Additional Coverage:
- ‘Big Short’ investor Michael Burry says markets are missing a trick as the Venezuela raid just ‘changed the game’ (businessinsider.com)
“Big Short” Investor Michael Burry Warns Markets Underestimating Venezuela Takeover Impact
Financial luminary Michael Burry, famously known for his foresight in “The Big Short,” is sounding the alarm, asserting that current market reactions are failing to grasp the profound, long-term implications of the recent US intervention in Venezuela.
Burry, who has transitioned from managing a hedge fund to sharing his insights on Substack, declared early Monday that “the game just changed” for global energy dynamics. He emphasized that “markets are not pricing in all that may come of this weekend’s events,” a sentiment he reiterated on X, stating, “This is a paradigm shift despite the markets yawning.”
The investor’s pronouncements come as benchmark oil prices saw only a modest climb of less than 1% on Monday, and US stock futures opened higher. This subdued market response followed the weekend’s events where the US reportedly captured President Nicolás Maduro, with President Trump announcing that America would temporarily “run” the oil-rich nation.
Burry views the seizure as a “shot across China’s bow,” highlighting the billions of dollars China has loaned to Venezuela under its Belt and Road Initiative (BRI). These loans were collateralized by future oil output, which Burry notes is “now in US hands.”
The investor, celebrated for his accurate bet against the mid-2000s housing bubble, suggested that China might now have a “blueprint” for a potential takeover of Taiwan. However, he posited that China “must be in awe of Trumpian America’s infuriating gall and decisive power.” Consequently, Burry believes Chinese stocks appear “somewhat riskier” due to potential sanctions, with companies like Alibaba and Baidu facing “some volatility” if China escalates aggression in the South China Sea or targets Taiwan.
Beyond China, Burry also commented on Russia’s position, stating that “Putin’s jaw has to be on the floor” after the US achieved in “practically seconds” what Russia has pursued in Ukraine for three years. He believes Russian oil has “just became less important” in the mid to long term, as access to Venezuelan oil could bolster the US and “reduce Russia’s income and power.”
Furthermore, Burry suggested that Canada and Mexico could “lose a good amount of leverage” in trade with the US if American refineries opt to switch from Canadian crude to Venezuelan oil.
Looking at potential beneficiaries, the veteran investor pointed to US oil-services companies such as Halliburton, Schlumberger, and Baker Hughes, predicting they “should benefit significantly.” He anticipates these US contractors will be tasked with repairing and modernizing Venezuela’s extensive pipelines and refineries.
Finally, Burry forecast a “long term tailwind” for the US economy. He expects inflows of Venezuelan oil to drive down prices for gas, diesel, and jet fuel. This could lead to reduced prices for consumers, particularly those with lower incomes, cut supply chain costs, and alleviate some uncertainty for business owners regarding future economic conditions.