Michael Burry says the US raid on Venezuela is a much bigger deal than the markets’ muted reaction suggests.
The investor of “The Big Short” fame, who recently pivoted from running a hedge fund to writing on Substack, published a post early Monday saying the “game just changed” in the mid to long term, and “markets are not pricing in all that may come of this weekend’s events.”
“This is a paradigm shift despite the markets yawning,” he later wrote on X.
Benchmark oil prices climbed less than 1% on Monday, and US stock futures opened higher, after the US captured President Nicolás Maduro over the weekend and President Trump said America would “run” the oil-rich country for the time being.
The seizure was a “shot across China’s bow,” Burry wrote, pointing to billions of dollars in loans that China has made to Venezuela under its Belt and Road Initiative (BRI), which were collateralized using future oil output that is “now in US hands.”
The investor, who shot to fame after his prescient bet against the mid-2000s housing bubble was featured in the book and movie “The Big Short,” wrote that China may now have a “blueprint” for how to take control of Taiwan, but “must be in awe of Trumpian America’s infuriating gall and decisive power.”
Burry said that China stocks strike him as “somewhat riskier” now in terms of running afoul of sanctions. He wrote that Alibaba, Baidu, and other potential sanction targets “could be in for some volatility” if China escalates its aggression in the South China Sea or targets Taiwan.
The contrarian bargain hunter also wrote that “Putin’s jaw has to be on the floor” after the US did in “practically seconds” what Russia has been trying to do in Ukraine for three years.
He added that Russian oil “just became less important” in the mid to long term, as tapping Venezuelan oil could strengthen the US and “reduce Russia’s income and power.”
Burry also suggested that Canada and Mexico could “lose a good amount of leverage” in trade with the US if American refineries switch out Canadian crude for Venezuelan oil.
The veteran investor also said US oil-services companies such as Halliburton, Schlumberger, and Baker Hughes “should benefit significantly” as US contractors will be tasked with fixing and modernizing Venezuela’s pipelines and refineries.
Burry also forecast a “long term tailwind” for the US as inflows of Venezuelan oil will mean gas, diesel, and jet fuel prices will drop. He said that could push down prices to the benefit of consumers, especially lower-income ones, cut supply chain costs, and ease some uncertainty about the future for business owners.
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