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- Michael Burry compared the Silicon Valley Bank fiasco to the dot-com and housing crashes.
- The "Big Short" investor blamed SVB's collapse on its managers' greed and recklessness.
- Burry hinted that government bailouts can lead to problems such as asset bubbles and inflation.
Michael Burry has blasted Silicon Valley Bank's bosses for their recklessness, and compared the fiasco to the dot-com and housing crashes.
"2000, 2008, 2023, it is always the same," the investor of "The Big Short" fame said in a now-deleted tweet on Sunday. "People full of hubris and greed take stupid risks, and fail."
The Scion Asset Management chief also called out the Federal Reserve, US Treasury, and Federal Deposit Insurance Corp. for swooping in to guarantee SVB depositors won't lose any money.
He compared it to past government interventions to help failing businesses and buttress the economy during previous crises. However, he hinted that bailouts and excessive spending have consequences such as asset bubbles and inflation.
"Money is then printed," Burry tweeted. "Because it works so well."
SVB appears to have failed for a few reasons. It held a large volume of uninsured deposits, and had a concentrated customer base of cash-hungry, venture-capital backed companies. It also purchased long-duration bonds, which slumped in price after the Fed hiked interest rates from nearly zero to upwards of 4.5% in the space of a year.
The lender launched a share sale last week to shore up finances, sparking fears it could collapse. Its stock price promptly plunged, and depositors raced to pull their money out, effectively causing a bank run. The FDIC took control of SVB on Friday, and Treasury Secretary Janet Yellen announced on Sunday that depositors' money would be guaranteed.
Burry recently compared SVB to Enron, the energy-trading giant that was busted for accounting fraud and went bankrupt in 2001.
Bethany McLean, the coauthor of a book about Enron titled "The Smartest Guys in the Room," questioned that parallel. She noted there's no sign of fraud at SVB, Enron's collapse didn't pose systemic risks, and authorities didn't save the day in that case.
"SVB and the VCs who funneled money into it may not have been the smartest guys in the room (couldn't resist) but I don't see any fraud (haven't looked closely, though)," McLean told Insider.
"Maybe the lesson is, don't be Enron!" she continued. "If you're going to collapse under the weight of your bad decisions, make sure you take enough others down with you - particularly innocent others like employees who may not get their paychecks - so that the government has to step in."
Burry has predicted another major company will collapse in time.
"Next, we find our WorldCom," he said in a since-deleted tweet Saturday, referring to a telecoms titan that faced its own accounting scandal and blew up in 2002. "Patience," he added.
Burry has been sounding the alarm on financial markets and the US economy for several years now. For example, he warned of the "greatest speculative bubble of all time in all things" in the summer of 2021, and cautioned retail investors buying up meme stocks and cryptocurrencies that they were signing up for the "mother of all crashes."
The investor, known for his dire predictions, shot to fame after his billion-dollar bet against the mid-2000s housing bubble was immortalized in the book and movie "The Big Short."
Here's a screenshot of Burry's deleted tweet:
Twitter/@michaeljburry