Dear Fellow Investor,
Good morning. Happy Saturday!
I hope you’re getting a slower morning than the market gave us this week.
But first, let’s talk about Michael Burry — one more time.
Last Friday, I told you why I wasn’t going short Micron.
I agreed with Burry on the fundamentals.
Memory is a commodity business.
China is adding capacity.
Prices will come down eventually.
I just didn’t know when.
I told you about Larry Tisch, who lost $2 billion shorting the market from 1996 to 2000 because he was right on the facts and wrong on the timing.
And then I said this:
“If I were going to make a play here, it would be long-dated puts on Micron — not an outright short.”
Three days later, Michael Burry did exactly that.
What Burry Changed
On Monday, September 28th, Burry told his newsletter subscribers he had traded in his Micron short.
In its place, he bought put options.
They expire in June 2027, with strike prices around $500.
He did the same thing with his short positions in Nvidia and Palantir.
Now, I’m not going to pretend Burry reads my letter.
He doesn’t need to.
Anyone who does this long enough learns the same lesson eventually — usually the expensive way.
If you’re like most people, you’re probably asking: what’s the actual difference between a short and a put?
Fair question. Let’s dig in.
Why Puts Instead of a Short
When you short a stock, you borrow shares, sell them, and hope to buy them back cheaper later.
If the stock goes up instead, your losses have no ceiling.
That’s what got Larry Tisch.
A put is different.
It’s a contract that pays off if a stock falls below a certain price by a certain date.
If you’re wrong, the most you can lose is what you paid for it.
That’s it.
You still have a timing problem — the clock runs out in June 2027.
But you’ve put a fence around how much the crowd can hurt you while you wait.
Burry didn’t change his mind about Micron.
He changed how much being early could cost him.
That’s a very smart move.
The Best Quarter Ever — and a Shrug
Two days after Burry made his switch, Micron reported earnings.
And they were enormous.
Revenue came in at $54.23 billion for the quarter.
A year ago, the same quarter brought in $11.32 billion.
Earnings were $33.42 a share, beating the $31.16 Wall Street expected.
Gross margins were 86.8%.
And Micron told investors to expect about $61.5 billion next quarter.
For a memory company, those numbers are unheard of.
So what did the stock do?
Almost nothing.
Micron closed that day at $1,066.10, up 0.1%.
After hours, it barely budged.
When a company posts the best quarter in its history and the stock shrugs, the market is telling you something.
It already knows how good things are.
What it’s starting to wonder is how long it lasts.
That’s the exact question Burry is betting on.
Where the Timing Gets Tricky
Here’s the part I’d keep an eye on.
Micron’s new factory in Idaho isn’t expected to add meaningful supply until late 2027 or 2028.
Burry’s puts expire in June 2027.
And Jim Cramer went on TV this week to say anyone shorting Micron is “digging your own grave.”
So you have record profits, tight supply, and a loud crowd on the other side of the trade.
I’ve watched this movie too many times.
The cycle will turn. It always does.
But the crowd can keep the party going a lot longer than anyone expects.
That’s why I still won’t short it.
Follow the Bottleneck
Here’s the bigger lesson in all of this.
Memory chips are something a lot of companies can make.
When supply catches up, prices fall.
The money that lasts in a boom goes somewhere else.
It goes to whatever everyone has to go through.
The bottleneck.
Morgan Stanley said something this week that I thought was important.
The bottleneck in AI is shifting away from chip production.
It’s moving to data center land, power, and financing.
Look at Elon Musk.
His AI company plans to switch on about 420,000 Nvidia GPUs at Colossus, his supercomputer in Memphis, in November.
It’s already renting out some of that horsepower to Anthropic, a direct rival.
That’s not a business China can copy by building another memory factory.
And from what I’ve found, Colossus depends on one company Wall Street has overlooked.
I’ve put together the full story on who it is and why it matters so much.
Have a wonderful weekend.
I’ll see you Tuesday.
“The Buck Stops Here,”
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Written by Dylan Jovine