"Burry From 'The Big Short' Warns of Possible Repeat of 1987 Crash Even as S&P 500 Hits Record High"

"Low Volatility Encourages Leveraged Buying"

As the S&P 500 index hit an all-time high, investor Michael Burry has once again warned that this upward trend could end with a sharp sell-off similar to the 1987 stock market crash. Burry is known as the real-life inspiration for the film 'The Big Short' and gained fame for predicting the U.S. subprime mortgage crisis.

Warning: "A Bear Market Could Come"

Michael Burry. Photo by Yonhap News

According to CNBC in the United States, on August 4 (local time), Burry said on Substack, "I still believe that we may be close to a major peak," adding, "I think a bear market like 1987 could occur."

The "1987" Burry referenced is the year that saw "Black Monday," one of the worst stock market crashes in U.S. history. On October 19, 1987, the Dow Jones Industrial Average plunged 22.6 percent in a single day, and the S&P 500 index dropped 20.5 percent. The aftermath spread to major stock markets in places like Hong Kong and Europe, causing a significant shock across the international financial system.

Burry emphasized, "The S&P 500 index hitting a new high makes it more likely that fresh money will flow into the market," and further noted, "When the market rises and volatility declines, volatility-target funds have no choice but to increase their leverage, and other momentum strategies also end up using leverage—keep that in mind." This message is interpreted as a warning that rising stock prices and low volatility can lead to automatic system-driven buying, which could eventually amplify a sharp decline later on.

Burry Maintains Semiconductor Short Positions

A trader at the New York Stock Exchange in the United States. Photo by EPA Yonhap News

Previously, during the overnight session on the New York Stock Exchange, the three major indices recorded gains for the fourth consecutive day, with both the Dow and S&P 500 indices closing at record highs. It took two months for the S&P 500 to reach a new peak since its previous record close of 7,609.78 on June 2. The market believes that news of progress in negotiations between the U.S. and Iran over transit issues in the Strait of Hormuz has boosted investor sentiment.

Despite the recent stock market rally, Burry stated that he continues to hold short positions on the iShares Semiconductor ETF, as well as Micron, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials.

He said that he still has long-term conviction about these stocks. However, he noted that he could unwind his positions if trades move unfavorably in order to minimize losses. He also explained that, except for his short position in Nvidia, all his other positions remain profitable. Burry added, "Again, short selling is not a strategy suitable for everyone. I have to do it, but most people should not."

This content was produced with the assistance of AI translation services.