Michael Burry, a prominent figure in the world of finance, is known for his uncanny ability to foresee major market shifts. Bursting into the spotlight for accurately predicting the cataclysmic 2008 housing market crash, Burry cemented his reputation as a skilled prognosticator.
Profiting immensely from his foresight by shorting the market, he carved a substantial fortune.
In the years that followed, Burry’s reputation grew, captivating investors and financial experts alike with his audacious forecasts.
Picks for you
But did his success persist? In the upcoming exploration, we delve into the ‘Big Shorts’ trail of hits and misses, dissecting his prowess in predicting market trends, based on data revealed by stock and options trader Adam Khoo on August 15.
A look at Burry’s stock market predictions
In 2005, Burry’s prescience was demonstrated when he predicted the collapse of the subprime mortgage market. This prognostication proved eerily accurate, as the housing market crashed in 2008, ushering in the Global Financial Crisis.
The investor gained a fortune by placing significant bets against the US housing market, turning a huge profit from the subprime lending crisis.
Over the following years, Burry remained under the radar when it came to predictions. That is until 2015, when the founder of Scion Capital forecasted an impending stock market crash within the following months.
However, contrary to his forecast, the S&P 500 (SPX) actually surged by 11% over the next year, confounding his bearish anticipation.
Two years later, in May 2017, Burry returned with another ominous prediction—this time, a global financial meltdown. However, the subsequent 12 months defied his foresight, with the SPX rallying by 19%.
Burry warns of stock market crash in 2019
In September 2019, Burry warned of a stock market crash due to a bubble in index exchange-traded funds (ETFs). Once again, the market had a different plan, recording a 15% gain over the following year.
March 2020 marked a revelation of a massive bearish bet by Burry. However, the SPX soared by an astonishing 72% in the subsequent 12 months, indicating a significant miscalculation on his part.
Less than a year later, the American investor voiced forth another prediction of a stock market crash due to a speculative bubble, coupled with a short position on Tesla (NASDAQ: TSLA). Despite his assertion, the market rallied by another 16% in the following year.
Moving to September 2022, Burry predicted lingering failures in the stock market, suggesting that the bottom had not yet been reached. Again, the market responded differently, witnessing a 21% upswing over the next 11 months.
Earlier this year, in January, the ‘Big Short’ urged investors to ‘sell,’ citing his prediction of a recession and new inflation round. However, the SPX remained resilient, recording a 17% increase year-to-date.
Burry’s latest short bet
Burry’s most recent short bet against the market was revealed on August 14, when new data showed that the investor shorted US stocks through put options.
Notably, Burry, bought 40,000 put options contracts tied to SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ), with a nominal value of $1.6 billion.
In other words, the hedge fund manager is betting that hundreds of stocks tracked by SPY and QQQ ETFs would depreciate in value.
Put options, or just puts, are derivative financial instruments that allow investors to sell a stock at a specific price by an expiration date.
Buy stocks now with Interactive Brokers – the most advanced investment platform
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
