The Big Short / Netflix
- Michael Burry raised the alarm on the stock exchange this weekend.
- The Big Short investor said extreme speculation and debt could crash.
- Burry’s warnings are being ignored as they were during the housing bubble, he said.
- Visit the Business Insider home page for more stories.
Rampant speculation and widespread borrowing bets pushed the stock market to the brink of collapse, warned Michael Burry over the weekend.
“Speculative actions end up causing players to get into too much debt,” said the investor tweeted, along with a graph showing the S&P 500 index and rising margin debt levels in recent months. “The market is dancing on the razor’s edge.”
Burry said the cash flow from actively managed funds to index trackers and the boom of day traders sharing tips on social media and promoting meme actions helped boost the market.
“The draining of passive investment IQ and the enthusiasm of the #stonksgroup increase the danger,” he said.
The head of Scion Asset Management highlighted a “massive spike” in the volume of bullish call options being traded on another tweet. He added the hashtags “#cautiontothewind” and “#blowofftop” to emphasize his view that these types of bets are driving stocks to extreme levels.
Burry is best known for his billions of dollars bet on the United States real estate market to break in the mid-2000s, which was immortalized in “The Big Short”. He was portrayed by Christian Bale in the film adaptation of the book.
The investor also laid the groundwork for GameStop’s small squeeze when it supported the video game retailer in 2019 and wrote several letters to its bosses.
Burry tweeted on Sunday, that his last warning is being ignored, just as Wall Street rejected his warnings during the housing bubble.
“People say I didn’t warn you the last time,” he said. “I did, but no one heard. So, I notice this time. And yet, no one listens. But I will have evidence that I did.”
Burry doubled his vision by adding that tweet to his Twitter bio. He already uses “Cassandra” as a username – a reference to the priestess of Greek mythology who was cursed to share true prophecies, but was never believed.