The Big Short/Netflix
- Michael Burry sounded the alarm on the stock market this weekend.
- “The Big Short” investor said extreme speculation and debt could cause a crash.
- Burry’s warnings are being ignored as they were during the housing bubble, he said.
- Visit Business Insider’s homepage for more stories.
Rampant speculation and widespread betting with borrowed money has driven the stock market to the brink of collapse, Michael Burry warned over the weekend.
“Speculative stock #bubbles ultimately see the gamblers take on too much debt,” the investor tweeted, along with a chart showing the S&P 500 index and levels of margin debt both soaring in recent months. “The market is dancing on a knife’s edge.”
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, have helped to fuel the market upswing.
“Passive investing’s IQ drain, and #stonksgroup hype, add to the danger,” he said.
The Scion Asset Management chief highlighted a “massive spike” in the volume of bullish call options being traded in another tweet. He added the hashtags “#cautiontothewind” and “#blowofftop” to emphasize his view that those types of wagers are propelling stocks to extreme levels.
Burry is best known for his billion-dollar bet on the US housing market to crash in the mid-2000s, which was immortalized in “The Big Short.” He was portrayed by Christian Bale in the movie adaptation of the book.
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.
Burry tweeted on Sunday that his latest warning is being ignored, just as Wall Street dismissed his cautions during the housing bubble.
“People say I didn’t warn last time,” he said. “I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.”
Burry doubled down on his view by adding that tweet to his Twitter bio. He already uses “Cassandra” as his username – a reference to the priestess from Greek mythology who was cursed to share true prophecies but never to be believed.
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