Michael Burry: How a stock can fall from $100 to $5 and still deliver a 6x return

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Watching a banal you ain autumn by fractional tin marque you privation to panic-sell oregon commune the terms returns to your introduction constituent truthful you tin exit. But Michael Burry, made celebrated by the movie The Big Short, utilized a June Substack station to reason that selling is the incorrect determination (1).

He wrote that erstwhile you're heavy underwater connected a stock, it doesn't substance however overmuch you paid for the stock. The lone fig that counts is the stock's existent price, due to the fact that that's wherever your adjacent summation oregon nonaccomplishment volition beryllium measured from.

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Burry, who is known for predicting the U.S. lodging crash, has spent the past twelvemonth informing that the marketplace appears to beryllium a bubble, driven by AI names similar Nvidia and Palantir. As a result, helium closed his fund, Scion Asset Management, successful November 2025 (2) to absorption connected his paid Substack, Cassandra Unchained (3).

So, penning an nonfiction astir encouraging a holding pattern, from a antheral known for betting against things, people stands out.

How a banal down 90% inactive pays off

Burry walked done an example.

Say a banal falls from $100 to $10 and the concern is inactive really worthy $30. Then a worth capitalist buys astatine that $10, but past it keeps falling each the mode to $5 — a 50% nonaccomplishment for this investor.

Almost everyone sells close there, but Burry says you don't person to. Years later, the banal is backmost astatine $30. Measured from that $5 low, Burry called it "a six times instrumentality successful 10 years" — astir 20% a twelvemonth (1). Even from the investor's $10 acquisition price, it's inactive a triple.

"What I picture present is astir precisely WBD," Burry wrote (1), naming Warner Bros. Discovery [NASDAQ:WSD]. The recovery, helium added, didn't instrumentality a decennary — these things usually don't.

Burry's constituent is that erstwhile you're underwater, the lone terms that matters is the 1 you could merchantability oregon bargain astatine now.

"That is the terms from which immoderate aboriginal instrumentality volition come," helium wrote (1).

If you person the patience to hold retired the recovery, the upside tin spell to the capitalist who held connected erstwhile everyone other gave up. Burry says that selling conscionable to enactment a achy presumption down you is usually the incorrect telephone successful the agelong run.