Scion Asset Management founder Michael Burry is once again betting against the market, according to new federal filings.
Key Details
- New Securities and Exchange Commission filings revealed Monday show that, in the second quarter, Scion bought put options on tens of thousands of stocks in the S&P 500 and Nasdaq.
- These options have a notational value of $739 million against Invesco QQQ Trust EFT and $886 million against SPDR S&P 500 EFT.
- Scion also liquidated or trimmed stakes in JD.com, Alibaba, Capital One, Wells Fargo, New York Community Bancorp, and regional banks, including Western Alliance, Huntington Bank, PacWest, and First Republic.
- This follows Burry’s $23 million bet on financial stocks prior to the historic collapses of Silicon Valley Bank, Signature Bank, and Silvergate Bank.
- This defensive position suggests that Scion expects the underlying assets to decrease in price in the near future and wants to lock in a fixed price to sell them since the market is facing a decline.
Why It’s Important
Given that these filings reflect his financial decisions last quarter, it is not entirely clear what they mean at the moment or for the duration of the year. However, as Benzinga notes, it could reflect Burry’s concern that the artificial intelligence craze that has spurred months of Wall Street rallies will dry up and leave the economy in a bear market for the duration of the year. This stance cuts against the generally bullish and optimistic attitude of the market.
Michael Burry is famous for his financial moves during the 2008 financial crisis, having predicted and bet against the market at a pivotal moment and profited from doing so. He is depicted in the 2015 Adam McKay movie The Big Short by Christian Bale. His predictions are not always in line with the direction of the market, but his history of success makes Wall Street take notice when he makes big moves.
As we previously reported, the market has experienced several months of strong rallies, partly thanks to the growth of artificial intelligence technologies. While recession fears, high-interest rates, high inflation, and a tightening labor market continue to stress the economy, strong innovation in the tech space has largely spurred investor success and optimism, leading many key analysts to predict that a recession is unlikely in the near future.