Michael Burry appeared on "The Big Short" author Michael Lewis' "Against the Rules" podcast, where he revealed more details on his bearish position in Palantir Technologies, Inc. (NASDAQ:PLTR) and why he closed his Scion Asset Management hedge fund.
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Burry, rather predictably, sees the stock market poised for a dramatic and indiscriminate downturn, similar to the tech bust of 2000.
Why He Closed Scion
Burry said that one of the keys to the closure of Scion was the rise of passive investing, specifically index funds, which he warns have fundamentally altered the market’s risk profile.
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He noted that over 50% of market capital is now “passive” money, with less than 10% managed by investors focused on long-term value.
"I think that we are in a bad situation in the stock market. I think the stock market could be in for a number of bad years," Burry told Lewis.
Burry believes the concentration of capital has eliminated price discovery and has driven unrealistic valuations — and will lead to an unusually severe and widespread crash.
He contends that when the inevitable downturn arrives, the market’s passive nature will ensure everything falls together.
"When the market goes down … the whole thing is just going to go down," he theorized, making it extremely difficult "to be long anything and be safe."
Burry confessed that a major motivation for closing the fund to outside investors was personal.
"I didn't want to go through that with investors again," he said, referring to the pressure and doubt he faced from clients during the wait for his 2008 short to pay off.
Betting Against AI’s “Luckiest Companies”
The investor pointed to the AI boom, particularly the valuations of big tech stocks, as a hallmark of the current market bubble.
He pointed to valuations of AI-leaders Palantir and NVIDIA Corp. (NASDAQ:NVDA) as hallmarks of the current market bubble and named them as "the two luckiest companies on the planet."
He reiterated many of his previously stated points, including questionable accounting practices and stock-based compensation, which he said disguise the true picture of less-attractive balance sheets.
He concluded that the AI bubble "looks an awful lot like the .com bubble" and that the market is already "at levels of prior peaks."
Burry revealed his bearish bet on Palantir consists of two-year puts which he sees as a sufficient timeframe to express his bearish view.
The Contrarian Path Forward
Despite his gloomy outlook, Burry identified one sector he sees as genuinely undervalued and worth buying: healthcare stocks, which he described as "really out of favor" at the moment.
His decision to close his fund and move to mainly trading personal capital was not a retreat from the market, but a strategic move away from the constraints of managing outside money in what he views as one of the riskiest, most overvalued markets in modern history.
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Image created using artificial intelligence via Midjourney.
