After popular investor and hedge fund manager Michael Burry warned a bubble is forming in the artificial intelligence (AI) sector, an AI entrepreneur has warned that the crypto market has entered a “casino reality.”
Burry, popular for shorting the housing market bubble collapse in 2008, recently cautioned traders against an AI bubble and singled out, in particular, Nvidia (Nasdaq: NVDA), Meta (Nasdaq: META), Oracle (NYSE: ORCL), and Palantir Technologies (Nasdaq: PLTR).
The 2008 episode was the subject of the Hollywood film The Big Short (2015) in which actor Christian Bale played Burry. The legendary trader had shorted overvalued sectors earlier too, such as shorting the dot-com bubble burst in 2000.
Michael Burry, former head of Scion Capital Group LLC, works in his office in Cupertino, California, U.S., on Monday, Sept. 6, 2010.
But Burry has now deregistered his hedge fund, Scion Asset Management. He said:
“My estimation of values in securities is not now, and has not been for some time, in sync with the markets.”
Eric Balchunas, the senior ETF analyst at Bloomberg, responded to the development and said nobody, including those who get portrayed by Christian Bale, knows the future.
Ahmad Shadid, founder of O Foundation, a Swiss-based AI research lab echoed similiar sentiments but about the rallying crypto market which has come to a halt.
He told TheStreet Roundtable, the crypto market has gone from a more “traditional” run in 2024 — with altcoins and crypto projects with actual utility gaining traction and retail investment — to a “completely crumbled, degen, casino reality” — only meme coins and such tokens gaining the attention of crypto retail.
Crypto retail traders have increasingly realized that they are the exit liquidity, said Shadid.
There is “blatant” manipulation of charts and there are so many pump-and-dump coins, so traders don’t bother to go for the highest-valued coins to make 2x-5x maximum, he added.
Both crypto retail traders and founders have realized that VCs and market makers are only milking them, Shadid opined.
The market is now in an “almost nuclear winter” where some projects with little adoption raise exorbitant amounts of money, only to end up being “forgotten and unused,” he said.
If a project doesn’t have a token with 500x potential, it doesn’t find any takers even if it has actual utility, he expressed his frustration.
Shadid said a lot of projects, including his own, now view crypto as a “toxic space” in which nothing matters other than the token.
The founder concurred with Burry’s view that we are in an AI bubble but said a bearish outlook on Nvidia isn’t substantiated enough. However, he said the company’s valuation is getting dangerous.
In fact, he is of the view that if and when the AI bubble bursts, useless AI companies operating at the App layer would collapse first. This, in turn, would affect Nvidia.
Nonetheless, Shadid didn’t contend the fact that there is no going back from the “AI-native world.”
Burry began aggressively buying Chinese stocks in the fourth quarter of 2022, and it seems to finally be paying off.
According to 13F filings, Burry’s Scion Asset Management, which manages about $200 million, has about half of its portfolio invested in Chinese tech giants.
Burry counts Alibaba at his largest position at 21% of the portfolio, and he was still buying the stock as recently as the second quarter, boosting his stake by 24%.
Burry also has 12% of his portfolio invested in Baidu, and another 12% of his portfolio invested in JD.com. Altogether, Burry had about 46% of his portfolio invested in the three Chinese stock as of June 30.
The People’s Bank of China announce key interest rate cuts, lowered bank reserve requirements to stimulate lending, and said it plans liquidity support for the stock market.
The country also encouraged its companies to start buying back stock.
All of these measures and dovish speak from policymakers led to a massive surge in China’s stock market this week.
The iShares MSCI China ETF is up 18% so far this week. Meanwhile, shares of Alibaba, Baidu, and JD.com are up 19%, 18%, and 32% so far this week, respectively.
According to data from HedgeFollow, which tracks and compiles data from 13F filings, the recent gains in China’s stock market should mean Burry too is seeing some sizable gains in his portfolio, with Alibaba leading the charge.
HedgeFollow estimates that Burry has an average cost per share of $78.83 for his Alibaba stake. Shares of Alibaba hit $105.25 in Thursday afternoon trades, representing an estimated gain of 34%.
This assumes that Burry has not sold any shares since Scion’s last 13F filing, which offers data as of June 30.
Burry isn’t the only hedge fund manager making money off of the recent surge in China’s stock market.
Like Burry, Tepper count Alibaba as his hedge fund’s largest position, making up about 12% of his $6.2 billion Appaloosa fund. Tepper believes there’s more upside to be had in Chinese stocks due to their depressed valuations.
“Even with the recent moves they’re like on a flat-line low compared to where they have been in the past. And you’re sitting there with single multiple PEs, with double-digit growth rates for the big stocks that trade over here,” Tepper said in an interview with CNBC on Thursday.
(Bloomberg) — Jeff Ubben, the veteran hedge fund manager who’s just closed his sustainable investing firm, is calling out what he’s dubbed the “echo chamber” of traditional climate summitry.
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The 62-year-old, whose Inclusive Capital Partners told clients last week it was selling investments and returning their money after not being “rewarded” by markets, said he’s worried about what he describes as entrenched points of view preventing progress in climate talks.
The tone has historically has been “so divisive,” Ubben said in an interview. But “we all need to work together.”
Ubben has long been an advocate of bringing big oil to the table. He joined Exxon Mobil Corp.’s board in 2021, the same year as activist fund Engine No. 1 secured three seats. He’s now on the advisory committee of COP28 in Dubai, which is hosting more oil executives than any other United Nations climate summit.
The setting of this year’s Conference of the Parties has drawn warnings from climate activists that the event risks becoming a deal-making venue for oil majors and the finance industry, with such vested interests compromising a strong final climate agreement. This year’s COP will likely be the best-attended ever, with more than 100,000 delegates, according to a provisional list compiled by the UN Framework Convention on Climate Change. That’s roughly twice as many as attended last year’s COP in Egypt.
Sultan Al Jaber, president of the COP28 summit and head of the United Arab Emirates’ national oil company, Adnoc, has denied reports that he’s using his position at the talks to strike oil and gas deals. He also says he wants as many interests as possible represented to ensure a “successful” outcome.
On Saturday, Exxon was one of 50 oil and gas producers at COP28 to pledge to cut emissions from their own operations. Darren Woods, the first Exxon chief executive ever to attend a COP summit since the gatherings began in the early 1990s, said in an interview that there’s “a much more diverse group of people recognizing” that climate change is a “hard problem” to solve.
Woods also said there’s now a greater recognition that the energy transition will require a breadth of technologies, which “opens the door for us.”
The deal struck by oil and gas producers will be controversial given none of the companies is actually agreeing to reduce production. But they will pledge to stem releases of methane, one of the most dangerous greenhouse gases, to near zero by 2030 to stop routine flaring of natural gas.
Ubben said getting “companies like Exxon invited” was a clear goal because carbon-emitting companies “haven’t been part of the conversation” thus far.
Instead, “it’s been this echo chamber of diplomats going to these conferences and putting out flowery language and goals, but it doesn’t have traction,” Ubben said. “There’s no money behind it, which is why company balance sheets are so important.”
Ubben launched Inclusive Capital three years ago during a boom in green investing, and after two decades of running activist hedge fund ValueAct Capital. At the time, he told investors his new venture would back companies focused on tackling problems ranging from environmental damage to food scarcity, and his goal was to raise $8 billion for that purpose.
Inclusive Capital had $2.6 billion of assets, including borrowed money, at the end of last year, a March regulatory filing shows. Its closure coincides with one of the worst years for climate investing, as higher borrowing costs and supply-chain bottlenecks batter capital-intensive green companies.
Despite historic subsidies into climate technologies in the US, China and Europe, the S&P Global Clean Energy Index is down about 30% this year, while the S&P Global Oil Index is broadly unchanged over the period.
When Ubben created Inclusive Capital, the plan was to “collaborate with companies whose core businesses address essential societal needs with a focus on reducing negative externalities,” according to the memo handed to clients informing them of its closure. But it’s a strategy that “unfortunately hasn’t been rewarded in the public markets,” the memo read.
In reality, over the past three years, the “exact opposite” has played out, it continued. “Shares of companies pursuing capital-intensive projects needed to drive lower greenhouse gas emissions have been ‘sold off’ in the public markets as being too risky or too far out in terms of any potential reward.”
For now, there’s little to indicate that markets are about to shift tack. In fact, Bloomberg’s recent Markets Live Pulse survey shows that the slump that’s dragged down green stocks is expected to continue into 2024.
Oil companies like Exxon, meanwhile, are also seeing their share prices decline as the spike in demand fanned by the energy crisis fades. Exxon’s share price is down roughly 14% from a September high. Chevron Corp. is down 15% in the same period.
A key goal of the COP28 talks is to get governments to agree to a tripling of global renewable energy capacity by 2030. That would require investments equivalent to around a 10th of the world’s 2022 gross domestic product, according to BloombergNEF.
For investors trying to calibrate their climate strategies, the outlook remains challenging.
“Energy use is going to grow,” Ubben said. “And we need to keep energy affordable for those people that want the right to develop.”
Bloomberg Philanthropies regularly partners with the COP Presidency to promote climate action. Michael R. Bloomberg, the founder and majority owner of Bloomberg LP, parent company of Bloomberg News, is the UN secretary general’s special envoy for climate ambition and solutions.
