Michael Burry, the investor who predicted the 2008 global financial crisis, warned of a potential stock market crash similar to 1987's Black Monday in a Substack post published local time. Burry stated he believes the market may be approaching a major peak and that a 1987-style decline is possible. The warning comes as the S&P 500 index reached a record high, with Burry cautioning that rising markets and low volatility could amplify leverage in the system and eventually magnify a sharp decline.
Burry Warns of Potential 1987-Style Market Crash
Burry stated in his Substack post that he "still believes there is a possibility we are approaching a major peak" and that he "thinks a decline like 1987 is also possible," according to CNBC. The 1987 reference points to Black Monday, one of the worst crashes in US stock market history. On October 19 of that year, the Dow Jones Industrial Average plunged 22.6% in a single day, while the S&P 500 fell 20.5%.
Burry emphasized that "the S&P 500 hitting new highs is likely to bring new money into the market" and that "it is important to remember that when markets rise and volatility decreases, volatility-targeting funds have no choice but to increase leverage, and other momentum strategies also utilize leverage." This message is interpreted as a warning that rising stock prices and low volatility could encourage automatic buying driven by systematic strategies, ultimately amplifying a sharp decline later.
S&P 500 Reaches Record High Amid Leverage Concerns
New York stock markets saw the three major indices rise together for the fourth consecutive trading session overnight, with the Dow and S&P 500 recording record closing highs. The S&P 500's record high was its first since June 2 (closing at 7609.78), marking the first record in two months.
Burry Maintains Short Positions in Semiconductor Stocks
Despite the recent market rally, Burry reported he continues to hold short positions in the iShares Semiconductor ETF and in Micron, NVIDIA, Caterpillar, Palantir, Tesla, and Applied Materials. He stated he still has conviction in his long-term outlook for these stocks, but indicated he could close positions to minimize losses if trades move unfavorably. Burry explained he is currently profitable on all short positions except NVIDIA.
Burry added, "Again, short selling is not a strategy suitable for everyone" and "I have to short sell, but most people should not."
FAQ
What did Michael Burry warn about in his recent Substack post?
Michael Burry warned in a Substack post published local time that the stock market may be approaching a major peak and that a decline similar to 1987's Black Monday is possible. He cautioned that rising markets and low volatility could increase leverage in the system and amplify a future sharp decline.
What happened during the 1987 Black Monday crash that Burry referenced?
On October 19, 1987, the Dow Jones Industrial Average fell 22.6% in a single day, and the S&P 500 dropped 20.5%. This event is considered one of the worst crashes in US stock market history.
Which stocks is Michael Burry currently shorting?
Burry reported he continues to hold short positions in the iShares Semiconductor ETF and in Micron, NVIDIA, Caterpillar, Palantir, Tesla, and Applied Materials. He stated he is currently profitable on all these short positions except NVIDIA.
