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The world holds its breath every time Michael Burry makes a power move.

The renowned investor and hedge fund manager has faced adversity from the start, losing his left eye to a rare form of cancer at just two years old.

At 37 — the same age I am now — Burry shot to fame during the 2008 housing crisis, making $725 million for investors in his firm, Scion Asset Management.

The impact was so profound that Hollywood turned it into a movie, The Big Short.

I’ve lost count of how many times I’ve watched it. What I love about the film, where Christian Bale plays Burry, is how it simplifies a complex subject.

The movie’s writer, Michael Lewis, explained, “There were many people who made money out of the 2008 crisis, but I wanted to write about the ones who, if it didn’t work out, had it all to lose.”

Burry, indeed, had everything on the line.

The Big Short portrays him as a rare type of person who thrives in chaos and has a monk-like approach to managing risk. His bet against the booming housing market seemed destined to fail — at first.

My favourite scene is when Burry, barefoot and blasting the heavy metal track “Darkest Hour,” calmly walks to a whiteboard and writes “minus -11.3%” beside “Scion’s Value” in bold.

Without a word, he returns to his office, shuts the door, and screams, “Fuuuuuuuuck!” at the top of his lungs.

The crisis took two years to unravel. During that time, investors thought Burry had lost his mind. Even he doubted himself as Scion’s value dropped while waiting for the market to collapse.

The film dramatises him ignoring furious calls from investors about his $8.4 billion hedge against the housing market — but it’s not far from the truth.

Burry, who is on the autism spectrum, rarely gives interviews. When he does, he admits his confidence in the trade “ticked off a few people.” He finds it ironic that despite making them tens of millions of dollars, “they’re still pretty upset.”

Now, the man who saw the 2008 housing crisis coming is making another bold move — betting 93% of his fund’s portfolio against the entire stock market.

Investors see it as a chilling warning: the stock market might be headed for disaster.

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The moral dilemma behind Michael Burry’s success.

After countless articles and over 65 hours of research on Michael Burry, one thing is clear: his expertise lies in short-selling.

At its core, short-selling involves betting against the market, and while the concept seems simple, it’s a bit of a moral grey area.

Here’s how it works: Imagine borrowing a toy from a friend (representing a stock). You sell the borrowed toy for $100 at its current value. Later, when the toy’s value drops to $80, you buy it back, return it to your friend, and pocket the $20 difference.

That’s essentially what Burry does with stocks, minus some fees.

But here’s the moral rub: making money by betting on something to fail doesn’t sit well with everyone.

The darker side of short-selling is one reason some of Burry’s investors stopped speaking to him. They reportedly questioned who was on the losing side of his trades.

Even Michael Lewis, the writer of The Big Short, pointed out the ethical quandary:

If Burry made $100 million when the subprime mortgage bonds he shorted defaulted, that meant someone else lost $100 million.

And that “someone” wasn’t just a number on a balance sheet — they were people losing their homes.

Yet, Burry’s knack for being right, even if it takes time, is undeniable.

More recently, his bets against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation proved he’s far more than just Christian Bale’s doppelgänger.

Burry purchased 2,355 “put contracts” against Ark Innovation, effectively betting the fund’s value would drop. His hunch paid off, with Ark Innovation’s stock price plunging by as much as 80% from its all-time highs.

While it was a massive win for Burry, it was a devastating blow for Cathie Wood and her investors.

Burry’s success comes with undeniable brilliance, but it also raises uncomfortable questions about the ethical cost of profiting from someone else’s losses.

AI hype is walking to the tip of an icy ledge.

Despite this, markets are rallying — not everyone is convinced the worst is behind us.

Cathie Wood is among the skeptics.

While the stock market has shown signs of recovery, she warns it’s narrowing dangerously, like walking toward the tip of an icy ledge. Only a handful of stocks are driving growth, and much of that is fueled by AI hype.

Cathie Wood — Source

A closer look at the S&P 500 reveals the truth behind her warning: eight of the top 10 companies in the index are tech giants, and together, they account for 30.84% of the entire market’s value.

The data speaks for itself — tech stocks, particularly those hyping AI, are driving the market, creating a widening gap between their performance and other sectors. Check the chart below to see just how stark the difference is.

Something worse is on the horizon

While some worry the AI hype will fade, Michael Burry believes there’s a far bigger storm brewing: the return of inflation.

If inflation rises again, it could spell disaster. With current rates still at 2.6% — no below the long-term average of 3.38%.

Michael Burry — Source

The $1.6 billion bet

Burry isn’t just talking — he’s making headlines with a massive bet against the stock market.

His Scion Asset Management fund recently bought $866 million in “put options” against the S&P 500 and $739 million in “put options” against a fund tracking the Nasdaq 100. Combined, these bearish bets account for 93% of his portfolio.

To outsiders, this might seem outrageous, but Burry’s track record says otherwise.

If you’d followed his SEC filings over the past three years — tracking every stock he bought or shorted — you’d have generated an annualised total return of 38.4%.

For context, the S&P 500 ETF (SPY) delivered just 9.3% annualised returns in the same period.

Check out the 13F SEC filing below to see the scale of Burry’s $1.6 billion position.

Not everyone agrees.

While Michael Burry predicts doom, macroeconomic expert Raoul Pal takes a different view. After years of studying his work, I can see why. Pal believes the stock market is sensitive to M2 money supply.

Now financial conditions are improving we’ll see a rise in assett prices.

According to his indicators, including the ISM (Institute for Supply Management) index, the business cycle is poised to shift. He predicts we’ll enter what he calls the “banana zone” sometime during the Trump innaugauriton.

This is where prices go wild.

As Pal explains, “It’s simple: when there’s more money in circulation, the stock market goes up.”

He backs this up with data: when you overlay the S&P 500 with M2 money supply (all the money in circulation), they mirror each other almost perfectly.

Raoul Pal:

Pal believes the chances of further catastrophic failure are slim. Why? Because the conditions for increased liquidity are already lining up.

Raoul Pal — Source

Final thoughts

As one YouTuber joked, Michael Burry has “predicted 60 of the last three recessions.”

It’s a funny quip, but it also underscores the reality: no one knows for sure what’s coming.

This is all calculated guesswork.

Personally, I think the worst is behind us. With excess pandemic savings dwindling, inflationary pressures are easing, and the economy is starting to stabilise.

The Federal Reserve Chair, Jerome Powell, has already signalled his intent to not reduce rates any lower than he needs to.

That plays directly into Burry’s thesis.

His recent $1.6 billion short position suggests he’s betting the stock market is heading for a significant collapse.

And when someone like Burry bets it all, it’s a warning that’s hard to ignore.