The implication is that investors shouldn’t get their hopes up about any rallies in the coming months, as they’re likely to be brief respites that won’t result in a market recovery. Fears of soaring prices, aggressive rate hikes, and a painful economic downturn sent the S&P 500 down 19% and the Nasdaq Composite 33% lower in 2022. However, investors have piled back into stocks this year, driving the benchmark index up 9% and its tech-heavy peer up 17% year to date. Next, he dumped all but one of his holdings in the second quarter, slashing his portfolio’s value from $165 million to about $3 million and stoking fears that a market crash was around the corner. A man who famously made a fortune by predicting the collapse of the US housing market in 2008 now appears to be suggesting that two major stock markets will tumble in value. An investor who was featured in the film The Big Short after he correctly bet on the housing market collapse in 2008 has now predicted that a Wall Street crash will take place by the end of this year.
The Big Short investor Michael Burry bets $1.6bn on stock market crash
‘The Big Short’ was initially a bestselling book by Michael Lewis before it was adapted into the film, which also starred Steve Carell, Ryan Gosling and Brad Pitt. As of 17 August, his account appears to be inactive without any tweets whatsoever, after he deleted his activity in a stand against Elon Musk. Mr Burry bought $866m (£679m) in put options against a fund that tracks the S&P 500, and $739m (£580m) in put options against a fund that tracks the Nasdaq 100. Security Exchange Commission filings released on Monday show that he has taken out negative options on the S&P 500 and the Nasdaq 100 – both of which are representative of the US economy at large. Michael Burry, played by Christian Bale in the 2015 film directed by Adam McKay, is reported to have bet more than $1.6bn (£1.25bn) on the event happening in 2023.
Inflation, recession, and the Fed
The investor set alarm bells ringing in August, when he revealed that he virtually liquidated his US stock portfolio in the second quarter of this year. Scion, which owned 11 stocks worth $165 million at the end of March, only held a $3.3 million position in a single stock three months later. The fund manager of “The Big Short” fame shared a screenshot of a S&P 500 chart, showing the benchmark stock-market index has tumbled 18% from its December peak, despite several blistering rallies this year. He doubled down on his doomsaying in the first half of 2022, warning the S&P 500 was heavily overvalued and could halve in value to around 1,900 points. Burry is best known for his billion-dollar bet on a crash in the US housing market in the mid-2000s, immortalized in “The Big Short.” Christian Bale portrayed him in the movie adaptation of the book.
Michael Burry, the hedge fund manager of “The Big Short” fame, rang the alarm on the “greatest speculative bubble of all time in all things” in the summer of 2021. He warned the retail investors buying up meme stocks and cryptocurrencies that they were headed towards the “mother of all crashes.” Burry’s latest chart and comment suggest he sees shades of the stock market’s surge in early 2001, when rates were 6%. He seems to expect both the S&P 500 and the Fed Funds rate to eventually tumble — as they did during the dot-com crash — with the Fed cutting rates as the economy weakens and asset prices slump. Burry has previously warned the S&P 500 could plummet by more than 50% to around 1,900 points.
‘Big Short’ investor Michael Burry offers an inside look at how his iconic bet against the housing bubble began
Notably, Burry emphasized in October that he’s bracing for a collapse in stocks that dwarfs the dot-com crash, as there’s so much money parked in index funds today. Novastar, another major subprime lender with a slew of internal issues, was also burnt badly when the bubble burst. The US stock market appears to be following the pattern of previous bubbles, leaving it poised for a monumental crash, Burry noted in a May 8 tweet. Michael Burry sounded the alarm on the “greatest speculative bubble of all time in all things” last summer, and cautioned investors buying into the hype that they were headed for for the “mother of all crashes.” Michael Burry, the hedge fund boss featured in The Big Short, in which he was played by Christian Bale, held negative options on both the S&P 500 and Nasdaq 100 at the end of the second quarter, securities fillings show.
Sipley worked as an analyst at Burry’s hedge fund between 2003 and 2006, and returned to serve as Scion’s director of equities in 2013, his LinkedIn shows. He fought an aggressive form of brain cancer for eight years and died in 2019, according to his obituary. The Scion boss joked he was early with his prediction, just as he was during the mid-2000s US housing bubble. Burry noted that 12 of the 20 largest one-day rallies in the Nasdaq index took place as the dot-com bubble burst, while nine of the S&P 500’s 20 biggest one-day rallies occurred in the aftermath of the Great Crash in 1929. Such options give the right to sell shares at a fixed price in future, and are typically bought to express a bearish or defensive view.
Burry flagged the risk of post-reopening inflation as early as April 2020, and has repeatedly criticized the Fed for overstimulating markets and acting too slowly to curb price increases. Mr Burry is reported by CNN to be using more than 90 per cent of his portfolio to bet on the market downturn. Burry’s investment strategy is closely followed by investors due to the fame he continues to enjoy following the coverage of his success at the time of the subprime crisis and subsequent dramatisation of his role in The Big Short. Strong starts to 2023 have allowed the $416bn SPY to climb 16.4 per cent and sent the $207bn QQQ up 42.3 per cent year-to-date, according to Morningstar.
- SOXX is up about 42 per cent since January 1 and about 7 per cent since September 30, according to data from Morningstar.
- Moreover, he suggested the coming downturn could rival the financial crisis in magnitude and devastation.
- Burry flagged the risk of post-reopening inflation as early as April 2020, and has repeatedly criticized the Fed for overstimulating markets and acting too slowly to curb price increases.
- While Mr Burry, who founded Scion Asset Management, appears to have placed a large proportion of his assets at risk, it is not clear what his fund paid for the “put options”.
- The investor noted that 5.2 times Microsoft’s outstanding shares were traded between the software stock’s peak during the dot-com bubble and its bottom in 2002.
In another tweet, the Scion Asset Management chief highlighted a “massive spike” in the volume of bullish call options being traded. He added the hashtags #cautiontothewind and #blowofftop to emphasize his view that those types of wagers are propelling stocks to extreme levels. Michael Burry, of “The Big Short” fame, reflected on the origins of his iconic bet against the US housing bubble, and praised a late colleague who helped him research the wager, in a tweet on Sunday. Burry appeared to take a victory lap in a May 10 tweet, suggesting he believes the stock-market crash that he’s been warning about has finally arrived.
“You will get it back, even though you shorted Tesla, you bastard,” Musk tweeted in April about Burry’s blue checkmark on Twitter, adding a crying-with-laughter emoji. The investor may be feeling vindicated, as Tesla stock has plunged nearly 70% from its peak last November. “I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.” When the S&P 500 has crashed in the past, it has traded lower several years later, Burry noted. He pointed to the index bottoming 13% lower in 2009 than it did in 2002, 17% lower in 2002 than it did during the Long-Term Capital Management fiasco in 1998, and 10% lower in 1975 than in 1970.
He noted that after the dot-com bubble burst, the Nasdaq rallied 16 times by more than 10% — gaining on average 23% each time — on its way to a 78% decline at its nadir. The Scion Asset Management chief’s stance seems to be that the market boom is over, stocks are headed downward, and any rallies will prove short-lived. Burry also predicted inventory gluts for retailers, layoffs for white-collar workers, higher long-term inflation, and a years-long recession.
While he partially restocked Scion’s portfolio in the third quarter, Burry rushed interactive brokers forex review to disabuse his followers of any notion he’s optimistic about the market outlook. The Scion Asset Management chief warned of a dramatic decline in stocks, and forecasted a slump in consumer spending and company earnings would spark a painful recession. His fund, Scion Asset Management, was shown to have bought large stakes in put options against both stock-market indexes. Burry’s portfolio has scaled down significantly with the retirement of the QQQ and SPY bets and now sits at about $99mn, near the $107mn of Scion reported holdings on March 30, according to the filings. The position against SOXX represents nearly half of Scion’s portfolio as of the most recent filing. Burry tweeted on Sunday that his latest warning was being ignored just as Wall Street dismissed his warnings during the housing bubble.
Michael Burry, who founded Scion Asset Management, appears to have placed a large proportion of the fund’s assets at risk. Burry bet against Apple, virtually liquidated his portfolio for a period, and hinted he may be short the market. In January, he tweeted the word “Sell” to his 1.4 million followers, but then in March he wrote “I was wrong to say sell”. SOXX is up about 42 per cent since January 1 and about 7 per cent since September 30, according to data from Morningstar. The investor also laid the groundwork for the GameStop short squeeze when he backed the video-game retailer in 2019 and wrote several letters to its bosses.
But over the third quarter of the year, the ETFs declined 3.2 per cent and 2.8 per cent, respectively. This indicates that Burry’s bets may well have paid off because second quarter 13F filings show the bets were in place at the end of that quarter. Michael Burry has hinted the surge in stocks this year reminds him of the dot-com bubble, and could end with a similarly devastating crash.
The changes to Scion’s portfolio were revealed in 13F filings, which are mandatory reports to the Securities and Exchange Commission by managers with assets of at least $100mn. They must be lodged with the regulator within 45 days of the close of the previous quarter, which was September 30. He noted that Scion could bet against the questionable securities by purchasing credit-default swaps, an insurance-like derivative that would pay out handsomely if enough people defaulted on their mortgages. The investor shared a screenshot of an email he sent to one of his employees, Joe Sipley, plus500 forex review on May 19, 2005.