Warren Buffett’s Berkshire Hathaway is facing a legal battle with Volkswagen after rejecting a settlement deal with the German auto giant related to its emissions scandal.
Volkswagen took out a “first excess liability insurance policy” with Berkshire’s international-insurance unit in January, the automaker revealed in an investor document last week. That policy puts Buffett’s company on the hook for up to 50 million euros ($59 million) if a claim exceeds Volkswagen’s 25 million euros’ worth of coverage from its primary insurer, Zurich.
The German automaker had been locked in talks with insurers for years over how much they owed it under various insurance policies following its emissions fiasco. It has now reached a settlement with insurers including AIG and Allianz that will see them pay a total of 270 million euros to Volkswagen, minus payments they’ve already made or scheduled. However, Berkshire refused to sign the agreement.
Volkswagen intends to enforce Berkshire’s insurance obligation “including in court if necessary,” and its supervisory board has “instructed that preparations be made for legal action against Berkshire Hathaway,” the investor document shows.
The automaker added that it won’t be bound by the settlement amount and other terms it offered Buffett’s company while negotiating the settlement. That suggests it could seek more money from Berkshire than it initially requested.
Berkshire and Volkswagen didn’t immediately respond to requests for comment from Insider.
Volkswagen has faced billions of dollars’ worth of legal claims and fines since it admitted to installing “defeat devices” in millions of its diesel-powered cars between 2009 and 2015. The secret software enabled the cars to cheat vehicle-emission tests and skirt environmental regulations – a scandal dubbed “Dieselgate.”
In addition to its insurers, Volkswagen has reached Dieselgate-related settlements with its former chairman, Martin Winterkorn, and an Audi board member, Rupert Stadler. Winterkorn and Stadler will pay 11.2 million euros and 4.1 million euros respectively, partly by waiving their claims to bonuses.
Volkswagen might be clashing with Buffett, but it counts another famous value investor among its fans: Michael Burry of “The Big Short.” The Scion Asset Management boss disclosed in March that he holds a stake in Porsche SE, the German holding company that owns about 31% of Volkswagen.
“Investors, partly due to the #ESGFog, underestimate the size, scale, brands, staying power, and resources of Volkswagen,” Burry tweeted at the time.
Michael Burry and Jeremy Grantham are bracing for a devastating crash across financial markets. They’re far from the only experts to warn that rampant speculation fueled by government stimulus programs can’t shore up asset prices forever.
The billionaire investors Leon Cooperman, Stanley Druckenmiller, and Jeffrey Gundlach have also sounded the alarm. The same is true for the “Shark Tank” star Kevin O’Leary, the market prophet Gary Shilling, and the “Rich Dad Poor Dad” author Robert Kiyosaki.
Here are the most striking warnings from these 8 market experts:
Burry in June described the markets as the “greatest speculative bubble of all time in all things” and said retail investors were buying into the hype around meme stocks and cryptocurrencies before the “mother of all crashes.”
Earlier this year, the investor of “The Big Short” fame, who runs Scion Asset Management, pointed to Tesla, GameStop, bitcoin, dogecoin, Robinhood, and the red-hot US housing market as signs of speculative excess.
“Everything I look at would suggest caution, intermediate to long term, would be the rule of the day,” the billionaire investor and Omega Advisors boss said. “When this market has a reason to go down, it’s going to go down so fast your head’s going to spin.”
But Cooperman described himself as a “fully invested bear” because factors that typically cause bear markets — rising inflation, recession fears, a hostile Federal Reserve — weren’t present.
The billionaire investor and DoubleLine Capital boss said that claiming the stock market was “anything other than very overvalued versus history” was “just to be ignorant of all the metrics of valuation.” He predicted that stocks would fall by upwards of 15% when the downturn comes.
Gundlach, known as the “bond king,” predicted that the retail investors who had piled into meme stocks and other speculative assets wouldn’t stick around once prices started dropping.
“We’ll have a tremendous unwind of a lot of the money that thinks that the stock market is a one-way thing,” he said.
O’Leary said in April that stocks would eventually crumble, but he framed the downturn as an educational opportunity for rookie investors.
“Buying the dip is more rock-and-roll, but what invariably happens is you go through a massive correction and you learn a very important lesson,” the “Shark Tank” star and O’Leary Funds chief said.
“The generation that is trading right now has never gone through a sustained correction. It’s coming — I don’t know when, I don’t know what’ll trigger it, but they will learn their lesson,” he continued.
“If you have a lot of leverage on, it’s a hell of a lesson because you end up in a negative net-worth position,” O’Leary added. “But you do learn from it.”
“Biggest bubble in world history getting bigger,” the personal-finance guru and author of “Rich Dad Poor Dad” said. “Biggest crash in world history coming.”
Kiyosaki has accused the Federal Reserve of overstimulating markets and devaluing the dollar. He’s advised investors to prepare for the downturn by stocking up on precious metals and cryptocurrencies.
“ARE YOU READY?” he tweeted in April. “Boom, Bust, Mania, Crash, Depression. Mania in markets today. Prepare for biggest crash, depression in world history. What will Fed do? Print more money? Save more gold, silver, bitcoin.”
Shilling predicted in April that financial markets would nosedive, but he declined to hazard a guess at when the crash would arrive.
“I’m not making any firm prediction as to when this thing is going to collapse,” the veteran forecaster and president of A. Gary Shilling & Co. said.
“Speculations outrun any logic and that’s probably going to be true of this one,” Shilling continued. “But at some point, boy, there’s going to be a lot of blood on the floor.”
Michael Burry warned the frenzied buying of meme stocks reminded him of the dot-com boom and housing bubble in a recent Barron’s interview, and predicted the social-media favorites would plummet in value soon.
The Scion Asset Management chief noted the people who went all-in on technology stocks at the turn of century, and those who took out massive loans to buy multiple homes in the mid-2000s, didn’t expect the good times to end. Meme-stock investors are falling into the same trap and risk getting burned, he said.
“We probably do not have to wait too long, as I believe the retail crowd is fully invested in this theme, and Wall Street has jumped on the coattails,” Burry told Barron’s in an email. “We’re running out of new money available to jump on the bandwagon.”
Burry is best known for his billion-dollar bet against the housing bubble in the mid-2000s, which was immortalized in the book and the movie “The Big Short.” He also took a stake in GameStop in 2019 and underscored the video-game retailer’s potential in letters to its board, emboldening retail investors to execute a short squeeze of the meme stock at the start of this year.
The Scion chief told Barron’s that Wall Street professionals are now tracking social-media chatter and cashing in on the latest meme stocks.
“They are in a better position than retail to participate, sniff out and start gamma squeezes in the options market,” he said. A “gamma squeeze” refers to buying call options on a stock to force market makers to purchase the underlying shares to hedge themselves, which in turn pushing the stock price up even more.
Burry, who has been warning of an historic market crash for months, also trumpeted the success of his GameStop wager. While he exited the position before the stock skyrocketed in January, he still turned a sizeable profit. “If I get within years of a thesis coming true, I’m happy,” he said.
Finally, the investor emphasized that for an ailing business like GameStop or AMC Entertainment, being picked as a meme stock is like hitting the jackpot. They can issue shares at inflated prices to rake in huge sums, allowing them to pay off their debts, invest in their operations, and revitalize their prospects.
The legendary investor rose to fame betting against the US housing market in the mid-2000’s, with his billion-dollar bet immortalized in the book and movie “The Big Short.”
Since then, Burry has issued several bearish forecasts, like a 2017 warning that the global financial system is going to collapse, and most recently a warning that the market is in the “greatest speculative bubble of all time.”
User “u/nobjos” who told Insider their first name is “Noble” posted an analysis in several Reddit threads questioning how many times Burry has been correct. The user originally posted it on their Substack blog, though the post in WallStreetBets received over 5,000 upvotes.
“I recently observed that in every news article/tweet, he always talks about an impending crash. As recently as last week, he issued another warning stating that there would a ‘mother of all crashes soon due to the meme-stock and *****currency rally that will approach the size of countries,'” Noble said. “Basically, what I wanted to analyze was whether Michael Burry always predicts a crash and gets lucky when there is an actual crash or does his prediction actually turns out to be true most of the time?” Noble tracked news articles that mentioned Burry forecasts from the last 15 years. He then compared the S&P 500’s return one month, one quarter, and to date after Burry’s bearish call. If Burry specified a stock, he used the particular stock as a benchmark.
The analysis shows that the S&P 500 has gone up 93% since Burry’s 2017 warning about a global financial meltdown and 50% since his 2019 prediction that index fund inflows are the next market bubble. Tesla stock has mostly gone down following Burry’s latest musings.
Noble concludes that “Burry’s only prediction that we can say confidently was right” after 2008 is that he called bitcoin a “speculative bubble” in March 2021. Bitcoin has dropped roughly 30% since his prediction, though Noble noted there isn’t enough data yet to show how Burry’s prediction will turn out over the next few years.
“I have immense respect for Michael Burry and his skills. He was a doctor and worked as a Stanford Hospital neurology resident and then left to start his own hedge fund that became extremely successful. But, as you can see from the above analysis, he is more often wrong than right with his predictions,” Noble wrote.
“But, the stock market rewards predictions disproportionately . Out of the 100 predictions you make, even if you get 99 wrong but get one extremely unlikely event right your overall returns will still be extremely high,” he added.
As for now, it remains to be seen whether Burry’s latest forecasts will come true. Some on Wall Street argue bubbles can take years to form and eventually pop, and it’s nearly impossible to pinpoint when the crash will occur.
The Scion Asset Management boss, who famously predicted the US housing-market collapse that precipitated the global financial crisis, has pointed to Tesla, Robinhood, dogecoin, GameStop, and SPACs as demonstrating signs of rampant speculation and dangerous excess in recent months.
Here are Burry’s 10 best tweets from his brief Twitter homecoming:
1. “People always ask me what is going on in the markets. It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude. #FlyingPigs360.”
2. “All hype/speculation is doing is drawing in retail before the mother of all crashes. #FOMO Parabolas don’t resolve sideways; When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries. History ain’t changed.”
3. “The problem with #Crypto, as in most things, is the leverage. If you don’t know how much leverage is in crypto, you don’t know anything about crypto, no matter how much else you think you know.”
4. “Easiest riddle you’ll ever get from me. What do Troy Polamalu and #Bitcoin have in common?” – “Neck not broken yet on either,” he explained in a follow-up tweet about the former American football player with an enormous head of hair, and the leading cryptocurrency.
5. “Knowing saves half the battle. Got it? It’s not hard. Analyze, think independently, be informed, find the data, and you’ll know a lot that no one else does.”
6. “Some stocks, funds cannot own, for now. Maybe 1x book, 1x sales. Growing fast. But, pink sheets, federal laws, clients in certain jurisdictions… some cases there is a path to funds gaining the ability to own such. Knowing saves half the battle, #capisce?” – underscoring the opportunity for investors to buy stocks now that institutions might own in the future.
7. “Re: RMBS CDS, ancient history, but… because my investors revolted, I was completely out of the trade before any bailouts. And I hated the bailouts too! AIG should have been allowed to fail, and @GoldmanSachs with it. Today’s narratives would be very different.” – commenting on the government bailouts of major banks and insurers during the financial crisis.
8. “Everywhere and anywhere you see #shortages – things, people, places, experiences, and services – you know the price is just not high enough, yet.” – suggesting that a national ammo shortage is evidence of upward pressure on prices.
9. “Micro-hoarding. Millions and millions micro-hoarding. The secret to longevity… of the inflationary mindset. And since #PlungeProtectionTeam mentality infiltrated the Greenspan #Fed after the ’87 crash, it has compounded and compounded. And become today’s misguided monster.” – accusing the Federal Reserve of fueling inflation by focusing too much on shoring up financial markets.
10. “Who could’ve seen this coming?” – Commenting on a news report that supply-chain disruptions, labor shortages, and a post-pandemic demand surge are stoking inflation. Burry flagged the risk of inflation spiking after the economy reopens as early as April 2020.
Michael Burry deleted his Twitter account on Monday after sounding the alarm on a colossal bubble in asset prices and predicting the worst crash in history.
The investor of “The Big Short” fame only rejoined Twitter last week after deleting his account in early April. During his brief return to the platform, his tweets ranged from investing advice to song lyrics, and he also commented on cryptocurrencies, stocks, inflation, and government bailouts.
The Scion Asset Management boss cautioned in now-deleted tweets that bitcoin is overpriced and a dangerous borrowing binge has fueled the crypto boom. He also described the Federal Reserve as a “misguided monster” for focusing so much on preventing market declines. Moreover, he highlighted news reports of supply shortages and hoarding as evidence of a mounting inflation threat.
Burry offered some tips for investors, too. “Analyze, think independently, be informed, find the data, and you’ll know a lot that no one else does,” he tweeted.
The fund manager highlighted the opportunity to pinpoint stocks that institutions can’t own currently because of their size, client base, or federal regulations, but where there’s a path to future ownership.
Burry revealed that he wasn’t a fan of the US government stepping in to save banks and insurers during the financial crisis. “I hated the bailouts too!” he tweeted, adding that AIG and Goldman Sachs should have been allowed to collapse.
Notably, the value investor isn’t as bearish on “big tech” stocks as might be assumed. He tweeted that recent stock-price gains for Google parent Alphabet and Facebook were “for very good reasons that completely #trump my own personal distaste.”
Meanwhile, one of Burry’s followers asked him whether he’d been approached about making a new movie, presumably on the meme-stock boom this year. “Believe it or not, yes,” he tweeted in response.
Burry is best known for his starring role in “The Big Short,” a book by Michael Lewis that chronicled his billion-dollar bet against the US housing bubble in the mid-2000s. The fund manager was played by Christian Bale in the movie adaptation.
The Scion chief laid the groundwork for the GameStop short squeeze in January by investing in the video-game retailer back in 2019, and underscoring the company’s untapped potential in several letters to its bosses.
Casual investors buying meme stocks and cryptocurrencies are signing up for devastating losses, Michael Burry warned on Thursday.
“All hype/speculation is doing is drawing in retail before the mother of all crashes,” the investor tweeted. “When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries.”
Burry added that people’s fear of missing out has propelled asset prices to unsustainable levels. “#FOMO Parabolas don’t resolve sideways,” he cautioned.
The Scion Asset Management boss also sounded the alarm on crypto fans borrowing recklessly to buy their favorite coins.
“The problem with #Crypto, as in most things, is the leverage,” he tweeted. “If you don’t know how much leverage is in crypto, you don’t know anything about crypto.”
The Scion chief has attracted a cult following since he anticipated the housing-market crash that precipitated the global financial crisis. His billion-dollar bet against the bubble was chronicled in the book and the movie “The Big Short.”
Burry also helped pave the way for the GameStop short squeeze in January, which kicked off the meme-stock boom. He bought a stake in the video-game retailer in 2019 and wrote several letters to its board, emboldening retail investors to bet on the stock.
Michael Burry on Tuesday warned of the biggest market bubble in history, suggesting that his concerns about rampant speculation only grew during his 10-week hiatus from Twitter.
“People always ask me what is going on in the markets,” the investor tweeted. “It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude. #FlyingPigs360.”
The hashtag was likely a reference to a famous saying in investing: “Bulls make money, bears make money, but pigs get slaughtered.” Burry has repeatedly told investors that they’re being too greedy, speculating wildly, shouldering too much risk, and chasing unrealistic returns.
Burry is best known for his billion-dollar bet against the US housing bubble in the mid-2000s, which was immortalized in the book and the movie “The Big Short.” He also helped lay the groundwork for GameStop’s comeback this year, as he bought a stake in the video-game retailer in 2019 and wrote several letters to its board.
The investor, who has complained many times about his warnings being ignored, has “Cassandra” as his display name on Twitter, a reference to the priestess from Greek mythology who was cursed by the gods to share true prophecies but never to be believed.
Burry’s latest tweet echoed his other cautions. For example, he’s compared the hype around bitcoin, electric vehicles, and meme stocks to the dot-com and housing bubbles and said earlier this year that the stock market was “dancing on a knife’s edge.”
Michael Burry is betting against Elon Musk, one of the world’s richest and most powerful men, on two fronts. The contrarian investor didn’t just buy options that pay off if Tesla’s stock falls, he also backed one of SpaceX’s biggest rivals.
Burry’s Scion Asset Management revealed this week that it bought bearish put options against 800,100 Tesla shares last quarter. It also snapped up 462,000 shares in Vector Acquisition that were worth $5.5 million at the end of March.
Vector is a special-purpose acquisition company (SPAC) that struck a deal in March to buy Rocket Lab, a business that designs and manufactures rockets to carry satellites and other cargo into space. Rocket Lab’s flagship Electron rocket is second only to SpaceX’s Falcon 9 in annual launches, and the upstart is venturing further into Musk’s sphere by developing reusable and crewed rockets.
Burry might be genuinely bullish on Rocket Lab’s prospects, but it’s much more likely that he’s trolling Musk. The Scion chief is skeptical of SPACs, mostly invests in value stocks like Kraft Heinz, and probably isn’t on board with Rocket Lab’s targeted public valuation of $4.1 billion – an astounding four times its projected revenue in 2026.
The investor has also targeted Musk before. He announced he was short Tesla in December, and suggested Musk capitalize on the automaker’s “ridiculous” stock price by issuing more shares. He later compared the hype around Tesla to the dot-com and housing bubbles, telling shareholders to “enjoy it while it lasts.”
Burry also dismissed Tesla’s $1.5 billion purchase of bitcoin earlier this year as “digital confetti,” intended to distract from the company’s clash with Chinese regulators over car-quality issues.
The Scion boss shot to fame after his billion-dollar bet against the US housing bubble was featured in the book and the movie “The Big Short.” Burry also helped pave the way for the meme-stock boom earlier this year – his GameStop investment in 2019 and letters to the company’s board stoked enthusiasm among retail investors.
Michael Burry warned the post-pandemic reopening could cause inflation to spike as early as April last year – mere weeks after the first lockdowns in the US. His prediction was proven right this week by data showing consumer prices jumped 4.2% year-on-year last month, the sharpest increase in 11 years.
“When we start working and playing again, inflation may be in store,” the investor told Bloomberg for a story published on April 7 last year.
Burry is best known for anticipating the collapse of the US housing market in the mid-2000s, and making a billion-dollar bet on that outcome. That episode of his career was immortalized in the book and movie “The Big Short.” He also helped lay the groundwork for the meme-stock frenzy earlier this year by investing in GameStop and pushing for changes at the retailer back in 2019.
The Scion Asset Management chief ramped up his inflation warnings in February of this year. He cautioned that stimulus checks, the Federal Reserve’s continued pumping of liquidity into markets, and the reopening of large parts of the economy were likely to drive prices higher.
“Prepare for #inflation,” Burry tweeted on February 19. “#Inflation pressure building. The Fed is monetizing $80 billion of Treasury debt per month, and now comes $Trillions in stimulus/debt + reopening,” he tweeted four days later.
Burry highlighted America’s inflation woes in the 1970s, as well as Weimar Germany’s hyperinflation in the 1920s, as cautionary tales about the risks of soaring prices. He also flagged Warren Buffett’s description of inflation as a “tax on capital,” as it discourages companies from investing by reducing their real returns, and acts as an implicit tax on investors by eating into their purchasing power.
The Scion chief’s takeaway was that profitable companies shine during inflationary periods.
“Each $ of earnings today becomes important,” he tweeted on February 23. “Earnings 10 and 20 years from now, the corollary goes, may be worth substantially less tomorrow’s today.”
Burry didn’t only raise the alarm on inflation. He also warned the stock market was “dancing on a knife’s edge” in February, and called out Tesla, GameStop, bitcoin, and Robinhood as examples of dangerous speculation in markets.