Burry has submitted a tweet recently, that had the community speculating on if there are some tickers within the tweet to decode. The tickers found if looking at only capital letters in the tweet was: PIGS, BATA, TBF. What we were left over with was P360.
"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
Trying to search PIGS and BATA will yield undesirable results. However, if you add an X at the end of both tickers, what you get are two BlackRock funds: PIGSX, holds National Mortgage Association and a lengthy list of Treasury Notes and BATAX, is composed mostly of Domestic Bonds but also as a portion of Foreign Stocks and Bonds. Both of which are Fixed Income Funds.
Reading through PIGSX risks in their prospectus is highly informative, here are some interesting bullets:
Interest Rate Risk -...interest rates increase by 1%, assuming a current portfolio duration of ten years, and all other factors being equal, the value of the Fund’s investments would be expected to decrease by 10%. The magnitude of these fluctuations in the market price of bonds and other fixed-income securities is generally greater for those securities with longer maturities... The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by Fund management....
How does this fit into the current narrative? It's generally believed that interest rates will need to rise sooner than originally predicted. Even the Fed has lowered down the estimates and I suspect that estimate is going to continue to lower as inflationary concerns rise. The more dramatic the interest rate goes up, the more negatively this Fund will be impacted.
Reverse Repo Risk - ..Reverse repurchase agreements involve the risk that the other party may fail to return the securities in a timely manner or at all. The Fund could lose money if it is unable to recover the securities and the value of the collateral held by the Fund, including the value of the investments made with cash collateral, is less than the value of the securities...
How does this fit into the current narrative? Repo rates don't look like they will be declining anytime soon.
Turnover Risk - ...A general rise in interest rates has the potential to cause investors to move out of fixed-income securities on a large scale, which may increase redemption from funds that hold large amounts of fixed-income securities. Heavy redemption could cause the Fund to sell assets at inopportune times or at a loss or depressed value and could hurt the Fund’s performance...
How does this fit into the current narrative? Not only would interest rates impact the value of the fund, but the fund could lose a number of clients, causing a sell-off at inopportune times causing more damage to the fund.
Emerging Markets Risk — Emerging markets are riskier than more developed markets because they tend to develop unevenly and may never fully develop. Investments in emerging markets may be considered speculative. Emerging markets are more likely to experience hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging securities markets have far lower trading volumes and less liquidity than developed markets.
How does this fit into the current narrative? This is actually interesting because it poses inflationary risks are in emerging markets. But, those problems are also domestic as well. If inflation were to rise, the value of the fund (being debt) would inflate the value away. Compound that with an interest rate hike and that might cause a number of clients to exit. Oh, by the way, did I mention that they list that they are not inflation-indexed either?
As for BATAX (prospectus), it suffers from similar risks but in different ways. Being as that there is no inflation protection within the bonds, the bonds can be inflated away in value. In this case, instead of government bonds, they are mostly corporate bonds. It's worth mentioning that both Funds appear to use leverage.
TBF is a ProShare Short 20+ Year treasury. Sound familiar? In his last 13F, Burry shorted TLT and went long on TBT (2x leveraged reverse ETF that shorts 20y treasuries).
The question came up how to trade on this information. Well, that's a little more nuanced to answer. You don't have to trade on this. Just be cautious moving forward. I can give you my thoughts about how I might play this, once convicted. I do suspect that inflation will go beyond estimates this year and certainly watching Jerome talk to the public didn't abate that. One nice thing about Burry is that A. He's a really strong predictor for Bearish black swan events and B. He is usually very early. Perhaps his 13F drop on August 15th will help us understand if any of this conspiracy is true.
In the meantime, I'll be watching closely over inflation data and continuing the research companies that are preparing for inflation: P&G, Colgate-Palmolive, Coca Cola, KHC and other consumer defensive already have news articles regarding current and future price hikes which should be represented nicely in the monthly CPI reports. Bruce Greenwald (article), Columbia Business Value Investing Professor whom has written a book on demystifying competition, says that we have not even begun to see companies ability to demonstrate pricing power. A pattern I'm seeing amongst the news is that things seem to be coming together in the Oct/Sept time frame (fall). It's interesting that it lines up with the next FOMC update, however Powell has made mention that they plan on letting the public know immediately if a rate hike is going to happen.
Burry has already made mention that the Fed was correct in saying "If inflation goes too far above 2%, or for too long, people will become very fearful and inflation will become a self-fulfilling prophecy." I think the Fed is trying to appear so calm and confident that people will interpret that as "nothing to worry about it" until some data lands that slaps their paradigm in the face... then the subsequent panic... and dominoes of panic all fall down.
Burry's current rhetoric indicates that we are in a Bubble, fueled by historically high Margin Debt and insanely leveraged speculation such as with BTC and even with family-runned Funds. I think looking at the SP500 graph makes that pretty plausible... but the fact that he sites EV, Crypto and SaaS... I can absolutely see it.
As for the leftover P360, I'd love to know people's opinions. I was heading down the PPP 60% forgiveness path where the government had spent $349 billion and then an additional $310 billion in loans for small business Payroll in response to Covid. If this is true, it may just be an illustration of the all-time high spending that is going on, which includes things like QE, Government Spending, Discussions regarding Infrastructure, and so on.
Either way, it was an interesting rabbit hole to go down - even if it turns out not to be Burry's intention. Would like to thank the folks on the Discord for bringing up the tickers, spitballing with me and will add names for credit later, once desire is verified. This is definitely something worth keeping an eye on.
