Michael Burry, the investor
who became famous
for predicting the massive 2008
housing market collapse
in the US, appears
to have
recently placed
a big bet against the US stock market.
He was featured in Michael
Lewis, his book The Big Short,
which was made into a movie
The whole housing market
is propped up on these bad loans.
They will fail
The housing market is rock solid.
It's a time off.
So Mike Burry,
who gets his haircut of Supercuts
and doesn't wear
shoes, knows more than Alan
Greenspan and Dr. Mike Burry.
Yes, he does.
Well, this time around, Burry is bought
$1.6 billion worth
of financial instruments called options
that would allow him to profit
from a stock market fall,
according to a filing made
with the US regulators.
Let's bring in
Julia Chatterley in New York.
He reckoned that
he understood
more than or certainly was suggested
you must understand
more than Alan Greenspan.
He was the Fed chairman at the time
back in 2008.
And he understood the financial markets
more than those
who are supposed to run them.
And what does he know
that they do this time?
You know what?
He makes a big move.
You're absolutely right.
The market listens
for all of those reasons.
And the thing I loved about that movie
actually is it's simplified,
something that tends to be incredibly
opaque and complex.
And this is no different, quite frankly.
What he's done is basically buy
these financial instruments,
as you mentioned,
to protect against the downside.
Now, you might do this
for a number of reasons.
You might actually hold
lots of stocks,
but think that the market
perhaps will go down
for a short period of time
and you want to protect that
so you can stay holding onto
those stocks,
but just limit you make money
with these options. To protect them.
Or you could just outright
think that the market's going to fall
and we don't really know.
He has said and made several warnings
about the stock market.
He's concerned about these
so-called exchange traded funds.
And that's
what he's taken these options
on, that they oscillate and amplify
the directional movements of the markets,
be they up and down.
He's warned about millennials
coming in earlier this year, Becky.
He did tweet out
or ex out, whatever it's called now.
Saying Sell.
And then afterwards, he came back
and said, look, I was wrong.
Remember, we then into the bull market
for the tech heavy NASDAQ and the S&P.
500 so the suggestion from this,
at least at the time,
they may still not be options
that are relevant today, of course,
because we don't know
at the time
he was concerned
about some kind of fall but
the market's march ever higher.
So why
you should always listen to this man
because he's proved
he's smart in the past.
No knee jerk reactions,
please, based on this information
It's interesting, isn't it,
because there's a sort of herd mentality,
as you and I know
well enough in in the markets and enough
go in one direction.
The rest of the herd starts chasing.
Is there enough other
activity out there to
justify some sort of moves
together at this point?
Is there any evidence of that,
any evidence of further shorting?
It's a great question to ask.
Look,
when this bet was made, remember,
we were probably talking about
actually when he was tweeting
about selling,
we were concerned about U.S.
recession risk.
We were concerned
about rising interest rates.
But he was also buying into stocks
of banks.
So the difficulty in trying to take
a filing like this
and try and understand
exactly what
he was thinking or doing over
what time
horizon and based on what event
is impossibly difficult to know.
And as you and I both know,
and this is vitally important,
there is so much passive
investing out there today
that just one human saying
we're buying this
or selling
that does not dictate
market moves to any great extent.
So I'll reiterate the warning.
He's interesting to watch.
Don't make moves.
Market moves
based on his judgment, particularly
if you're investing for the longer term.