Michael Burry, Famous for Predicting the 2008 Housing Crash, Bets Against Wall Street Again

Michael Burry, the investor who gained notoriety for accurately predicting the 2008 housing crash, is once again making bearish bets against the stock market. According to securities filings released on Monday, Burry’s company, Scion Asset Management, has purchased put options worth $739 million against the Invesco QQQ Trust ETF, which consists of popular Nasdaq 100 companies. Additionally, Scion has hedged $886 million against the S&P 500 through put options.

Put options are contracts that allow the seller to sell assets at a fixed price before a specific date. Typically, purchasing put options indicates a defensive or pessimistic outlook on the market. While the filings do not disclose the exact price paid for the options or their expiration dates, it is clear that Burry’s team is making substantial bearish bets against major indexes.

It is worth noting, however, that the actual amount paid for the options may be lower than the disclosed figures, and there may be a longer-term strategy at play. Burry’s previous success in predicting the housing crash has made him a respected figure in the investment world, and his latest moves suggest that he believes a market downturn may be on the horizon.

Market Correction Warnings and Agreement from Other Investors

Burry is not the only investor expressing concerns about an impending market correction. Morgan Stanley’s Mike Wilson, ranked number one in last year’s Institutional Investor survey for accurately predicting the stock market sell-off, has been warning that stock prices are overpriced. Wilson stands by his boom-bust call, citing the unprecedented budget deficit spending and potential slowdown in the economy next year.

Bill Gross, known as the "Bond King," also shares this sentiment. Gross believes that a finance-based economy cannot thrive if low-risk investments yield more than high-risk investments. He predicts a slowing of fiscal stimuli and its impact on consumers and consumption, leading to lower real GDP and inflation around 3%.

Burry Backs Out of Chinese Investments

The securities filings also reveal that Burry has exited his investments in China. Despite doubling down on Chinese stocks in May, Burry has now backpedaled on these bets. This move comes as fears of a property sector crash in China loom, with the country’s largest private real estate developer, Country Garden, seeking to delay payment on a private bond.

Scion Asset Management, which had $233.3 million of assets under management at the end of last year, has also sold off 150,000 shares of JPMorgan-owned First Republic Bank. It is unclear whether this occurred before or after the bank’s collapse and subsequent takeover.

In conclusion, Michael Burry, famous for predicting the 2008 housing crash, is once again making bearish bets against the stock market by purchasing put options against major indexes. Other investors, including Morgan Stanley’s Mike Wilson and Bill Gross, have also expressed concerns about an impending market correction. Additionally, Burry has exited his investments in China amidst fears of a property sector crash. These moves suggest a cautious outlook on the economy and the potential for significant market volatility in the near future.

Key Takeaways:

• Michael Burry, known for predicting the 2008 housing crash, has purchased put options against the Invesco QQQ Trust ETF and hedged against the S&P 500, indicating a bearish outlook on the stock market.
• Other investors, such as Morgan Stanley’s Mike Wilson and Bill Gross, have also expressed concerns about an impending market correction and economic slowdown.
• Burry has exited his investments in China amidst fears of a property sector crash in the country.
• These moves suggest a cautious outlook on the economy and the potential for significant market volatility in the near future.