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I agree with Alex Karp, this is dumb to short these things.

When Burry shorted the mortgage market, he had the advantage of profound historical data, and he was shorting a very mature market. He could also observe some of the hedging behavior of other industry players and derive semi-reasonable conclusions therefrom.

When Fannie Mae and Freddie Mac abandoned the whole notion of “conventional” mortgages (which, boiled down, means 20% down payments and 33%(+/- small) debt coverage for borrowers there was little or no question that Fan and Freds’ historical sub-1% default rates would spike. How far? And how soon? Because shorting something early is remarkably just like being wrong, and his bets had inherent carrying costs, so the time required for “the crash” to play out was critical for him to assess.

So that was somewhat measurable, because he could see the “tapes” of lending institutions (an industry term that basically runs down the quality of borrowers in terms of their ability to service debt and LTVs which of course impact the quality of tranched loans) And he could see that loan quality was being aggressively corroded across the entire industry. He could also see that the conditions were “criminogenic” in that incentives were in place to write shakier and shakier and even illegal loans, practically without limit.

I was a beginning loan rep at the time, having gotten into the industry late, late late. I recall a rah-rah breakfast meeting that was held by Countrywide at a local hotel for loan reps. They were making sure that all the reps were acquainted with all their “products”. And I walked out of that meeting stunned....Basically, their 4 or 5 products were: product #1: conventional loan, we hate those. product #2: leave the following information off the loan app. product #3: leave even more information off the form. product #4: Do not include the borrowers soc sec number or income. product #5: Call your local manager and we will get him or her approved.

Now shorting NVDA and PLTR are an entirely different story. This AI is a brand new whiz-bang thing, clearly at the beginning of its uptake, nowhere near maturity, and the excitement is palpable. Yeah, it’s a bubble, but there are no other bubbles going on in the economy, and simple observation of these stocks reveals that the market absolutely cannot resist owning them. Nothing about these stocks in terms of how the market values them is measurable. You short something just because your spidey sense say ‘the price is too high” and you’ll almost always get scorched.