Michael Burry Warns of a Repeat of the 1987 Crash
Investor legendaris Michael Burry, the man behind ‘The Big Short’, is refusing to back down. Even as the S&P 500 index breaks through record highs, he is holding onto his short positions while issuing a stark warning: this rally could end in a sudden collapse similar to the 1987 crash.
In a Substack post on Tuesday, Burry suggested the market may be near a major peak. He acknowledged, however, that the S&P 500’s new record could paradoxically attract even more money into the market. The index surged 1.9% on Tuesday, marking its first record close since June, buoyed by better-than-expected corporate earnings and a drop in oil prices amid hopes the Strait of Hormuz will reopen to shipping traffic. The Nasdaq Composite soared 2.7%, bringing its two-day gain for the week to nearly 5%.
Burry has long been one of the most sceptical voices on Wall Street regarding the euphoria surrounding artificial intelligence. He has repeatedly argued that demand for AI infrastructure is underpinned by risky and potentially unsustainable financing schemes. Adding to his concerns, he noted that rising markets amid declining volatility are forcing target-volatility funds to increase their leverage. This, he warned, creates a domino effect that drags in other momentum strategies, generating a self-reinforcing cycle.
Rather than retreating, Burry confirmed he is still holding short positions via the iShares Semiconductor ETF (SOXX) and against individual stocks including Micron, Nvidia, Caterpillar, Palantir, and Tesla. He stated he remains committed to his long-term thesis, though he is prepared to cut his losses if prices move significantly against him. By his own account, all of these positions are currently profitable—except for his bet against Nvidia.
Despite his conviction, Burry issued a crucial warning for retail investors tempted to mimic his trades. He stressed that short-selling is not a strategy for everyone, stating that while he has to do it, most people probably should not.