Burry Sees "Worthless Stock" in Fannie & Freddie, Charts Point South 📉

Michael Burry, the investor profiled in "The Big Short," said Sunday that Fannie Mae and Freddie Mac have formed a head-and-shoulders top, a chart pattern he described as predicting "worthless stock." The two government-controlled mortgage giants back a large share of US home loans and remain under federal conservatorship since the 2008 financial crisis. Burry, who disclosed sizable stakes in both companies less than a year ago, said he made a move in both stocks this week, without disclosing the direction of that trade publicly.

The mortgage giants' shares jumped after Donald Trump's 2024 election win on expectations he would release them from conservatorship. According to Yahoo Finance data, Fannie Mae closed at $1.39 on Election Day 2024, peaked at $15.31 on September 11, 2025, and closed Friday at $4.04, a 74% drop from the high and roughly 80% reversal of the post-election rally. Freddie Mac moved from $1.20 to a peak of $14.15 before closing at $3.68 on Friday, mirroring the same trajectory.

In a Sunday newsletter post, Burry argued that the Treasury's senior preferred shares, which must be repaid before common shareholders receive proceeds, grow each quarter. Citing share prices and commentary from investment bank KBW, he said Wall Street increasingly expects Treasury to convert that preferred stake into common stock. He estimated such a swap would dilute existing common holders' ownership by at least 90%.

The Cassandras of finance rejoiced as Burry's post on X noted that both stocks had "retraced essentially all their gains since Trump's election, and they put in a giant head-and-shoulders-and-elbows top for added emphasis." The two conditions he has previously written are required for common shareholders to avoid losses, an end to government conservatorship and a reduction of Treasury's senior preferred claim, have not occurred and depend on decisions in Washington.

Burry's warning on Fannie and Freddie follows his call earlier in the week that Anthropic's valuation is in a bubble, and an earlier post stating US equities are in denial ahead of a broad market downturn, a stance he has compared to conditions before the 2000 and 2008 crashes. He also said the share of stocks participating in the broader market rally has shrunk toward levels last seen near 2000, with most non-AI equities punished over the summer.