There aren't many names from the world of Wall Street that reach mainstream fame, but there are a handful of prominent investors who can command a room, or a news cycle, whenever they take a big risk. You've got your Warren Buffetts, your Bills Gross and Ackman, your Carl Icahns. And, for the past decade or so, your Michael Burrys.
For the uninitiated: Burry is famous for shorting the housing market before the 2008 crash — a wild wager on a collapse that few saw coming.
Burry (played by Christian Bale in the 2015 movie "The Big Short") minted a cool $100 million for himself and $700 million for his hedge fund.
So it shouldn't be a surprise that when The Michael Burry bets big against the stock market, folks on Wall Street (along with Burry's many social media fans) pay close attention.
Here's the deal: Burry revealed in regulatory filings Monday that he has placed a $1.6 billion bet on a Wall Street crash, my colleague Nicole Goodkind reports.
Burry's fund, Scion Asset Management, bought $866 million in "put" options — that's the right to sell an asset at a particular price — against a fund that tracks the S&P 500, and another $739 million against a fund that tracks the Nasdaq 100. All told, Burry is using more than 90% of his portfolio to bet on a market downturn.
To be clear, the $1.6 billion figure represents how much it would cost to exercise those options — not what Burry spent on them. The nuance has to do with the way the SEC requires options to be reported, using the notional value of the underlying shares rather than the value of the contracts. For more on that, here's a helpful X thread.)
Put simply: We don't know from the SEC filings what Burry spent on the options, but it was less than $1.6 billion.
Nuance aside, it's still a big, breaking-with-the-herd wager that sparked a lot of chatter this week.
Considering that the S&P 500 and Nasdaq 100 have both been on a tear this year, it may seem like a head-scratcher. The S&P 500 is up 16% and the Nasdaq has surged nearly 40% this year.
Not everyone is sold on Burry's prescience, of course.
"Michael Burry has predicted 72 of the last 5 recessions," quipped one user on X.
To wit: Back in January, as inflation was trending down, Burry forecast another spike in consumer prices and said he believed the US was already in a recession — neither of which turned out to be accurate. At the time, he tweeted a single word — "sell" — to his 1.4 million followers. A few months later, he backtracked, writing: "I was wrong to say sell."
Also notable from Scion's disclosure: The fund dumped shares of US regional banks, including First Republic, PacWest and Western Alliance. Burry also reversed course on Chinese stocks, selling his shares of JD.com and Alibaba, just months after doubling down on them.
While one big payoff doesn't guarantee future returns, Burry does have a strong investment record. Traders following the investments disclosed by Scion over the past three years would have made annualized returns of 56%, according to an analysis by Sure Dividend. Over the same period, the S&P 500 had annualized returns of about 12%.
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