But over the third quarter of the year, the ETFs declined 3.2 per cent and 2.8 per cent, fxdd review 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, on May 19, 2005.
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 broker liteforex 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.
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.
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.
Sparring with Elon Musk
‘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.
Bubble and crashes
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.
Stocks are set to tumble a lot further
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.
While he partially restocked Scion’s portfolio in the third quarter, Burry rushed 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.
Moreover, he has dismissed the rebounds in stocks this year as bear-market rallies or “dead cat bounces” — temporary reprieves along the road to inevitable disaster. 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”. Mr Burry’s bet on a market downturn amounts to more than 90% of his firm’s portfolio, CNN reports. He cautioned they might run short of money by the end of 2022, causing consumer spending to slump, corporate earnings to suffer, and economic growth to weaken.
- He warned the retail investors buying up meme stocks and cryptocurrencies that they were headed towards the “mother of all crashes.”
- Higher rates encourage saving instead of spending and investing, and make borrowing more expensive, which can relieve upward pressure on prices.
- Jeremy Grantham, another doomsaying investor and market historian, also shrugged off the recent upturn in stocks as a bear market rally, in a new research note titled “Entering the Superbubble’s Final Act.”
- Moreover, he cautioned that stubborn inflation might prevent the Federal Reserve from bailing out markets, and said observing the downturn felt like watching a plane crash.
- Burry said the flow of cash from actively managed funds to index trackers and the boom in day traders sharing tips on social media and touting meme stocks had helped to fuel the market upswing.
- “Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade,” he tweeted at the time.
The email directed Sipley to analyze a list of mortgage-backed securities and pinpoint the riskiest ones — those linked to mortgages at high risk of default, but not priced to reflect that danger. A “dead cat bounce” refers to a temporary rebound in stock prices after a significant fall, often because speculators buy shares to cover their positions. Like Burry, he warned of an “unprecedentedly dangerous mix” of hugely overpriced assets, commodity-price shocks, and a Federal Reserve intent on curbing inflation by cooling the economy. Jeremy Grantham, another doomsaying investor and market historian, also shrugged off the recent upturn in stocks as a bear market rally, in a new research note titled “Entering the Superbubble’s Final Act.” Burry suggested in May that the S&P 500 could drop as low as 1,900 points, or another 53%, over the next few years, based on how past crashes have played out.
Trader who predicted 2008 financial crisis bets $1.6bn on stock market crash by end of 2023
“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.
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.