The “Big Short” Guy Warns of the “Mother of All Crashes”

BlackBerry stock could still be a reasonable addition to your portfolio, despite the warning of a major market crash predicted by Michael Burry.

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Caution, careful

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It is no secret that the rise of meme stocks and cryptocurrencies has had a significant impact on the economy in recent months. All the attention that these assets are getting might lead to significant and devastating losses for investors. At least, that is what Michael Burry has to say about the situation.

Michael Burry is better known for being the guy who made a billion-dollar bet against the housing market bubble that caused the 2008 market crash. The head of Scion Asset Management rose to fame for his prediction of the crash and has garnered a cult-like following. He has very strong opinions regarding the current situation in the markets. I will discuss his warnings of a major market crash and a stock you could still consider, despite the warning.

Setting up for devastating losses

Casual investors and retail investors led a change in the investing landscape, as they began pouring money into cryptocurrencies and meme stocks earlier this year. With an increasing number of people investing in these alternative assets and meme stocks, speculation has led to these assets approaching unbelievably high valuations.

Michael Burry tweeted, “When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries.”

He also added that the people’s fear of missing out on profits has propelled the prices for these assets to unsustainable levels. Many cryptocurrency bulls are borrowing a lot of money to buy their favourite cryptocurrencies, making matters worse.

The sheer and inherent volatility of these assets that do not have any fundamentals backing their values makes them high-risk investments. If a significant crash comes, retail investors could be in for unimaginable losses.

A meme stock that could still be a buy

BlackBerry (TSX:BB)(NYSE:BB) stock is one of the meme stocks propelled by retail investors banding together on Reddit communities to pull off short-squeeze maneuvers this year. Unlike cryptocurrencies and other meme stocks, however, BlackBerry stock might not be too bad an investment to consider if you are looking for a long-term buy-and-hold asset.

BlackBerry was once the iconic smartphone brand that was ousted by the emergence of Android and iOS phones. The company could not compete with the new players in the industry and faded out of the limelight. BlackBerry then shifted its focus to autonomous vehicles, the Internet of Things (IoT), and other products and services.

The autonomous vehicle market still requires a few years to become substantial, and IoT has yet to gain significant traction, but both offer promising potential for the company. The company’s most recent quarter that ended earlier this month saw it report a loss of US$0.11 per share. While the company’s losses were lower than anticipated, its 77% year-to-date gains are not justified.

Foolish takeaway

Despite the negative news surrounding BlackBerry, the stock could prove to be a good long-term investment. The meme stock rally has led to inexplicable gains for the former smartphone manufacturing giant. However, it may still be a good buy for long-term investors considering its work on autonomous vehicles and IoT position it well for the future.

Whether or not you believe that Michael Burry is right, it might be a wise idea to watch BlackBerry stock from the sidelines for now and wait for it to go down to a more attractive valuation before adding it to your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry.

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