Market bears Jeremy Grantham, Michael Burry clash with critics over track records

Bear-hunting season is in full swing, if the shots fired at Jeremy Grantham and Michael Burry are any indication.

Grantham, the cofounder of asset manager GMO and author of "The Making of a Permabear," told CNBC's "Squawk Box" on Friday that early investors in AI would "lose their shirts" just like they did in the railroad and internet booms, and tech stocks would eventually crash 70% or more.

He also dismissed bitcoin as a worthless speculation that would "dwindle away over time."

"You're gonna be totally wrong on bitcoin too?" Joe Kernen, the show's cohost, exclaimed. "You're gonna be wrong on everything you've covered."

Grantham has been sounding the alarm on a historic asset bubble and predicting a devastating crash for many years. Yet the benchmark S&P 500 stock index has more than tripled from its pandemic low to record highs of over 7,300 points today.

"Anybody that listened to you from 2010, you've done a grave disservice to them," Kernen said.

"Someday you might be right like a broken clock," he continued, adding that "this may be a huge bubble that we're in, but you've said it again and again and again."

Take a smarter break in your day - and see how far you get.

Grantham fired back, saying Kernen didn't know what he was talking about and disagreed that his track record was calling the market incorrectly year after year.

The heated spat quickly went viral in finance circles on X, dividing Grantham's defenders and AI skeptics from Kernen's supporters and bitcoin fans.

Omg, permabear Jeremy Grantham and Joe Kernen went AT IT on CNBC today.

Must watch TV.

Even got Jeremy to say bullshit on live tv lol.

But good on Joe for calling him out. pic.twitter.com/3jm6bIu7tq

When reached for comment by Business Insider, Kernen replied: "If the crash you're predicting from current levels doesn't get you down anywhere near the level where you first started predicting a crash, it's not very useful advice, is it?"

As for Burry, the investor of "The Big Short" fame, he's been busy defending the originality of the trade that made him famous. That was buying credit default swaps (CDS) — a form of insurance against default risk — to bet against subprime mortgage-backed securities (MBS) during the mid-2000s housing bubble.

After Burry posted to his nearly 2 million X followers on Friday about his "lone wolf" nature, one commenter replied that "Burry wasn't a lone wolf," arguing that scores of hedge funds had placed the same wager.

Burry replied that he created the specific trade and shared his idea with other market players, including John Paulson, Greg Lippmann, Peter Thiel, and Goldman Sachs.

I was the first and created the trade.
I sent people to teach Paulson. And I showed Greg Lippmann the trade. I showed Peter Thiel and others. I also showed Goldman exactly what I was doing when they asked me formally in late 2005. Of course Goldman and Greg at Deutsche sold the… https://t.co/B3Tm4Yfnbk

Several people backed up Burry's claim, including derivatives guru Janet Tavakoli, who called him a "pioneer" in targeting the most vulnerable subprime mortgages and "analyzing loan-level details when few others bothered."

Tavakoli also praised Burry for having "the conviction required to hold while CDO deal makers fudged accounting, ratings were bogus, and anyone speaking publicly was attacked."

Thank you Janet! Your books are how I learned about CDS. I owe you!

Notably, value investor Mohnish Pabrai said on a podcast in 2023 that Burry "tried hard to educate" him about his housing short before the bubble popped, but Pabrai was "too dumb to absorb his sage advice."

Burry, who for years has joined Grantham in banging the table about a dangerous asset bubble he says is destined to crash, pivoted from running a hedge fund to writing on Substack late last year.

Since then, he's warned the AI bubble will burst painfully, and clashed with Nvidia and Palantir after placing short bets against them.

Burry didn't immediately respond to a request for comment from Business Insider.

Kernen's strikingly harsh and public critique of Grantham somewhat echoes the blowback that Burry has faced in recent years. Elon Musk also called Burry a "broken clock" and poked at him for shorting Tesla a few years back, while Palantir CEO Alex Karp said in November that Burry's AI shorts were "batshit crazy."

A historic stock-market run seems to have emboldened bulls to open fire at bears and riddle their track records. Whether Burry and Grantham will ultimately be proven right is an open question.

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