It’s Not the Money You Make

Talk about a one-hit wonder…

Michael Burry, the trader famous for shorting the housing market starting in 2005, is giving us a great lesson on risk management. I could not be happier to let him show us just how badly someone can manage a trade.

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The Big Picture

First, well done to Michael Burry during the financial crisis. He made something like $700M profits for his hedge fund, including $100M for himself.

Listen, I’ve never made that kind of money trading, okay?

But that was like 15 years ago. That dude, for 15 years, can’t fall out of a boat and hit water.

Now, I’ve made fun of him for years, but have you heard about his lululemon athletica inc. (NASDAQ: LULU) trade?

He bought LULU at $240 a share in Q2 2025. Then he doubled down on LULU in Q3 2025.

Apparently he aggressively added shares earlier this year at $127, although there’s no 13F filing because he de-registered his hedge fund.

On Friday (Sept. 4) Burry said he still owns the shares and could add to his position if the stock fell below $100.

Guess what happened when LULU reported earnings? It dropped to $96 overnight…

Think About It Like a Penny Stock

Just as a thought experiment…

If this was a penny stock and you bought it at $2.40, would you ever hold all the way to $0.96?

Even if you made that terrible decision to hold from $2.40 to $0.96, would you add at $0.96?

Now, what are our rules?

You would make a trade plan before you bought the stock. You’d know:

• Your entry
• Your risk
• Your target

In what universe would you hold a -60% losing trade and then ADD to your position?

There’s an old quote you might’ve heard before…

It’s Not the Money You Make, It’s the Money You Keep

There are variations of this going back through time. Maybe the closest is an old English proverb:

“It is not what a man makes, but what he saves, that makes him rich.”

I can tell you straight up that buying the dip at $240, doubling down, and then aggressively adding to your position at $127 is a bad idea. Don’t even get me started on throwing more in the bag under $100.

My Take

Congrats to him for making $700M+ shorting the housing market 20 years ago.

The reason I’m talking about this is because it happens to people all the time.

They make a lot of money and get overconfident, okay? Because of that overconfidence, it’s all gone and then some.

Has he lost everything? Probably not. But there’s no denying this is a poorly managed trade. Yoga pants, anyone?

Watchlist

Today’s stock is more of a swing trade or even an investment idea.

Tomorrow (Sept. 9), Apple Inc. (NASDAQ: AAPL) is hosting a special event called Surprise and shine. It’s where the company announces a bunch of new products.

Now, everyone talks about the iPhone because that’s what a majority of people care about.

But what I’m most excited about is these new Mac Studio and Mac Minis. They’re all on pre-order and the prices are through the stratosphere. Why? They’re great for running AI models.

Also, I love this new CEO. Now, Tim Cook was an amazing manager. You look at the market cap, it’s hard to say anything against him. But one thing I will say is, with innovation, he wasn’t the guy.

Now, I think John Ternus is going to bring back massive innovation from Apple. So, if you can’t tell, I love this stock for the next months, years, and even decades.

On My Radar

• The August jobs report came in hot
• Are capacitors the next big AI infrastructure trade? (Lesson: always look beyond the obvious for trade opportunities)
• Reminder my colleague Ben Sturgill’s free 2-day bootcamp starts 1 week from today