Market at Peak, Michael Burry Short: "We Are Close to a 1987-Style Crash"
Michael Burry warns that the current market rally could end in a sharp crash reminiscent of 1987. The investor holds put options on several major stocks and ETFs, betting on a downturn.
Michael Burry continues to stick to his bearish bets, even as the S&P 500 index soars to an all-time high, and warns that the rally may still end in a sharp crash reminiscent of the 1987 stock market collapse.
"I continue to believe that we may be close to a dangerous peak, which could even lead to a fall in the style of 1987," Burry wrote.
Let us recall that Burry does not only warn of declines — he also bets on them. The investor holds put options on prominent stocks and ETFs, including SOXX, Nvidia, Palantir, Micron, Tesla, Caterpillar, and Applied Materials. Therefore, if his forecast for a crash to materialize proves correct, he is expected to profit from it.
Yesterday, following the jump in Palantir (30%), he recorded significant losses. Among other things, he also reported that he has put options on Caterpillar, which jumped yesterday following its earnings reports.
The S&P 500 index rose yesterday by 1.9% and set its first closing record since June, supported by financial reports that were better than expected and a further decline in oil prices, against the backdrop of hopes for the reopening of the Strait of Hormuz to vessel traffic. The Nasdaq soared by 2.7%, and in the first two days of the week, it completed a cumulative increase of almost 5%.
Burry is among the most prominent critics on Wall Street of the wave of investments in artificial intelligence. According to him, the demand for AI infrastructure is driven, among other things, by financing arrangements that may prove unsustainable over time. According to him, the gains in the market create a self-feeding cycle, as the decline in volatility encourages systematic investors to increase their exposure.
"Remember — when the market rises and volatility falls, funds that adjust their exposure according to the level of volatility are forced to increase leverage, and other momentum strategies also add leverage," he wrote.
The investor added that he is still confident in his long-term forecast regarding these positions, but emphasized that he will close them if it turns out that the market is moving sharply against him. According to him, all these positions are still profitable — except for the bet against Nvidia.
"Again, shorting is not for everyone. I have to short. Most people should not," Burry wrote.
