Michael Burry Has Called 12 of the Last 3 Market Crashes — Now He Says Stocks Are in ‘Denial’
The man who predicted the 2008 housing collapse now says stocks are deep in denial, drawing parallels to the months before two historic crashes. Before you act on that warning, consider what happened to investors who trusted his last dozen…
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Rising stocks can make caution feel expensive. Sell because trouble looks inevitable, and every subsequent gain becomes a reminder that protecting your money has an opportunity cost. Stay invested, however, and a sudden downturn can erase years of progress. The challenge is separating evidence that stocks are expensive from evidence that they are about to fall.
Those are different judgments, requiring different responses. Historically stretched valuations means elevated prices can threaten future returns without supplying a reliable sell date. For investors building wealth over decades, that matters more than any forecaster’s reputation.
Michael Burry’s Latest Stock Market Warning
Michael Burry is sounding the alarm again. The famed “Big Short” investor recently wrote on his Cassandra Unchained X account, “The stock market is quite obviously in its first stage of grief, denial. Per 2000 and 2008, this stage lasts 6-9 months.”
The comparison is ominous, but the statement supplies neither a downside target nor a starting date for that six-to-nine-month clock.
His chosen moniker fits his public role. In Greek mythology, Cassandra could foresee disaster but was cursed to not be believed. The catch: Cassandra’s prophecies were true. But market skepticism alone doesn’t make a forecast correct.
Burry’s Hit-or-Miss Track Record
It’s necessary to separate the headline punchline from the performance record. Perpetual futures trading platform Trading Alpha highlighted on X 12 bearish statements or positioning snapshots Burry has made since his famous housing market call back in 2009. Of those dozen times he seemingly forecast a market crash, there were three times stocks suffered conspicuous declines:
- 2020 pandemic collapse
- 2022 bear market
- Late 2023 correction
Ben Carlson’s A Wealth of Common Sense blog records maximum calendar-year drawdowns of 33.9%, 25.4%, and 10.3%, respectively. Whether all three were “crashes” stretches the term. Rather, more revealing is Alpha’s reported S&P 500 price gains from Burry’s selected “correct” warnings through Oct. 6.
In August 2019, Burry said “index funds are the new CDOs,” telling Bloomberg at the time that passive investing distorts prices for the stocks and bonds that they are designed to track. He said “the longer it goes on, the worse the crash will be.” That the appearance of the COVID virus tanked the market after those comments hardly credits Burry with calling the decline. Since Burry’s warning, though, the S&P 500 has gained 281%.
In June 2021, Burry predicted the “mother of all crashes,” but he was referring to the hype surrounding crypto and meme stocks at the time, a buying frenzy he actually helped create with his bet on GameStop (NYSE:GME | GME Price Prediction). Yet the market peaked on Jan. 3, 2022 and finally hit bottom in October with a number of sharp rallies along the way after the Federal Reserve began aggressively raising interest rates to contain rapidly rising inflation. Even so, the market has gained 84% since his call.
Finally, in August 2023, the billionaire investor placed big bets against the SPDR S&P 500 ETF (NYSEARCA:SPY) and the Invesco QQQ ETF (NASDAQ:QQQ) valued at $1.6 billion. While he might not have made any commentary about a crash, his 13F filing with the SEC at the time spoke volumes. The stock market ultimately suffered a 10% correction, but has since gone on to rise 74%.
Those figures illustrate the cost of selling and never returning, not Burry’s actual trading returns. He could have profited handsomely from his trades. Neither does his warnings prove he anticipated the cause or timing of a subsequent decline — and timing matters to him, too, as he will reduce bearish bets as options lose value over time.
A Warning Is Not an Investment Plan
Burry also changes his mind. His own Substack retrospective acknowledges reversing his January 2023 “Sell” message that March. And this past April he went long on Microsoft (NASDAQ:MSFT).
If you try to invest based on one bearish post, you can follow a position its author has already reconsidered.
Key Takeaway
I would not lightly dismiss Burry’s warnings; his concerns are often grounded in observable facts. But I also would not treat his predictions or calendar as gospel. Such forecasts are a good time to examine your portfolio, rebalance oversized positions, protect money needed soon, and keep investing long-term funds in diversified holdings. His warning deserves scrutiny. It does not justify abandoning a sound investment plan.
Contact [email protected] for any questions or corrections.
After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
