‘Big Short’ investor Michael Burry appears to be betting on a market crash – but after predicting the 2008 mortgage crisis he has also made multiple false doomsday prophecies

After Michael Burry, the investor made famous in the book and movie “The Big Short,” appeared to be betting on a major downturn in the US stock market, his track record of market predictions in the spotlight.

Burry, 52, became famous for correctly predicting the 2008 subprime mortgage crisis that triggered the Great Recession, making some $100 million personally and $700 million for his investors by betting against the housing bubble.

A securities filing earlier this week revealed that Burry had bearish put options at the end of the second quarter against stocks tracking the S&P 500 and Nasdaq 100 index worth a combined $1.6 billion.

That number refers to the value of the underlying securities, not the price of the options, and it’s unclear how much money Burry actually put on the line or whether his position is part of a more complex trading or hedging strategy.

The filing also revealed that Burry has taken significant new long positions in companies involved in luxury retail, travel and tourism, and media, suggesting he is bullish on industries that would normally be hit hard by a recession.

The investor did not respond to questions about the filing, and its once-active Twitter account is currently closed, leaving observers wondering about the strategic implications of its new positions.

On Twitter, he goes by the nickname “Cassandra BC” in clear reference to the priestess of Greek mythology who was destined by the gods to utter true prophecies but never be believed.

A physician by training, Burry is a long-short value investor, meaning he looks for fundamentally undervalued assets to invest in and overvalued assets to bet against.

He is married with children and lives in California, but maintains a low public profile and communicates with journalists primarily via email.

Burry’s fame and success mean he has legions of fans who follow his financial revelations and try to emulate his trading – but he also attracts critics and detractors, who like to pick apart his predictions and track record.

He first gained attention and increased returns for investors in his fund in the early 2000s, shorting high-flying technology stocks during the height of the Dot Com bubble.

Burry then became famous for his bets against the US housing market before the 2008 financial crisis.

Michael Lewis’s non-fiction book about the saga ‘The Big Short’ was released in 2010 and the movie version came out in 2015, starring Christian Bale as Burry.

However, some of Burry’s other gloomy forecasts of bubbles and market crashes seem to have failed – or, as he might argue, maybe they just came too soon.

Most recently in January of this year, he issued the dire one-word “Sell” warning on Twitter, only for Wall Street’s major stock indices to rise further.

In March, he admitted his mistake by tweeting “I was wrong about selling” before deleting his Twitter account, something he usually does.

In September 2019, Burry also made headlines for a Bloomberg interview in which he warned of a bubble in stock index funds due to a passive investing craze.

He even compared the situation to the pre-2008 bubble in collateralized debt obligations, the complex mortgage-backed securities that imploded and caused the financial crisis.

A similar collapse of index funds has never happened — but months later, when the onset of the pandemic sent global markets crashing in March 2020, Barry revealed that his bearish positions paid off.

In late 2020, he took a short position against Tesla, calling the stock overvalued, but later said it was just “a trade” and that he left the position after Tesla’s stock continued to rise, according to CNBC.

In February 2021, he warned his Twitter followers that the stock market was “dancing on the cutting edge” and, according to him, was collapsing. Insider. Markets continued to rise in 2021 before a protracted sell-off for much of 2022.

However, Burry has also made accurate predictions regarding inflation, warning of inflation risk as early as April 2020, before prices started to rise, and then correctly calling an inflation spike last June, when annual inflation topped 9 percent.

Burry has also argued that while his market forecasts seem wrong, sometimes they are just too early.

Indeed, his call of a housing bubble in 2005 initially cost his fund dear as the housing market continued to rise for two years, before finally paying off when the market began to collapse in late 2007.

“Doing only one thing well is hard,” Burry said in a tweet last summer, responding to his critics.

Burry made headlines again this week with a revelation that showed what appears to be a major new bearish bet against the US stock market.

Regulatory filings show that its Scion Asset Management bought put options at $739 million worth of shares in the popular Invesco QQQ Trust ETF, and individual put options at $886 million worth of the SPDR S&P 500 ETF in the past quarter.

Put options give the right to sell shares at a fixed price in the future. They typically rise in value as the price of the underlying stock falls, making them a defensive bet.

The dollar amounts of the positions refer to the value of the underlying securities, but the new filings do not reveal how much money Burry paid for the options.

Options contracts give the holder the right to buy (in the case of calls) or sell (in the case of puts) a block of 100 shares of the security in question, at a certain price and on a certain date.

Their value can fluctuate rapidly, depending on the strike price and expiration date, based on more modest changes in the price of the underlying asset.

It wasn’t clear how Burry’s recent options bets against the Nasdaq and S&P 500 had fared, given that the regulatory records don’t show the terms of the contracts, including their expiration date and strike price.

And since the filings only revealed long positions, it was also not clear whether the puts were held outright or against other contracts held short.

That means Burry’s betting against the market could be part of a more complex trading or long-term strategy that cannot be deduced from the filing alone.

Burry did not respond to a request for comment on his market outlook on Wednesday.

So far this year, the S&P 500 is up about 17 percent, while the Nasdaq composite is up nearly 32 percent over the same period.

Big gains in a handful of tech megacap companies like Nvidia and Meta fueled much of the year’s rally.

Major tech stocks were fueled by investor enthusiasm for the potential applications of artificial intelligence, as well as the prospect that the Federal Reserve will soon end its inflation-fighting rate hikes.

Meanwhile, Burry’s fund has also liquidated its interests in Chinese e-commerce companies JD.com and Alibaba Group Holdings, as well as regional banks PacWest and Western Alliance Bancorp, the new declaration shows.

From its long positions, the fund has more than doubled its holding in online luxury goods market RealReal Inc, which is up nearly 100 percent year-to-date.

The fund also increased its exposure to oil and gas, media and travel and tourism related stocks.

It also added new stakes in iHeartMedia, Carter Communications, and Warner Bros. Discovery, the filing revealed.

The fund also added a massive new position in travel technology company Expedia Group worth $10.9 million and a block of shares in MGM Resorts International worth $6.6 million.