Bubble Watch, Part 3: No, the U.S. stock market isn’t “giving Enron vibes”
Owenomics 4 min
December 2025
Bubble Watch, Part 4: So you think there’s a bubble
What should you do if you think that the U.S. stock market is in a bubble? Michael Burry, of The Big Short fame, recently bought puts on leading AI firms.[1] Is that a good idea? Well, that depends on whether the alleged bubble bursts before his puts expire. If the bubble bursts quickly, Burry wins. If it bursts slowly, or continues to inflate, Burry loses. So Burry’s not just betting that there’s a bubble, he’s betting on how fast it bursts.
Traditionally, there are two main approaches to trading a bubble: go short (like Burry) or go long (George Soros: “When I see a bubble forming, I rush in to buy, adding fuel to the fire. This is not irrational.”) But, if you have an entrepreneurial bent, there’s a third approach: quit your job and start a new firm, with the goal of going public in the next 18 months.
For example, suppose that in February 1999, you correctly believed that internet stocks were wildly overvalued. Consider the following three approaches:
- Short internet stocks. Terrible idea, because the Nasdaq composite subsequently doubled.
- Buy at-the-money puts on internet stocks, with expiration date August 2000. Better than (A), but sadly, these puts would have expired worthless.
- Set up a new internet firm. That’s what the founders of Pets.com did, incorporating in February 1999 and going public in February 2000. The insiders were allowed to sell their shares six months later, in August 2000.
An IPO is a great way to exploit crazy high prices, because once the IPO is completed and the lockup period has passed, you can sell your shares. If you believe that we’re in a bubble that won’t collapse in the next 18 months, or if you believe that we’re not currently in a bubble but we will be in 18 months, an IPO might be the way to go.
Where do IPOs fit in the framework of going long versus going short? Both going short and going public have the mechanical effect of increasing the supply of shares available to buy; issuance is a substitute for short selling as argued by Lamont (2004). However, if the bubble bursts before you go public, your efforts will be wasted. So the Burry approach and the IPO approach have differing outcomes depending on the path of prices over the coming months.
Ideally, your IPO will be a good idea, and you’ll become the next Jeff Bezos. If you don’t have a good idea, do not despair; a bad idea that appeals to retail investors will also suffice. Don’t worry about products, revenue, or track record; in a stock market bubble, these are “nice-to-have” not “must-have.”
Here's one possible timeline for you to obtain generational wealth in just 18 months:
December 2025. Incorporate your new firm.
January 2026. Hire a CEO. I’d suggest a Silicon Valley resident with a penchant for making outrageous statements about religion, politics, and sexuality. The following are not disqualifying and may be desirable: a prior history of drug problems, accounting fraud, or cult involvement.
February 2026. Run a commercial during the Super Bowl. If you can’t get a celebrity to endorse your company, use puppets.
March 2026. Contact investment bankers and hire the one who can take you public fastest.
December 2026. Go public. The best method is via IPO. You can also try direct listing, SPAC, or reverse merger. The important thing is to find some way to sell shares to gullible investors.
June 2027. IPO lockup expires. Sell your shares and let the good times roll.
To ensure success, pick a firm name that will appeal to the dumb money. One approach would be the name of a famous scientist or thinker. While the names of Nikola Tesla, Michael Faraday, and (most recently) Enrico Fermi are already taken, I believe that Friedrich Nietzsche, Robert Oppenheimer, and Dr. Strangelove are still up for grabs. Here are some other ideas:
- Frodo AI Labs (ticker: FRODO). While you can’t directly claim that your firm is backed by Peter Thiel, nobody can stop you from saying that your firm is “inspired by Peter Thiel.”
- Quantum Crypto Gigawatt Rare Earth Small Modular Large Language Agentic Hyperscalers, Inc. (ticker: HYPE). Your stock will be a hit no matter what topic catches the public interest.
- MVIDIA Corporation (ticker: MVDA).
Now, you may feel that my suggestions are ridiculous, but ridiculous new issues are a time-honored feature of bubbles, as shown by this 1720 commentary from Chancellor (2000):
It is observed that many of these projects are so ridiculous and chimerical, that it is hard to tell which is most to be wondered at, the impudence of those that make the proposals, or the stupid folly of those that subscribe to them …
As I have previously argued, I don’t think we’re in a bubble right now, because we’re not experiencing a huge wave of IPOs, ridiculous or otherwise. Perhaps we’ll see a huge wave of IPOs in 2026, and if so, that will be a sign that the bubble has arrived.
One last piece of advice. If and when we see a wave of AI IPOs, you should avoid purchasing offerings such as FRODO or HYPE. The worst possible time to buy IPOs is during an IPO wave, as argued by Lamont (2002). To build generational wealth, you want to be selling to the dumb money, as opposed to being the dumb money.
Endnotes
[1] “Michael Burry Returns With Two Big Shorts,” The Wall Street Journal, November 4, 2025.
References
Chancellor, Edward. Devil take the hindmost: A history of financial speculation. Penguin, 2000.
Lamont, Owen. "Evaluating value weighting: Corporate events and market timing." NBER Working Paper 9049 (2002).
Lamont, Owen, Short Sale Constraints and Overpricing, in Short selling: strategies, risks and rewards, Frank J. Fabozzi ed., (2004).Legal Disclaimer
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