'Big Short' legend Michael Burry warns stocks will keep falling - and predicts many investors will suffer heavy losses
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- Michael Burry expects US stocks to fall further and many investors to incur heavy losses.
- The "Big Short" investor compared the ongoing market slump to the onset of the dot-com crash.
- Burry slammed the passive-investing boom for inflating asset prices in recent years.
Michael Burry warned US stocks have further to fall, compared the current market downturn to the onset of the dot-com crash, and predicted many investors would suffer painful losses in a flurry of since-deleted tweets over the weekend.
The investor of "The Big Short" fame noted in a Friday tweet that there are 218 companies with a primary stock listing in the US, a market capitalization north of $1 billion, and annual losses exceeding $100 million. Of those, 29 boast market caps over $10 billion and are worth a combined $655 billion, he added.
"Saying it again. ALL the silliness must go," Burry wrote. He was nodding to a tweet in August in which he complained that "COVID-era silliness" had returned to markets, and emphasized that such speculation had inflated past bubbles but eventually disappeared every time.
The Scion Asset Management boss pointed out in a Saturday tweet that 13.48% of US stocks closed above their 200-day moving average on Friday. That percentage was 1.2% when the market bottomed in 2009, and 2.8% in 2020, he noted.
"Currently at December 2007 levels," he added, suggesting he expects stocks to drop significantly lower before bottoming out. Burry has previously suggested the S&P 500, which is already down about 25% this year, could plunge another 48% to around 1,900 points.
In a Sunday tweet, Burry said the current market backdrop reminded him of the second half of 2000 — some unloved stocks were trading at bargain prices, but high-flying names had further to fall.
"Another feeling I'm getting is mid-late 2000," he said. "Free cash flow totally on sale and ignored while former momentum stocks are coming down but not far enough, and darling 'better businesses' still had a ways to fall. Value was about to take off for years despite more crash on the way."
In a follow-up tweet, Burry accused index funds and exchange-traded funds (ETFs) of mindlessly driving up asset prices. He also compared the market to a packed theater, and warned many investors would be crushed as they all rushed for the exits.
"Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade," he wrote. "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."
Burry is best known for his billion-dollar bet against the mid-2000s housing bubble, which was chronicled in the book and the movie "The Big Short." He also placed wagers against Elon Musk's Tesla and Cathie Wood's Ark Innovation fund last year, and purchased a stake in GameStop before it became a meme stock.
The Scion chief has been predicting a devastating market collapse for a while. He highlighted "the greatest speculative bubble of all time in all things" in June last year, and warned it would end in the "mother of all crashes."