Michael Burry's $1.6 Billion Wager On A US Stock Market Collapse

EDITOR'S NOTE: In a compelling twist, Michael Burry, the enigmatic figure behind the "Big Short" and famed for prophesying the 2008 housing market debacle, is once again making waves. This time, he's placed a daring bet exceeding $1.6 billion on a potential Wall Street crash. The mastermind behind Scion Asset Management has tactically targeted the S&P 500 and Nasdaq 100, employing put options to wager against these indices. Astonishingly, over 90% of his portfolio is dedicated to this audacious market downturn prediction. The saga deepens as Burry's sentiments waver between bullish and bearish, echoing his past dualities. As the S&P 500 and Nasdaq 100 post formidable gains this year, Burry's audacity has transformed him into the center of a high-stakes narrative once again, where history and potential violently collide in the volatile world of finance.

Burry is making his bearish bets against the S&P 500 and Nasdaq 100, according to Security Exchange Commission filings released Monday. 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 $739 million in put options against a fund that tracks the Nasdaq 100.

Burry is using more than 90% of his portfolio to bet on a market downturn, according to the filings.

But Burry appears to have been wavering between bullish and bearish on his stock picks this year. In January, he tweeted a cryptic message to his 1.4 million followers. “Sell,” he wrote. But by the end of March, he backtracked. “I was wrong to say sell.” he wrote.

The S&P 500 and Nasdaq 100 have both notched big gains so far this year. They’re up nearly 16% and 38%, respectively.

In the mid-2000s, Burry was famous for placing a wager against the housing market and profited handsomely from the subprime lending crisis and the collapse of numerous major financial entities in 2008. The event was chronicled by Michael Lewis in his bestseller “The Big Short: Inside the Doomsday Machine” and later adapted into a film where Burry was played by Christian Bale.

Getting out of regional banks and China

Burry’s fund is also getting out of its shares in a number of regional banks – it sold its 150,000 shares of First Republic Bank (FRC) as well as holdings in Huntington Bank PacWest (PACW) and Western Alliance (WAL). It’s unclear whether these sales took place before or after JPMorgan Chase took over First Republic Bank (FRC) in May.

Burry also reversed course on Chinese stocks – selling his shares of JD.com (JD) and Alibaba (BABA) in the second quarter of the year.

A little long

There are some names that Burry and his team at Scion are betting on.

About 6% of the company’s stock portfolio is long and in the second quarter of the year he increased his exposure to the travel and healthcare industry – purchasing shares of Expedia Group (EXPE), MGM Resorts (MGM), CVS (CVS) and Cigna (CI).

Burry also purchased $4.7 million shares worth of CNN parent company Warner Bros. Discovery (WBD) and $3.3 million in online second hand retailer, The RealReal (TRR).

But in financial circles, Michael Burry’s bearish predictions often garner more attention than his optimistic bets.

While one big payoff doesn’t guarantee future returns, Burry does have a strong investment record. Traders following the investments disclosed by Scion’s over the last 3 years (between May of 2020 and May 2023) 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%.

Originally published by: Nicole Goodkind on CNN Business