'Big Short' investor Michael Burry's new bets against the S&P 500 and Nasdaq-100 are no surprise. Here's why.
- Michael Burry bet against two ETFs that track the S&P 500 and Nasdaq-100 last quarter.
- The "Big Short" investor held bearish put options on the SPDR S&P 500 and Invesco QQQ in June.
Michael Burry disclosed sizable bets against the S&P 500 and Nasdaq-100 in his latest portfolio update. The wagers won't surprise his close followers.
Burry's Scion Asset Management held bearish put options on 200,000 shares of the SPDR S&P 500 ETF Trust — an exchange-traded fund that tracks the benchmark US stock index — at the end of June, a Securities and Exchange Commission filing showed on Monday.
The investor of "The Big Short" fame also disclosed puts on 200,000 shares of the Invesco QQQ Trust, which tracks the tech-heavy Nasdaq-100. The combined notional value of the two positions was a hefty $1.6 billion on June 30, but Burry's options will have cost him a fraction of that amount.
The two holdings could be hedges, intended to soften the blow to Scion's portfolio if the stock market slumps and its long positions tumble in value. But they could also signal that Burry is pessimistic about the two index funds, which are dominated by aggressively valued stocks like Tesla and Nvidia.
The Scion chief has been ringing the alarm on stocks and other risky assets for a while. For example, he diagnosed the "greatest speculative bubble of all time in all things" and predicted the "mother of all crashes" in the summer of 2021.
He suggested last spring that the S&P 500 might only bottom about 1,900 points — a 57% drop from its current level — if it followed the pattern of past crashes. He indicated last summer that the Nasdaq Composite could nosedive to 6,000 points, or about 56% from here, as valuation multiples shrank and corporate profits declined.
Burry has also called out the passive-investing boom in recent years. He labeled it a "bubble" in 2019, and said in 2021 that the flood of millennial money into index funds and ETFs was driving stocks to dangerous highs.
In October, he said the trend was laying the groundwork for a greater disaster than the dot-com crash, and enormous losses for investors.
"Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade," he tweeted. "All theaters are overcrowded and the only way anyone can get out is by trampling each other. And still the door is only so big."
It's worth noting that Burry said he was "wrong to say sell" this spring, and has bought a range of stocks in recent quarters. But the S&P 500 and Nasdaq-100 have surged by about 16% and 38% respectively this year, and aren't far off their all-time highs.
Given Burry's past doubts about stocks and dire warnings of epic crashes, it's quite possible he's bearish on the indexes and betting they'll collapse.