Michael Burry, (‘Big Short’) gambled $1.6 billion on a stock market meltdown

Michael Burry, who gained notoriety for his role in the film "The Big Short," recently placed a wager for $1.6 billion on the stock market's collapse.

Michael Burry, the "Big Short" investor who became famous for correctly predicting the massive crash of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash.

Security Exchange Commission records made public on Monday show that Burry is betting against the S&P 500 and the Nasdaq 100. Burry's fund, Scion Asset Management, bought the right to sell an asset at a specific price, called a "put option," for $866 million against a fund that follows the S&P 500 and for $739 million against a fund that tracks the Nasdaq 100.

According to the papers, Burry is putting more than 90% of his money on the market going down.

But Burry has gone back and forth this year between being bullish and bearish about the stocks he picks. In January, he sent a message to his 1.4 million fans that was hard to understand. "Sell," it said. But towards the end of March, he changed his mind. He wrote, "I was wrong to say sell."

So far this year, the S&P 500 and the Nasdaq 100 have seen significant gains. They have gone up by about 16% and 38%, respectively.

In the middle of the 2000s, Burry was known for betting against the housing market. He made much money from the subprime lending disaster and the failure of many large financial institutions in 2008. Michael Lewis wrote about the event in his best-selling book "The Big Short: Inside the Doomsday Machine." The book was later turned into a movie in which Christian Bale played Burry.

Getting out of regional banks, China Burry's fund is also getting out of its shares in several regional banks. It sold its 150,000 shares of First Republic Bank (FRC), as well as its holdings in Huntington Bank PacWest (PACW) and Western Alliance (WAL). It needs to be clarified if these deals happened before or after First Republic Bank (FRC) was bought by JPMorgan Chase in May.

Burry also changed his mind about Chinese stocks. In the year's second quarter, he sold his shares in JD.com (JD) and Alibaba (BABA).

Burry and his team at Scion are putting their money on a few people.

About 6% of the company's stock portfolio is long. In the second quarter of the year, he bought shares of Expedia Group (EXPE), MGM Resorts (MGM), CVS (CVS), and Cigna (CI) to increase his exposure to the travel and healthcare industries.

Burry also bought Warner Bros. Discovery (WBD) shares worth $4.7 million, and The RealReal (TRR) shares worth $3.3 million. Warner Bros. Discovery is the company that owns CNN.

But Michael Burry's negative statements tend to get more attention in the financial world than his positive ones.

Even though one big payoff doesn't mean that Burry will keep making money, he has a good track record as an investor. An analysis by Sure Dividend shows that traders who followed the investments Scion's revealed between May 2020 and May 2023 would have made annualised returns of 56%. During the same period, the S&P 500 averaged a return of about 12% per year.