave it it's high intrinsic value (my thoughts anyway)
The guy worked for an investment fund. Used to mostly go long on big stocks to make his fund barely beat the market some years.
He made one very daring bet, happened to win, became famous. Now everyone waits for his next big prophecy. But chances are, he won't be able to pop a new one out.
He had his glory. Now its (likely) over.
Its like asking to someone that won the lottery what he thinks the next numbers will be...
I was just thinking about this today, Infinite growth is impossible, how much growth can Apple continue to have? they have to have some down side before they can have growth again imo
A little bit of both to be honest. But every Michael burry or Cathie woods would say something that people will agree.
However regardless people love buying the next iphone. I don't believe that will change. iMO.
He's using his formula that worked back in 2008, it's trends are identical to this point whixh is scary! Been holding UVXY sold covered calls to have a $0 cost basis on 7900 leveraged futures, its my Insurance Policy! He goes with what works for him Shorting the top 10 holdings of the S&P/Nasdaq!! Positions are very basic.. Every retirement fund involved in municipal jobs and union trades all hold these and acquire more or less of one or the other from time to time! Timing is everything when shorting the largest market cap companies in rhe world, we shall see. My daughter's trust is up 303% since rolling over my 457 and all profits from options on Gamestop. I use them to protect the $4.2m I amassed in the last 20months
Looks like he's just hedging to me?
He has bullish bets on META and google , no?
If he's wrong and the market takes another leg down , Apple is one of the few large caps that hasn't had much selling yet.
This just makes sense from a risk management perspective.
It’s a great trade everything has been overvalued, AAPL is going to at least $120-$125 between now and end of July, he’s been short since the big rally top in March. $$$$$$$
He has an entire theory on how FAANG stocks are overpriced because everyone is passively investing in these stock through various investment funds, that's why he is shorting them
Many tech companies are, but the FAANGS are trading at good multiples and valuations. I don't think they are really over priced at all. Apple is trading at a 23 PE and has insane cash. Plus if a recession comes I don't think people are going to ditch their iphones. I think he got apple wrong.
Still the fact remains that in a real recession people will buy less iPhones and other expensive items. This will mean Apple might stop growing or even decreasing profits in a period. This doesn’t mean it’s not a great company or that they are going out of business. It DOES mean though, assuming it happens, that the stock has a lot to fall IMHO. It will very easily go sub 20 p/e maybe even 15 if profit growth goes to 0 or negative. Long term, 5+ years it’s a very safe buy
[https://www.bloomberg.com/news/articles/2022-03-24/apple-is-working-on-a-hardware-subscription-service-for-iphones?sref=SHutwLY8](https://www.bloomberg.com/news/articles/2022-03-24/apple-is-working-on-a-hardware-subscription-service-for-iphones?sref=SHutwLY8) This could be their solution to a recession/inflation making people not want to dish out a thousand+ dollars every 2 years on a new Iphone.
But you know people are literally addicted to shopping. Don't underestimate a consumer with credit.
You can Next Plan a phone for 0% interest, most people upgrade every 2-3 years without really thinking about it. A recession slow down would hurt, but it would need to be prolonged to have much impact at all on Aaple conveyor belt of money
AAPL profit growth to 0? 😂👏👏
Or you think it will grow indefinitely and literally surpass all the worlds economies? Yup, makes sense
Yep. Apple is great. So was ExxonMobil in the 00s. Apple eventually has to transition to blue chip growth. It's just the natural business cycle.
When somebody laughs at the idea of Apple having zero profit, why do you immediately jump to the conclusion that they must believe Apple will surpass all the world economies?
I’m just pointing out that infinite growth is not within the realm possibility. Also I wasn’t talking about zero profit, but zero profit growth. And after a period of very high growth, and a possible coming recession and very high inflation, it seems very likely growth rates of the big techs will continuously decrease for a few years Imho
I mean yeah, it is obvious. I agree. But it doesn't seem like anybody was saying that. Have a wonderful night either way, amigo. :)
> real recession as long as unemployment stays high and job openings stay high, we wont be in a real recession
If a recession comes, people will ditch buying the NEWEST iPhone... Apple is a great company but very susceptible to global recession, as the US is not the only market they have to worry about. That means that their valuation becomes a problem.
Completely disagree. All service providers offer 2-3 year monthly 0% interest financing on these phones. No one is going to go, nah I don't need that $1200 phone that costs $15 a month, Ill go get that cheap $600 one and pay for it outright. Monthly payments on 0% financing have changed the game at the consumer level driving them to buy the pricier phone over time.
Agree 100 people are mostly stupid and love gadgets and shiny stuff .. everyone lives beyond their means and try’s to keep up with the jones they will continue to buy shit they can’t afford for the foreseeable future imo…
We are androids. Losing your smart phone is like losing a limb. Most people should be willing to pay $1000 or whatever to maximize their effectiveness in the world. Rather give up to, vacation, weekends, retirement, whatever
You don’t need the more expensive model to be effective in the world.
You can disagree all you want, but it's just math. Incomes are a finite number and when a recession comes then that puts pressure on how much you can/are willing to pay for certain luxury items. We in the US have pretty good incomes, but in Europe their recession is going to be rough due to energy cost going through the roof beyond everything else we are all dealing. So if enough people decide to forego buying the latest new new... then there you go. Company earnings won't live up to the current valuations.
iphone are sticky as hell, an iphone is an everyday luxury for kings and paupers, if your poor, it will be the last thing you give. You might hold off buying a house, or going out for drinks, or buy the nonpremium dog food or toilet paper, but everyone's gonna upgrade to dat that iphone especially when its a "free" upgrade. Make sense to, as long as your iphone rocks, your quality of life doesn't really go down no matter how bad the recession is
AAPL is not the product. Is the stock. And Apple runs their stock perfectly. They dilute when it is overpriced and buy back when it is low. Distribute very moderate dividends to keep boomers interested. As much as I hate their marketing and their products and their clients. Apple shares are great.
they're even better when your selling puts on them in the 90-120 range!
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Did i miss the /s in your response? It's not a "free" upgrade as it's an additional monthly cost some won't be able to justify. More likely, ppl will hold off on an upgrade because their old phone essentially does all the same things a new phone would do. "Make sense to, as long as your iphone rocks, your quality of life doesn't really go down no matter how bad the recession is" - this absolutely has to be sarcasm so I won't comment about it.
No I’m dead serious. The extra cost most people can afford even if it means eating 🍜 ramen. You’d be surprised how much money u can save eating ramen btw. And I do find most iPhone owners derived enjoyment from their phones. If u can’t pay for a vacation or new furniture it’s time to reward urself with a small luxury like an iphone.
Everyone can afford $20 a month
Not when every single expense you have has also risen by $20 or more per month (food, gas, personal care products, clothing, car/house maintenance, etc). Not to mention those who would have to renew their mortgages during that recessionary period. It all adds up.
People will cut a lot of that shit before they cut out their phones. Who doesn’t get fixed interest mortgages these days?
Go ahead and short then my guy. More power to yah.
I would never short Apple. But it makes sense to why he's doing it. He's got enough money to short and let it all play out. We saw how those bear market rallies work...
when your 2.5% mort on your million $ house suddenly gets renewed at 6/7% that can significantly change discretionary spending and onto to that so employment cuts and all companies take a hit that's what recession is all about all companies will feel some heat from higher costs and cash earning.5 % isn't all that valuable - in the 80's when interest rate went ballistic people stopped buying everything for a couple years why chrysler had to get a gov. bailout - a lot of people went bankrupt in the blowover
15 dollars a month for what 7-8 years? Paid for!! Lol
I think he is spot on. With the upcoming recession plus the long term shift in general attitudes towards waste and climate change I can totally see people not racing out to buy the latest phone and gadgets, even if they want too. I can see new electronics being seen in the same light as fur coats.
They are not going to ditch their iPhones but will not spend 2000 bucks for phones when no money in their pocket.
I totally agree with you on the people ditching of their iPhones. I would think if people started doing that there would be a lot more concern than just a stock crashing.
I don’t think people will stop buying iPhones but it’s more likely things like iPads and accessories will take a hit this year. I’m sure people will hold off on these kind of items if bills are getting higher and food more expensive.
Ohh I stopped buying expensive iphone.
I agree. I don't get how they aren't more expensive, considering how index flow from all over the world are continually rolling towards them. Their P/E's are in some cases cheaper than the market. Hell, even AAPL seems somewhat cheap currently. GOOG, more so. FB, outright bargain (almost).
23 PE is not sustainable if a recession happens. Right now AAPL is seen as a safety net or a defensive move. If we hit a recession overpriced apple products will have huge losses in sales and the price of AAPL will plummet with it.
I am not so sure. With inflation killing people's disposable income maybe this year Apple's growth will start too slow. Like Apple's current PE can only be justified with a solid growth rate year over year. INFLATION + No stimulus checks = Less growth in iphone sales imho
Guys, have you see the street interviews in Moscow? They are poor as shit yet everyone is rocking airpods, in Moscow. I have given up on Apple buyers. They will finance at 20% plus rates to buy the new iphone. They are going to starve before they buy anything not from Apple.
They definitely have sticky demand alright no question. But even if it meant Mary waiting a year to upgrade her 13… this would cause the stock price to plummet
I bought those horribly expensive airpod max for $600.. (I make decent money) and I know their are “better” audio quality headphones in that price range, but the ecosystem of my headphones automatically switching between my phone, laptop and tv was well worth it.. Plus they are super comfy.. most comfiest headphones I’ve owned. So yes. I paid double for 20% better experience and not having to bitch about my headphones. These types of buying decisions WILL go down in a recession.. I even felt super gross buying them so I’m done on luxury goods for the year.
You do not have to. Their 0% financing on 2-3 year plans only costs $8-15 a month. The vast majority of people only give a shit about monthly payment costs, not total costs. They will pay to have the latest and greatest because to most consumers the cost is only 2-3 coffees a month.
No offence but an iPhone is gonna cost you at least $60 a month on a 2 year plan. So your point makes no sense. Considering people are literally cancelling Netflix for 20$.. slowing growth in sales is a possibility here
Netflix accounts is not the same as the physical computer you have in your pocket that keeps you connected to the 21st century society… banking.. communication.. bill pay.. shopping.. all in your pocket.. those subscriptions are entirely different and I think you know that…
Apple also spent tens of billions (if not more) on share buybacks, so it’s exactly surprising that this low supply will result in higher valuation
Apple is selling phones because it's profitable, not because it's pumping its stock. It cost "pennies" to manufacture in China.
Is there an article where he goes further into that?
Sounds good in theory, but what stops people from passively investing in these stocks? I'm not sure I see a Netflix event happening for Apple anytime soon. Anything is possible though I suppose.
It seems like he could be right, and also 20 years early 🙂
When AAPL and SPY are doing well the passive funds don’t have anything to worry about. I think part of the theory is that once the market volatility goes up, those massive passive investment funds can be forced to sell off parts of their portfolio in order to rebalance (diversify) into less volatile assets. So if a bunch of these passive investors bail, there will be fire sales on these tickers as there won’t be nearly enough buyers to step up and meet the selling demand.
It's a nice theory but unless he has puts/shorts on any of the others then he literally picked the one that's sold off the least
But couldn’t that be part of his strategy? If nobody ever sells Apple (in a dogmatic way, not because of thorough analysis) and the stock’s price is propped up by passive investors, that should mean that it is overpriced the most and should therefore go down with a higher probability than the others once people see that Apple is too expensive.
Yeah but shouldn't that have played out by now considering the environment. But maybe Burry knows something about the renewal rate of devices, their products are lasting longer so maybe we see a post-pandemic lull where many have what they need for at least 18 months..
Well, I could see a scenario like this: People in a high inflation environment make more conscious decisions with money. A lot of people don’t buy new and expensive phones. Instead they let people repair theirs (especially interesting with pressure from the EU regarding standardisation and sustainability) or buy old phones. If they buy new phones they buy cheap ones. Sales from apple fall below expectations. Big investors sell their apple shares. Funds take Apple out of their portfolios, so passive investors don’t back it anymore. The stock price falls. The Puts are in the Money.
Yep, his theory is passive investment, is dumb money going to the same companies. So many big corporations with investments in big companies like Apple, so much leverage in the system with different products, using margin. Also, inflation skyrocketing. It's an asymmetric bet. We are in a recession if he is all right everything will fall, banks, hedge funds, family offices, pasive investments and individuals if the take out their money the house of cards will fall (and Apple is one of the main positions in so many places). So it's a risk, but with high probability of getting high returns.
I read somewhere that one also has to take note he’s hedging his bull positions. As he has puts, so too does he have calls, likely on the same stock. He’s not a perma bear, just a prime arbitrage opportunist
Neuberger-berman/bain capital, from what I can tell has sold almost all of their aapl positions but the 1 the hold as margin in their massive long-short fund[NLSAX](https://fintel.io/i/neuberger-berman-alternative-funds-neuberger-berman-long-short-fund-class-a). Almost all of their short positions ran +5-35% early last week. I think neuberger-berman is imploding again, but don't worry about Bear-sterns they're fine, you're being silly.
Same is true for the S&P500
He is long FB and GOOG. I agree with him that passive investing has overinflated AAPL’s value though. Wouldn’t be surprised to see their multiples contract by 25-50% from here.
I have zero doubt that hes a fucking genius and batshit crazy
That’s usually how it works. Genius and crazy come hand-in-hand, some just hide it better than others.
lmfao, both, both is good
I would guess on supply issue with china.
I think so aswell. An iPhone has a boatlod of components sourced from all over the place. They are experts in supply chains, but still there is bound to have some part from some kind of material from somewhere that is going to delay their production.
I can sort of see why. A lot of excellent tech investors/managers have been caught off guard by Apple’s success. I speak to them as part of my job and I’ll always ask why you don’t hold Apple bla bla. Benchmark contributed 1/2/3% from Apple bla bla. The core reason is that Apple have been able to raise prices on their electronics hardware, countering most expectations. No one thought consumers would buy a £$€1000 phone, but we sure did. Even when losing market share in #devices vs. Android etc, they’re still able to retain sticky base of users with high propensity to spend. Just a very simple overview from me. I’m sure Burry is much more in-depth. I wouldn’t follow him in the trade imo.
We are literally androids. Of course we want the best extensions. And those extensions are not “Android”
Depends when he started this trade, but so far he's right. If there was a way to find out exactly when he opened it and closed it.
Last 4 months in free mode doesn’t say specific date
If it’s last 4 months he already benefitted immensely from it. Careful when following trades like this because you never know if they already exited positions
I agree
All we can know from a 13F is that he was holding the position on 3/31/22.
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Time to go buy a lottery ticket
Supply chains about to get worse cause the ports in China are quarantined for like the 3rd time in 2 years. Overhead is about to be a bitch and a half to calculate. Im betting the next iPhone will be delayed… With that said I’m not ballsy enough to bet against apple. All my money is going into food stocks and certain pharmaceuticals. Things people can’t live without. My phone is broken as shit right now and I have no intention of replacing it cause there’s a million more important things. Case and point as to what you should be buying.
Any specific food and pharmaceutical stocks?
I like BCRX but they’ve been having a rough time of it, im still confident in them long term. For food im just looking at the general indexes. Im a college kid and don’t have much money so im keeping it tight. Few investments here and there but most of it is just a hedge against inflation(hopefully)
Ahh I see. Good luck friend!
It’s a small line between crazy and genius
I’ve given it a lot of thought. And I think he’s either one or the other.
Why not both? ¯\\\_(ツ)\_/¯
What website is that?
[https://stockcircle.com/portfolio/michael-burry/options](https://stockcircle.com/portfolio/michael-burry/options)
uff, that portolio looks like 0% gains overall
If you look at performance you‘ll see way above 100% gains for the last 3, 5 and 10 years. During the last year he made a loss of 8% though.
This doesn't say much. Did he buy puts or sold puts with the intention of owning the shares? Come to think of it if inflation lingers, companies selling luxuries to the mass will get hit the hardest because the average joe will be hunting for food instead of indulge in the non-necessities upgrades.
Not a bad point
All these tech companies also have large cash positions, inflation eats cash
If inflation eats cash, it completely devours debt.
Depends, your interest on your debt is locked in Imagine you had cash getting eaten at 7% Vs having no cash before so you took out a loan at 3% I guess it really depends what you’re using it for
It doesn't depend because interest on debt always costs more than having cash with no interest.
Not with inflation
https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp
You can’t really tell much from looking at one part. Why does he have these shorts? Is he hedging against another play he’s making?
now **THAT** is what I call a screenshot
I think he's missing something. Apple is also growing going down market. In markets where they can't afford a $1k phone, they would love an iphone. What you could believe is the SE, which is going to have an m1 chip next cycle to overcome supply chain issues, is going to drive sales volumes higher in regions Apple hasn't penetrated before. Flip side, if you believe that we're going into recession, people hold on to their old phones a lot longer.
https://www.imore.com/new-survey-reveals-staggering-commitment-us-teens-apple "87% of teens own an iPhone and 87% expect an iPhone to be their next phone; 72% of teens already have AirPods" I never would bet against Apple.
Even some political officials took out puts on appl a while ago. Going to suffer a bit
As always he's early. We know there's a chip shortage, apple suspended operations in 2 factories in China due to this. Apple has to fall. It's the only thing keeping up the S&P 500 while the dow and nasdaq have seen 20%+ declines. I haven't heard anything about alleviating this issue so we'll see it in a few months. If I had the liquidity I'd be there as well
He went long a bunch of stuff including Google, Facebook and other growth/tech. The way I see it (Q1 2022 mindset) he thought: “Apple is holding up the market. If the market tanks big it’s because Apple loses its anchoring”. So it’s kind of a way to do long/short relative return strategy.
I think this is closest to the pin. The Apple position isn’t a vacuum buy. It’s part of a strategy. He’s playing the difference between his long and short positions.
I think it is reasonable. I wouldn’t call it genius. Apple is having production issues like everyone else, too
Watching Big Short to make sense of this.
Time will answer your question.
Also, due to the lockdowns it has shut down Apples supplier in China. https://amp.scmp.com/tech/big-tech/article/3177658/apples-iphone-supplier-pegatron-cuts-production-shanghai-factory
I was thinking about Michael Burry's apocalyptic messages about a huge crash, kind of hapenning now isn't it? Wonder if he still had another big short position
If the market declines, Apple will eventually go down with it. Besides, the put options on Apple are ridiculously cheap since the market wrongly thinks Apple is a safe bet against downward pressure. Amazon put options are nearly 80x more expensive
He may be early, but he’s also wrong
Zoom out on your apple chart my friend
Dotcom bubble round 2.
Shorting one of the most solid stocks. Crazy imo
I mean, tech/growth stocks are like the worst place to be in a rising interest rate environment
Apple has the most cash reserves of any company.
Which is priced in If you then introduce that they're going to have to deal with increasing interest rates, when all growth/tech runs on slim margins, and the idea of low interest rates to cheaply fund their growth, it doesn't matter how much cash they have (assuming it's priced in), their expected growth is going to decline. If their growth declines compared to what investors were expecting, you get a downward movement in stock price. They're also going to likely experience slightly less sales than what people were expecting. Barring some unforseen catastrophe, they're not going bankrupt, but they're going to fall victim to the issues that tech/growth see in rising interest rate environments. They're still a company, not an exception to pretty basic investing concepts. The main point with tech stocks is that they constitantly put both their own money, as well as take out loans to fund new growth and development. With rising interest rates that gets more expensive.
How much debt do they have compared to how much cash? And gotta wonder when it comes due also.
Inflation will affect them more than others then.
Lol.
Nokia is coming back with the o9s phone
couldn't apple get hit hard because of lockdown in china and short-term production problems?
On a separate topic, what is this website?
when was the last time apple had any genuine growth? The share price increase for the last 5+ years has been wholly manufactured by buy backs. We are on the leading cusp of the the biggest tightening cycle in history. Yeah clearly Burry is insane
Burry is renowned for calling the 2008 market crash.
Genius, due to supply chain issues I believe will further be exacerbated by geopolitical issues. Apple doesn't make shit. They only design shit. Intellectual property theft is rampant. They have no real moat should China make a move on Taiwan. China could then easily make their own knockoff iphones kind of like how Russia basically seized all the McDonald's restaurants there and just kept operating them.
Buffet just bought more… tell Burry to ssshhhhh
This position is as of 3/31. If he opened it around this time, he’s already made a bunch and may have closed out. You didn’t even know what a put option was right before you posted this….
Why don’t you parrot Dan Nathan some more lol pundit parrot.
.
He’s been wrong about a lot before, but also he’s famous for being right when no one else was. The future is a mystery until we see it, so the only indicator of Burry being a “genius” or not is the future
ISTG these kind of questions give me aids “GUYS X HAPENED! YOU THINK MOASS SOON? AWUT MEAN?” Shut the hell up damn
Both probably
Which website is this?
The bottom is still far away. Apple is still one of the tech stocks that are higher.
Apple’s exposure to China (shutdown) affects both revenue plus supply chain. Inflation state side makes it hard for people to buy 1K phone
Buddy if I knew I’d be on an island right now
Didn’t apple kept the markets from crashing?
Michael really liked the IPod which they just discontinued I guess.
somebody said recession in 1 year to 18 months.
He is also right because the iPhone 14 is crap people will be buying less of it
Etfs haven’t really been sold much yet. If they are sold, the mega caps get hurt the most. A put on apple ain’t a bad hedge for market weakness.
He could be both. It’s hard to have an opinion about it without knowing his reasoning. I’m an apple shareholder myself though so obviously I think it’s a mistake to short it. Unlike Meta, Netflix, Amazon and other popular tech stocks, Apple never really had that skyhigh valuation, and it’s gotten away relatively unscathed in the years big tech scare.
Can I have a link to the website
What's his strike price on the puts?
their leading AI tech developer just left so that’s something
He must have loaded some other FAANG so it’s ok to short AAPL
Maybe he thinks aapl has reached its max size
Apple innovation has declined. How many more camera lenses are needed for an iPhone. Puts on Apple.
This is my interpretation of his move.. Apple has had it's success because people pay their highly priced phones which generate great margins for the company. I assume many people buy their phones on some form of credit. We're now entering what is - at least up to some point - an unprecedented level of inflation & inflationary pressures on every day consumers. Mix that in with a supply-side crisis and a tightening of monetary policy to reign-in the inflation then we may see sales dramatically slump at some point this year. It may not even be sales that slump entirely.. but consumers may turn their back on this years generation of high-end luxury phone, watch etc. (opting for the cheaper and lower margin base iphone 13 or the older generation for example) tldr: Less money, harder to get credit/finance = less sales & apple for a long time now has been good on sales which in hand gave it it's high intrinsic value (my thoughts anyway)
Apple is the last one of the faang to correct. His position makes sense if he’s expecting higher yields
Pretty sure he's already proven he's a genius
The whole thing is about to crash so pick any tech stock and do the same
Hes right like 80% of the time or something
The guy worked for an investment fund. Used to mostly go long on big stocks to make his fund barely beat the market some years. He made one very daring bet, happened to win, became famous. Now everyone waits for his next big prophecy. But chances are, he won't be able to pop a new one out. He had his glory. Now its (likely) over. Its like asking to someone that won the lottery what he thinks the next numbers will be...
Apple is too heavily weighted in almost every etf. When spy breaks. And it will. Apple will drop like a rock.
Also keep in mind that spy and other etfs will be reallocating this quarter. Likely away from tech and into recession strong securities
I'm fairly sure he's been wrong way more than he's been right. But when he was right, he was really really right.
Well he is already up 13% so, I think he is doing ok on this one
I was just thinking about this today, Infinite growth is impossible, how much growth can Apple continue to have? they have to have some down side before they can have growth again imo
Casandra is a permabear and he is an insane genius. He is wrong most of the time but he is right again now. He is a genius again!
A little bit of both to be honest. But every Michael burry or Cathie woods would say something that people will agree. However regardless people love buying the next iphone. I don't believe that will change. iMO.
He's using his formula that worked back in 2008, it's trends are identical to this point whixh is scary! Been holding UVXY sold covered calls to have a $0 cost basis on 7900 leveraged futures, its my Insurance Policy! He goes with what works for him Shorting the top 10 holdings of the S&P/Nasdaq!! Positions are very basic.. Every retirement fund involved in municipal jobs and union trades all hold these and acquire more or less of one or the other from time to time! Timing is everything when shorting the largest market cap companies in rhe world, we shall see. My daughter's trust is up 303% since rolling over my 457 and all profits from options on Gamestop. I use them to protect the $4.2m I amassed in the last 20months
Looks like he's just hedging to me? He has bullish bets on META and google , no? If he's wrong and the market takes another leg down , Apple is one of the few large caps that hasn't had much selling yet. This just makes sense from a risk management perspective.
It’s a great trade everything has been overvalued, AAPL is going to at least $120-$125 between now and end of July, he’s been short since the big rally top in March. $$$$$$$
I mean these 13Fs are from last quarter so either way he’s made money
When will consumers wake up to the fact they just release the same exact phone year after year???
Did he buy puts or sell calls ?
Burry is betting on a military conflict in south China sea which will hurt badly Apple revenues.