To many investors on Wall Street, the market trend since the early days of the pandemic recovery is worth celebrating.
But one prominent analyst believes a crash is coming.
“The market is dancing on a knife’s edge,” according to Michael Burry, who was the main player in the housing-bubble book and movie, “The Big Short.”
Burry cited the gamble on increased growth through the use of borrowed assets has pushed the market to the brink of collapse.
In a series of tweets over the weekend, Burry believes the “gamblers take on too much debt” in speculating on upside.
Burry included a chart showing the rapid increase in both the S&P 500 index and levels of margin debt.
He also referenced the influx of day traders expanding the market discussion via social media.
“Passive investing’s IQ drain, and #stonksgoup hype, add to the danger,” he said.
Burry earned fame predicting the U.S. housing market would crumble – and making what amounted to a billion-dollar bet on it. He tweeted Sunday that this warning is also being ignored.
“People say I didn’t warn last time,” he said. “I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.”
That quote, also added to his Twitter bio with the display name Cassandra (from Greek mythology), underscores his belief that he, like Cassandra, is never initially believed though ultimately proved to be accurate.
So what does Burry’s Scion Asset Management fund suggest? In the 13F report (for the fourth quarter of 2020) to the SEC, Scion is shown to have scooped up 1.5 million shares of NOW Inc. (NYSE:DNOW), representing a 7.7% portfolio weight.
The second-largest was Wells Fargo (NYSE:WFC); third was GEO Group (NYSE:GEO).