Charlie Munger eviscerated cryptocurrencies during Daily Journal’s annual meeting.
Warren Buffett’s right-hand man labeled the likes of bitcoin, ether, and dogecoin as “cryptocrappo.”
Munger said he felt ashamed that some Americans like crypto and US officials haven’t banned it.
It’s fair to say that Charlie Munger isn’t the biggest fan of cryptocurrencies.
“Sometimes I call it cryptocrappo and sometimes I call it, well, cryptoshit,” the billionaire investor said during Daily Journal‘s annual meeting on Wednesday, which was broadcasted live by CNBC.
Munger, 99, is Warren Buffett’s business partner and the vice-chairman of Berkshire Hathaway. The two men built Berkshire into one of the world’s most-valuable corporations by acquiring businesses such as Geico and See’s Candies, and purchasing large stakes in Coca-Cola, American Express, and other public companies.
‘Big Short’ investor Michael Burry warned stocks would crash and rallies wouldn’t last. Here are 6 of his key tweets in 2022, and what they meant.
“The Big Short” investor Michael Burry suggested the S&P 500 could plunge below 1,900 points.
The Scion Asset Management chief based his prediction on how past crashes have played out.
Burry said brief rallies were likely, and joked about his penchant for premature predictions.
Michael Burry, the hedge fund manager of “The Big Short” fame, rang the alarm on the “greatest speculative bubble of all time in all things” in the summer of 2021. He warned the retail investors buying up meme stocks and cryptocurrencies that they were headed towards the “mother of all crashes.”
The Scion Asset Management chief’s grim prediction may be coming true, as the S&P 500 and Nasdaq indexes tumbled by 19% and 33% respectively in 2022. In tweets posted in May 2022 then subsequently deleted, Burry took credit for calling the sell-off, explained why he expects further declines, and cautioned against buying into relief rallies.
Here’s a roundup of Burry’s best tweets about the stock-market slump:
The pandemic crash was just the start
The S&P 500 index has rebounded strongly from the pandemic crash in the spring of 2020, rising from a low of 2,192 points to around 3,800 points today. However, it could halve in value to below 1,900 points over the next few years, Burry tweeted on May 3, 2022.
When the S&P 500 has crashed in the past, it has traded lower several years later, Burry noted. He pointed to the index bottoming 13% lower in 2009 than it did in 2002, 17% lower in 2002 than it did during the Long-Term Capital Management fiasco in 1998, and 10% lower in 1975 than in 1970.
If the benchmark index follows that historical pattern, it could trade 15% lower than its level in the spring of 2020, Burry said.
There may be epic but short-lived rallies
A “dead cat bounce” refers to a temporary rebound in stock prices after a significant fall, often because speculators buy shares to cover their positions.
They often occur during major declines in the stock market, Burry said in a May 4 tweet. The implication is that investors shouldn’t get their hopes up about any rallies in the coming months, as they’re likely to be brief respites that won’t result in a market recovery.
Burry noted that 12 of the 20 largest one-day rallies in the Nasdaq index took place as the dot-com bubble burst, while nine of the S&P 500’s 20 biggest one-day rallies occurred in the aftermath of the Great Crash in 1929.
Don’t be fooled by stocks rebounding
Stocks could stage multiple rallies before the crash is over, Burry warned in a May 5 tweet.
He noted that after the dot-com bubble burst, the Nasdaq rallied 16 times by more than 10% — gaining on average 23% each time — on its way to a 78% decline at its nadir.
Burry also emphasized that after the Great Crash of 1929, the Dow Jones index rallied 10 times by more than 10%, rising by an average of 23% each time, before bottoming at a 89% decline.
Stocks are on a dangerous trajectory
The US stock market appears to be following the pattern of previous bubbles, leaving it poised for a monumental crash, Burry noted in a May 8 tweet.
The Scion chief pointed to the S&P 500’s trajectory over the past 10 years, noting it was strikingly similar to the index’s chart for the decade leading up to the dot-com crash, and the Dow’s chart for the 10 years before the Great Crash of 1929.
Burry suggested that human nature was behind the consistently decade-long buildups, and implied that history is repeating itself.
Burry predicts correctly, but early
Burry appeared to take a victory lap in a May 10 tweet, suggesting he believes the stock-market crash that he’s been warning about has finally arrived.
The Scion boss joked he was early with his prediction, just as he was during the mid-2000s US housing bubble.
Burry also nodded to Elon Musk calling him a “broken clock” last year, after the Scion chief bet against Tesla stock, predicted it would collapse in value, and questioned Musk’s motives for selling his company’s shares.
Stocks are set to tumble a lot further
7/7 SLIDES
Munger is a Daily Journal director, and oversees the newspaper publisher and legal-software seller’s investment portfolio. He dismissed the possibility that he might be wrong about the likes of bitcoin, ether, and dogecoin.
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“I think the people that oppose my position are idiots,” he said.
Munger, who counts Costco and Tesla-rival BYD among his proudest investments, certainly didn’t shy away from laying into crypto.
“It’s not even slightly stupid, it’s massively stupid,” he said. “It’s worthless, it’s no good, it’s crazy, it’ll do nothing but harm, and it’s antisocial to allow it.”
“It’s just unspeakable, it’s an absolute horror, and I’m ashamed of my country that so many people believe in this kind of crap and that the government allows it to exist,” he continued. “It is totally, absolutely, crazy-stupid gambling with enormous house odds for the people on the other side.”
Unsurprisingly, Munger advised completely avoiding crypto and the people promoting it. He also underlined the critical role that fiat currencies have played in the development of modern human civilization. He ridiculed the idea of ditching national currencies with crypto, arguing it was as futile as trying to replace countries’ air.
Munger denounced the cryptocurrency industry as speculative, unregulated, and predatory earlier this month, and urged the US government to ban it completely. He’s previously compared crypto to “rat poison,” a “venereal disease,” and an “open sewer,” and said he wouldn’t want anyone involved with it to marry into his family.
