'Big Short' Burry Sold All Stocks and Bought Only Prison Companies... Why?

Burry Issues Repeated 'Economic Recession' Warnings
Appears to Have Sold All Stocks Expecting Market Decline
US Correctional Facility Industry Worth 13 Trillion Won

Michael Burry, the protagonist of "The Big Short," who gained fame for accurately predicting the 2008 global financial crisis, has sold all his stocks but was found to have purchased shares of GEO Group, a private prison company. The photo is not related to the specific content of the article. [Image source=Pixabay]

[Asia Economy Reporter Yoon Seul-gi] Michael Burry, the protagonist of 'The Big Short' who gained great fame by accurately predicting the 2008 global financial crisis and investing during the economic downturn, sold all the stocks he held in the second quarter but was found to have purchased shares of GEO Group. GEO Group is a private prison and mental health facility operator, considered a beneficiary during the Trump administration.

According to the investment report (13F) recently disclosed to the U.S. Securities and Exchange Commission (SEC), Scion Asset Management, led by Burry, sold all shares of 11 stocks held as of the end of the second quarter this year, including Meta Platforms (Facebook), Alphabet A, Warner Bros. Discovery, Global Payments, and Bristol-Myers Squibb.

As of the end of the first quarter, Scion Asset Management held stocks worth a total of $165 million (approximately 216 billion KRW), but it appears that Burry sold all stocks anticipating a further decline in the U.S. stock market.

However, Burry purchased $3.3 million (approximately 4.3 billion KRW) worth of GEO Group shares. Previously, Burry had repeatedly bought and sold GEO Group shares over the past two years. Following the news of Burry's purchase, GEO Group's stock price surged 10.63% to close at $7.60 on the 15th. Burry reportedly refrained from commenting on this sale and purchase.

Former U.S. President Donald Trump. [Image source=Yonhap News]

GEO Group is a private prison company operating in 18 U.S. states as well as in the United Kingdom, Australia, South Africa, and five other countries, totaling eight countries. Under contracts, it operates government-owned facilities and provides detention centers for illegal immigrants.

The private prison industry was considered a beneficiary during former U.S. President Donald Trump's administration. This was because Trump repealed the phased reduction policy of private prisons initiated by former President Barack Obama. Additionally, the demand for detention facilities increased due to stricter illegal immigration enforcement at the time.

According to U.S. market research firm IBISWorld, the U.S. correctional facilities industry grew at an average annual rate of 3.5% between 2017 and 2022, with a market size of $10.4 billion (approximately 13.6 trillion KRW). IBISWorld analyzed the correctional facilities industry as "dependent on crime rates or incarceration rates," noting that "growth opportunities mainly exist in the form of immigrant detention and re-entry facilities." However, it pointed out that since political influence is significant, if public opinion toward private prisons worsens and related government policies change, profitability could deteriorate.

Michael Burry, the protagonist of 'The Big Short,' who gained fame for accurately predicting the 2008 global financial crisis, has sold all his stocks but was found to have purchased shares of GEO Group, a private prison company.
[Image source=Yonhap News]

Meanwhile, Burry is known for predicting the mortgage crisis ahead of the 2008 financial crisis and betting on the crash, earning astronomical profits. Recently, he expressed concerns about an economic recession through his social media, and analysts suggest that his recent stock sales reflect a pessimistic outlook on the stock market.

In fact, on the 5th, Burry wrote on his Twitter, "Global supply chain bottlenecks, onshoring (return of production bases to home countries), blue-collar labor shortages, and the restructuring of global supply chains will cause long-term inflation." On the 12th, he warned, "Winter is coming," adding, "Consumers are facing inflation and instead of cutting spending, they are aggressively increasing borrowing, causing credit balances to rise sharply."