It’s Time To Get Real
Long considered the “Oracle of Omaha,” Warren Buffett might have some competition. Michael Burry is the latest sage to be lauded for his ability to anticipate the markets. This week, he made waves when he tweeted, then quickly deleted, “You have no idea how short I am.”
Nobody has any idea what he is “short” on, but if his latest market moves are any indication, we have an idea of where his portfolio is headed.
Considered one of the most influential investors of his time, Michael Burry seems one step ahead of everyone else. He came to fame for predicting the housing collapse and profiting off the housing crash of 2008 by shorting subprime mortgages. He also made money shorting the tech bubble of 2021. He shorted Tesla (TSLA) and the ARK Innovation ETF (ARKK), among others. He also bought into the GameStop (GME) hype. He bought it in the single digits before the short squeeze. (seekingalpha.com)
Earlier this year, he made a lot of headlines after he sold the majority of his portfolio, including Meta (META), Bristol Myers (BMY), and Cigna (CI), and once again, his timing was impeccable as the market began to sell off soon after.
Although nobody is sure what assets or stock Burry is “short,” there’s a clear indication of what assets he is “long.”
‘The Big Short’ Michael Burry Buys Real Assets Hand Over Fist. –seekingalpha.com
It’s not a surprise that Burry is long on real assets. Ultra-net-worth investors have long relied on real assets to insulate their portfolios against potentially troubled waters. If you’ve been paying attention to the headlines during the past couple of years of high inflation, you’ll understand why Burry is long on real assets.
“Rents in US Rise at Fastest Pace Since 1986.” -bloomberg.com
“5 reasons why rents are rising at a record pace.” -multifamilydive.com
Investors can retreat in the face of inflation by cashing out their portfolios and sitting on their cash. However, this is neither an ideal nor wise strategy since inflation will eat away at the buying power of sidelined cash.
Inflation doesn’t have to be the enemy. As rising rents have shown, it can be an investor’s friend. Savvy investors have long leveraged inflation to their advantage by investing in assets tied to essential goods and services that keep pace with inflation. In an atmosphere of rising prices, the ideal assets will be tied to goods and services consumers will always need, no matter the price. These goods or services that can move in price with inflation without a drastic dip in demand are the assets you want in your portfolio during uncertain times.
Real assets fit into the class of essential goods and services – along with housing, food, energy, etc. – consumers need in any environment. Compared to luxury goods which are the first to go as consumers tighten their belts, consumers will always need places to live and work.
While real assets are best equipped to deal with economic downturns and rising prices, certain sectors thrive during downturns. For example, during the Great Recession, multifamily and affordable housing thrived. This makes sense since, as pocketbooks tighten, people will downsize to save money by resorting to multifamily and affordable options.
While certain real estate segments like office and retail tend to track with the broader economy in a recession, multifamily and affordable housing thrive, as the Great Recession and COVID demonstrated. In 2020, while most commercial real estate sectors saw increases in vacancies and declines in rents, multifamily and affordable housing, like manufactured homes, bucked the trend. They saw decreased vacancies and increased rents – with those two sectors rebounding quicker than any other sector.
Protect yourself from the coming economic storm. Don’t wait for the other shoe to drop before taking action.
It doesn’t look like Michael Burry is waiting around, either. It’s time to face reality and admit that tough times are ahead. It’s time to get real. Invest in real assets to cushion any future pain.
With 2023 around the corner, now is the time to prepare. 2023 doesn’t have to be hard times. You can make it great today by allocating assets that best protect and uphold your portfolio. Real assets fit the bill for ultra-wealthy investors, and they can do the same for you.