The investor who called the 2008 housing crash has a new message. Sell the AI rally, but do not try to short it.
Michael Burry posted on Substack Sunday telling investors to scale back exposure to tech, and to "reduce positions almost entirely" in any stock going parabolic. He compared the current market to the final months of the 1999-2000 dot-com bubble.
Burry said he is running "a significant leveraged short position" against companies he sees as overvalued, which is the same play he used in 2000.
He does not think regular investors should follow him in. "Shorting is not the answer. It is not something most people should ever do," he wrote.
Burry pointed out that put options have gotten expensive, and a direct short can run up "significant pain" even if the trade is eventually right.
His pitch instead is simpler: raise cash and wait. The party can keep going for another week, month, three months, or a year, but the end, in his read, will be lower prices.
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Last week, Burry compared the Philadelphia Semiconductor Index to the chart that preceded the March 2000 crash. He has been making this comparison for months.
The market keeps disagreeing. Major indexes have hit record highs throughout the spring, even as the Iran war drags on and oil hovers near $100.
Capital keeps flowing into semiconductor names and megacap tech, which is the gap Burry sees. Record valuations on top of macro stress, propped up by AI excitement.
Wall Street is split on whether the rally has gone too far. Burry's view is one of the loudest on the bearish side, but it is not the consensus.
Burry has been early before. He was early on housing in 2005 and early on a meme-stock unwind in 2021, which means being right and being on time are not the same trade.
The framing in his Substack post is unusual. He is not telling investors to bet against the market, only to step back from the parts of it that have gone vertical.
For most readers, the practical question is whether to trim winners now or wait for a real signal. Burry's answer is to trim first, and to put the cash somewhere it can earn while it waits.
His firm Scion Asset Management has used put options to short tech stocks in recent quarters, a different tool than the credit default swaps he used to short subprime mortgages before the 2008 crash.
His call also lands in a market that has powered through plenty of bearish predictions, with the S&P 500 grinding higher through war headlines and rate fears.
He is not telling you to bet against the rally. He is telling you to step out of the room.
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