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Michael Burry, top investor from ‘The Big Short,’ is betting against Tesla

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Burry’s firm, Scion Asset Management, revealed in a Securities and Exchange Commission filing Monday that it held bearish put options on more than 800,000 Tesla (TSLA) shares, worth about $534 million, as of the end of the first quarter.

Put options give investors the right to sell a stock at a specified price and are a sign that an investor thinks the stock will go down.

No reason was given in the filing for why Burry thinks Tesla’s stock is due for a fall.

But shares of Tesla have taken a hit recently, plunging nearly 25% in the past month — in part because of concerns about CEO Elon Musk focusing more on bitcoin, dogecoin and other cryptocurrencies instead of the company’s core electric vehicle market.
Musk was also recently the guest host of “Saturday Night Live.” And in his spare time, he runs SpaceX as well. Needless to say, Musk is a bit stretched, which worries some investors.

Burry bet against the housing bubble in the mid-2000s and profited from the eventual demise of the subprime lending market and many big financial firms in 2008. His prescient forecasts were detailed in the Michael Lewis book and subsequent movie, in which Burry was played by Oscar winner Christian Bale.

But Burry is not just looking to profit from stocks that he thinks are ripe for a fall. According to the SEC filing, Scion also holds call options, which give an investor the right to buy a stock at a certain price, on Google owner Alphabet (GOOGL), CVS (CVS) and Facebook (FB).



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Dow surges more than 500 points

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The Dow (INDU) surged more than 500 points, or 1.5%, in the late morning, and the S&P 500 (SPX) — the broadest measure of Wall Street — was up 1.2%. The tech-focused Nasdaq Composite (COMP) rose 0.7%.
The Dow stands to snap a five-day losing streak, its longest since January, while the S&P is looking at its first gain in four days — its longest losing streak since February.

The stock market losses came on the heels of last week’s Federal Reserve policy update, which paved the way for a sooner-than-predicted interest rate hike.

The Fed’s projections showed interest rates would increase in 2023, though some central bank officials even think a rate hike would be feasible next year. On Friday, St. Louis Fed President James Bullard said during an interview with CNBC that he believes rates should be raised as soon as the end of 2022.

Higher interest rates are perceived as negative for stocks even if they come on the coattails of a stronger economy because they would mean higher borrowing costs for companies.

Pain in the crypto-verse

But it’s not all rallies and green arrows Monday. Bitcoin dipped nearly 5%, dropping to its lowest level in about two weeks. One bitcoin bought nearly $32,900, according to coindesk data.

The drop came on the back of China cracking down further on cryptocurrencies, both in terms of mining bitcoin and trading digital currencies.

“Bitcoin needs to expedite transitioning mining out of China,” said Edward Moya, senior market analyst at Oanda.



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Dow plummets more than 500 points as volatility returns to stock market

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The Dow fell more than 530 points Friday, a drop of around 1.6%. It was a broad-based selloff, with all 30 Dow stocks finishing in the red. Intel (INTC), Goldman Sachs (GS) and Walgreens (WBA) were among the biggest decliners.

The Dow is now on a five-day losing streak, falling nearly 3.5% this week. That’s the worst weekly pullback since late January.

Bullard, who does not have a say on the Fed’s policy committee this year but will have a vote in 2022, also said in the interview that the Fed is also starting to discuss the idea of tapering, or cutting back, its bond purchases.
Wall Street is worried about inflation. But investors are also nervous about the Fed taking away the stimulus it injected into the market during the height of the Covid-19 pandemic.

“There is more future volatility ahead,” said Bruce Monrad, portfolio manager of Northeast Investors Trust. “It should increase as the Fed starts to think about raising rates and once it starts tapering.”

These market gyrations could become more routine, which may alarm investors who have gotten used to more calm on Wall Street.

It’s actually been an unusually quiet first half of 2021 — despite the craziness with meme stocks like AMC (AMC) and GameStop (GME) and the big moves in bitcoin (XBT) and other cryptocurrencies.
This cannabis stock is a new Reddit favorite
If you look at the broader stock market, and the VIX (VIX) volatility index in particular, 2021 has been serene for investors.

“Volatility has been very low because the market overall supported by improving earnings,” said Marco Pirondini, head of equity at Amundi US. “But there is always some speculation in other corners of the market.”

The VIX, which many investors refer to as Wall Street’s “fear gauge,” is now hovering around the pre-pandemic levels of February 2020. It’s been steadily declining since peaking in March of last year. The VIX has fallen nearly 15% in 2021.

But the VIX spiked about 10% Friday, and some experts warn that the summer and latter half of 2021 could be a bit bumpier than the first six months of the year.

“When you look at the VIX, it’s eerily quiet. But that’s a little bit misleading,” said Darren Schuringa, CEO and founder of ASYMmetric ETFs, which runs a fund designed to lower investor risk.

Schuringa said he’s worried about the “speculative excess” in the meme stocks as well as in the tech sector and thinks that a broader market correction could be on the horizon.

It’s also clear, as Friday’s market pullback illustrates, that investors are hyperfocused on every little thing the Fed says about interest rates, tapering, inflation and the economy.

“I’m concerned about volatility in the second half of year. There is less room for error,” said Daniela Mardarovici, co-head of US multisector fixed income at Macquarie Investment Management. “Even a mild surprise from the Fed could create an aftershock.”

Still, it’s worth noting that volatility, while rising lately, remains relatively low. Measures of volatility for oil and interest rates have tumbled in recent months, along with the VIX.

“We could see some hiccups ahead. But it’s still pretty calm,” said Bill Sterling, global strategist with GW&K Investment Management.

Investors may also be overreacting to every utterance by Fed members. After all, Bullard is just one person, who doesn’t even have a vote until next year. The remaining Fed members still don’t think a rate hike is imminent.

“Big changes from the Fed are likely still years away. This volatility might be transitory but it will rear its head every now and then because of more uncertainty,” said Marvin Loh, senior global macro strategist with State Street Global Markets.



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Dow plummets 500 points as volatility returns to stock market

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The Dow fell 500 points in late morning trading Friday, a drop of around 1.5%. It was a broad-based selloff, with 29 of the 30 Dow stocks in the red. Caterpillar (CAT) was the only winner while Intel (INTC), Goldman Sachs (GS), American Express (AXP) and Walgreens (WBA) posted the biggest drops.

The Dow is now on pace for its fifth straight day of losses, falling more than 3% this week.

Bullard, who does not have a say on the Fed’s policy committee this year but will have a vote in 2022, also said in the interview that the Fed is also starting to discuss the idea of tapering, or cutting back, its bond purchases.
Wall Street is worried about inflation. But investors are also nervous about the Fed taking away the stimulus it injected into the market during the height of the Covid-19 pandemic.

“There is more future volatility ahead,” said Bruce Monrad, portfolio manager of Northeast Investors Trust. “It should increase as the Fed starts to think about raising rates and once it starts tapering.”

These market gyrations could become more routine, which may alarm investors who have gotten used to more calm on Wall Street.

It’s actually been an unusually quiet first half of 2021 — despite the craziness with meme stocks like AMC (AMC) and GameStop (GME) and the big moves in bitcoin (XBT) and other cryptocurrencies.
This cannabis stock is a new Reddit favorite
If you look at the broader stock market, and the VIX (VIX) volatility index in particular, 2021 has been serene for investors.

“Volatility has been very low because the market overall supported by improving earnings,” said Marco Pirondini, head of equity at Amundi US. “But there is always some speculation in other corners of the market.”

The VIX, which many investors refer to as Wall Street’s “fear gauge,” is now hovering around the pre-pandemic levels of February 2020. It’s been steadily declining since peaking in March of last year. The VIX has fallen nearly 15% in 2021.

But the VIX spiked more than 10% Friday morning, and some experts warn that the summer and latter half of 2021 could be a bit bumpier than the first six months of the year.

“When you look at the VIX, it’s eerily quiet. But that’s a little bit misleading,” said Darren Schuringa, CEO and founder of ASYMmetric ETFs, which runs a fund designed to lower investor risk.

Schuringa said he’s concerned about the “speculative excess” in the meme stocks as well as in the tech sector and thinks that a broader market correction could be on the horizon.



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