‘Big Short’ Investor Who Once Touted GameStop Calls Rally ‘Unnatural, Insane, and Dangerous’

By Connor Smith

Updated Jan. 26, 2021 8:32 pm ET / Original Jan. 26, 2021 7:29 pm ET

Michael Burry, head of Scion Asset Management and a major character in The Big Short film that was based on Michael Lewis' book of the same name.

Astrid Stawiarz/Getty Images

A high-profile investor in GameStop called the stock’s recent rise, “unnatural, insane, and dangerous.”

Investor Michael Burry, head of Scion Asset Management and a major character in The Big Short book and film, said in a now-deleted post on Twitter that he believes there should be legal repercussions for what’s happening with GameStop trading. Burry made a substantial investment on GameStop in 2019 and noted that he’s happy for investors who made money following his initial investment in the retailer.

“If I put $GME on your radar, and you did well, I’m genuinely happy for you,” he wrote in a quickly-deleted Tweet on Tuesday. “However, what is going on now – there should be legal and regulatory repercussions. This is unnatural, insane, and dangerous.”

Burry told Barron’s in an email that he deleted the post because he tagged the wrong SEC Enforcement account. After publication, Burry reposted the same comment, this time with the proper account tagged.

GameStop stock is up more than 3,415% in the past 12 months, riding a wave of retail investor enthusiasm and crushing short sellers. The stock’s sky-high short interest was targeted by speculative traders on Reddit’s WallStreetBets forum. It’s been a favorite among that crowd for months, and their faith paid off big time. This month’s surge was initially kicked off by an announcement that Chewy co-founder Ryan Cohen and two former executives of the e-commerce firm would join GameStop’s board. Cohen’s RC Ventures holds roughly 13% of GameStop shares.

In August of 2019, when GameStop shares below were $4 a share, Burry disclosed a 3% stake in the company. Burry thought shares were undervalued, pointing to GameStop’s balance sheet and predicting that the next generation of videogame consoles, due out in late 2020, would still include disc drives, extending GameStop’s relevance.

Burry’s firm sold more than a million GameStop shares, or about 38% of its stake, during the September quarter of 2020, according to an SEC filing. Burry did not immediately return a follow-up email asking whether he still held shares.

Burry’s investment has proved wildly successful for those that followed him in and held on through last week. GameStop stock closed up 92% to $147.98 Tuesday, and shares were flying higher in after-hours trading after a shoutout from Tesla CEO Elon Musk.ly below.

Overall in the advanced economies, Europe's growth of real gross domestic product is expected to fall into negative growth in October-December 2020, and Japan is also expected to sink into negative growth in January-March 2021.

While the real economy is headed for another downturn due to the renewed mobility restrictions, global stock markets are at historically high levels, with global market capitalization topping $100 trillion for the first time last December. As of Friday, the figure rose 6% in a month to $105 trillion, according to QUICK-FactSet. The International Monetary Fund's forecast for global nominal GDP in 2021 is $91 trillion, marking an unusual era when market capitalization is set to exceed the amount of world GDP.

Fumio Matsumoto, chief strategist at Okasan Securities, said, "The worse the economy is, the more stock prices are rising due to investors' expectations for economic stimulus measures." The amount of stimulus measures taken by governments around the world has reached 1,300 trillion yen ($12.5 trillion).

The people severely affected by the pandemic are largely part-time workers or young people working in the food and tourism industries. Bold economic measures are essential to support vulnerable workers in the service sector, but massive fiscal spending and monetary easing by central banks are causing financial markets to overheat. These fiscal and monetary policies will further widen the gap between the suffering part-time workers and the wealthy who will benefit from higher asset prices.

On the other hand, if inflation risk increases due to soaring asset prices and a booming manufacturing sector, financial markets will be more likely to see central banks tighten policy, but if this happens, it could lead to a plummet in stock prices.

Japan's inflation rate turned negative, but prices of home appliances such as desktop computers and microwave ovens are rising due to more people working from home. In the U.S., inflation has been steadily above 1% since last summer; housing prices for existing homes in December increased 13% year-on-year -- investors are becoming aware of inflation, and so U.S. 10-year treasury yields are gradually rising.

As the pandemic continues, it is becoming increasingly difficult for governments and central banks to steer their policies.

Additional reporting by Hiona Shiraiwa in New York; Tomihiro Ebuchi, Ryo Saeki and Masanori Tobita in Tokyo.