I definitely think that he thinks he's smarter than the market and sees bubbles everywhere, and I also definitely think that there's a gigantic AI bubble, or at least extreme 'frothiness' with all this circular investing to prop stock prices up.

Actually turning a bubble into money is another question entirely, however, especially since he himself popularized shouting the emperor has no clothes at every turn. When the market will believe someone is a different story.

Eisman, Burry and Paulson all got their brain broken by that.

With Burry I think the redeeming part is that he is mostly, AFAIK, running his own capital since that time so there's no point criticizing him for his weird picks.

Paulson spent the last decade burning investor capital using the reputation, good for him I guess.

Eisman didn't do so well the last decade either, but at least his Youtube / podcast is light years ahead of the garbage that rich VCs are doing in terms of education.

Right. He also went long on Lulu Lemon. Where’s the undervaluation thesis on yoga pants?

I am interested in quantitative / probabilistic analysis on your thesis. Where should I go look?

Yes, but I haven't seen anything from AI technology to suggest it's going to live up to the hype in the short term. I'm not saying Burry is completely accurate in this case, but the draw down could be quite big.

GPT-4 was released in early 2023. Back then AI maximalists were saying AGI is near. We're approaching early 2026 and we obviously aren't anywhere close to anything any reasonable person would consider AGI. But what do we have? "Agents" that are mostly useless. Image and video clip content generators that are pretty much only good for social media memes and spam. We do have better software development tools, but that's not a life changing advancement.

It seems like in order for all this speculation and all these massive build-outs to pay off we're going to need AI to redefine how we work and live within the next 3-5 years. Even if we AI development doubles or triples what it's been able to do in the last 3-5 years, I don't see this happening.

So, when this does not happen, when the AI hype does not live up to the promises, by a longshot, what will happen to the markets?

> His track record since “the big short” has been horrific.

Has it? I couldn't find the returns for his fund. Since you have them can you post them and highlight what about them are horrific?

> His track record since “the big short” has been horrific.

You would expect that with low probability, highly leveraged bets, which shorts largely are. You are wrong most of the time and then make a giant pile of money when you are right. People definitely should understand that strategy though and not just follow him blindly into investments without the expectation that you will probably lose your money almost every time.

A crisis is when money flow stops in the market. In The Big Short, he bet on the fact that cash flow would stop, and they won. The stock market works in a similar way to a company’s cash flow. When money is pumped into a stock, its value increases; when money is pulled out, the value drops.

The news is essentially about making a bet, as the title suggests, with no real evidence or information on who will pull the money out or how it will happen. Just because the price is high doesn’t necessarily mean there will be an outflow. It’s more like gambling, based on speculation rather than solid facts.

There's no way he gets margin called, these surely are puts, not pure stock shorting. This isn't some random guy.

These are puts, you buy them, they have a fixed expiration date at which point they will be worthless if the price is above the strike price.

Fixed down side, upside is $100 per contract per dollar the stock is below the strike at expiry. You can also sell them before then, and price depends on time to expiry, volatility, and distance to the strike price. See Black-Scholes model for more info.

You can make a lot of money on options even if the price doesn't collapse completely. Options dramatically amplify movements of the underlying price. Even if the market swoons a little bit, he can cash out for a big profit, as long as it happens before his positions expire, even if it doesn't hit his strike price.

Hence the famous warning: “the market can remain irrational much longer than you can remain solvent ”

You are right about timing being key when buying put options but...

> Or you could end up getting margin called

Completely false

Buying puts is a short position and does not require any further maintenance costs

Yes, theta decay is a thing but stating you can get margin called or there is any level of maintenance required is completely wrong and shows a total lack of understanding of the very basics of options

Come on, Karp is such a nice guy:

“I love the idea of getting a drone and having light fentanyl-laced urine spraying on analysts that tried to screw us,” he said during a talk in New York to promote his new book in February."

https://www.ft.com/content/64a2345e-3961-4d5d-ae04-82d933fa5...

Personally I find the reporting of underlying value more useful than the price paid in puts, since it reflects the asset itself rather than an arbitrary price for an option that could be any of many different strikes or expirations. The option price itself is not that meaningful.

This kind of thing happens with investors... they work their butt off for years, do well, then think it's them rather than the work.

This is a correct and at the same time rather misleading article. Sure, in principle it would be prudent to investigate literally everything every time. And he makes it sounds like not doing so makes a person literally 100% useless and dysfunctional. But he "forgets" to mention that investigation is non-free. And depending on the topic, the amount of such investigations and the length of each one can vary dramatically. Up to the point where whole life and all of the resources could be spent doing it.

Heuristics That Almost Always Work have a helpful hint right there in the name. They do work, and they do it almost every time. And depending on the topic that 99.99% may be even 100%, but we just can't reliably prove it. Stuff that works 99.99% of the time is very valuable and helps humans free resources and time for the less reliable or more severe problems. Or just for leisure. Personally, I invite author to go disprove every single idea on the internet and do it in careful and deep detail, let's see how long he would last without heuristics. :)

They're basically IBM + Oracle but sexy because tech is different this time around for some reason?

They are of the industry formerly known as “Big Data” or “data science.”

They think hard about how to collect and make use of, what most would describe as, grains of sand.

A common use case for their data is figuring out for a government who they should kill that week.

In East Germany, the Stasi had 90,000 full-time staff deciphering reports from maybe 400,000 regular informants and around 1/6th of the population as occasional informants. They used this to run a totalitarian surveillance state which abducted 250,000 supposed dissidents.

This is a horrendously inefficient system. 90,000? 400,000? In a population of 16 million? The expense! The time! The sensitivity to data irregularities! The friction which the non-dissidents must feel! This is a worse imposition than an occupying army. How many of those 250,000 were actually conspiring against the state in a meaningfully threatening way? 1/10th? 1/100th? How many actual dissidents make it through the sieve, because the security service was unable to cross-reference suspicious entries on three pages in files occupying different filing cabinets in different buildings in the complex?

The US, despite its military might, rapidly hit a manpower limit in the occupation of Afghanistan & Iraq, and was largely unable to effectively fight a collection of counterinsurgencies and "sympathizers".

In the 2020's we have much greater capability to surveil. We have electronics tracking everything, we have phones that listen all the time, we have cameras at every streetcorner, data brokers know more about us than our diary does. But manually checking these things in untargeted surveillance would be almost impossible. It would take our entire population spying on ourselves.

Enter Palantir. Proposition: "We would like to explore if we could make this possible & efficient, using modern database & machine learning techniques. We will collect, categorize, transcribe and cross-reference all the data, of every type, we will generate suspicious activity reports autonomously, we will make follow-up trivial".

This was literally George Orwell's nightmare in 1984 - that looking back at the long history of repression and rebellion, the cycle of violence and freedom, of authority and abuse of authority, that perhaps at some point, eventually, technology gives so much power to the authority that it's simply impossible to overthrow them.

He's not clearly right on Nvidia. People have been saying "it's clearly overvalued" for years now. And it just keeps growing at an insane pace and quite frankly their position in the market isn't really being eroded by anyone. There are hopes and dreams, but little real competition.

Expenses can be reduced too. It's not solely about earnings growth.

If a company has 1 billion in revenue and 999 million in costs, they are doing 1 million in earnings. It's trivially easy for them to grow earnings 30x, they can just decide to do it in most cases.

You have to look at the cost structure now v what it should be in a "steady state" situation, perhaps 10 years out.

This math doesn't always hold up to common sense, as these ratios will explode when E hovers around zero, but it has a very small effect on the business itself.