Michael Burry became famous after predicting the 2008 financial crisis, and now the hedge fund manager has issued a sort of warning against another possible collapse.
But it wasn't until most of us watched The Big Short, and Margot Robbie in that bathtub, before we understood what actually went down.
The 2015 film shows how only a few investors, like Michael Burry (played by Christian Bale), predicted the financial crisis some 17 years ago.
Banks were basically handing out risky home loans to people who couldn’t afford them, then bundled those loans into 'mortgage-backed securities'.
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These were sold as safe investments, but when people started defaulting, the whole system collapsed.
Just a handful of people knew this bubble would eventually burst, and so they bet against, or 'shorted', the housing market, making huge profits when it crashed.
How much Michael Burry made from the 2008 financial crisis
The American investor used his hedge fund Scion Capital to buy credit‐default swaps (CDS) on subprime mortgage‐backed securities, essentially insurance against home‐loan defaults.
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As a result, his fund generated about $725 million for investors and he personally earned around $100 million.
For context, his return from November 2000 to June 2008 was about 489 percent net of fees, compared to the S&P 500’s roughly two percent over the same period.
Michael Burry's previous bets
In 2021, Burry's fund disclosed that it 'put options' on Elon Musk's Tesla, betting that shares in the automotive company would drop. However, Tesla's stock ended up more than doubling in the following six months.
And just earlier this year, Scion Asset Management doubled its position on the French beauty company Estée Lauder, with stock increasing in value by more than 40 percent, according to Yahoo Finance.
Is Michael Burry betting against AI?
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As reported by Celebrity Net Worth, it has been claimed in recent days that Burry placed a $1 billion bet against the stock market, specifically targeting Nvidia and Palantir, AI stocks that he reportedly thinks are overvalued.
The rumour started after Burry’s fund, Scion Asset Management, filed its quarterly SEC Form 13F showing put options on Nvidia and Palantir worth a notional $1.1 billion. That number represents the total value of the underlying shares, not the amount he spent.
In reality, Burry likely paid only one to five percent of that - about $10 to 50 million.
A put option is like insurance, it costs a small premium but can pay off big if prices fall.
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So, Burry hasn’t risked $1 billion; he’s made a leveraged trade to profit if the AI boom crashes.
The speculation all started last month after shared an image of Bale playing him in The Big Short alongside the cryptic warning: "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play."
His tweet suggests he’s warning of a possible tech bubble, but it doesn't seem like he's betting everything on a market collapse, as suggested elsewhere.
Anish Vij